Bitcoin falters after Grayscale DCB owner reveals $2 billion debt

Bitcoin falters after Grayscale DCB owner reveals $2 billion debt

Barry Silbert, founder and CEO of Digital Currency Group, said they can handle the cryptocurrency cold. Photo: Heidi Gutman/CNBC/NBCU Photo Bank/NBCUniversal via Getty

Grayscale owner DCB has revealed he is $2 billion (£1.65 billion) in debt, making the value of bitcoin increasingly questionable due to the company’s holdings of digital assets and its ownership of troubled crypto lender Genesis.

The Grayscale Bitcoin Trust is one of the world’s largest Bitcoin (BTC-USD) holders with a total volume of 643,572 BTC worth $10.6 billion. This is approximately 3% of all available bitcoins.

The gray scale could be affected by the recent collapse of cryptocurrency exchange FTX, as its parent company Digital Currency Group (DCG) also owns Genesis, which was forced to stop customer withdrawals.

The lending platform has $175 million locked up on the bankrupt FTX exchange, and investors are waiting to see if DCG bails out its struggling subsidiary.

In an address to shareholders on Tuesday, DCG founder Barry Silbert tried to reassure investors about the financial health of DCG’s Genesis subsidiaries Grayscale Investments and mining company Foundry.

Check: Cryptocurrency prices in real time

Silbert wrote: “We have survived previous crypto winters, although this one may seem harsher, collectively we will come out of it stronger.”

Genesis needs a $1 billion capital injection, according to Reuters. DCG’s debt is just over $2 billion, and the company has lent Genesis roughly $575 million. It also absorbed a $1.1 billion debt owed by failed cryptocurrency hedge fund Three Arrows Capital to Genesis.

Genesis Global Capital was reported to have hired investment bank Moelis & Co to explore options, including a potential bankruptcy.

Crypto commentator TradFiWhale tweeted: “DCG’s grayscale business is extremely valuable.

“DCG doesn’t want to sell this so they will most likely leave Genesis bankrupt.

“Genesis will probably file for bankruptcy, I think creditors will end up getting most of the money back, and DCG will survive with a black eye and a bad reputation.”

Watch: Bitboy Crypto Warns About Exchanges Getting Money From Exchanges After FTX Scandal | Crypto Mile

DCG tweeted: “The impact is related to Genesis’ lending business and does not affect Genesis’ trading or custody business.

“It is important that this temporary action will not impact the business operations of DCG and our other subsidiaries.”

Genesis may be the last domino to fall in a crisis that has its origins in the May crash of UST/Luna (LUNA1-USD) Terra, which wiped out Three Arrows Capital, Voyager Digital (VYGVQ) and eventually FTX a few months later .

However, since Genesis is an institutional lender, the fallout from its fall could have broader market implications.

Read more: “Take Money Off Exchanges,” Bitboy Crypto Warns After FTX Scandal

A cryptocurrency lender is considered the main broker of the entire cryptocurrency ecosystem, a place where institutions can access the cryptocurrency markets.

On Thursday, David Hoffman of the Bankless podcast asked, “Is Genesis going to crash all crypto?”

Silbet said: “Despite the difficult conditions in the industry, I am more than ever excited about the potential of cryptocurrencies and blockchain technology in the coming decades, and DCG is determined to stay at the forefront.”

On Friday, Bitcoin fell 1.7% over the past week to $16,471, while Ether (ETH-USD) fell 1.6% to $1,182.

FTX collapse

After the collapse of FTX caused a number of related crypto lending platforms to stop withdrawing funds from customers, decentralized exchanges (DEXs) were looked at by some proponents as a solution.

DEX is a type of cryptocurrency exchange that allows direct peer-to-peer crypto transactions from one digital wallet to another without the need for an intermediary, while the user’s funds remain in the wallet owned by that user.

However, what initiatives are actually coming from the decentralized finance space to solve the problem of insolvency on centralized platforms?

A set of decentralized exchanges such as Drift Protocol, GMX, and Perpetual Protocol are “creating an aggregated dashboard” that they promise will bring more transparency to institutional and retail users.

This new aggregated dashboard will provide information on evidence of deposits, insurance funds and borrowing levels.

Read more: FTX Bankruptcy Loses 80,000 UK Crypto Investors

The team told Yahoo Finance UK: “We already have a solution to the problems exposed by the FTX collapse, decentralized finance, and we must work together to prove its worth.

“Our biggest fear is that this incident will be used to stop the development of technology that was created to prevent this in the first place. Now is the time to rely on the promise of DeFi.”

Organizations running decentralized exchanges are reaching out to global regulators to start a dialogue to improve industry transparency and security.

Drift Protocol, GMX and Perpetual Protocol told Yahoo Finance UK: “DeFi as a primitive was designed to prevent the loss of customer deposits that has occurred to date. Although this distinction can be confusing for non-cryptocurrency people.

“We are here, ready, willing and able to guide any regulator through the clear distinctions that separate DeFi from CeFi.

“We welcome meaningful and productive engagement with regulators to advance this space.”

Watch: What Would Karl Marx Think About Cryptocurrency? – Episode 7 “Crypto Mile”

Written by khirou

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