BlocksInform
The insolvency of Genesis Trading and the related uncertainty about the future of Digital Currency Group (DCG) and Grayscale have not really dampened the mood on the Bitcoin market in recent weeks. Genesis’ bankruptcy filing, which was announced last Thursday, seems to have already been priced in by investors.
Nevertheless, the risk of a worst-case scenario with the liquidation of Grayscale’s Bitcoin Trust (GBTC) with over 630,000 BTC has still not been eliminated. A crucial event in this context could be the grayscale lawsuit against US securities and the foreign exchange commission (sec) asking for approval to convert gbtc into a spot etf.
And perhaps in the initial bankruptcy, the Court of Appeal advanced the timeline of the oral argument between the gray scale and the dry. According to a January 23 court order, the hearing date has been set for March 7 at 9:30 AM ET.
Earlier, Grayscale’s chief legal officer Craig Salm had estimated that oral arguments would not be exchanged until the second quarter. The date of the hearing therefore follows almost nine months since Grayscale filed its complaint against the Sec in June 2022.
After several delays, the SEC denied Grayscale’s request to convert Bitcoin Trust (GBTC) into a Bitcoin-based spot ETF, citing concerns about market manipulation and investor protection.
Why litigation is critically important for Bitcoin.
After Genesis went bankrupt, investors question what this means for DCG and its subsidiary Grayscale. While there is currently no clear answer to this, there is speculation that the crypto lender might take his parent company and therefore gray with it.
Also, another huge puzzle for dcg and gray scale especially is the loss of confidence in gbtc. The discount to net asset value is currently around 41%. Many believe that converting the trust to ETFs would be the best solution for investors and the business to regain confidence and eliminate the reduction.
But it could be a race against the clock. Last week, it was announced that dcg was suspending its quarterly dividend to reinforce its balance sheet by reducing operating expenses. In addition, DCG is looking into selling crypto media company CoinDesk to raise much-needed cash.
All this suggests that the dcg is in unstable territory, while the sale of his own assets is not really an option. According to Bloomberg's data, dcg holds almost a tenth of the total gbtc equities.
But due to securities regulations, dcg is not allowed to sell more than 1% of its outstanding gbtc shares on a quarterly basis. In addition, dcg would further undermine confidence and broaden the haircut.
With regard to that, the lawsuit against the sec seems like a glimmer of hope to pick up steam with the first bitcoin spot etf approved on u.s. soil while patching the holes created by genesis. As a result, Bitcoin investors are expected to follow closely the evolution of Grayscale's legal battle with the SEC.
At best, the first Bitcoin spot ETF will be endorsed – an investment vehicle for institutional investors that has long been regarded as the Holy Grail for a Bitcoin bull race. In the worst case, a grey-scale prosecution rejection could have a serious impact on next steps for dcg.
Bitcoin prices these days.
At the time of the press, BTC was trading at $22,901, staying relatively calm in a range from $23,361 to $22,296. A smaller cut would result in a support zone of $21,650. A breakout on the rise could allow a push to $24,000.
