Why Grayscale May Be Next After FTX Crash?

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Will Clemente, co-founder of crypto analytics firm Reflexivity Research, in a December 17 tweet revealed that cryptocurrencies tied to Barry Silbert’s Digital Currency Group have seen massive sell-offs in the past 24 hours. Cryptocurrencies include Filecoin, Flow, Stacks, Livepeer, Ethereum Classic, Decentraland and others. Are Genesis and Grayscale in trouble?

Bitvavo Custody BV, which is part of Dutch cryptocurrency exchange Bitvavo, revealed in a blog post that it was having trouble accessing its €280 million allocated to DCG. He said DCG and its affiliates are currently experiencing liquidity issues and have suspended redemptions until further notice.

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Are DCG’s Grayscale and Genesis on the brink of insolvency?

Andrew Parish, the co-founder of ArchPublic, said Genesis creditor claims are starting to sell in small batches “in what could be described as a black market. He reported that two deals worth $15 million closed at 35% of their pre-withdrawal hold value.

Commenting on the data shared by Andrew Parish, Adam Cochran noted that if this is correct, it could be the start of the DCG’s insolvency. Genesis and Alameda had bad loans and intertwined crypto-borrower-lender relationships. The failure of FTX and Alameda could risk the liquidation of Genesis and lead to the bankruptcy of its parent company Digital Currency Group (DCG).

The DCG’s $1.1 billion promissory note to Genesis could cause the parent group to dissolve GBTC and Grayscale’s EETH. This indeed risks the insolvency of Grayscale. According to data from 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%.

Liquidation of the crypto market

Bitcoin price is trading at $16,729, down more than 4% in the past 24 hours. Ethereum price fell by 8%, with the current price trading at $1,181.

Cryptocurrencies associated with the DCG

Cryptocurrencies tied to Barry Silbert’s digital currency group, such as Filecoin, Mask, Flow, and Ethereum Classic, were down 26%, 16%, 16%, and 12%, respectively. Genesis’s 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.

Also Read: Crypto Market Tanks 6%, Bitcoin Slips Below $17,000

Varinder is a technical writer and editor, technology enthusiast, and analytical thinker. Fascinated by disruptive technologies, he shared his knowledge on blockchain, crypto-currencies, artificial intelligence and the Internet of Things. He has been associated with the blockchain and cryptocurrency industry for a substantial period of time and currently covers all the latest updates and developments in the crypto industry.

The content presented may include the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or publication assumes no responsibility for your personal financial loss.

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