• Digital Currency Group (DCG) is selling off its crypto holdings at distressed prices following the bankruptcy of Genesis.
• DCG owns the Grayscale Bitcoin Trust, which has been trading at a discount due to concerns around reserves held.
• The market seems to have priced this in, but there could be more twists to come.
Background on DCG and Genesis Bankruptcy
Digital Currency Group (DCG) is the parent company of the Grayscale Bitcoin Trust, the world’s largest Bitcoin fund. Recently, their subsidiary platform Genesis filed for bankruptcy, leading to concern around the reserves held by DCG and their connection with GBTC. This led to a large discount compared to net asset value of the fund over the last couple of years.
DCG Selling Off Crypto Assets
In order to mitigate risk from further fallout from Genesis‘ bankruptcy filing, DCG has begun selling off its crypto holdings at discounted prices. This move is likely meant as an attempt to prevent contagion across other firms in the space that are connected with each other through different pieces of information and investments.
The market appears to have already priced this in since it is not uncommon for companies in financial trouble to sell assets at discounted prices. However, it remains unclear what further implications this will have for other firms connected with DCG or how GBTC will react if more assets are sold off at discounted rates.
Uncertainty Around Reserves Held By GBTC
The main issue surrounding DCG’s current situation is uncertainty around reserves held by GBTC and whether they are actually backed by Bitcoin or not. Despite calls for proof of reserves, Grayscale declined to provide assurance so far which has only added fuel to speculation that there may be some misappropriation going on within GBTC’s coffers.
Overall, while it appears that investors have taken into account these developments when pricing in assets related to DCG, there remain many unknowns about how far-reaching this could go and what repercussions it could have on other firms within the crypto space that are connected with each other through investments and partnerships.