Thread by @WinterSoldierxz

1/ The world's largest crypto lender is collapsing.

Genesis, under DCG, is ironically the latest victim of the FTX contagion after publishing Alameda Research's balance sheet via Coindesk (DCG's subsidiary).

The contagion has come full circle. Here's what you need to know ⬇️

2/ The parent company of @Grayscale & @GenesisTrading, @DCGco, is having liquidity issues & seeking a $1B emergency loan.

Before we dive into the details & ramifications, we must understand who’s involved & what their roles are.

https://twitter.com/AP_ArchPublic/status/1594386225200234496

3/ Three parties plagued by the contagion concern this time:

@DCGco
@GenesisTrading
@Grayscale

4/ @DCGco is a US-based crypto-focused conglomerate. It is the parent company of:

• @GenesisTrading: the world’s largest #crypto lending & OTC intermediary
• @Grayscale: a trusted authority in crypto asset management regulated by the SEC
• 5 other subsidiaries

5/ @Grayscale is the issuer behind Grayscale Bitcoin Trust (GBTC). #GBTC, a type of U.S. securities, is traded at a premium/discount to the net asset value (NAV).

It enables #TradFi institutions & investors to gain exposure to $BTC and profit from selling the shares at premium.

6/ As the largest legal holder of $BTC, Grayscale currently owns ~640k #Bitcoin, at a valuation of USD $10.58 billion.

More on GBTC arbitrage and why institutions trade it👇

https://twitter.com/lookonchain/status/1592945778582253568

7/ @GenesisTrading, the lending capital affiliated with DCG, might pull DCG & Grayscale into the contagion.

As the only full-service prime brokerage for digital currency, Genesis offers sophisticated financial institutions access to trade, borrow & hedge.

8/ The crisis triggered when @GenesisTrading announced it halted withdrawals citing the lack of liquidity on 16 Nov 2022.

https://twitter.com/GenesisTrading/status/1592867206722859008

9/ @GenesisTrading loaned 3AC $2.4B. The trading colossus is said to have suffered nine-figure loss due to connections with over-leveraged 3AC & Babel Finance in June 2022.

With further $175M announced stuck in #FTX, Genesis allegedly needed a $1B liquidity injection.

10/ Today, Genesis warns of bankruptcy without new funding.

#Binance and Apollo were approached for fundraising while Binance refused to invest.

https://twitter.com/dogetoshi/status/1594815598990696455

11/ The fall of Genesis has cascading effects on the industry, not only in #crypto but also #TradFi sector.

The issue was even concerning since Genesis is acting as the sole liquidity provider of Grayscale Bitcoin Investment Trust.

https://twitter.com/JoeConsorti/status/1593622993313357827

12/ If Genesis goes insolvent, its shares in Grayscale might be liquidated to pay off outstanding debts / cover the liability on Genesis’ balance sheets.

If Genesis defaults, Grayscale will potentially become insolvent unless they find new LP to take up the shares.

13/ Meanwhile, DCG is the GBTC’s largest shareholder with a 4.1% stake.

Grayscale’s $GBTC is trading at its historical low with a discount of >40% to the spot price of $BTC with #FTX contagion hitting crypto as a whole.

14/ Now Genesis is in desperate need of liquidity.

There are 3 possible moves for DCG:

- Dump GBTC & ETHE to bail out Genesis
- Keep @Grayscale & let Genesis go default
- Dissolve the trust

https://twitter.com/AP_ArchPublic/status/1594478480439271430

15/ To fill the 1B shortfall on its balance sheets, DCG might end up in a situation of liquidating its sizable investment in Grayscale's trust.

Further discount to GBTC’s NAV might become a reality with significant GBTC holders selling off their shares.

16/ Long-term investors might suffer catastrophic loss due to the record-breaking discount.

17/ As concerns with DCG getting in trouble loom large, the collapse of LUNA, 3AC, FTX & many CEXs make one thing abundantly clear: nothing is too big to fail.

Reminded by the quote from Warren Buffet, “​Only when the tide goes out do you discover who's been swimming naked.”

18/ The most solvent looking entity can always go insolvent.

Stay off #CEXes until the dust finally settles.

#NotYourKeysNotYourCoins.

https://twitter.com/crypto/status/1593771132489846787

19/ To understand the full picture of how FTX has spread contagion to DCG, Genesis & Grayscale, check out the thread by @alphaketchum.

https://twitter.com/alphaketchum/status/1593828448833011714

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