The society Grayscale, owned by Barry Silbert’s DCG group, holds a significant amount of cryptocurrency. However, if Grayscale were to come to the aid of Genesis, a subsidiary of the same group, the company would be obliged to sell a large quantity of tokens. A rescue that would potentially impact the cryptocurrency market as a whole. Explanations.
Grayscale’s solvency questioned
Digital Currency Group holds Grayscale, Genesis, CoinDesk and other crypto-focused companies. It attracts particular attention and mistrust at the start of the year. Being in the crosshairs of many investors, Grayscale is causing uncertainty in the market by refusing to disclose its reserve proof. At a time when transparency is paramount and a new FTX episode would be catastrophic, almost all centralized exchange platforms (CEX) do not hesitate to publish the list of their crypto assets. This solution, initially proposed by Binanceaims to build user confidence in the solvency of exchanges.
Beyond that, Genesis, belonging to the same company, is also experiencing complicated times. Following the fall of theUSTof 3AC and of FTX, many private investors, but also companies that have deposited funds with them, logically wish to withdraw their funds. A butterfly effect that will generate thetemporary stop purchases and new loans on the platform due to a lack of liquidity. Faced with such a situation, one wonders what the impact on the markets would be if Genesis were to go bankrupt!
A new cataclysm in the making for the crypto market?
If Genesis were to fall – and we will insist on the “if” -, we would logically have a situation where the DCG group would try to to save one of his. For that, they would probably have no choice but to deploy capital, notably from Grayscale. But then, how much tokens held by Grayscale could fuel Genesis liquidity?
The user Karl0x highlights the total sum of assets held by Grayscale, which could be used to cover funds from Genesis users. 14 billion of assets are held by the American company, of which, no less than 632,150 bitcoins or 3,040,000 ether.
Astronomical sums that could well impact the market as a whole if, they were to be used to cover user funds. By holding 3.28% of the total capitalization of Bitcoin or even 8.53% of Ethereum Classic, we can imagine the disastrous impact of a bankruptcy of Genesis.
Gemini bosses get involved
As attention shifts to Genesis, Cameron Winklevossco-founder of Gemini, also complains about the dubious management of Barry Silbert and his team. By posting a open letter on Twitter, he accuses him of taking disproportionate risks with the funds of “Earn” users, a service launched by Gemini in partnership with Genesis. Winklevoss even accuses him of embezzling part of the assets. This is why the 340,000 users still cannot withdraw their funds from the yield program, because the DCG subsidiary would run out of liquidity.
A situation that is not getting any better on the side of Grayscale and Genesis, at this rather hectic start to the year. We cannot predict how the situation will work out, but one thing is certain, Barry Silbert wants to make Genesis liquid again in order to restart withdrawals. It will therefore be interesting to monitor the situation and understand the consequences.
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