Finally some encouraging signs in the crypto market. Bitcoin managed to break its strong resistance at $17,000, with the price otherwise closing above the 30- and 50-day moving averages for five consecutive days. The price had not closed a day above the latter since November 7. As the fallout from multiple bankruptcies of major players in the crypto industry fades, the odds of actually reaching the end of the bear cycle look good.
Among the question marks among these players is undoubtedly the fate of lender Genesis, a parent company of Barry Silbert’s Digital Currency Group (DCG). This is also the topic that has really got the ink flowing over the last week. First, last Thursday, DCG, owner of Genesis and Grayscale, confirmed the closure of its wealth management division called HQ. “Due to the state of the broader economic environment and the extended crypto winter presenting significant headwinds to the industry, we have made the decision to liquidate HQ, effective January 31, 2023,” a DCG spokesperson said. “We are proud of the work done by the team and look forward to revisiting the project in the future.”
The decision to close HQ comes on the same day Genesis announced major job cuts, with 30% of the workforce affected. This decision is due to the negative impact on DCG and its subsidiaries caused by the collapse of the FTX stock exchange in November. “These measures are part of our ongoing efforts to drive our business forward. We sincerely appreciate the hard work of our talented and dedicated team as we continue to work to identify the best outcome for Genesis’ business, customers and employees over the long term.” We can read in the comments. Genesis has been struggling financially for some time, following the decision to stop withdrawals in November following the FTX implosion. The company announced at the time that it had $175 million in exposure to FTX.
According to a Friday report from Bloomberg, DCG is being investigated by federal prosecutors in New York and the SEC for insider transfers at its Genesis lending subsidiary. According to the same Bloomberg report, federal prosecutors in the Eastern District of New York requested documents and interviews from DCG, citing people familiar with the investigation. In addition, the SEC is also conducting an independent investigation into DCG. The investigations have not yet been officially announced by the authorities and are only in their early stages. It should be noted that neither Digital Currency Group (DCG) nor its CEO Barry Silbert have been charged with any criminal activity by the authorities.
One of the companies most affected by Genesis’ difficulties is undoubtedly Gemini, or more specifically its program. win which allowed interest to be earned on its crypto assets through loans made through Genesis. Genesis reportedly owes $900 million to Earn program customers. In this regard, Gemini’s Cameron Winklevoss called for the resignation of Digital Currency Group (DCG) CEO Barry Silbert and made numerous serious allegations against the cryptocurrency conglomerate, including allegations of misrepresentation and accounting fraud. statement claims there is no future for the company as long as Silbert remains CEO and he has shown he is incapable of running the company. Winklevoss alleges that Genesis, DCG and its key personnel, including CEO Barry Silbert, conspired to misrepresent and deceive Gemini, its investors and the general public regarding Genesis’ financial condition. Additionally, Winklevoss said claims made by DCG in early July that it had invested $1.2 billion in Genesis were false and that DCG had not provided actual funding to Genesis.
The dispute between Digital Currency Group and Gemini over blocked user funds continued to escalate throughout the week. DCG blamed Cameron Winklevoss for ‘malicious attacks’. In a response on Twitter on Tuesday, DCG said Winkelvoss’s statement was “yet another desperate and unconstructive publicity stunt” and that the company “reserves all legal remedies in response to these malicious, false and defamatory attacks”. Winklevoss claims DCG owes Genesis $1.675 billion, which Gemini’s defrauded customers were apparently supposed to pay, but Silbert claims that figure is incorrect. In a letter to shareholders on Tuesday, Silbert also denied the “completely baseless and false” rumors about DCG and severed all ties to FTX and its former CEO, Sam Bankman-Fried. Silbert claims that DCG “never had a relationship with Alameda,” but that Genesis had a “trading and lending relationship” with the crypto trading company, which was also founded by Bankman-Fried.
Then, later yesterday, amid the ongoing public dispute with Genesis, Gemini officially ended its Earn program. Gemini informed its customers by email that this action was taken to pressure Genesis to repay the $900 million owed to Gemini customers. The message goes on to say that the action requires Genesis to return all remaining assets to the program. Customers can now see their earning balances as “pending balances” as Gemini works to find a way to return the assets to users. “The return of your assets remains our top priority and we continue to operate with the utmost urgency,” the email said.
In short, if we had to sum it all up in a nutshell, it seems plausible that DCG is currently trying to isolate its Genesis division from its other entities in order to put it into bankruptcy and thus freed from its huge debts. In exchange, all of Genesis’ creditors are trying to make DCG a single entity so that the assets of the other companies’ branches allow Genesis’ debts to be settled.
This effort of DCG was also reflected in its share price Grayscale Bitcoin Trust (GBTC), another entity owned by the company. The OTC paper rose 11.56% on Monday to $9.65. That brought the discount to the net asset value (NAV) of its bitcoin holdings to 38.55%, the smallest deviation since mid-November.
As for the FTX saga, the next hearing will be held today in a bankruptcy court in Delaware. The build-up to the hearing resulted in a number of legal filings, including a request to authorize attorneys from Montgomery McCracken Walker & Rhoads to represent Sam Bankman-Fried’s interests in the case.
Binance yesterday acknowledged system failures that led to at least $1 billion in undercollateralization in its Binance offering BUSD Smart Chain, one of the company’s stablecoins, which is supposedly pegged 1:1 to the US dollar. Industry analysts claim that this issue caused the BUSD to deviate from the fixed value at least three times. “The retention process peg involves many teams and has not always been flawless, which may have caused operational delays in the past,” a Binance spokesperson told Bloomberg. BUSD on the Ethereum blockchain is fully backed by US dollars, overseen by Paxos, a company New York-based fintech However, BUSD on Binance’s own blockchain, Binance SmartChain, is not under the supervision of any external audited company. To validate its BUSD, Binance claims to keep it fully collateralized with Paxos-settled BUSD. Therefore, this BUSD held on Binance’s own blockchain is called Binance-Peg BUSD. However, it seems that Binance-Peg BUSD it has not always kept the fixed value. A Binance spokesperson told Bloomberg that despite these delays in raising the appropriate collateral, the connection process has since been corrected. “Recently the process has been greatly improved with strengthened mismatch checks to ensure it is always 1-1 matched,” he said.
Following the legal changes in Canada governing cryptocurrency exchanges that we recently reported to you about, Crypto.com will no longer facilitate transactions involving Tether and plans to remove the largest stablecoin by market capitalization for customers in the country. “Please take urgent action to review your USDT balance and take necessary action,” the statement said. This decision to withdraw Tether follows a regulatory clarification from the Canadian Standards Association (CSA) in December. The update is posted on the Ontario Securities Commission website. “CSA continues to monitor and evaluate the presence and role of stablecoins in the Canadian financial market,” it said. “As a result of this ongoing work, the CSA is of the view that stablecoins, or stablecoin agreements, may constitute securities and/or derivatives.”
The market panic that followed the collapse of Sam Bankman Fried’s FTX exchange in early November appears to be easing. For the first time since the fall of FTX, quarterly bitcoin (BTC) futures contracts listed on the Chicago Mercantile Exchange (CME) are currently trading at a premium to the current market price. These futures contracts are considered by many to be an indicator of institutional activity. The renewed premium indicates that institutional activity is no longer concentrated on the short side. The term structure of CME futures contracts – the spread between futures contracts of different maturities at any given time – however remains inverted or in backwardness. In other words, the more distant month contracts continue to trade at lower prices than the closer month contracts, an anomalous situation considering that prices are generally higher at the long end of the curve.
As was the case for a good period of 2022, it is the macroeconomic trend that is likely to dictate future price movements. We can therefore expect a trend to be confirmed or invalidated tomorrow, when consumer price index data is released for the month of December in the United States.
The fund meanwhile picked up most of its positions during the week, with around 50% exposure to ETH among invested capital.
This article is brought to you by Fonds Rivemont. The Rivemont Cryptocurrency Fund is Canada’s first and only actively managed cryptocurrency fund. RRSPs and TFSAs eligible. Accredited investors can learn more here.
Disclaimer: This column does not necessarily reflect the opinion of CryptonewsFR and does not constitute investment advice or trading instructions..
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