• Genesis Trading and Digital Currency Group (DCG) have reached an agreement over a debt dispute.
• To raise capital to pay creditors, DCG is selling shares in Grayscale Bitcoin (GBTC) and Ethereum (ETHE) Trusts at a discount.
• Selling these shares could have a massive impact on the discount to NAV of the trust, though DCG may not be allowed to sell more than 1% of its outstanding shares without separate approval from the SEC.
Genesis Trading and DCG Reach Agreement
After a long back-and-forth, Genesis Trading and Digital Currency Group (DCG) have reached an agreement regarding their debt dispute.
DCG Selling Shares in Grayscale Trusts
In order to generate funds to pay creditors from Genesis Trading, DCG has begun selling shares in several of its most valuable Grayscale trusts at a steep discount. According to US securities records seen by the Financial Times, Grayscale’s Ethereum Trust is currently the focus of DCG’s sales activities, with about a quarter of its shares sold since January 24th for around $22 million. Each share entitles investors to $16 worth of Ether but is being sold for about $8 per share.
Selling GBTC Could Impact Discount To NAV
At this time it remains unclear whether or not DCG plans on selling any of its GBTC holdings as well in order to raise liquidity. However if they do so it could have a major impact on GBTC’s discount rate relative to Net Asset Value (NAV). Currently GBTC’s discount rate stands at 43%. Furthermore, according to US law, DCG cannot sell more than 1% of its outstanding GBTC shares each quarter without receiving separate approval from the Securities and Exchange Commission. If they were allowed that much it would take 2.5 years for them to sell all their holdings in the trust.
Future Uncertainty For Crypto Markets
The future looks uncertain for both Bitcoin and Ethereum markets as there are still many unanswered questions surrounding this situation such as how much impact will these sales have on their respective prices? What if no SEC approval is granted? Will other shareholders follow suit? All these questions remain unanswered at this time but crypto traders should keep an eye out for any further developments regarding this story as it may affect their investments significantly in the near future.
Though both parties involved have come to an agreement over their debt dispute with Genesis Trading, there are still plenty of unknowns when it comes to what implications this might have for cryptocurrency markets moving forward – especially if DCGs sales continue or increase beyond what regulators allow them legally without prior approval from the SEC. For now traders should just keep an eye out for any new news related to this incident as it might affect their portfolios greatly moving into 2021