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Op-Ed: Could DCG be the catalyst for max pain in the crypto markets?

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Op-Ed: Could DCG be the catalyst for max pain in the crypto markets?

Op-Ed: Could DCG be the catalyst for max pain in the crypto markets? Liam ‘Akiba’ Wright · 11 hours ago · 5 min read

Struggling institutional crypto platform Genesis may be causing parent company DCG a billion-dollar problem that it cannot solve possibly linked to 3AC

5 min read

Updated: November 20, 2022 at 8:50 pm

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Cover art/illustration via CryptoSlate

Following the recent collapse of FTX, the fallout spread to Genesis, which had already been bailed out by parent company Digital Currency Group (DCG) earlier this year following the failure of Three Arrows Capital.

There are growing concerns over the possibility of the contagion spreading to Greyscale Bitcoin Trust and Digital Currency Group but are these fears valid?

Genesis & Digital Currency Group

According to Nathaniel Whittemore, speaking on the CoinDesk podcast, The Breakdown, DCG is a $1.2 billion creditor of Three Arrows Capital. For the sake of transparency, CoinDesk is owned by DCG.

Genesis recently announced that it would be suspended withdrawals for its Genesis Earn program. Further, news then began to circulate that the company may be in debt to the tune of $1 billion. According to a Wall Street Journal article, the company sought a $1 billion loan following the collapse of FTX, but no deal was made.

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Adam Cochran, a partner at VC firm Cinneamhain Ventures, broke down DCG’s assets to assess whether a potential $1 billion hole in its balance sheet was likely to cause further pain in the crypto markets.

Specifically, DCG-owned companies could be at risk of further contagion with their portfolio, including crypto custodians, BitGo, web3 browser, Brave, USDC issuer, Circle, crypto news organization, CoinDesk, and many other core crypto projects that form the heartbeat of the industry.

Should DCG continue to struggle, the impact on the entire industry could be catastrophic. Andrew Parish, Co-Founder of ArchPublic, claimed on November 20 that there had been “zero takers” for Genesis’ request for finance, including rejections from the significant crypto-focused VC firms.

B2C2 – “No”
Fortress – “No”
Jump – “No”
Galaxy – “No”
Apollo – “No”

**and there are no crypto-centric funds with any meaningful appetite, much less the liquidity of scale

— Andrew (@AP_ArchPublic) November 20, 2022

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Parish posted an update some hours later alleging that B2C2 “might” be open to a “very small” investment to cover part of Genesis’s lending book.

A collapse of Genesis could be much more impactful on the entire crypto industry than FTX. Genesis is a critical part of the institutional infrastructure currently in place within the crypto industry. The company was the first OTC Bitcoin trading desk created in 2013. In 2020, then-CEO Michael Moro claimed that Genesis was on track to become “on par with the world’s top financial institutions.”

Digital Currency Group Assets

Cochran outlined the baseline of DCG’s “empire,” coming to a figure of around $38 billion in assets under management as of 2021.

2/18

We know in 2021, in a sale to Softbank, they were valued at $10bn, and that GBTC would have been around $500M – $750M in fees that year with $38BN AUM.

This can give us a ballpark of each of the components in the empire by worth. pic.twitter.com/G5V1fIe5WD

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— Adam Cochran (adamscochran.eth) (@adamscochran) November 19, 2022

Further, Cochran estimated the following ball-park breakdown of DCG holdings across its portfolio based on certain assumptions of its prior investments.

Source: Adam Cochran

Genesis and Greyscale relationship confusion

It is important to note that as of October 2022, Genesis was no longer a participant in the Greyscale Bitcoin Trust but “will continue to serve as a liquidity provider for Grayscale.”

However, on November 16, Greyscale  distanced itself further from Genesis as it announced its assets were now held with Coinbase and that Genesis “is not a counterparty or service provider for any Grayscale product.”

The statement, however, contradicts a previous statement from October 3 when Grayscale CEO Michael Sonnenshein told CoinDesk that Genesis was its “sole liquidity provider” and it saw no need to diversify.

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“Today, Genesis remains our sole liquidity provider and we’ve had nothing but a positive relationship with them, going back to 2013, so I can’t see a need to expand.”

Sonnenshein expanded by commenting that “Genesis will still handle buying the cryptocurrencies underlying Grayscale’s trusts.” There have been no further announcements on Greyscale’s official news channel regarding the removal of Genesis from this position.

Greyscale defines its need for “liquidity providers” as a way to ensure “investments are fulfilled.”

“Working with a liquidity provider like Genesis enables us to tap into various digital asset or protocol markets to ensure that investments are fulfilled in a timely manner. “

The small print of the Greyscale website does include a note stating that its products are distributed by Greyscale Securities and that “prior to October 3, 2022, the Products were distributed by Genesis Global Trading, Inc.”

Still, confusingly, a statement released by Greyscale on November 18 reinforced Greyscale’s lack of exposure to Genesis some 56 days later.

“No other entity, including DCG, Genesis, nor any other Grayscale affiliate, has any control over the digital assets underlying the Grayscale products.”

Given that less than two months previously, Genesis had been confirmed as a liquidity provider tasked with “buying the cryptocurrencies underlying Grayscale’s trusts,” it is difficult to ascertain the exact exposure to Genesis and DCG at this time.

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Genesis appears to have had a bullish outlook on the future of Bitcoin’s price discovery over recent times as strategists at the firm failed to call Bitcoin’s top. In November 2021, a strategist at Genesis claimed that the small drawdown in Bitcoin’s price from $69,000 to $55,000 was simply a “natural breather.” Since the statement, Bitcoin has fallen another 70% to trade below $17,000.

Currently, the Greyscale Bitcoin Trust is trading at a 43% discount to its net asset value (NAV), meaning that Bitcoins held under the trust are presently valued at around $9,300.

The collapse of DCG assets

Cochran then assessed the potential real-world value of each part of DCG’s portfolio, looking at the available liquidity within each investment. Cochran made several guesses in establishing valuations for each element, so any numbers should be considered hypothetical using publicly available information and his own professional insights.

However, Cochran concluded that to raise $1 billion, DCG would likely have to sell equity, venture, liquid crypto assets, or one of its flagship brands.

14/18

So to get to $1b it seems they’d have to:

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-Sell some equity
-Sell all their venture
-Sell all their liquid
-Sell Luno/Coindesk/Foundry (if it has any value)

And hope they get good values for it all.

— Adam Cochran (adamscochran.eth) (@adamscochran) November 19, 2022

Former Goldman Sachs trader, Patrick Feeney, supported the assertion that Greyscale and, subsequently, DCG is in trouble. Feeney claims to have avoided the FTX collapse by assessing the body language of Sam Bankman-Fried as well as escaping “MtGox, BTC-e, Cryptsy, Cryptopia.”

Feeney argued that DCG and Greyscale are in a “tough spot” with a lack of liquidity and “outsized loaning issues.”

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this is a tough spot. It means not liquid enough, hence too big on the loaning issues, and nonhedging mechanisms and poor assumptions of risk. Amaranth did same. Only, unlike here, Amaranth WAS the mkt in Nat Gas by Fall of 2007, levered 10x on $4bln, it took 3 wks to blow up 4/n

— Feeney Factor (@TheFeeneyFactor) November 19, 2022

Cochran concluded that DCG might need to rely on someone “overpaying” for a portion of its GBTC or Genesis holdings to avoid further problems.

16/18

Maybe they get lucky on someone overpaying for something, or they manage to sell a portion of Grayscale or Genesis to some big player like Fidelity.

But, there is a chance they have to scuttle everything else to save the golden goose here.

— Adam Cochran (adamscochran.eth) (@adamscochran) November 19, 2022

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Arthur Hayes contributed to the discussion by sharing a Medium article by DataFinnovation. The summary of the article stated that

“It looks like DCG and 3AC were engaged in some kind of scheme to extract value from the GBTC premium.”

The article broke down publicly available data to assert that Genesis, DCG, Greyscale, and 3AC created a circular infrastructure to borrow and lend BTC to make GBTC shares and “squeeze money from the GBTC premium.”

Source: DataFinnovation

Given that both Greyscale and Genesis are registered with the SEC, DataFinnovation argued that “it is not going to be hard for the regulators to figure this out.” While some of what is discussed in the above analysis could be considered speculation, DataFinnovation makes a salient point. With the invested parties subject to apparent regulatory oversight, the truth is likely to come out. The question is, what impact will it have on the global crypto markets?

Bear market blues

Crypto bear markets are notoriously tough. For example, in 2018, the global market cap of the industry fell from $828 billion in January 2018 to a low of just $100 billion by September 2018. The downturned marked an 87% drawdown in the total market cap.

On November 9, 2021, the total market cap of the crypto industry reached $2.8 trillion. However, the market cap is down 70% to $831 billion as of press time. Therefore, the 2018 bear market bottom was 17% lower than today. An equivalent capitulation to the 2018 collapse would bring the current global market cap to just $350 billion.

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Should DCG, Greyscale, or Genesis end up facing insurmountable financial distress, a new catalyst for the market to test the 2018 bottoms could be entering the arena.

Bear Market

Kraken to layoff 1,100 people to ‘adapt to current market conditions’

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Kraken to layoff 1,100 people to ‘adapt to current market conditions’

Kraken to layoff 1,100 people to ‘adapt to current market conditions’ Samuel Wan · 7 hours ago · 1 min read

The U.S.-based crypto exchange announced it intends to lay off roughly 30% of its staff due to the turbulent market conditions.

1 min read

Updated: November 30, 2022 at 5:38 pm

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Cover art/illustration via CryptoSlate

U.S.-based crypto exchange Kraken has announced laying off 1,100 staff members, equating to 30% of its workforce, as a response to weathering crypto winter.

The blog post, signed by CEO Jesse Powell, expressed regret in arriving at this decision. However, Powell said it was necessary to “adapt to current market conditions.”

Staff affected by the cut were notified this morning, with Powell saying the company will assist in finding new work opportunities for those impacted.

Crypto winter bites hard

Powell said Kraken had tripled its workforce over the past few years to cope with rising demand. The reduction in headcount reverts numbers back to a year ago.

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In explaining the reasons behind the decision, blame was laid on macroeconomic and geopolitical factors, which have negatively impacted financial markets.

“This resulted in significantly lower trading volumes and fewer client sign-ups. We responded by slowing hiring efforts and avoiding large marketing commitments.”

However, with these factors continuing to bite down hard and all other options exhausted, the decision was made to reduce workforce numbers.

Departing staff will “receive comprehensive support,” including 16 weeks of separation pay, performance bonuses for eligible individuals, four months of healthcare, and support with visa issues and work placement opportunities.

The future

Despite the news being a blow for the company and the crypto industry in general, Powell said the cuts would ensure the company’s survival into the future.

“I’m confident the steps we are taking today will ensure we can continue to deliver on our mission which the world needs now more than ever before.”

With that, he signed off, saying he remains bullish on crypto and Kraken.

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Bankruptcy

Insights on Sam Bankman-Fried’s ‘dark’ Republican political donations

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Insights on Sam Bankman-Fried’s ‘dark’ Republican political donations

Insights on Sam Bankman-Fried’s ‘dark’ Republican political donations Samuel Wan · 40 mins ago · 2 min read

YouTuber Coffeezilla gives his take on a Tiffany Fong interview with Sam Bankman-Fried, in which he claimed to be a secret Republican donor.

2 min read

Updated: November 30, 2022 at 2:09 pm

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Cover art/illustration via CryptoSlate

Former FTX CEO Sam Bankman-Fried (SBF) gave his first interview with “citizen journalist” Tiffany Fong post-collapse.

The pair discussed multiple aspects of the FTX saga, including the “backdoor,” FTT as collateral, and his regrets. But of particular interest were SBF’s comments on dark money donations made to Republican politicians.

It is widely known SBF was a significant supporter of the Democrat administration. His $37 million donations made him the party’s second-biggest donor, after investor George Soros.

Some speculate this link is a factor in the lack of criminal proceedings against him. For example, lawyer John E. Deaton questioned why authorities have failed to respond, calling the criminal justice system “compromised.”

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Let me make this clear if SBF isn’t arrested and charged with fraud, wire-fraud, theft, and possibly money laundering before and instead gets to spew out his bullshit narrative, our system of justice has been compromised. @ewarren you claim to be for the little guy, where are you https://t.co/cdmOa7U0an

— John E Deaton (@JohnEDeaton1) November 23, 2022

However, based on Fong’s interview, it seems SBF has more political clout than first thought.

Sam Bankman-Fried played both sides

In recent months, Fong’s investigations into Celsius, and now FTX, have earned her a reputation for sound investigative journalism.

During the 20-minute interview, the issue of political donations cropped up, with SBF saying he donated “about the same amount” of money to both parties. Further, donations to the Republican party were “dark.”

“I donated to both parties, I donated about the same amount to both parties… All my Republican donations were dark.”

Explaining why he chose this route, SBF said it was not for regulatory reasons. Rather, it was to quell the potential backlash from left-biased news outlets.

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“It’s because reporters freak the f*ck out if you donate to Republican. They’re all secretly liberal and [I] didn’t want to have that fight, so I made all the Republican ones dark.”

Coffeezilla speaks

Chiming in on the disclosure, YouTuber Coffeezilla aka Stephen Findeisen, said there was a lot to unpack with SBF’s comments.

Firstly, referring to SBF’s now infamous tweet in which he said “FTX is fine,” Coffezilla said he is skeptical about whether the former CEO is telling the truth. Nonetheless, whether he is lying or not, it is a lose-lose situation for SBF.

Sharing his insights, Coffeezilla said it goes to show that SBF has no political agenda, only that he wanted to be powerful and to be seen to care, “that’s why he played both sides.”

“If he’s lying, this looks bad for him. But if he’s telling the truth it looks worse. It shows you how cynical Sam was. He never cared about politics. He cared about power and perception”

Coffeezilla continued by saying this mindset is about “trying to craft an image.” With the generous billionaire image in tatters, SBF is now trying to deflect the criminal narrative into one of “the smart guy who made an embarrassing mistake.”

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Bear Market

The Bear Market Trend Continues, Solana And Avalanche Investors Should Consider Runfy For 20X Profits By 2023

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The Bear Market Trend Continues, Solana And Avalanche Investors Should Consider Runfy For 20X Profits By 2023

The growth of the virtual metaverse has sparked a boom in cryptocurrency initiatives, opening doors for users of the cryptocurrency to profit from the expanding metaverse market. Runfy (RNF), a brand-new cryptocurrency is one such project.

The presale cryptocurrency Runfy (RNF) promises to use the metaverse to enhance one of the most important aspects of human life;  health. Runfy (RNF) aims to provide more than other industry leaders like Solana and Avalanche who have experienced a bad fall due to the prolonged bear market. In this article, we’ll examine these three cryptocurrencies, and explain why you should add RNF to your portfolio before Solana and Avalanche.

Solana (SOL) The Top Crypto Platform

Solana is a top crypto platform that has gained popularity over the years. The Solana (SOL) platform allows its users to “delegate” their coins to validators in a manner similar to how people “delegate” your local fiat money to a bank to earn interest. Users can contribute a stake to the network’s validation because Solana is a Proof of Stake cryptocurrency, ensuring that it keeps running smoothly.

Each Solana validator has proven their dependability as a decision-maker and authority figure by putting up a stake. Participants get paid according to the size of their investment because it is an essential network function. With each Solana validator being able to add a little charge, these payouts now amount to almost 8% APY on coins that have been staked (typically 0-10 percent). But many staking-focused investors are starting to steer clear of Solana.

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Solana is a good token with amazing features, no doubt. However, it’s reign might be over as the near market has refused to let up, causing the token to fall drastically.

Avalanche (AVAX) The Smart Contract Crypto

Avalanche (AVAX) is a smart contract-based cryptocurrency network that has a distinct competitive advantage over most other blockchain networks in terms of speed and scalability. The Avalanche (AVAX) network, according to its developers, can perform more than 4,500 transactions per second (TPS) and complete transactions in under two seconds.

This is a substantial improvement over the existing payment infrastructure and a huge step forward from some smart contract-enabled networks. One of the most affordable transaction fees in the smart contract ecosystem is offered by Avalanche (AVAX). Additionally, it is anticipated that the Avalanche (AVAX) network would draw a number of decentralized application (dApp) developers. This is because the Ethereum Virtual Machine is compatible with the Avalanche (AVAX) blockchain (EVM). The Avalanche (AVAX) network has been widely adopted due to this novel feature.

Runfy (RNF) The Brand New Crypto

Runfy (RNF) is a brand-new cryptocurrency that aims to dominate the market with its distinctive design. Obesity is a significant issue that affects people all around the world, and Runfy (RNF) intends to assist users combat it. Runfy (RNF) seeks to accomplish this by offering token incentives to encourage weight loss. The Runfy App allows users to track their fitness objectives and keeps tabs on both their dietary and physical development.

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Users can also participate in the regular fitness challenges offered daily, weekly, or monthly to receive additional incentives. Users can access RunfTR, a platform where they can offer weight reduction consultations and get compensated with Runfy (RNF) tokens in the form of fees, inside the Runfy metaverse. The RunfShop, another feature of the Runfy metaverse, allows users to buy and sell products and equipment for exercising.

While getting support from other investors on the platform, users will be able to publish about their fitness objectives and actions. All users can now make their own avatars and engage in virtual interactions with one another thanks to the Metaverse. Additionally, every time a user advances, Runfy tokens are awarded to them. These can be converted for cash or applied to other purchases on the Runfy platform, such protein powder and athletic apparel.

To join the platform, you can click on the links below:

Runfy (RUNF)

Presale: https://presale.runfytoken.io/

Website: http://runfytoken.io/

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Telegram: https://t.me/RunfyTokenOfficial

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