What are the immediate risks of downside in the market?
In this episode, Natalie Brunell is joined by Sam Callahan, Lead Analyst at Swan Bitcoin, to discuss Winklevoss open letter, DCG, Genesis, $GTBC concerns and more.
Read our notes below to learn more.
DCG and Genesis
They need to work out a deal for them to restructure loans or negotiate with each other.
None of them benefit from a long and lengthy bankruptcy proceedings.
$1.1B Promissory Note
In the letter, it shows DCG had borrowed $1.1B from Genesis and a promissory note that’s due in 10 years.
There weren't any specific details about the note.
Barry is making it sound like they are in good standing and not missing any payments to Genesis.
Will GBTC be liquidated?
DCG is the largest shareholder of the GBTC and they own 66 million shares of it, ~10% of the total supply.
If they decided to liquidate the trust, that would be a different scenario and an event of DCG bankruptcy.
In the event of DCG bankruptcy, if there are greater than 50% of the shareholders vote, they can prevent the liquidation of the trust and move it to a different sponsor instead.
The liquidation of the trust is a probability but a less likely scenario to happen.
DOJ Investigation
DCG and Grayscale scenarios would be an immediate risk for a downside or sell pressure.
Binance has always been an offshore unregulated exchange that has shady practices in the past and the biggest risk is regulatory risk.
If Binance gets charged by the DOJ, the funds of users could be inaccessible in that scenario.
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FTX, $FTT, Commodities and Securities
There are similarities between Binance and FTX but not the exact same situation at all.
There are a lot of other custodies out there that are safer and regulated.
There were class action lawsuits that came out against Gemini from Gemini Earn users.
Gemini Earn is acting a lot like a savings account.
Gemini offers interest accounts on 38 cryptocurrencies that are small caps and shitcoins.
They deserve criticism for offering these kinds of products.
Macro Picture
The Feds are probably going to hike interest rates a little bit more this year and try to keep it high for a long period of time.
There is still a ‘buy the dip’ mentality in the market.
Retail investors are still yoloing in the stock market through growth stocks.
Home sales are down 30-40% from their all time highs.
There will be lay-offs in the employment sector and start to see earnings get impacted.
There will be more traditional and economic fallout from the tight policy and risk assets would probably struggle.
In the later half of 2023, it will be rocky.
Governments around the world didn’t learn their lesson and are still spending a lot of money.
There was an article about Spain promising $10B for anti-inflation measures.
Politicians will be pressured once their constituents start struggling a little bit more and they will probably give handouts again.
There might be a pivot once things hit the fan.
Banks raise interest rates up high but still refuse to increase customer’s savings account rates.