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Report: Genesis Owes Gemini Customers $900 Million, Exchange Is Attempting to Recoup Assets

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Controlling shareholders’ stakes in GBTC are ‘highly illiquid’: Report

November 28, 2022 Coin Telegraph

Bitcoin

"It's net good news for GBTC shareholders and FUD fighting," said Selkis.

According to a new Twitter post by Ryan Selkis, CEO of blockchain research firm Messari, Grayscale Bitcoin Trust's (GBTC) controlling shareholders Genesis Global and Digital Currency Group cannot simply "dump" their holdings to raise more capital. Selkis explained that the restrictions are due to Rule 144A of the U.S. Securities Act of 1933, which forces issuers of over-the-counter, or OTC, traded entities to give advance notice of proposed sales, as well as a quarterly cap on sale of either 1% of outstanding shares or weekly traded volume.

2/ DCG bought nearly $800mm worth of GBTC shares since the premium flipped to a discount in early 2021.

DCG's board authorized up to $1.2bn of share purchases across Grayscale Trusts.

In light of the current liquidity issues, the remainder is likely on hold indefinitely.
— Ryan Selkis (@twobitidiot) November 28, 2022

Based on calculations provided by Selkis, this works to a maximum of $62 million in liquidations per quarter based on the outstanding shares test and $23 million in liquidations per quarter based on the trading volume test. "It's *much* more likely DCG-Genesis refinance using GBTC as collateral," he wrote.

Grayscale Bitcoin Trust, the largest Bitcoin investment trust in the world, is currently trading at a discount to net asset value (NAV) of 40% due to liquidity issues surrounding its operator Genesis Global and rumors of insolvency surrounding its owner Digital Currency Group. It is said that Digital Currency Group bought nearly $800 million worth of GBTC shares since it began trading at a discount to NAV. The firm and its affiliates now own roughly 10% of the trust's outstanding shares.

After Genesis Global began halting withdrawals on Nov. 16, rumors began circulating that its parent company Digital Currency Group, was also in a state of insolvency and would need to liquidate GBTC to pay back its creditors. Grayscale has since clarified that "the laws, regulations, and documents that define Grayscale's digital asset products prohibit the digital assets underlying the products from being lent, borrowed, or otherwise encumbered" and that "the $BTC underlying Grayscale Bitcoin Trust are owned by $GBTC and $GBTC alone."

Grayscale also published a letter signed by Coinbase's CFO, Alesia Haas, and CEO of Coinbase Custody, Aaron Schnarch, showing that it currently holds 635,235 Bitcoins (BTC) under custody in Grayscale's name.

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BTC price holds $16K as analyst says Bitcoin fundamentals ‘unchanged’

November 23, 2022 Coin Telegraph

Bitcoin

Bitcoin sentiment is the worst one analyst has ever seen as BTC price action holds its own into Thanksgiving.

Bitcoin (BTC) lingered near $16,500 at the Nov. 23 Wall Street open as United States markets awaited Thanksgiving cues.

*BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView*

Grayscale, GBTC still dominate crypto mood

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD shunning volatility after fresh two-year lows the day prior.

The pair left analysts guessing the day before U.S. markets closed for the Thanksgiving holiday, with crypto commentators still focused on Digital Currency Group (DCG).

Potential liquidity problems with DCG-owned Genesis Trading continued to agitate those already expecting further losses across Bitcoin and altcoins.

As Cointelegraph reported, concerns had already spread to doubt the future of the Grayscale Bitcoin Trust (GBTC), the largest Bitcoin institutional investment vehicle with assets under management worth over $10 billion.

On Nov. 22, Grayscale’s ex-CEO, Barry Silbert, released a letter to DCG shareholders, widely shared on social media, seeking to shore up morale.

“Not sure how to interpret the mixed reports around DGC, GENESIS, Grayscale, but Barry Silbert 's letter yesterday gave the crypto market some hopium,” analytics resource Material Indicators wrote in part of a Twitter thread on the day.

It added that announcements on GBTC could nonetheless come after hours in a potential volatility catalyst.

An accompanying chart of buy and sell pressure on largest global exchange Binance showed strong resistance in place at just below $17,000.

On the buy side, only $15,000 presented any solid support at the time of writing, with the bulk at $14,000.

*BTC/USD order book data (Binance). Source: Material Indicators/ Twitter*

"Never have seen sentiment this bad"

Commenting on the general state of the crypto market after the FTX debacle, meanwhile, popular commentator William Clemente said that sentiment should not be confused with Bitcoin's underlying strength.

"Never have seen sentiment this bad," he acknowledged.

"Concerns about every centralized company in the industry, people giving up, losing hope, depression. Meanwhile the fundamentals of Bitcoin are completely unchanged. Posting this to revisit when BTC is pushing to new highs in a few years."

According to classic yardstick, the Crypto Fear & Greed Index, there was nonetheless room to fall, with a score of 22/100 still more than double that which traditionally accompanies bear market bottoms.

*Crypto Fear & Greed Index (screenshot). Source: Alternative.me*

"The word dead has been rapidly circulating around crypto platforms in November," research firm Santiment added in insights of its own on Nov. 22.

"As one of the more bearish sentiment words, this is a sign of traders giving up on markets rebounding. Ironically, this capitulation is historically when markets rebound."

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

DCG