Coindesk, Genesis, DCG, Grayscale – Who else is teetering in Cryptoland?
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The seismic activity underfoot across the entire crypto landscape seems to be rising even as the FTX scandal continues to reveal layer upon layer of chicanery. SBF appears to have been distributing customer wealth to his parents as it is now discovered they purchased $127 million worth of Bahamian real estate in the last two years.
And as these revelations pile up, the scrutiny of other major players in cryptoland is intensifying.
DCG (Digital Currency Group) is the largest crypto asset owner in the world, it is believed. Controlled by Barry Silbert, its subsidiaries included Coindesk, Genesis, Grayscale, Foundry, Luno and Tradeblock, among many other less recognizable names.
Genesis is, or perhaps was one of the largest lending platforms of crypto in existence. Yesterday the New York Times reported they had engaged Moelis and Company to “explore options including a potential bankruptcy”. DCG owes Genesis $575 million, due in May 2023, and has a further $1.1 billion promissory note outstanding that matures in June 2032.
Genesis has $175 million locked up in the FTX bankruptcy and currently soliciting capital to shore up its balance sheet – an unlikely scenario, given the fact that DCG is may now be facing its own liquidity issues.
To give you an idea of the scale of Genesis’ exposure, the company reported Q3 2022 loan originations totalling $8.4 billion, total active loans worth $2.8 billion, spot-traded volume of $9.6 billion, and derivatives notional value traded at $18.7 billion. (All figures in USD).
DCG subsidiary Grayscale was denied an application to launch a spot Bitcoin ETF after the company failed to satisfy the SEC’s request for explanations around insider trading on the platform. Grayscale also declined to provide any “Proof of Reserves” reporting, leading to suspicions that the company may be in more serious trouble than originally thought.
All this adds up to a significant ongoing threat to the entire crypto infrastructure, as faith in other major centralized exchanges, Binance, BitFinex, and others, is beginning to waver.
DCG’s website, which purports to always have available for public viewing its digital currency and token positions, recently replaced the link with one that just loops back to the Portfolio’s page without actually disclosing any of its holdings.
If the contagion still rippling out from FTX were to engulf DCG, the sudden flood of crypto sales forced by bankruptcy proceedings could take Bitcoin and the rest of the crypto complex down significantly. Already the entire crypto market capitalization has drifted below $800 billion, showing rapidly deteriorating interest in the space.
ARK Invest CEO Cathie Wood ploughed $1.4 million into Grayscale Bitcoin Trust ( GBTC), the world’s largest bitcoin fund, as it is trading at a 45% discount to the price of its underlying asset. Important to remember that Wood has predicted Bitcoin will be worth over $1 million by 2028.
JAMES WESTEDITOR AND PUBLISHERJames West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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