The question of whether Genesis Trading and Digital Currency Group (DCG) will go bust currently hangs over the crypto and Bitcoin market like the sword of Damocles. In the event of bankruptcy, DCG could be forced to liquidate its cash cow, Grayscale and its Grayscale Bitcoin Trust (GBTC).
DCG is one of the most important companies in the crypto industry and the parent company of numerous well-known crypto firms, including Genesis and Grayscale.
Genesis is the only full-service prime broker in the crypto space and has been a jewel in DCG’s portfolio. The company plays a critical role in providing access and managing risk for large institutions.
Nevertheless, it was already floundering after the collapse of Three Arrows Capital and was rescued by DCG. The parent company is now a $1.2 billion creditor of 3AC.
Genesis announced late last week that it would suspend payouts for its Genesis Earn program. As a result, it was revealed that the company would need a $1 billion cash infusion by today, Monday.
If Genesis is unable to raise this amount from external backers, things could look bad for DCG and, by extension, Grayscale, according to rumors. The Grayscale Bitcoin Trust currently holds 634,000 BTC that could reportedly be liquidated, putting massive selling pressure on the Bitcoin market.
Assuming Genesis does indeed fails to attract capital, DCG could be forced to sell equity and some of its portfolio. Adam Cochran, a partner at VC firm Cinneamhain Ventures, has been scrutinizing DCG’s assets to assess whether it could close the $1 billion hole on its own.
DCG could try to sell the companies in its portfolio, including Luno, Foundry, and Coindesk, as well as a substantial venture portfolio.
Ultimately, DCG would have to throw everything overboard to save its golden goose. Only if this fails, a liquidation of the Grayscale Bitcoin Trust would be on the table.
If there is no acquirer, DCG would have to plug the hole, which Ahluwalia believes it will not do because the business is not profitable.
Bitcoin investors seemed highly unsettled and in a de-risk mode. The Bitcoin price dropped to $16,000, close to the bear market low of $15,675.
