The risk appetite in investors has weakened significantly, and, of course, there is a reason for this. The danger is great, it can cause destruction for the market. Considering the countless disasters we have experienced in the year 2022, the Grayscale collapse may be the biggest. Hundreds of thousands of Bitcoins and dozens of giant companies, so will FTX, Grayscale be the next?
Apocalypse For Crypto Coins
On November 18, Grayscale, the asset manager that manages the world’s largest Bitcoin fund, said it could not share information related to proof of reserves detailing the security of digital asset products. They also explained at length that they did not do this for security reasons. This statement, which came after the collapse of FTX, did not fully satisfy investors. Because SBF and his team made similar statements, but you know the result.
Grayscale holds more than $10 billion in BTC, Ether and other assets. Since DCG is the largest source of income, its possible bankruptcy will cause the collapse of dozens of giant crypto companies. Barry Silbert, founder and CEO of Digital Currency Group, the parent company of Grayscale (which also owns trading firm Genesis, mining company Foundry, crypto investment app Luno and media outlet CoinDesk, among others), made some statements to DCG shareholders on November 23 about the fear surrounding the company. Silbert said that despite the crypto winter, they are targeting $ 800 million in revenue this year. “We have survived previous crypto winters,” the CEO’s note said, and he also said that although this winter will be tougher, they will also survive this.
Will Grayscale Go Bankrupt?
Silbert is one of the early adopters of Bitcoin and a true cryptocurrency enthusiast. However, unlike Sam Bankman-Fried, he has 28 years of experience. Before discovering crypto, he was an investment banker in New York and was the CEO of the stock trading platform Second Market, which he sold to Nasdaq in 2015. In other words, this is not her first rodeo. Silbert is fighting a strong fight against the US Securities and Exchange Commission after Grayscale rejected his application to convert the Grayscale Bitcoin Trust (GBTC) into the first spot Bitcoin exchange-traded fund (ETF) in the US.
The SEC sees this fight as a failure to address its concerns. However, the litigation process continues, and the Coinbase exchange has submitted an Amicus brief supporting the Grayscale front. For now, there are two ways in front of the crypto money company. Either the SEC will step back and approve the ETF conversion decision that will save the company. Or the declines in the cryptocurrency markets will end and the investor interest that has begun to increase will increase the revenues of Grayscale and other companies. For now, it seems unlikely that either will happen in the short term.
The Grayscale assets stored by the Coinbase exchange were confirmed by the exchange. In other words, the Bitcoins in the company’s reserves are in place, and since Coinbase is a publicly traded company, it cannot show synthetic assets such as FTX as reserves. In this case, Grayscale will not go bankrupt due to a problem in its reserves. Then we need to turn our eyes to Genesis. The company, which suffered a billion-dollar loss with the collapse of 3AC and FTX, is still looking for an emergency loan of $ 500 million. DCG was unable to secure a loan of this Jul-tude.
Then he needs to sell some of his companies or find investors. We know that he has not found investors for now, the best news that will come these days will be the announcement that he has sold a company that can bring in more than $ 500 million in cash. Otherwise, Genesis will have to explain its bankruptcy, and this will cause Grayscale to take a bigger hit. After that, it is a complete doomsday scenario. DCG knows this, and if it does not want its own end, it should continue its SEC struggle and the operation to save Genesis with all its might to eliminate this doomsday scenario, and achieve success.
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