DCG crisis likely won’t include “lots of sales” — Novogratz

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Galaxy Digital Holdings CEO Mike Novogratz allayed fears about the crisis facing Digital Currency Group (DCG) and Genesis, saying while this is “not good news”, it “won’t include not many sales”.

In a Jan. 10 interview on CNBC’s Squawk Box, Novogratz said he expects the current debacle of DCG and its affiliates to “happen” in the next quarter.

“There are still overhangs – DCG and Genesis and Gemini – that will play out in the next quarter. It’s not going to be great,” Novogratz said, adding:

“I don’t think it will include a lot of sales, it’s just not good news.”

DCG is a major crypto conglomerate known as the owner and operator of Grayscale Investments, the world’s largest digital asset manager.

He also owns institutional lending firm Genesis, advisory firm Foundry, crypto exchange Luno, and crypto media company CoinDesk.

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Novogratz’s opinion contrasts sharply with a Jan. 4 report from Arcane Research. Warning investors should pay attention to DCG’s “continued financial distress” as the outcome “could have a severe impact on crypto markets.”

He argued that if DCG were to go bankrupt, the company could be forced to liquidate assets and sell significant positions in its Grayscale Bitcoin Trust (GBTC) and other crypto-related trusts, which would put pressure on crypto prices.

However, Novogratz argued that Bitcoin (BTC) and Ether (ETH) have remained “pretty stable” despite “lots of bad news” over the past few months and have even seen an uptick in recent days.

“It’s a pretty clean market right now,” Novogratz said, referring to investors who have sold or reduced leverage in recent months.

Alarm bells started ringing for DCG and Genesis late last year, after Genesis halted withdrawals on November 16 citing “unprecedented market turbulence” caused by the collapse of FTX. and Three Arrows Capital.

In an open letter to DCG CEO Barry Silbert on Jan. 2, Gemini co-founder Cameron Winklevoss alleged that DCG-owned Genesis had yet to repay a $900 million loan that he owed Gemini, which was owed to DCG which owed Genesis $1.675 billion. .

On January 10, Winklevoss wrote a second letter, this time to DCG’s board of directors, claiming that Silbert and DCG had only “pretended” to fill a $1.2 billion hole in the balance sheet of Genesis. He said Silbert was “unfit” to lead the company and called for his removal, effective immediately.

Coinbase’s layoff was “the right thing”

The Galaxy CEO also commented on Coinbase CEO Brian Armstrong’s recent decision to cut another 20% of its workforce in an effort to further reduce operating costs.

Last year “was a big wash for growth stocks and for crypto, and so everything associated with it (…) which had significant declining costs and revenues – got hammered,” said said Novogratz.

“I think the CEOs (including) Brian of Coinbase, and any rational CEO, are doing the right thing.”

Novogratz said the outlook for the crypto wasn’t awful, but it was “not great.”

“We have regulatory headwinds that we didn’t have before. We have time to heal and rebuild the narrative and so people will cut costs and survive this transition period,” he said, adding:

“2023 is a year where you want to survive and catch up.”