Crypto Selloff: Why Grayscale May Be Next In Line After FTX Crash?
Will Clemente, co-founder of crypto analysis firm Reflexivity Research, in a tweet on December 17 revealed that cryptocurrencies related to Barry Silbert’s Digital Currency Group saw massive selloffs in the last 24 hours. The cryptocurrencies include Filecoin, Flow, Stacks, Livepeer, Ethereum Classic, Decentraland, and others. Are Genesis and Grayscale in trouble?
Bitvavo Custody BV, a part of Dutch cryptocurrency exchange Bitvavo, in a blog revealed that it is facing problems accessing its EUR 280 million allocated to DCG. It said DCG and its affiliates are currently experiencing liquidity problems and has suspended repayments until further notice.
Are DCG’s Grayscale and Genesis on the Brink of Insolvency?
Andrew Parish, the co-founder of ArchPublic, shared that Genesis creditor claims are starting to sell in small batches “in what could be described as a ‘dark market’. ” He reported that two transactions worth $15 million closed at 35% of their pre-withdrawal suspension value.
Commenting on data shared by Andrew Parish, Adam Cochran noted that if that’s accurate, it could be the early stage of DCG insolvency. Genesis and Alameda had bad loans and intertwined crypto borrower-lender relationships. FTX and Alameda bankruptcy could risk Genesis liquidation and may cause its parent Digital Currency Group (DCG) to go bankrupt.
DCG’s $1.1 billion promissory note to Genesis could cause the parent group to dissolve Grayscale’s GBTC and EETH. This indeed risks insolvency for Grayscale. According to data by Coinglass, GBTC is trading at a discount premium rate of -48.79% and EETH at a discount premium rate of -52.58%. In fact, Grayscale’s Ethereum Classic fund ETHC is trading at a discount of over -70%.
Crypto Market Selloff
Bitcoin price is trading at $16,729, down over 4% in the last 24 hours. Ethereum price plummeted 8%, with the current price trading at $1,181.
Cryptocurrencies related to Barry Silbert’s Digital Currency Group such as Filecoin, Mask, Flow, and Ethereum Classic are down 26%, 16%, 16%, and 12%, respectively. Genesis’ lending business Genesis Capital is already considered insolvent by many experts. Neither Barry Silbert nor DCG and Genesis have released statements to clear the FUD.
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