Monat: Januar 2023

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Silbert responds to Winklevoss’s accusations: DCG doesn’t have to return the funds

  • Cameron accused Silbert of misrepresenting statements to Gemini on how the company was capitalized  
  • DCG’s responsibility for Genesis restructuring and bankruptcy based on non-callable $1.1b promissory note

The feud between Gemini crypto exchange cofounder Cameron Winklevoss and Digital Currency Group (DCG) CEO Barry Silbert continues to escalate, with Winklevoss calling for Silbert’s removal from the company. David Hollerith reports on Yahoo Finance. 

Winklevoss demanded Silbert step down 

Cameron Winklevoss filed the second of two open letters. In the first one, which came last week, Winklevoss wrote:

There is no path forward as long as Barry Silbert remains CEO of DCG.

He demanded Silbert step down so DCG and Gemini can settle their ongoing dispute out of court. 

Misrepresenting statements 

Most recently, Cameron accused Silbert of misrepresenting statements made to Gemini in relation to how the company was capitalized after an earlier loss in the summer. 

Silbert responded in a letter to investors. The key point of contention is about how culpable the company DCG is for Genesis’ current restructuring and potential bankruptcy. It boils down to this $1.1 billion promissory note, which is not callable now. That means DCG would not have to return those funds in the event of bankruptcy. 

What does this mean for Genesis?

There still isn’t much debate there, but the war of words will go on according to Hollerith. Silbert has claimed that his company never took out a $1.675 billion loan from Genesis, adding that the company is current on all outstanding loans and never missed an interest payment. He suggested the next interest payment on the loan would be made in May.

The background 

The Winklevoss twins turned to Genesis when the company introduced its Gemini Earn program, which offered a yield of up to 8% on crypto assets. Gemini paid the interest partially by loaning customer money to Genesis Global Capital, owned by DCG, which then loaned the funds to institutional clients.

After FTX’s collapse, Genesis suspended customer redemptions, leaving Gemini unable to pay back Earn clients. 

The post Silbert responds to Winklevoss’s accusations: DCG doesn’t have to return the funds appeared first on CoinJournal.

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Grayscale Bitcoin Fund up 25% this year, but discount still killing investors


Key Takeaways

  • GBTC Fund is up 25% since the start of the year, compared to a 4% rise in the underlying asset, Bitcoin
  • The discount is now back to where it was prior to the FTX collapse, at 37%
  • The discount had hit an all-time high of 50% only four weeks ago

 

The largest Bitcoin fund in the world, the Grayscale Bitcoin Trust, has seen its value jump by 25% since the start of the year. Bitcoin, on the other hand, is only up about 4% on the year.

This means that the discount to the underlying asset, Bitcoin, is at its smallest level in months. I had analysed the divergence in December, only four weeks ago, when the discount hit an all-time high of 50%.

Today, the discount sits at 37%, back to where it was before the ignominious collapse of FTX.

What is the Grayscale discount?

Grayscale is a trust which provides an avenue for investors to gain exposure to Bitcoin without physically buying Bitcoin. This can be convenient for institutions or other entities who may not be able to participate I the Bitcoin market directly for regulatory or legal reasons.

But Grayscale has rarely traded at the same price as its net asset value. Previously, it had traded at a premium to the underlying Bitcoin as shares surged with investors desperate to get exposure to the high-flying cryptocurrency.

Today, however, it is the opposite – a steep discount. While there is a chunky fee of 2% that explains some of the discount, this does not come close enough to bridging a discount of 30%+ that we have seen consistently in this crypto winter.

The SEC recently denied Grayscale’s application to convert the trust into an exchange-traded fund, spelling bearish action around the fund. There has also been the rise of more competition, with similar funds being launched, especially in Europe, and filings for Bitcoin ETFs.

But the most significant worry was surrounding the safety of reserves. This issue grew legs after the FTX collapse, as speculation mounted that Grayscale’s parent company, Digital Currency Group (DCG), may file for bankruptcy.

DCG is also the parent company to Genesis, which recently laid off 30% of its staff and is reportedly considering bankruptcy. Concern grew when Grayscale refused to publish a proof of reserves report, suddenly in vogue following the nefarious actions behind the scenes at FTX.

It cited “security concerns” as the reason that this would not be possible, but analysts decried this, with it very unclear what security concerns could be ignited by the publishing of public records on the blockchain.

Why has the discount closed?

While the discount is still enormous at 37%, this has narrowed from the staggering 50% it reached in the aftermath of the FTX implosion.

There has been increasing pressure on DCG to address this discount, with calls from within the industry that the trust should allow investors to redeem their holdings, which would allow them to realise the full value of the Bitcoin they hold. This clamour may have helped narrow the gap somewhat.

One hedge fund, Fir Tree, even launched a lawsuit against Grayscale, demanding that the company either lower its fees or allow redemptions such that the discount can be closed.

But like everything in crypto right now, macro also has a part to play. The year has begun with crypto prices rising off increased optimism that inflation may have peaked. This follows a relatively serene month or so in crypto markets.

The discount widened to a large degree in the aftermath of the FTX crash because people feared contagion and the chips were still falling. Similar to the peg on Tether slipping when the UST crisis occurred.

Now that normal service has somewhat resumed, the discount has narrowed. Unfortunately for investors, it is still a staggering 37% off the net asset value. In a year where Bitcoin itself has plummeted, layering in a discount on top of that torrid price action is the last thing investors needed…

The post Grayscale Bitcoin Fund up 25% this year, but discount still killing investors appeared first on CoinJournal.

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Coinbase lays off 950 employees, CEO says the exchange is well capitalized

  • The exchange wants to reduce operating costs by 25%.
  • It is the second crypto exchange after Huobi to confirm layoffs in 2023.
  • Coinbase CEO has however confirmed that the exchange is well capitalized.

The American-based cryptocurrency exchange, Coinbase has announced through its website that it is cutting down on its operating expenses by 25%. The move includes laying off 950 employees, which accounts for about 20% of the company’s workforce.

The exchange’s CEO, Brian Armstrong, has listed the ongoing bear crypto market and the broader macroeconomy as the main reasons to reduce the company’s expenses.

Hard times for the exchange

While announcing the laying off, the CEO also assured the public that the crypto exchange is well capitalized and added that crypto is not going anywhere.

Nevertheless, the CEO noted that while the exchange has gone through multiple crypto bear markets, the current bear market is proving to be a real struggle for Coinbase. He said that it is the first time a global economic meltdown has aligned with a bear crypto market. He said:

“As we examined our 2023 scenarios, it became clear that we would need to reduce expenses to increase our chances of doing well in every scenario. While it is always painful to part ways with our colleagues, there was no way to reduce our expenses significantly enough without considering changes to headcount.”

2023 has already seen several layoffs

Coinbase joins several other companies that started the year 2023 by announcing layoffs. Huobi exchange also recently confirmed 20% layoffs.

For example, Salesforce announced it is planning to reduce its workforce by 10%, which would translate to laying off about 8,000 people. Amazon also confirmed that it is carrying out its second round of layoffs that will see it lay off about 18,000 people from its workforce.

The post Coinbase lays off 950 employees, CEO says the exchange is well capitalized appeared first on CoinJournal.