A seemingly coordinated sell-off this Saturday in assets held by the Digital Currency Group (DCG), like Filecoin and Flow, has apparently opened a ‘dark market’ where Genesis claims are being traded.
“Genesis [Capital] creditor claims are starting to sell in small batches in what could be described as a ‘dark market’,” says a seemingly pseudo-anonymous Andrew that describes himself as Founder X. “Two transactions >$15M closed at 35% of their pre-withdrawal suspension value.”
He claims himself as the source for this trade, which we can’t verify. This activity is picking up, with Andrew adding:
“Lots of activity in the 35-50% (of principal $$) range and an increase in both buyers and sellers of pre-bankruptcy claims. The selling of DCG portfolio tokens spooked many last night.”
Genesis Capital suspended withdrawals last month following a $1 billion loss to the now defunct crypto hedge fund Three Arrows Capital and a $170 million loss to the recently bankrupted exchange FTX.
They had $1.8 billion in loans outstanding, and rumors now suggest their hole is similar, about $2 billion.
The staking at Gemini, a crypto exchange, has been affected by this suspension as has a little known Dutch exchange called Bitvavo.
“Bitvavo Custody BV, a part of the Bitvavo Group, has used services from the Digital Currency Group and its subsidiaries (“DCG”) to offer off-chain staking services to its clients,” the exchange said.
Nonetheless they claim they are not affected, they hold all assets one to one, even though “Bitvavo manages approximately EUR 1.6 billion in deposits and digital assets. Of this amount, EUR 280 million has been allocated to DCG.”
That’s about 20% of all their assets, with the bigger fish here being the Digital Currency Group itself and in particular the Grayscale Bitcoin/ETH trusts.
Some suggest DCG owes about $1 billion to Genesis, with the situation remaining unresolved now a month on.
The sell off on Saturday perhaps has raised some funds towards resolving it, but if they did liquidate assets, that may show they actually have no fiat left.
That’s because business at the Grayscale Trusts has dried up completely, from billions a month in 2021 to now barely $100 million in all of 2022.
They’re still entitled to management fees, however, but this is not a publicly traded company so it is not clear whether they have kept a lid on their costs.
But what is somewhat clear is that they don’t have the cash at hand to resolve this Genesis situation, which at worst can potentially escalate to the wind up of the Grayscale Trusts.
What effect that would have is not too clear as it has not quite happened before, but the trusts remained one of the preferred ways of investing for US based institutional investors.
It acts as an amplifier during bull, with the six months locking up period seen as taking the assets off market for some time.
However, the opposite may be the case during bear, but redemptions have been almost non-existent for some reason.
The discount in theory may also affect bitcoin’s global price because if the trusts are fully backed, why buy spot bitcoin instead of 50% off GBTC.
And yet, investors are not biting with the share price action suggesting they are basically trapped.
Converting it into an ETF would be a way out, but the Securities and Exchanges Commission is contesting that in court.
The Trusts therefore are currently very unappealing as investors have basically been locked, with the Genesis uncertainty worsening the situation as investors don’t know whether they’ll end up with a complex winding up of the trusts, which may take some time.
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- Source: https://www.trustnodes.com/2022/12/18/genesis-claims-are-selling-for-35p-to-the-dollar
