“Never in my professional life have I seen such a complete failure of corporate controls and such complete absence of reliable financial information as what I have seen here.” These are words heavy with meaning shared by FTX’s new CEO, restructuring expert John J. Ray III, who played the same role in the Enron saga in 2001. From flawed regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced individuals the inexperienced and potentially vulnerable, this situation is unprecedented.”
Unsurprisingly, it is this saga surrounding the bankruptcy of the FTX exchange that has continued to spill the beans and drive the markets over the past week. According to documents filed Saturday in Delaware bankruptcy court, the company said it owes $3.1 billion to the 50 largest creditors. FTX’s top 10 creditors alone have more than $100 million each in unsecured debt, according to filings, or more than $1.45 billion in total. In this context, apart from the losses of countless investors who used the platform to exchange and store their cryptocurrencies, it is always the domino effect that this crisis can have that creates uncertainty and thus downward pressure on the markets.
Of these, it is probably Genesis that mainly attracts attention. And indeed, always the same report, the third most important creditor in the ranking comes with $174 million that one owes him. Although not officially named, this number matches what cryptocurrency lender Genesis revealed 10 days ago that $175 million in funds were locked in its FTX account. Genesis launched the first over-the-counter Bitcoin trading desk in 2013, and it has become one of the major players in the industry. However, the latter was badly affected by bankruptcy Three shares of capital earlier this year. Last week, after suspending lending services and devoting a weekend to unsuccessful fundraising efforts, Genesis Global Capital hired investment bank Moelis & Company to explore possible options, including possible bankruptcy. At least that’s reported by The New York Times, with Genesis still publicly claiming it had no such plans.
To properly explain the scary domino effect, this has to be mentioned Genesis Global Capital is a branch of Digital currency groupwhich is owned by the company Grayscale investments, which operates the Grayscale Bitcoin Trust. This financial product has $10.2 billion under management. Meant to allow negative exposure to the Bitcoin price, the latter has instead decoupled from the BTC price over the past year. As a result, the discount to buy a stake in GBTC reached a record high of 43% compared to the net worth of the fund and the bitcoins held. To this end, founder and CEO Digital currency groupBarry Silbert, revealed in a note to shareholders that DCG has approximately $575 million in debt with Genesis Global Capital, which matures in May 2023. However, the latter wants to be reassured about corporate structure and cascade risks: “Genesis Global Capital is not a counterparty or service provider for any Grayscale product. […] Grayscale products continue to operate as normal, and recent events have had no impact on product operations.” Still, the perceived risks are clear. Does DCG have enough capital to recapitalize Genesis? If not, the fear is that the company will be forced into liquidation. Its product is GBTC, which could create a new wave of challenges for a whole group of market participants regarding the use of GBTC as collateral.
However, major players say these concerns are not justified. On Friday, custodian service Coinbase Global Inc. The security of the Grayscale digital assets you hold. In a letter released yesterday by Silbert, we learned that DCG expects revenue of $800 million in 2022, down about 20% from last year. He adds regarding shareholders that “we will let you know if we decide to proceed with a table round.” “Let me be absolutely clear: DCG will continue to lead the way in construction and we are committed to our long-term mission to accelerate the development of a better financial system,” he wrote. In the cryptocurrency space, however harsh it may sound, we will collectively come out of it stronger.”
It is in these periods of uncertainty that the best opportunities always emerge. The problem is that this guide only stands for later. However, some players undoubtedly take this gamble. Such is the case of Cathie Wood of Ark Invest who added $1.4 million in GBTC to her hedge fund. It must be said that the risk to reward ratio is tempting. Not only is the Bitcoin price at a clear bottom, but this offer allows for a potential additional profit of over 40% GBTC discount against the net worth of the fund. This is the company’s second major purchase of GBTC in as many weeks. Ark now owns approximately 6.357 million GBTC shares representing 0.4% of the company’s total investment.
This crypto winter also does not cool the President of El Salvador, Neb Boquel. The country is finally taking a decisive step towards realizing its ambitious “Bitcoin Bond” project. Economy Minister Maria Luisa Heim-Prive has presented a bill confirming the government’s plan to collect $1 billion and invest it in building a “Bitcoin City”. Over the past twelve months, the project has been delayed several times. The project is now expected to be approved by Christmas. It remains to be seen if investors will be there.
If you have funds on the Celsius platform, please note that a deadline has been set for submitting your claim as a creditor. The defrauded investors have until January 3 to provide proof of their frozen funds at the defunct cryptocurrency lending firm.
Despite the recovery over the past 24 hours, the cryptocurrency market is posting another bearish week. The defensive position of Rivemont crypto funds, with more than 50% of assets held in cash, will mitigate the impact of this downturn. From a technical point of view, it is hoped that the rapid rebound after Bitcoin’s dip below $16,000 will continue to form a “double bottom”. A close above $17,300 will take one day for the full momentum of this bullish signal to be achieved.
Anyway, as the death of Bitcoin is starting to be announced again by some of the media, it is important to remember that this is not a 1Dr industry crisis. Each time bitcoin comes back stronger. No one doubts at this point that 2022 is going to be a disastrous year for the mother of cryptocurrencies. However, when you look at this data, when in the past did it make sense to invest in the asset? However, as we said earlier, this evidence only stands in retrospect.
This article is brought to you by Fonds Rivemont. The Rivemont Crypto Fund is Canada’s first actively managed cryptocurrency fund. RRSP and TFSA qualification. Accredited investors can learn more over here.
Disclaimer: This column does not necessarily reflect the opinion of CryptonewsFR and does not constitute investment advice or trading instructions..
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