WTF is $GBTC, DCG and Genesis, why is everybody panicked, and why could it crash #Bitcoin? 👇
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I am going to be impartial for most of this thread and just report the facts to the best of my understanding. I'll share my opinion towards the end.
Let's get started...
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Let's get started...
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GBTC (@Grayscale) is a Bitcoin trust that is traded on the stock market. It's part of the @BarrySilbert empire which also includes
@DCGco @GenesisTrading @CoinDesk @TradeBlock and more.
Wtf is a Bitcoin trust though?
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@DCGco @GenesisTrading @CoinDesk @TradeBlock and more.
Wtf is a Bitcoin trust though?
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It's a stock thats value is derived from the amount of Bitcoin the trust holds. Grayscale holds 643,572 Bitcoin which is worth just over $10 billion.
Buying GBTC stock allows investors to have BTC exposure without buying BTC.
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Buying GBTC stock allows investors to have BTC exposure without buying BTC.
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So if BTC is worth $16,531 and each Grayscale share is worth 0.00091477 BTC then each share should be worth $15.11 (16,531 * 0.00091477) right?
No, because Grayscale's value is not tethered to the value of BTC, it is loosely based on it.
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No, because Grayscale's value is not tethered to the value of BTC, it is loosely based on it.
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Sometimes GBTC trades at a premium to BTC and other times at a discount. Since March 2021 it's been trading at a growing discount and a few days ago it hit a record discount of -45.08% 👀 But why? To know this we need to look at DCG (@DCGco).
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The parent company of @Grayscale is DCG, which is also the parent of prime broker @GenesisTrading.
Genesis is huge, they are worth billions, they've been around since 2013 and they provide brokerage services to institutions as well as lending services.
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Genesis is huge, they are worth billions, they've been around since 2013 and they provide brokerage services to institutions as well as lending services.
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But Genesis is in trouble and it's not because of FTX.
Sure, they had $175m exposure to FTX but to them that's nothing. They have a $1.675b hole in their books that needs to be filled asap 👀
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Sure, they had $175m exposure to FTX but to them that's nothing. They have a $1.675b hole in their books that needs to be filled asap 👀
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See, back in June 3AC defaulted which left Genesis with liabilities that rendered it insolvent.
Instead of declaring bankruptcy, DCG assumed the liabilities by taking a $1.1b loan from Genesis. Wait, what?
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Instead of declaring bankruptcy, DCG assumed the liabilities by taking a $1.1b loan from Genesis. Wait, what?
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How can an insolvent Genesis lend out $1.1b to DCG and then get bailed out by DCG?
Well, Genesis is a lender. Customers deposit crypto which Genesis lends out, earns interest on and then pays depositors part of that interest.
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Well, Genesis is a lender. Customers deposit crypto which Genesis lends out, earns interest on and then pays depositors part of that interest.
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Genesis basically loaned itself money using DCG as a go-between. This means that DCG has taken on the liabilities from 3AC which it cannot afford to pay off atm.
Now Genesis is looking for a $1b loan to fill the hole in its lending book but it's struggling to get one.
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Now Genesis is looking for a $1b loan to fill the hole in its lending book but it's struggling to get one.
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So the worry is that if Genesis goes under, DCG and Grayscale follow and since Grayscale holds 643,572 BTC it might be dumped to save Genesis.
Which in my opinion, doesn't make any sense. All tweets from here on out are my opinion and definitely not financial advice 🤣
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Which in my opinion, doesn't make any sense. All tweets from here on out are my opinion and definitely not financial advice 🤣
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Despite GBTC's share price dropping (as I mentioned above), Grayscale is not in trouble. They hold a lot of BTC and as Frank Chaparro recently reported Grayscale has made $477m revenue this year. They are very profitable, selling makes no sense.
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And Genesis will most likely get the $1b it needs to cover the hole in the short term.
This is just my opinion but I think Grayscale is fine and that much of this is blown out of proportion. As is normal in crypto.
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This is just my opinion but I think Grayscale is fine and that much of this is blown out of proportion. As is normal in crypto.
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One concern I have is that Grayscale has recently refused to show proof that it actually holds the 643,572 Bitcoin it claims to hold, sighting security concerns.
Coinbase has since stepped in saying it holds the Bitcoin for Grayscale but that's not proof.
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Coinbase has since stepped in saying it holds the Bitcoin for Grayscale but that's not proof.
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I am not overly concerned about the lack of proof but you never know in crypto.
This could turn into a sh*tshow of epic proportions but the most likely scenario is that the damage is contained to Genesis and maybe Bitcoin takes a hit in the hysteria that ensues.
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This could turn into a sh*tshow of epic proportions but the most likely scenario is that the damage is contained to Genesis and maybe Bitcoin takes a hit in the hysteria that ensues.
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However, I believe Grayscale will be fine so I will use it as an opportunity to buy the dip.
As always, my stance may change as this story unfolds.
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As always, my stance may change as this story unfolds.
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