Genesis’ bankruptcy filing, announced last Thursday, is an important day for Bitcoin, and it seems to have already been priced in by investors.
The trial date has been announced
The bankruptcy of Genesis Trading and the associated uncertainty about Digital Currency Group (DCG) and Grayscale’s future haven’t really dampened the mood in the Bitcoin market in recent weeks. Genesis’ bankruptcy filing, announced last Thursday, seems to have already been priced in by investors.
However, with Grayscale’s Bitcoin Trust (GBTC) liquidated with more than 630,000 BTC, the worst-case scenario risk is still not eliminated. A crucial event in this context could be the Grayscale lawsuit against the US Securities and Exchange Commission (SEC) seeking approval to convert GBTC into a spot ETF.
Presumably on the occasion of Genesis’ bankruptcy, the Court of Appeals changed the timing of the verbal debate between Grayscale and the SEC. According to a January 23 court order, the hearing date has been set for March 7 at 09:30 AM.
Earlier, Grayscale’s chief legal officer Craig Salm had predicted that oral discussions would not be exchanged until the second quarter. So the trial date comes roughly nine months since Grayscale filed the lawsuit against the SEC in June 2022.
The case matters for Bitcoin
Following Genesis’ filing for bankruptcy, investors are wondering what this means for DCG and its subsidiary, Grayscale. While there is currently no clear answer to this, there are speculations that the crypto lender could take down its parent company, and thus Grayscale, along with it.
Additionally, another big headache, especially for DCG and Grayscale, is the loss of trust in GBTC. The net asset value reduction is currently around 41%. Many believe that converting the trust into an exchange-traded fund will be the best solution for investors and the company to regain their trust and eliminate the discount.
But this could be a race against time. Just last week, it was announced that DCG is suspending its quarterly dividend distribution to strengthen its balance sheet by reducing operating costs. Additionally, DCG is considering selling crypto media company CoinDesk to raise much-needed money.
DCG owns one-tenth of GBTC
All this suggests that DCG is on shaky ground and selling its own GBTC and ETH holdings is not really an option. According to Bloomberg data, DCG owns about one-tenth of all GBTC shares.
However, due to securities regulations, DCG is not allowed to sell more than 1% of outstanding GBTC shares quarterly. Moreover, DCG will further undermine confidence and expand the price cut.
In this respect, the lawsuit against the SEC looks like a beacon of hope to gain momentum with the first Bitcoin spot ETF approved on US soil, while closing the holes created by Genesis. Therefore, Bitcoin investors should closely monitor the developments in Grayscale’s legal battle with the SEC.
At best, the first Bitcoin spot ETF, an investment vehicle for institutional investors, long considered the holy grail for the Bitcoin bull run, will be approved. In the worst-case scenario, dismissal of the Grayscale case could have a serious impact on DCG’s next steps. cryptocoin.com As we mentioned, BTC is traded at $ 22,930.
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