After temporarily touching a fresh two-year low on Monday, Bitcoin rallied over $16,000 on Tuesday. By Monday afternoon, the world’s largest cryptocurrency had fallen below $15,500.
This plunge in Bitcoin price worsened the liquidity woes posed by the collapse of Sam Bankman-Fried’s crypto exchange ‘FTX.’
An anonymous social media user over the weekend had crypto industry sources, including a division of Digital Currency Group (DCG), questioned can the venture capital behemoth might be the next crypto domino to fall.
It is important to know that DCG owns Grayscale Investments. Grayscale Investments manages the world’s largest crypto fund ‘Grayscale Bitcoin Trust (GBTC). As of today, Grayscales manages more than 3% of the world’s Bitcoin.
DGC also manages the cryptocurrency broker Genesis Global Trading as well as the digital-asset news portal CoinDesk. Moreover, Genesis has already stated that the platform might file for bankruptcy as it is struggling to raise capital.
Bloomberg on Monday Reported
The company has “no intentions to file for bankruptcy in the near future.” Following the Bloomberg report, one of Genesis’s spokespersons told that the company is working to resolve the current issues.
Genesis is exploring ways to bypass the threat of solvency, he also added. He also told to TechCrunch that Genesis has also reduced its funding target to half which is now around $500 million.
Genesis Global Capital’s Current Troubles
Last week, the digital asset brokerage requested a $1 billion emergency loan, the Wall Street Journal reported on Thursday.
Genesis Global Capital, on Wednesday, confirmed that the fund’s liquidity concerns have been worsened after a few of its customers handed abnormal withdrawal requests.
Three Arrows Capital, located in Singapore, and Alameda Research, a trading business linked with FTX, were two of Genesis’ largest borrowers. However, both borrowers have already filed for bankruptcy.
As FTX began to fall apart, DCG provided Genesis with a $140 million equity injection on November 11.
Moreover, the Gemini cryptocurrency exchange halted withdrawals from interest-bearing accounts because of the statements that Genesis is its lending partner.
Grayscale Bitcoin Trust Suffers from Price Drops
Following the news of Genesis’s solvency troubles, Grayscale’s trust prices dropped. In their recent statement Grayscale clearly said that they will continue to operate in the market.
According to Grayscale, Genesis Global Capital is neither a counterparty nor a service provider for any Grayscale product.
On Oct.3, 2022, Grayscale filed submitted its report to SEC making it clear that Genesis is not an authorized partner of GBTC but will continue to operate as Grayscale’s liquidity provider.
As this news is circulating, many investors are worried that DCG can start unloading its Bitcoin holdings to arrange a bailout package for Genesis.
