Unchained Genesis May Be Facing Bankruptcy. Could It Take DCG Down With It? - Ep. 429
Dec 6, 2022
Ram Ahluwalia, CEO of Lumida, and crypto analyst Samuel Andrew delve into the financial turmoil facing Genesis and its parent company, Digital Currency Group. They explore the potential repercussions of Genesis's liquidity crisis and its ties to the FTX collapse. Key topics include risky loan practices, the relevance of the Grayscale trade, and the looming threat of bankruptcy. They also discuss regulatory challenges and what a spot Bitcoin ETF could mean for the industry, emphasizing the urgent need for regulatory frameworks to stabilize the crypto market.
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Importance of Genesis and DCG
- Genesis and DCG are crucial for crypto market liquidity due to their large trading volumes and loan issuances.
- Their potential downfall poses contagion and reputational risks for the entire crypto industry.
The Grayscale Trade
- Genesis's problems began with the "Grayscale trade," where firms profited from GBTC's premium over spot Bitcoin.
- This premium flipped to a discount, impacting firms like Three Arrows Capital (3AC), who had borrowed from Genesis.
Reckless Lending
- Genesis displayed reckless loan underwriting, with 47% of their loan book issued to 3AC.
- This risky behavior was likely driven by the high profits generated by the GBTC trade.