The crypto market has had a difficult year, but the approaching months or even weeks might bring even more hardship to a sector that is barely able to exist without new inflows.
The bulk of market participants were undoubtedly aware of DCG’s difficulties after the collapse of FTX and countless other companies. The liquidity issue caused the bankruptcy of one of Genesis’s subsidiaries.
After Genesis‘ issues became apparent, commentators posed a critical question: what would happen to other subsidiaries of DCG, such as Grayscale, which owns vast quantities of Bitcoin that would be liquidated if the firm were as illiquid as Genesis?
The bankruptcy of Digital Currency Group would be disastrous for markets, since the disposal of their assets would result in the sale of substantial holdings in GBTC and other Grayscale trusts. After Cameron Winklevoss wrote an open letter to Barry Silbert saying that Genesis owes Gemini $900 million, investor sentiment has soured.
The letter included no indication that Gemini intends to pursue Silbert if he disregards the highlighted problem. The optimal conclusion would be a coordinated settlement between both businesses, which might involve an involuntary petition for DCG’s Chapter 11 filing.
Companies associated with DCG performed poorly in 2022 because to the large outflow of institutional investment from the sector. The lack of liquidity might be the cause of yet another market meltdown, but the next time we run the danger of reaching levels that most individual investors cannot tolerate.
At press time, the size of the cryptocurrency market was $800 billion, and Bitcoin was selling for around $16,803.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Cryptocurrency investments are subject to market risks, and individuals should seek professional advice before making any investment decisions.