‘Contagions’ are apparently caused not only by biological viruses, but also by fear in bear markets. One crypto company after another appears to have exposure to other companies with financial problems, which in turn makes them vulnerable themselves. Mike Novogratz of the crypto hedge fund Galaxy Digital thinks so the problems at Digital Currency Group (DCG) will not cause sales pressure, but not everyone agrees.
‘Bad crypto news, but not for prices’
Novogratz spoke to CNBC’s Andrew Ross Sorkins about the problems at DCG. He doesn’t think that selling will be part of the situation, but at the same time it is not good for the industry. “The outlook for crypto isn’t terrible, but it’s not great either. We have headwinds from upcoming regulations, and people are going to cut costs [om deze periode te overleven]. Crypto is not going to disappear,” he stated.
He also finds the market quite ‘clean’ due to the lack of leverage in the market, and he notices that crypto prices still relative have remained stable over the past few months. All investors with leverage have sold because of all the bad news, so there are not that many people who want or need to sell.
“The outlook for #crypto isn’t horrible but it’s not great. We’ve got regulatory headwinds we didn’t have before. People are going to cut costs and survive this transition period,” says @novogratz. “Crypto is not going away. It’s a pretty clean market right now.” pic.twitter.com/k57ITlRFOV
— Squawk Box (@SquawkCNBC) January 10, 2023
‘Arcane Research: DCG is bad for crypto prices’
His analysis is in stark contrast to others, including crypto market researcher Arcane Research. Novogratz suggests that DCG, stakeholders and investors are unlikely to sell, but Arcane Research thinks it is. If DCG filed for bankruptcy, it would be forced to sell its assets. This could also apply to Grayscale’s trust funds, such as GBTC and ETHE. Grayscale is a subsidiary of DCG.
Investors should pay attention to the ongoing financial distress related to Digital Currency Group (DCG) as the outcome could severely impact crypto markets.
Read more:https://t.co/5syXBpEw7q
— Arcane Research (@ArcaneResearch) January 4, 2023
DCG ran into trouble when DCG subsidiary Genesis was unable to return customer tokens after Genesis was hit by the demise of FTX. After negotiations, the company proposed to return Bitvavo only 70% of the $280 that the Dutch exchanges still receive from DCG, but Bitvavo disagrees here.