Liquidity Problems:
The lending arm of DCG subsidiary Genesis is still subject to a withdrawal freeze, while Grayscale’s Bitcoin fund is trading at historical discounts.
Bitvavo, a Dutch cryptocurrency exchange, claims to be stuck with Digital Currency Group (DCG) for 280 million Euros ($297 million in USD), or 17.5% of the $1.6 billion it claims to control in deposits and other assets. Bitvavo reassured customers that the event “has no impact on the Bitvavo platform.”
In a blog post, Bitvavo asserts that DCG “has postponed repayments until this liquidity issue has been handled” and that DCG is “experiencing liquidity challenges due to the current turmoil in the cryptomarket.”
However, a DCG representative told Reuters that Genesis, not DCG, is the entity holding the funds. Blockchain Gossips has contacted DCG for additional comment.
Reuters received a response from Bitvavo saying that it “held DCG accountable for the inaccessible cash.”
Barry Silbert, the founder of SecondMarket, is the CEO of DCG, one of the biggest and most well-known cryptocurrency companies. Genesis, Grayscale, CoinDesk, Foundry, and Luno are all owned by it.
DCG has not had a good five weeks after FTX‘s demise and filing for bankruptcy.
Genesis:
Genesis put its lending arm’s withdrawals on hold a month ago and still hasn’t unfrozen them. Because Genesis is a partner in Gemini Earn, Gemini, the exchange owned by the Winklevoss brothers (and not a DCG subsidiary), had to halt redemptions on its Earn product. Genesis supposedly owes users of Gemini Earn $900 million.
The financial stability of DCG is now in doubt due to the problems at Genesis.
Even though DCG owes Genesis $575 million, Silbert assured shareholders on November 22 that “we have survived prior crypto winters, and while this one may feel more severe, collectively, we will come out of it stronger.” However, the Financial Times reported on December 3 that DCG owes Genesis $1.7 billion.
A lawsuit filed by the New York hedge fund Fir Tree Capital Management against Grayscale Capital claims the company’s Grayscale Bitcoin Trust (GBTC) had “potential mismanagement and conflicts of interest” and poses a significant challenge for Grayscale Capital.
Investors can gain exposure to Bitcoin through The Grayscale Bitcoin Trust without purchasing it. According to information from CoinGlass, it is currently trading at a discount of -48.7% to the market value of the underlying asset.
On Friday, crypto analyst Will Clemente, co-founder of Reflexivity Research, noted on Twitter an aggressive selloff in the past 48 hours of many cryptocurrencies tied to DCG, speculating it could be DCG looking for liquidity.
Several crypto coins related to Barry Silbert's DCG have been selling off aggressively this evening (FIL, ZEN, ETC, NEAR), leaving many speculators to wonder whether the selling is derived from DCG itself. pic.twitter.com/M9mkQrEI7q
— Will Clemente (@WClementeIII) December 16, 2022
Conclusion:
According to data from CoinGecko, the prices of Filecoin and Flow, two cryptocurrencies that Clemente claimed DCG has exposure to, have fallen by 20% and 10%, respectively, over the last day.
