After a long back-and-forth, the drama between Genesis and DCG appears to be coming to an amicable end after Genesis reached an agreement with DCG and other creditors yesterday – but a price crash could be in the offing as DCG is forced to sell its stake in its Grayscale Bitcoin (GBTC) and Ethereum (ETHE) Trusts .
As the Financial Times reports today, Digital Currency Group has begun selling shares in some of Grayscale’s most valuable trusts at a discount. The sale was intended to raise capital to pay off debts from bankrupt Genesis Trading.
Bitcoin And Ethereum Crash?
The information is based on US securities records seen by news outlets. According to them, Grayscale’s Ethereum Trust is now the focus of DCG, where the group sold about a quarter of its shares in several transactions since January 24 to generate about $22 million.
The company sells for about $8 per share, although each share is entitled to $16 in Ether. “This is just part of our ongoing portfolio restructuring,” DCG said.
GBTC, which holds 633,000 Bitcoins, appears to be untouched so far. Whether DCG also plans to sell its shares to raise liquidity is unclear at this time. DCG bought nearly $800 million in GBTC shares from March 2021 to June 2022, in an effort to keep the discount from increasing due to lack of demand.
This gives the company approximately 9.67% of the trust’s outstanding shares. If DCG needs to raise more money, selling the stock may be an option. However, selling them can have a massive impact on the discount to NAV, which is already at 43.08%.
In addition, it should be noted that by law DCG cannot sell more than 1% of its outstanding shares per quarter unless it receives separate approval from the US Securities and Exchange Commission. In the absence of such an agreement, the sale of Grayscale Bitcoin Trust will take approximately 2.5 years for DCG to sell all of its shares.
In general, the current situation is uncertain as it is not clear that the sale of ETHE and GBTC will have a direct impact on the spot market. It depends on who the Bitcoin and Ethereum Trust shares are sold to and under what conditions – whether DCG allows redemption to provide liquidity at par.
The danger of a Bitcoin and Ethereum price crash will be premature.
It is also worth noting that DCG has started a “small block” sale of shares in a Litecoin Trust, Bitcoin Cash Trust, Ethereum Classic Trust and Digital Large Cap Fund, according to reports.
DCG And Genesis Reach Agreement With Creditors
Yesterday, so known that Gemini has reached an agreement in principle with Genesis, DCG and other creditors in a plan that will provide users Get a way to recover their assets. As part of this initiative, Gemini will also contribute up to $100 million to User Acquisition.
Under the terms of the agreement, DCG will also exchange $1.1 billion of notes due 2032 for convertible preferred stock issued by DCG. In addition, DCG will refinance its existing 2023 term loan with a new junior secured term loan in two tranches to be paid to lenders in an aggregate amount of $500 million.
One piece of information that is not specified is whether the value of the preferred stock will be transferred to DCG equity. According to previous knowledge, the new DCG package will ensure that the lender will recover more than 80% of the funds, but this still depends on the preferred business notes for conversion, liquidation prices realized, and the known costs associated with the bankruptcy procedure.
At press time, the Bitcoin price stood at $22,941, holding above the crucial support at $22,635.
Option images from iStock, Charts from TradingView.com