Bitcoin may implode when owner with 6K BTC goes bankrupt
- Nouriel Roubini warns that Bitcoin may soon fall lower than the recent bottom.
- According to the economist, the risk stems from the bankruptcy risk of DCG and Grayscale.
Economist Nouriel Roubini has warned of an impending collapse of Bitcoin (BTC). He says the implosion, which is already likely to happen, will be caused by the bankruptcy risk facing the Digital Currency Group (DCG).
In a tweet, Roubini stated that it is likely that DCG, the parent company of both institutional crypto trading firm Genesis Global Capital, and crypto fund manager Grayscale, may be in a financial crisis at the moment.
Many – 3AC, Alameda – tried that trade and went bankrupt. The discount could be larger given the bankruptcy risk for DCG (given the exposure to Genesis) and no evidence that GBTC has the assets it claims to have. Crypto is the mother of all scam card houses. And it’s imploding now! https://t.co/W8XFn5AFjC
— Nouriel Roubini (@Nouriel) 19 November 2022
Genesis has recently stopped withdrawals on its platform citing contamination from the FTX collapse. Grayscale, the largest institutional owner of Bitcoin (BTC) accumulating over 600,000 BTC, has seen its flagship fund, Grayscale Bitcoin Trust (GBTC) trade at a massive 42 percent discount to its net asset value (NAV).
The discount could be larger given the bankruptcy risk for DCG (given the exposure to Genesis) and no evidence that GBTC has the assets it claims to have. Crypto is the mother of all scam card houses. And it’s imploding now!
The Turkish-American professor was reacting to crypto trader Nic Carter’s suggestion of a hypothetical trade that could profit from the huge discount at which the GBTC fund trades. Roubini also added in his response that several other firms, including 3AC and Alameda which are both now bankrupt, have already tried the trade and failed.
Roubini previously named Grayscale and Genesis in a group of crypto firms he refers to as “Crypto’s Gangsta G Gang of 4.” The other two firms include Winklevoss Twins-owned Gemini and Michael Novogratz-run Galaxy Digital. According to Roubiniall the firms are now in deep trouble or in danger of collapsing.
The New York University professor has also taken a jab at Binance and its CEO Changpeng Zhao while calls the entire crypto market a collapsing house of cards among other names.
DCG and grayscale remove concerns from investors
Meanwhile, DCG has released a statement to dispel speculation that it is in financial trouble as a result of exposure to Genesis. The crypto giant said in a tweet that the impact of Genesis’ suspension of withdrawals and new loan generation is only in that part of Genesis. It does not even affect other parts of the lender’s business to DCG itself.
The impact lies with the lending business at Genesis and does not affect Genesis’ trading or custody business. Importantly, this temporary action has no impact on the business operations of DCG and our other wholly-owned subsidiaries.
— Digital Currency Group (@DCGco) 16 November 2022
The impact lies with the lending business at Genesis and does not affect Genesis’ trading or custody business. Importantly, this temporary action has no impact on the business operations of DCG and our other wholly owned subsidiaries,
Grayscale issued a similar Update revealing that while it cannot share a proof-of-reserve of its BTC holdings that it holds with Coinbase Custody for security reasons, the strict regulatory compliance under which it operates its GBTC funds is reason enough for investors to remain calm .
The rules under which Grayscale operates prohibit it from lending its underlying assets to other firms. It also clarified that these rules mean that Grayscale has exclusive ownership of the assets.
