• DCG, the parent company of Grayscale Bitcoin Trust, has filed for bankruptcy due to its connection with crypto platform Genesis.
• As a result, DCG has begun selling off its crypto holdings at distressed prices.
• The market appears to have priced this in already but there could be more twists and turns in the future.
DCG Files Bankruptcy Following Genesis Implosion
Digital Currency Group (DCG), the parent company of Grayscale Bitcoin Trust, has filed for bankruptcy following the implosion of crypto platform Genesis. This is causing ripples across the crypto space as investors become concerned about contagion and how interconnected firms are within the industry.
DCG Selling Crypto Assets at Distressed Prices
In response to their financial difficulties, DCG has started selling off their crypto assets at discounted prices in order to raise capital. This is causing further concern among investors as it raises questions about how much reserve Bitcoin is backing up Grayscale’s holdings and whether or not these sales will affect its performance going forward.
Grayscale Refuses to Provide Assurance on Reserves
Grayscale declined requests from investors for proof of reserves held by GBTC, citing security concerns as the reason why they cannot make such information publicly available through a cryptographic Proof-of-Reserve or other advanced cryptographic accounting procedure.
Market Appears To Have Priced In Contagion Risk
So far, it appears that the market has already priced in some of this risk associated with DCG’s bankruptcy as GBTC continues to trade at a sizeable discount compared to its net asset value despite these announcements. It remains unclear what will happen next and if there will be any further complications because of this situation.
Conclusion
The reverberations of Genesis‘ bankruptcy continue to ripple through the industry with DCG now selling off assets at distressed prices in order to stay afloat. While it appears that investors have already accounted for some potential contagion risk associated with this situation, there could still be more twists and turns ahead that could potentially cause further disruption in the markets.
