Research Firm Warns Bitcoin and ETH Investors About DCG

Renowned crypto firm Arcane Research has issued a warning to Bitcoin (BTC) and Ethereum (ETH) investors in light of the growing events surrounding Digital Currency Group (DCG), Genesis, and Grayscale. in a Article by analyst Vetle Lunde, the firm warns:

Investors should pay attention to the ongoing financial difficulties related to Digital Currency Group (DCG), as the outcome could severely affect crypto markets.

In the reasoning behind the warning, Arcane Research claims that if DCG goes bankrupt, it could be forced to liquidate its assets. “This could force DCG to sell its sizeable positions in GBTC and unknown positions in ETHE and other grayscale trusts”Lunde said.

Furthermore, the analyst argues that a “natural, less liquidity-constrained” solution could be a Reg M solution that allows holders of Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETH) and other trusts to redeem shares in net assets. . worth.

This would solve for the near-record NAV – the value by which the fund trades below the spot price of Bitcoin. GBTC was trading at -45.35% yesterday, while ETH had a NAV of -55.83%. The dissolution of the trust via Reg M would trigger tangible impacts on the crypto markets, as GBTC comprises approximately 3.3% of the circulating BTC supply and 2.5% of the ETH supply.

Arcane describes the threat to the market in mass arbitrage opportunities:

A Reg M would trigger a massive arbitrage strategy of selling spot crypto instead of buying Grayscale Trust shares. If this scenario plays out, crypto markets could face a further downside.

In the long term, however, Arcane Research calls this scenario a positive event, as the crypto market is “finally relieved of the enormous burden” caused by “greyscale widowhood trading.” According to Lunde, this could even be the final possible bottom event for the market.

Does Bitcoin Face a Final Intrinsic Clash?

Like NewsBTC BTC reported, the pressure on DCG is growing day by day. Earlier this week, Gemini founder Cameron Winklevoss published an open letter claiming that Barry Silbert’s DCG was using delaying tactics in bad faith. Winklevoss gave Silbert a January 8 deadline to return the $900 million in Gemini Earn client funds.

If Silbert fails to comply, this could culminate in coordinating a voluntary DCG Chapter 11 filing, according to Arcane Research. Besides, valkyrie investments and asset manager of $3.5 billion Fir tree also took the stage.

Valkyrie made an offer to become GBTC’s new sponsor and administrator while announcing the launch of an opportunistic fund to take advantage of GBTC discounts. Fir Tree has filed a lawsuit, presumably in a tactical move to hurt DCG’s valuation and reduce the likelihood of third-party investment.

At press time, Bitcoin price stood at $16,817, still without volatility.

BTC/USD, 1-day chart

Featured image from iStock, Chart from

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