To explain: Grayscale literally holds (or should hold) about 3% of all bitcoin (more like 5% of active BTC not presumed lost).
They belong to DigitalCurrencyGroup. DCG is also the owner of GenesisTrading.
genesis stopped withdrawals and redemptions 5 days ago citing FTX exposure. CT started talking about a 1B hole.
Naturally people started to look to DCG to plug this hole.
DCG responded with announcing a stock raise worth 1B over the weekend... problem is: they have no takers.
Further it became clear yesterday (20/11) that DCG owes GenesisTrading 1.1B, hence the attempted raise.
This means DCG likely doesn't have the money, which means they will go under if Genesis goes under (which is about to happen)!
And here we come full circle: DCG also owns Grayscale. Grayscale holds 3-5% of all Bitcoin. Or do they? If something was dodgy between Genesis and DCG, then...
CT is asking for reserves and Grayscale REFUSES to show the BTC on-chain. 🧵5/8
So, now there are concerns that GrayScale is selling paper Bitcoin (i.e. they don't actually hold the BTC, that their customers commissioned them to hold by buying GBTC).
Let's resume: ⏬
- Genesis has exposure to FTX, and stops payouts - DCG has 1.1B exposure to Genesis and fails to raise funds - Grayscale also belongs to DCG and refuses to show BTC on-chain. Paper bitcoin?
Serious concerns about whether another house of cards will collapse! 🧵7/8
My view: Genesis and DCG will likely go insolvent. There will be (is) a markdown.
BUT: if Grayscale fails, e.g. we find out they don't hold the whole 100% of bitcoin, the sell-off will be faster and deeper than ever before.
Hence: "OMG, we are fucked!"
🧵8/8This post is based on this twitter thread.