Is DCG On The Brink Of Bankruptcy?

Bitcoin yesterday still held around 16,000 USD. Altcoins also fell. ETH dropped a lot because of selling pressure because the amount of ETH in the FTX exchange hacker wallet was partially converted to renBTC, creating selling pressure.

The anxiety of the crypto market continues as they fear that Digital Currency Group (aka DCG), the parent company behind Genesis, may run into financial problems. If this is true, it will have a huge impact on the crypto market. DCG company is very big company, last year DCG was said to be worth 10 billion USD, also owns Bitcoin and crypto mining company Foundry, asset manager Grayscale, crypto exchange Luno and Coindesk news agency. Besides, DCG also invests in many other small crypto companies or projects.

The problem started when DCG’s Genesis company stopped letting customers withdraw money from their lending platform. As a result, the Gemini cryptocurrency exchange is also stopping customers from withdrawing money from the earn section on its platform. As of now, Genesis is announcing that they are stopping crypto withdrawals due to liquidity loss. However, investors speculate that they have hard-to-move money or actually have a financial hole. Recently, there has been a lot of information indicating that DCG is urgently seeking an emergency loan of 1 billion USD. If the fundraising fails, DCG may be facing a lot of problems.

After the collapse of FTX caused the price of BTC to drop from $20,000 to now, it is still around $16,000. Investors who wanted to sell and leave the market have already left. Remainers still believe in long-term BTC. However, many people are concerned that, if DCG has problems, this could be the possibility of a “black swan” event causing the market to continue falling. Because then, it is possible that the large amount of BTC that Grayscale company is holding will be liquidated leading to a sale that causes the market to drop.

A man named Adam Cochran shared his estimate of DCG’s fortune. In 2021, he estimates DCG to be worth around $7-8 billion. In which, Grayscale and Genesis account for most of the value.

In 2022, due to the falling market, DCG’s estimated assets according to Adam Cochran are about $4.4 billion. Now, companies and investment funds no longer want to take on high risks like last year. Money in the crypto market is getting scarcer. Therefore, it is very difficult for DCG to raise capital or borrow 1 billion USD (equivalent to 25% of the company’s capitalization) at this stage.

To be able to get $ 1 billion, Adam Cochran thinks that it is likely that DCG will have to mortgage the company to borrow. A higher possibility DCG will have to sell part of the company through the sale of shares, selling the companies in which it is investing, then liquid assets, companies like Luno/Coindesk/Foundry. If the above options are not enough, DCG will consider Grayscale company. If DCG has to sell Grayscale, it shows that they are in huge financial trouble. Fidelity Investments is said to be interested in Grayscale because it is storing BTC.

Grayscale is storing more than 3% of all BTC on the market, which is a huge number. Many people question whether that amount of BTC is enough. Previously, Grayscale announced that their BTC was entrusted to the Coinbase Custody Trust holding. Coinbase Custody Trust said that it does not disclose the address of the wallet it holds because it wants to protect customers. Therefore, investors are still waiting for the next moves of DCG in the coming days.