Finally some encouraging signs in the cryptocurrency market. Bitcoin managed to breach its tough resistance at $17,000, with the price otherwise closing above the 30- and 50-day moving averages for five consecutive days. Price had not completed a day above the latter since November 7th. As the aftermath of the numerous bankruptcies of major cryptocurrency industry players diminishes, the odds that we have truly bottomed out in 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 theme that has really been getting the ink flowing over the last week. First, on Thursday, DCG, which owns 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 which presents significant headwinds for the industry, we have made the decision to liquidate HQ, effective January 31, 2023,” a DCG spokesperson said. “We are proud of the work the team has done and look forward to potentially revisiting the project in the future.”
The decision to close the headquarters comes on the same day that Genesis announced major job cuts, with 30% of its workforce affected. This decision is due to the negative impact on DCG and its subsidiaries caused by the collapse of the FTX exchange in November. “These measures are part of our continued efforts to move 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 could read in the comments. Genesis has been in financial trouble for some time, following the decision to halt withdrawals in November following the implosion of FTX. The company announced at the time that it had $175 million exposure to FTX.
According to a Friday report from Bloomberg, DCG is being investigated by New York federal prosecutors and the SEC for internal transfers to its Genesis lending subsidiary. Federal prosecutors in the Eastern District of New York requested documents and interviews from the DCG, citing people with knowledge of the investigation, according to the same Bloomberg report. Additionally, the SEC is also conducting an independent investigation into DCG. The investigations have not yet been officially announced by the authorities and are only just beginning. It should be mentioned 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’s difficulties is undoubtedly Gemini, or more precisely its program to gain which made it possible to earn interest on its crypto assets through loans made through Genesis. Genesis reportedly owes $900 million to Earn Program customers. To that effect, Gemini’s Cameron Winklevoss called for the resignation of Digital Currency Group (DCG) CEO Barry Silbert and filed several serious allegations against the cryptocurrency conglomerate, including charges of misrepresentation and accounting fraud. The statement he claims that there is no future for the company as long as Silbert remains CEO and has proven that he is unable to run the company. Winklevoss claims that Genesis, DCG, and its key personnel, including CEO Barry Silbert, conspired to misrepresent and mislead Gemini, its investors, and the general public about Genesis’ financial condition. Additionally, Winklevoss said that claims DCG made in early July that it had invested $1.2 billion in Genesis were false and that DCG had not provided any actual funds to Genesis.
The dispute between Digital Currency Group and Gemini over blocked users’ funds continued to escalate throughout the week. DCG accused Cameron Winklevoss of “malicious attacks”. In a response on Twitter on Tuesday, DCG said Winkelvoss’ statement was “another desperate and unconstructive publicity stunt” and that the company “reserves all legal remedies in response to these malicious, false and defamatory attacks.” “. Winklevoss says DCG owes Genesis $1.675 billion, which would presumably pay off duped Gemini customers, but Silbert says the 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 with FTX and its former CEO, Sam Bankman-Fried. Silbert says DCG “never had a relationship with Alameda,” but that Genesis had a “business and lending relationship” with the cryptocurrency trading firm, also founded by Bankman-Fried.
Then later yesterday, amid the ongoing public dispute with Genesis, Gemini officially ended its Earn program. Gemini has informed its customers via email that this action is being taken to pressure Genesis to pay back the $900 million it owes Gemini customers. The message goes on to say that the action requires Genesis to return any remaining resources to the program. Customers can now see their earning balances as “pending balances,” as Gemini works to find a way to give resources back to users. “The return of your goods remains our top priority and we continue to operate on a matter of urgency basis,” the email reads.
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 sector from its other entities in order to bankrupt it and thus free itself from its huge debts. In return, all of Genesis’ creditors are trying to make DCG a single entity, so that the assets of the other branches of the companies allow for the repayment of Genesis’ debts.
This attempt by DCG was also reflected in the share price Grayscale Bitcoin Trust (GBTC), another company-owned entity. The OTC stock price jumped 11.56% to $9.65 on Monday. This drove the discount to equity (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 Delaware bankruptcy court. Preparation for the hearing resulted in a series of legal documents, including a request to authorize Montgomery McCracken attorneys Walker & Rhoads to represent Sam Bankman-Fried’s interests in the case.
Binance Yesterday Admitted System Failures That Led to At Least $1 Billion in Under-Collateralization 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 say this issue has caused the BUSD to deviate from its fixed value at least three times. “The maintenance process peg it 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 New York-based fintech company.However, BUSD on the Binance blockchain, Binance SmartChain, is not supervised by any external controlled company. To validate its BUSD, Binance claims to keep it fully collateralized with Paxos-regulated BUSD. This BUSD held on the Binance blockchain is then called Binance-Peg BUSD. However, it seems that Binance-Peg BUSD it has not always held its fixed value. A Binance spokesperson told Bloomberg that despite these delays in raising adequate collateral, the pegging process has since been corrected. “Recently the process has been greatly improved with tightened discrepancy checks to ensure it’s always pegged 1-1,” he said.
Following the legal changes in Canada governing cryptocurrency exchanges that we recently brought to your attention, 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 notice reads. This decision to retire Tether follows a regulatory clarification from the Canadian Standards Association (CSA) in December. The update was posted on the Ontario Securities Commission website. “The CSA continues to monitor and evaluate the presence and role of stablecoins in the Canadian financial market,” it reads. “As a result of this ongoing work, the CSA is of the opinion that stablecoins, or arrangements of stablecoins, may constitute securities and/or derivatives.”
The market panic that followed the crash of Sam Bankman Fried’s FTX exchange in early November appears to be easing. For the first time since the collapse of FTX, three-month bitcoin (BTC) futures contracts listed on the Chicago Mercantile Exchange (CME) are currently trading at a premium to the current spot 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. However, the term structure of CME futures contracts – the difference between futures contracts with different maturities at any given time – remains reversed or in relegation. In other words, further-month contracts continue to trade at lower prices than 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 will probably dictate the next price movements. One can therefore expect a trend to be confirmed or reversed tomorrow when US consumer price index data for December is released.
The fund meanwhile took most of its positions during the week, with around 50% exposure to ETH among its invested capital.
This article is offered by Fonds Rivemont. The Rivemont Crypto Fund is the first and only actively managed crypto fund in Canada. Eligible for RRSP and TFSA. Accredited investors can find out 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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