After the DXY fell intra-day to a brand new 7-month low of 101.56 yesterday, the Bitcoin price briefly managed to tackle the important thing resistance zone above the $21,500 mark, reaching its highest level since September 13, 2022, at $21,650. Nonetheless, the euphoria didn’t last long for 2 reasons.
First, the DXY showed a powerful bounce, and second, news became public that Genesis Trading may very well be preparing for bankruptcy. This has stoked recent fears that the contagion within the crypto market could roll on after the FTX bankruptcy in November. But what is understood thus far and what could this mean for the Bitcoin price?
Here’s What’s Known
In keeping with a Bloomberg report yesterday, Genesis Trading, a subsidiary of crypto mogul Barry Silbert’s DCG empire, is facing bankruptcy. If the report proves true, the bankruptcy filing could come as early as this week, in accordance with Bloomberg.
Faced with a scarcity of liquidity, Genesis is currently in confidential negotiations with various creditor groups. Genesis and DCG have reportedly exchanged several proposals with creditors, but have thus far failed to achieve an agreement.
Genesis is working on a restructuring plan, in accordance with informed sources. Some creditors apparently could be willing to simply accept a mixture of money and share certificates from DCG.
Nonetheless, the deal will not be ready yet, as Bloomberg reported yesterday. In keeping with crypto creator Samuel Andrew, citing sources near DCG, talks are continuing and plans could still change. Andrew wrote today:
UPDATE: The Genesis Trading news regarding a ‘pre-packaged bankruptcy’ is being refuted by several Genesis creditors that matter. **several sources claim that DCG/Genesis is leaking the pre-packaged bankruptcy narrative to force an agreement. Quote, ‘…removed from a done deal.’
What Impact Will It Have On The Bitcoin Price?
The impact of a Genesis bankruptcy on the Bitcoin price will likely depend largely on whether DCG will discover a take care of Genesis’ creditors or whether DCG shall be dragged into chapter 11 with them.
Although details usually are not yet available, it seems likely that a “pre-packaged” deal could prevent a serious market impact on Bitcoin price by stopping DCG’s insolvency and liquidation of Grayscale.
If there’s no deal, this might arguably end in the “money cow” Grayscale having to be sold or DCG being forced to liquidate large chunks of its Grayscale Bitcoin Trust (GBTC) holdings. That is resulting from the indisputable fact that DCG owns Genesis money. The loans are $575 million due in 2023 and one other $1.1 billion promissory note due in 2032 to Genesis.
Nonetheless, there are several aspects still unclear. Thus, it’s still not clear if a Genesis bankruptcy will mechanically end in DCG happening, depending on the query of in the event that they can raise enough funds. Also, the liquidation of GBTC isn’t a straightforward task because it comes with high legal hurdles and requires the SEC’s approval.
Accordingly, crypto influencer Lark Davis also commented via Twitter, “No indication yet on how this can affect DCG or the Grayscale Bitcoin and Ethereum Trusts.”
Hypothetically speaking, a liquidation of your entire GBTC could mean an enormous dump if greater than 630,000 BTC were flushed into the still illiquid market. Even when the liquidation were to happen over a period of several months, such selling pressure would likely drive the Bitcoin price significantly down.
At press time, the Bitcoin price remained relatively stable despite the rumors and stood at $20,802.
Bitcoin price rejected at key resistance | Source: BTCUSD on TradingView.com
Featured image from Behnam Norouzi / Unsplash, Chart from TradingView.com