Arcane Research, in a new report, pointed out that investors should keep an eye on the protracted financial troubles of the Digital Currency Group (DCG), as it could negatively impact the cryptocurrency market.
Analysts and investors expressed a major concern following the disclosure of the Genesis issues: what would happen to Grayscale, a DCG subsidiary that holds a substantial amount of Bitcoin. The majority of market participants have no doubt learned of the problems faced by DCG following the collapse of FTX and many other companies.
The research pointed out that if DCG files for bankruptcy, then it will be forced to liquidate its assets. After that, it will force DCG to sell its large positions in GBTC and unknown positions in ETHE and other grayscale trusts.
“Currently, GBTC is trading at a 45% discount to its net asset value, while ETHE is trading at a 59% discount to its net asset value. GBTC holds 3.3% of the circulating BTC supply and 2.5% of the ETH supply. A Reg M would result in a massive arbitrage strategy of selling cryptocurrencies versus buying Grayscale Trust stock. If this scenario materializes, crypto markets could face a further decline.
Arcane Research also pointed to the open letter written by Cameron Winklevoss to DCG CEO Barry Silbert accusing Barry of acting in bad faith and using stall tactics. At the end of the letter, Cameron asked Barry to publicly promise to help and resolve the issue by January 8. coordination of an involuntary request for a DCG Chapter 11.
“Additionally, on December 28, investment adviser Valkyrie offered to become the new sponsor and manager of GBTC while announcing the launch of an opportunistic fund seeking to take advantage of GBTC rebates.”