In a fast-moving sector, it’s easy to become overwhelmed with too much information. Here are a few big events to keep an eye on in the weeks ahead.
1. Genesis’ Bankruptcy Proceedings
Digital Currency Group subsidiary Genesis has officially filed for Chapter 11 bankruptcy protection and its first hearing was on Monday 23rd Jan. Judge Sean H. Lane in the Southern District of New York presided over the hearing.
Per the initial statements, Genesis lawyer Sean O’Neal told the judge: “We have a timeline and an approach to get through this case as quickly as possible. We really want to avoid getting involved in a prolonged case with litigation that effectively destroys value that would otherwise be available for the creditors.”
This is the first step in official bankruptcy proceedings where the court begins to determine the next steps in reaching a ‘consensual resolution’ with the company’s embattled creditors. If all goes well, a US Trustee will appoint a committee of unsecured creditors to participate in Genesis’s proposed reorganisation plan. Per the court filings, members of the committee will be selected from 20 of the firm’s largest unsecured creditors.
According to a declaration filed by Genesis’ provisional CEO, Derar Islim, the company has more than $3.5 billion in obligations to its top 50 creditors. This includes a $766 million claim to Gemini Trust Company, making it an important candidate in the committee. Last week, Gemini co-founder Cameron Winklevoss said the bankruptcy filing was a “crucial step” to recover assets for Gemini Earn users.
Filing information revealed that Genesis promised GBTC shares as collateral to Gemini Earn. After withdrawals were suspended, Gemini barred its GBTC collateral and sold shares to a private entity, which widened GBTC’s discount to Net Asset Value. This dynamic creates a negative loop which is said to place selling pressure on the market.
The next hearing will be held in mid-February
2. CoinDesk is Up For Grabs
Cryptocurrency media outlet and DCG subsidiary CoinDesk is exploring either a full or limited sale due the parent-company’s ongoing crisis. The outlet took on investment banker Lazard in order to help smoothen the process.
CoinDesk CEO Kevin Worth said the company received “numerous inbound indications” over the last few months. Some say that the offers are not as good as Worth initially anticipated. In such situations, forced liquidation of assets via parent-company bankruptcy proceedings tends to mean sellers would have to opt for whatever’s on offer.
Andrew Parish’s sources have said that initial bids for the media outlet are around the $15 million to $25 million range, with the most interest coming from mainstream media companies outside the sector. Cardano co-founder Charles Hoskinson also pondered buying out the firm, but said that at $200 million the company is ‘a bit overpriced’. According to his inquires, the company’s events sector – which is behind Consensys – is robust.
3. Bitcoin Whales Accumulating
Despite the generally gloomy and concerning market outlook from several key players in the industry (besides those that filed for bankruptcy proceedings), bitcoin and crypto whale investors have taken full advantage of the chaos as they continue to purchase cheap assets.
According to recent data from Santiment analytics, a cohort of Bitcoin whales holding between 1,000 and 10,000 BTC picked up about $1.46 billion worth of Bitcoin in the last two weeks.
Per their insights, “Bitcoin has now surpassed $22.7k for the first time since August 18, 2022. The price rise has come as the large whale tier group of addresses holding 1,000 to 10,000 BTC has collectively accumulated 64,638 ($1.46 billion) BTC in the past 15 days.”
The on-chain data firm attributes the rally past $23,000 to this whale activity.
The positive information is corroborated by another analytics firm. Galssnode data last week showed that capital rotation from stablecoins into Bitcoin has started. In a tweet, the firm said “we note a significant transfer of capital to the Bitcoin asset, akin to the twilight of the 2018 bear market and the 2021 rounded top.”
Additionally, Bitcoin held on over-the-counter trading desks saw a 70% uptick since January 11th.
4. The Fed’s terminal funds rate
The Fed raised interest rates from zero early last year to 4.5% in December, in what became known as the fastest rate-hike in its history. The non-governmental entity might raise its benchmark by 50 basis points in February as it expects ‘sticky inflation’ at around 4%.
However, investors are largely looking for the Federal Open Market Committee to raise the Fed funds rate by 25 basis points on February 1. The CME FedWatch tool showed a 97.2% probability of a quarter-percentage point rate hike at the first meeting of 2023.
The terminal federal funds rate is the ultimate interest rate level that the Federal Reserve sets as its target for a cycle of rate hikes or cuts. Rate hikes increase the cost of capital (borrowing), which means business must shore up their balance sheet to survive the squeeze.
Fed Chairman Jerome Powell has repeatedly stated that the bank will continue to work to bring inflation down to its 2% inflation target.
These four events are somewhat important to follow as we head deeper into the first quarter of 2023.