Cryptocurrency
It seems that the liquidity crises, rapid withdrawals, and the specter of bankruptcy that erupted in the digital currency market after the collapse of FTX is still emerging.
According to Aniya, Dutch cryptocurrency exchange Bitvavo Group is facing “liquidity issues.”
DCG’s Genesis still has a freeze on withdrawals from its lending arm, and Grayscale’s Bitcoin fund is trading at record lows.
Heavy sales
Crypto analyst Will Clemente, on Twitter noted strong selling in several DCG-related cryptocurrencies over the past 48 hours, predicting that DCG will be searching for liquidity.
Filecoin and Flow, both of which Clemente claimed DCG was exposed to, are down about 20% and 10% over the past 24 hours according to CoinGecko data.
Several cryptocurrencies linked to Barry Silbert’s DCG sold off aggressively this evening (FIL, ZEN, ETC, NEAR), leaving many speculators wondering if the selling was derived from DCG itself.
Company statement
Dutch cryptocurrency exchange Bitvavo said it has €280 million ($297 million) stuck with Digital Currency Group (DCG), or 17.5% of €1.6 billion.
Dutch group Bitvavo says it manages deposits and other assets. Bitvavo assured customers that the situation “has no impact on the Bitvavo platform.”
Bitvavo claims in a blog post that DCG is “experiencing liquidity issues due to the current turmoil in the cryptocurrency market” and that DCG has “suspended payments until this liquidity issue is resolved.”
But a DCG spokesperson said the money is owned by the “independent subsidiary” Genesis, not DCG.
The crisis is rooted
Dutch company Bitvavo said in a statement that it “held DCG responsible for the inaccessible funds.”
Headed by SecondMarket founder Barry Silbert, DCG is one of the largest and most well-known crypto companies in the world that owns Genesis, Grayscale, CoinDesk, Foundry and Luno.
The five weeks since FTX collapsed and filed for bankruptcy have not been good for DCG.
more details
Genesis froze withdrawals on its lending arm a month ago and has not unfrozen them, and Gemini, the exchange owned by the Winklevoss brothers (not a subsidiary of DCG), had to pause recalls on the Earn product because its partner in Gemini Earn is Genesis.
Genesis reportedly owes Gemini Earn users $900 million as problems at Genesis have put DCG’s finances into question.
The beginning of the crisis
On November 22, Silbert told shareholders that DCG owed Genesis $575 million, and said at the time that we have weathered previous crypto winters, and while this may be harsher, we will come out of it collectively stronger.
However, on December 3, the Financial Times reported that DCG owed Genesis $1.7 billion.
Grayscale Capital is also facing significant headwinds, as New York hedge fund Fir Tree Capital Management has filed a lawsuit against the company alleging that Grayscale Bitcoin Trust (GBTC) has “potential mismanagement and conflicts of interest.”
The Grayscale Bitcoin Trust is a fund that enables investors to gain exposure to bitcoin without buying the bitcoin themselves. It is currently trading at a discount of -48.7% compared to the market value of the underlying asset, according to data from CoinGlass.