The post Will Tension Between Gemini And DCG Lead To Massive Selling In The Crypto Markets? appeared first on Coinpedia Fintech News

Galaxy Digital Holdings CEO, Mike Novogratz, recently stated in an interview on the American business news program Squawk Box that despite the tension between Gemini and Digital Currency Group (DCG), there will not be a significant amount of selling. He also commented that despite recent negative news, the cryptocurrency market will pick up slowly and steadily. 

Novogratz believes that the crypto market will not be greatly impacted by the current financial stress of DCG and Genesis. Furthermore, he stated that while 2022 was a difficult year for the crypto market, it will recover in 2023. He believes that the crypto winter has given rise to stricter regulations and norms, which will benefit investors by better controlling fraudulent activities.

On January 3rd, 2023, Arcane Research warned investors that the financial stress of DCG would have a severe impact on the crypto market, however, Novogratz’s opinion is in contrast to this research report. He also commended Coinbase for cutting 20% of its workforce to minimize operational costs.

The crisis at DCG began when FTX collapsed, leading to mass withdrawals by customers. DCG owns a number of crypto-related companies, including the crypto lender Genesis, the crypto media company CoinDesk, the crypto investment wing Grayscale, the crypto exchange Luna, and the crypto advisory firm Foundry. 

As a result of the market turmoil, Genesis had to halt withdrawals, citing “unprecedented market turmoil.” Gemini, a crypto exchange, was severely impacted when Genesis, a lending partner in the Gemini Earn program, halted withdrawals. Genesis owes $900 million to Gemini, which has a fair business reputation. Cameron Winklevoss, the co-founder of Gemini, has written two open letters to DCG to solve the situation as soon as possible.

What Happened with DCG & Genesis: The Background Story

According to recent reports, Genesis, a subsidiary of Digital Currency Group (DCG), had lent $2.36 billion to Singapore-based hedge fund, Three Arrows Capital (3AC), which declared bankruptcy in June 2022. After liquidating collateral, Genesis was left with a loss of $1.2 billion.

Instead of providing capital to Genesis, DCG entered into a 10-year promissory note with a 1% interest rate, falsely reassuring investors that Genesis had sufficient funds. However, it is important to note that a promissory note with a maturity of 10 years cannot be treated as a current asset, but the DCG CEO allowed this to occur for personal gain.

It has come to light that Genesis did not have enough funds, and DCG officials repeatedly lied to investors about the company’s financial health and stability. The truth of the matter is that Genesis would have gotten away with this fraudulent activity if FTX had not collapsed in November 2022.

FTX’s collapse resulted in massive withdrawals from nearly all exchanges, and when Genesis halted withdrawals due to a lack of funds, users of the Gemini Earn program were also affected.

Cameron Winklevoss, the co-founder of Gemini, stated in an open letter that as long as Barry is the CEO of DCG, a solution to the current financial stress cannot be found. He further added that Barry is an unfit CEO who has allowed numerous unethical actions to occur under his leadership. Winklevoss also commented that with new leadership at DCG, he is willing to settle the issue out of court.

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Filed under: Bitcoin - @ January 11, 2023 12:14 pm