Trader Scott Melker, better known as The Wolf of All Streets, a pun on Jordan Belfort’s nickname, was worried about the current state of the Digital Currency Group (DCG) and Grayscale.
According to Melker, the insolvency of Genesis, another DCG subsidiary, appears to be a separate issue, not affecting Grayscale. However, note that if this fund needs to be resolved, the consequences will be dire.
Still, the trader was cool with the Genesis, noting that the market had already estimated its bankruptcy and potential for a breakout.
Would DCG’s Potential Bankruptcy Be Worse Than FTX’s?
In a letter sent to its shareholders this Tuesday (18), the Digital Currency Group (DCG) stated that it will suspend the payment of dividends to its shareholders. Therefore, the crisis affecting the company could quickly put it alongside many other corporate giants that have gone bankrupt in recent years, such as Voyager, Tree Arrows Capital (3AC), and Celsius.
Despite the size of DCG, Scott Melker believes that its potential bankruptcy will not be dangerous for the market. Speaking with Kicto News, the trader noted the following.
“I do not believe that [a falência da DCG] It will be more disastrous than FTX.”
“In my opinion, FTX was the worst case scenario. In addition to its size, number of assets and creditors, Sam Bankman-Fried was seen as a godsend to the digital currency industry.”commented Scott, highlighting the SBF’s many donations to politicians.
Finally, he points out that FTX has been used by cryptocurrency-loving investors, including institutional ones.
“These people have lost their money and are no longer in ‘buy’ mode”I continued. “FTX was the worst case scenario because of the people and society who lost their money. The [quebra do] DCG will have institutional effects but the average trader will not be affected, he will just buy the dip as he normally would.”
GBTC, an opportunity or a missed opportunity?
With GBTC trading at a steep discount, at one point trading 50% cheaper than Bitcoin, the trader was skeptical when asked if this was an opportunity.
“It depends on your view of what happens to the fund, and whether it converts to an ETF,” he said. The merchant replied. “I don’t believe in this […] At this point in the Genesis infection, I don’t think so [o GBTC] He will be the person chosen by the SEC.”
“50% off… What if it becomes 60% or 70%? It was 20% and people thought it was a good opportunity.”
Finally, the interviewer agrees with the risk of Grayscale needing to break up Bitcoin’s most famous fund.
A grayscale break could have massive impacts on Bitcoin
Although he didn’t think DCG’s bankruptcy was serious, Melker Scott was more concerned when it came to Grayscale. Even indicating that this would be a rare occurrence, he indicates that its dissolution would be catastrophic.
“The real problem for the cryptocurrency market, and especially the Bitcoin market, would be if this somehow caused an infection for Grayscale and GBTC.”Scott Melker warns. “[…] On the rare occasion that something like GBTC needs to be liquidated, we will see a massive Bitcoin short event, and that would obviously be negative for the price.”
In total, Grayscale Fund owns more than 3% of all bitcoins in existence. By way of comparison, Michael Saylor’s MicroStrategy has 132,500 BTC and Grayscale has 643,572 BTC, a nearly fivefold difference.
So even if the event is considered a black swan, especially since other funds are interested in acquiring Grayscale, it’s worth following up on this drama involving DCG and its affiliates.