“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial information as I have seen here.” These are words with a heavy meaning shared by the new CEO of FTX, the restructuring expert John J. Ray III, he who played the same role in the Enron saga in 2001. overseas regulatory oversight, to concentration of control. in the hands of a very small group of inexperienced, unsophisticated and possibly compromised individuals, this situation is unprecedented.
Unsurprisingly, it was the saga surrounding the bankruptcy of the FTX exchange that continued to spill the beans and drive the markets last week. According to documents filed Saturday in Delaware bankruptcy court, the company says it owes $3.1 billion to its top 50 creditors. FTX’s top ten creditors alone have more than $100 million each in unsecured debt, according to the 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 the domino effect that this crisis can always create that creates uncertainty and therefore downward pressure in the markets.
Among these, Genesis is probably the main one that has attracted attention. In fact, always in this same report, the third most important creditor is cited in the classification that has 174 million dollars as a debt to him. Although not an official name, this number corresponds to what the cryptocurrency lender Genesis revealed 10 days ago that $ 175 million of funds were locked in its FTX account. Genesis launched the first over-the-counter bitcoin trading desk in 2013, becoming one of the major players in the industry. However, the latter was greatly affected by the bankruptcy of Capital of the Three Arrows earlier this year. Last week, after suspending lending services and spending the weekend in unsuccessful collection efforts, Genesis Global Capital hired investment bank Moelis & Company to explore possible options, including possible bankruptcy. At least that’s what the New York Times reported, with Genesis publicly claiming to have no such plans.
To properly explain the dreaded domino effect, that needs to be addressed Genesis Global Capital a branch of Digital Currency Groupa company that owns Grayscale Investments, which operates the Grayscale Bitcoin Trust. This financial product has 10.2 billion dollars under management. It is allowed to allow passive exposure to the price of bitcoin, the latter in turn decoupled from the price of BTC last year. As a result, the discount for buying a share of GBTC reached a record level of 43% in relation to the net value of the fund and the bitcoins held. To this end, the founder and CEO of Digital Currency GroupBarry Silbert, revealed in a note to shareholders that DCG has a debt of approximately $575 million with Genesis Global Capital, which is due in May 2023. The latter, however, wants to be reassured about the structure of the companies and the risk of the cascade: “Genesis Global Capital is not a counterparty or service provider for any Grayscale product. […] Grayscale products continue to operate as usual, and new events have no impact on product operations.” However, the perceived risk is clear. Does DCG have enough capital to recapitalize Genesis? Otherwise, the fear is that the company will have to liquidate the GBTC product, which will create a new wave of challenges for all market participants related to the use of GBTC as collateral.
Key players say, however, that these fears are unfounded. On Friday, the custody service of Coinbase Global Inc. In a letter published yesterday by Silbert, we learned that DCG predicts revenue of $800 million in 2022, down about 20% from last year. He added about the shareholders that “we will inform you if we decide to continue with a tour de table. “Let me be crystal clear: DCG will continue to be a leading builder in the industry and we are committed to our long-term mission to facilitate the development of a better financial system. “, he wrote. “We have been through the past crypto winters and even though it may seem worse, we will come out stronger.”
It is in these times of uncertainty that the best opportunities often arise. The problem is that this evidence only stands in retrospect. However, some players undeniably took this gamble. This is especially the case of Cathie Wood of Ark Invest who added $1.4M worth of GBTC to her hedge fund. It must be said that the risk and reward ratio is attractive. Not only is the price of bitcoin at a clear bottom, but this exposure allows for additional potential profit of more than 40% from the discount of GBTC compared to the net value of the fund. This is the company’s second major GBTC purchase in as many weeks. Ark currently owns nearly 6.357 million GBTC shares representing 0.4% of the company’s total investment.
This crypto winter is not cooling the President of El Salvador Nayib Bukele either. The country has finally taken a decisive step towards the realization of its ambitious “Bitcoin bond” project. The Minister of Economy Maria Luisa Hayem Brevé presented a bill confirming the government’s plan to raise a billion dollars and invest it in the construction of a “bitcoin city”. Over the past twelve months, the project has been delayed several times. It is now expected that the project will be approved by Christmas. It remains to be seen if the investors will be there.
If you have funding on the Celsius platform, please note that a deadline is now available to file your claim as a creditor. Defrauded investors have until January 3 to submit proof of their frozen funds to the defunct crypto lending company.
Despite a rebound in the last 24 hours, the cryptocurrency market recorded another bearish week. The defensive positioning of Rivemont crypto funds, with more than 50% of assets in cash, will reduce the impact of this decline. Technically, it is expected that the rapid rebound after bitcoin fell below $ 16,000 may continue to form a “double bottom”. It took one day to close above $17,300 to realize the full momentum of this strong signal.
In any case, while the death of bitcoin begins to be announced again in some media, it is important to remember that it is not the 1d industrial crisis. Each time bitcoin came back stronger. No one doubts at this point that 2022 will be a disastrous year for the mother of cryptocurrencies. However, if you look at this data, when in the past has it made sense to invest in the asset? As we said before, however, this evidence only stands in retrospect.
This article is brought to you by Fonds Rivemont. Rivemont crypto fund is Canada’s first actively managed cryptocurrency fund. RRSPs and TFSAs qualify. Accredited investors can learn more 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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