Genesis strikes repayment deal with parent firm DCG to end $620M lawsuit

November 29, 2023 Coin Telegraph

Genesis strikes repayment deal with parent firm DCG to end 0M lawsuit

Digital Currency Group has over $320 million left to repay, according to Genesis, and the deal would see that remaining sum repaid by April next year.

Bankrupt crypto lender Genesis and its parent company, Digital Currency Group (DCG), has struck a deal that could end an ongoing lawsuit to claw back $620 million in repayments from DCG.

In a Nov. 28 filing to a New York Bankruptcy Court, Genesis said DCG agreed to pay its outstanding $324.5 million in loans by April next year, and Genesis can chase up on any unpaid amounts.

The proposed deal aims to allow Genesis to end a lawsuit filed against DCG in September that sought to have the firm repay overdue loans worth around $620 million. DCG has made some payments since the suit.

*Highlighted excerpt of the agreement between Genesis (GGC) and DCG. Source: Kroll*

Genesis said the repayment deal will provide it with “immediate significant and near-term benefits” and avoid the “risk, expense, and diversion of resources that would be required by litigation.”

The deal will form part of Genesis’ plans to pay back creditors, who will vote on the plan before it is sent to bankruptcy judge Sean Lean for a decision — who will consider the creditor’s votes.

Genesis also sued crypto exchange Gemini on Nov. 22, seeking to recover nearly $670 million in transfers.

Meanwhile, Genesis and Gemini are facing a lawsuit from the Securities and Exchange Commission, which claimed they sold unregistered securities. New York also sued the duo and DCG, alleging the trio defrauded investors.

Genesis filed for bankruptcy in January after suspending withdrawals in November 2022.

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Bitcoin derivatives data suggests BTC price holds the current range

September 12, 2023 Coin Telegraph

Bankruptcy

BTC investor sentiment turns increasingly bullish after this week’s quick rebound from a sharp price correction.

Bitcoin (BTC) experienced a 5% increase after testing the $25,000 support level on Sept. 11. However, this breakout rally doesn't necessarily indicate a victory for bulls. To put today’s price action in perspective, BTC has witnessed a 15% decline since July. In contrast, the S&P 500 index and gold have maintained relatively stable positions during this period.

This underperformance demonstrates that Bitcoin has struggled to gain momentum, despite significant catalysts such as Microstrategy's plan to acquire an additional $750 million worth of BTC and the multiple requests for Bitcoin spot ETFs from trillion-dollar asset management firms. Still, according to Bitcoin derivatives, bulls are confident that $25,000 marked a bottom and opened room for further price gains.

*Bitcoin/USD vs. gold and S&P 500 futures, 12-hour. Source: TradingView*

Some argue that Bitcoin's primary drivers for 2024 are still in play, specifically the prospects of a spot ETF and the reduction in supply following the April 2024 halving. Additionally, some of the cryptocurrency markets’ immediate risks have diminished following the U.S. Securities and Exchange Commission (SEC) experiencing partial losses in three separate cases involving Grayscale, Ripple and the decentralized exchange Uniswap.

On the other hand, bears have their own set of advantages, including the ongoing legal cases against leading exchanges like Binance and Coinbase. Moreover, there is the troubled financial situation of the Digital Currency Group (DCG) after one of its subsidiaries declared bankruptcy in January 2023. The group is burdened with debts exceeding $3.5 billion, potentially leading to the sale of funds managed by Grayscale, including the Grayscale Bitcoin Trust (GBTC).

Let's look at derivatives metrics to understand better how professional traders are positioned in the current market conditions.

Bitcoin futures and options metrics held steady despite the correction

Bitcoin monthly futures typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement. As a result, BTC futures contracts should typically trade at a 5 to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

*Bitcoin 1-month futures annualized premium. Source: Laevitas.ch*

It's worth noting that the demand for leveraged BTC long and short positions through futures contracts did not have a significant impact on the drop below the $25,000 mark on Sept. 11. However, the BTC futures premium continues to hover below the 5% neutral threshold. This metric remains in the neutral-to-bearish range, indicating a lack of demand for leverage long positions.

To gauge market sentiment further, it’s also helpful to look at the options markets, as the 25% delta skew can assess whether the retest of the $25,000 has made investors more optimistic. In short, if traders expect a drop in Bitcoin’s price, the skew metric will rise above 7%, while periods of excitement typically have a negative 7% skew.

*Bitcoin 30-day options 25% delta skew. Source: Laevitas.ch*

The situation underwent a notable shift on Sept. 11, as the 25% delta skew metric, which previously indicated a 9% premium on protective put options, suggesting investors were expecting a correction, has now leveled off at 0. This indicates a balanced pricing between call and put options, implying equal odds for both bullish and bearish price movements.

Macroeconomic uncertainty favors bears, but BTC bulls remain confident

Given the uncertainty on the macroeconomic front, particularly with the upcoming release of the inflation CPI report on Sept. 13 and retail sales data on Sept. 14, it's likely that crypto traders will be cautious and prefer a "return to the mean." In this context, the mean represents the predominant trading range of $25,500 to $26,200 observed over the past couple of weeks.

However, from a bullish perspective, the fact that derivatives markets held up during the dip below $25,000 is a promising sign. In other words, if bears had significant conviction, one would expect a stronger appetite for put options and a negative BTC futures premium, known as "backwardation."

Ultimately, both bulls and bears have significant triggers that could influence the price of Bitcoin, but predicting the timing of events such as court decisions and ETF rulings is challenging. This dual uncertainty likely explains why derivatives metrics have remained resilient, as both sides exercise caution to avoid excessive exposure.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Ethereum price risks losing the $1.6K support as multiple ETH price metrics decline

September 5, 2023 Coin Telegraph

Ethereum price risks losing the .6K support as multiple ETH price metrics decline

BASE

A lack of network activity and ground lost to competitors could eventually play a role in ETH losing the $1,600 support.

Ether (ETH) price surged by 31.3% from March 10 to March 18, coinciding with the U.S. Federal Reserve's injection of $300 billion to address the insolvency of Silicon Valley Bank.. Since then, Ether’s price consistently maintained a daily closing price above $1,600.

However, investors are now casting doubt on Ether's ability to sustain this support level, given the prevailing bearish sentiment in the cryptocurrency space and declining metrics on the Ethereum network.

Over the past six months, the cryptocurrency sector has been plagued by negative developments. Notably, the Digital Currency Group (DCG), the owner of Grayscale mutual fund manager, has faced financial troubles. Concerns are mounting that a portion of the $4.8 billion worth of ETH deposits held in the Grayscale Ethereum Trust could be liquidated to address DCG's debts.

Furthermore, two major global exchanges, Binance and Coinbase, are currently facing legal action from the U.S. Securities and Exchange Commission (SEC). Additionally, investors initially expressed excitement when several requests for futures-based Ether exchange-traded funds (ETFs) surfaced in early August. However, it's important to note that these instruments, unlike spot ETFs, would not involve actual ETH coins if approved.

On-chain metrics point to declining demand

Aside from a handful of unfavorable market conditions, Ethereum's on-chain metrics point to a stagnation in demand, both in terms of ETH investments and smart contract transactions.

*Number of Ethereum addresses with ETH minimum $1,000 deposits. Source: CoinMetrics*

Notably, the number of Ethereum addresses holding a minimum of $1,000 worth of ETH deposits has reached its lowest level in nearly six months. This is concerning, considering that Ether's price reached a peak of $2,130 in mid-April, which should have attracted new investors.

Part of the lack of investor interest can be attributed to the fact that Ethereum's average transaction fee has remained above $4 for the past six months. Consequently, despite fluctuations in network staking metrics, there appears to be no increase in the total number of investors when using the $1,000 threshold as a proxy.

Moreover, data on decentralized application (DApps) activity on the Ethereum network corroborates the notion of a dearth of new users.

*Ethereum network top DApps, 30 day active addresses. Souce: DappRadar*

Even excluding the significant 60% decline in the Uniswap NFT Aggregator, the average number of active addresses across the top Ethereum network DApps decreased by 4% compared to the previous month.

From cryptocurrency games to decentralized exchanges, NFT marketplaces, and Web3 services, every sector has witnessed a decline in the number of active users, according to DappRadar. Regarding token activity on the network, with the exception of stablecoins and wrapped ETH, no project has recorded more than 13,000 unique receiver addresses over the past week.

*Top token by unique receivers, last 7 days. Source: Etherscan.io*

This analysis underscores the fact that Ethereum's network is currently constrained by its relatively high transaction fees, which limits the number of active users. Without an uptick in network activity, the catalysts for a price recovery are lacking, such as potential network upgrades and implementations that could lead to lower costs or enhanced user privacy.

Competitors are benefiting from the stablecoin volumes

In the meantime, recent developments have left Ethereum enthusiasts somewhat disappointed. Visa, the payment processor, has incorporated Solana blockchain settlement capabilities, following Circle USD (USDC) introducing native accounts and transfers on the Base chain. In response, Coinbase exchange promptly announced its intention to assist partners in converting old, bridged versions of USDC to the new format.

Furthermore, Rune Christensen, co-founder of MakerDAO, has put forth a proposal to develop the decentralized finance project's upcoming native chain based on Solana's codebase, despite its longstanding affiliation with Ethereum.

In light of the prevailing bearish sentiment in the cryptocurrency market, which includes exchanges facing legal challenges from the SEC and diminishing interest in cryptocurrencies, as indicated by the latest Google Trends data, the likelihood of Ether's price dipping below the $1,600 support level has increased.

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Why approving a Bitcoin ETF might unleash $18 billion in sell-pressure

June 30, 2023 Coin Telegraph

bitcoin etf

Grayscale GBTC Trust conversion to an ETF will unlock a potential sale of up to $18 billion in Bitcoin.

The introduction of a spot-based Bitcoin (BTC) exchange-traded fund (ETF) would make the asset more accessible to individual investors and mutual funds. What's more, unlike a futures-based Bitcoin ETF, a spot-based ETF involves actually buying BTC.

So will the approval of the first Bitcoin ETF be a bullish event? Not necessarily.

GBTC 'discount' remains in the double digits

Over the years, the U.S. Securities and Exchange Commission (SEC) has rejected every Bitcoin ETF applicant, and the latest denial was issued to VanEck Bitcoin Trust on March 10, 2023.

The SEC concluded that the offer did not have a "comprehensive surveillance-sharing agreement with a regulated market of significant size related to spot Bitcoin." Regulators are hesitant to release what many believe would be a more equitable and transparent Bitcoin product.

Investors now question whether the latest bids from ARK Investment and BlackRock to launch their spot Bitcoin ETFs might be the solution to Grayscale’s Bitcoin Trust (GBTC), an investment vehicle with shares traded on the stock exchange.

Interestingly, the GBTC "premium" jumped to its best levels in months after BlackRock announced its ETF filing.

*Grayscale GBTC premium/discount to net assets. Source: CoinGlass*

But while the potential approval of a spot Bitcoin ETF might seem bullish at first, its consequences for BTC price can be negative, at least in the short term.

What's an ETF?

First, an ETF is a form of security that holds diverse underlying investments, such as commodities, stocks and bonds. The ETF may resemble a mutual fund because its issuer pools and manages the given assets.

The most well-known example of this instrument is SPY, the ETF that tracks the S&P 500 index. State Street is in charge of managing the mutual fund's $436 billion worth of assets.

Buying an ETF grants the investor direct ownership of the fund's contents, resulting in different tax consequences than holding futures contracts or leveraged positions. While Bitcoin spot ETFs continue to be rejected, identical products have been available for decades for bonds, global currencies, gold, Chinese equities, real estate, and oil.

30% GBTC discount is likely justified

The Grayscale Bitcoin Trust (GBTC), an investment fund with $18.4 billion of assets under management, is currently trading at a -30% discount versus its Bitcoin holdings. This gap between their 626,778 Bitcoins at market value and the GBTC shares trading on regular stock exchanges reached as low as -49% in December 2022.

Consequently, this discount is likely justified as the instrument lacks the tools to allow arbitrage. Grayscale's GBTC is the undisputed leader in the cryptocurrency market, despite being classified as a closed-end fund, which means that the number of available shares is limited.

Shares of GBTC are not freely created, nor do they have a redemption plan. Due to this inefficiency, there are large price differences when compared to the fund's actual Bitcoin holdings. In contrast, an ETF gives the market maker the ability to issue and redeem shares, ensuring that the premium or discount is typically small.

GBTC charges a set 2% annual administrative fee; therefore, the discount may be acceptable given that the SEC continues to reject appeals and requests from all fund managers.

On the other hand, ETFs typically trade at par with net assets, as opposed to GBTC. For example, the Purpose Bitcoin ETF (BTCC.U) held a $5.63 net asset value per share on June 27, and the shares closed at $5.65 on the Toronto Stock Exchange.

Similarly, the U.S. derivatives ProShares Bitcoin Strategy ETF (BITO)'s underlying price was $16.89 on June 28, while its shares traded at $16.89.

Spot Bitcoin ETF approval might initially pressure BTC

Essentially, an investment trust product is considerably less desirable than an ETF, and Grayscale has done little to mitigate the impact on GBTC investors thus far. However, market sentiment improved modestly after the world’s largest asset manager, BlackRock, filed to launch a Bitcoin spot price ETF.

The share price discount versus its contents will eventually trend to zero as redemptions and arbitrage opportunities arise if the SEC grants the asset manager Grayscale permission to convert its GBTC Trust to a bonafideBitcoin ETF.

In this scenario, odds are that a considerable amount of BTC could enter the market as investors will finally be able to exit their position at par.

The only question is: how much of that $18 billion will flow into other Bitcoin-related instruments or get sold on exchanges?

In any case, there's a good chance that a spot Bitcoin ETF approval will produce significant sell-pressure from Grayscale's GBTC conversion as BTC that's been locked for 3-8 years reenters the market.

DCG