- Digital Currency Group has reportedly started selling off shares of its Grayscale Ethereum and Bitcoin Trusts.
- The sell-off is an attempt to accrue funds to pay Genesis creditors.
Amid the ongoing turmoil within its subsidiary, the Digital Currency Group (DCG) is already selling off assets from its subsidiary, Grayscale Investments, including its Ethereum reserve. According to a report from the Financial Times (FT) based on an observed filing with the US Securities and Exchange Commission (SEC), Grayscale has started offloading its crypto Trusts.
According to the FTX report, a total of $22 million in Grayscale Ethereum Trust has been offloaded since January 24. This move accounts for how desperate the company is to recoup the funds it needs to repay the creditors of one of its bankrupt subsidiaries, Genesis Global.
Genesis Global filed for bankruptcy earlier in January following the intense exposure it had to FTX Derivatives Exchange. Though the FTX exposure was the strongest it recorded, its woes date back to the collapse of Three Arrows Capital (3AC) earlier last year.
With the bankruptcy, Genesis said it owes as much as $3.5 billion to pay creditors, one of whom is Gemini exchange. The crypto brokerage firm has about $900 million to payout to Gemini Earn customers. This outstanding debt had caused issues between DCG Chairman Barry Silbert and Gemini CEO, Cameron Winklevoss.
With the ongoing sales, the trio of DCG, Grayscale, and Gemini has reached an agreement alongside other creditors on how repayments can be made.
DCG Selloff: Will Bitcoin and Ethereum price fall?
Following the sales of the Ethereum Trust by the DCG, Grayscale is also reported to have offloaded its Litecoin, and Bitcoin Cash Trusts as well. Fear now mounts that the flagship Bitcoin Trust (GBTC) which harbors as much as $14.7 billion in Assets Under Management (AUM) will now also be sold which could be catastrophic for the crypto industry.
The sales of the Ethereum Trust were made at a very steep discount of $8 compared to their original worth of $16. The shares of the Trusts have been trading at such a discount for some time now owing to the ongoing crypto winter.
The same selling conditions hold through for its Bitcoin holdings. The fear that Grayscale will likely sell all or some of its more than 635,000 units of Bitcoin has grown since the Genesis bankruptcy news came to light. As the largest single corporate entity with Bitcoin holdings, the Fear, Uncertainty, and Doubt (FUD) that is associated with the potential sale is enormous.
Should the selloff news seep into the broader ecosystem, the price of both Bitcoin and Ethereum may reverse the upward trend they have charted since the start of the year.
This may be a significant trade-off for the company as selling off the assets will imply it is giving up the much-cherished trading fees it earns on the products
“DCG faces a trade-off: they could allow redemptions and enable liquidity at par value, including for their own holdings, but they’re better off not doing it because they make so much money from the management fees,” said Ram Ahluwalia, chief executive of Lumida Wealth.
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Closing the discount would mean giving up this cash cow.
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