GM. This is the Milk Road. The daily newsletter taking you around crypto like an AMEX rewards program takes you around the world. There's one major difference - we don't charge annual fees.
Here's how we're starting the week:
- WTF is going on with Genesis and Grayscale
- Legendary investor's crypto thesis
- Chart of the Day
- Milky Memes
GENESIS NEEDS $1B
Genesis is owned by Digital Currency Group. At the Crypto Thanksgiving, both of them aren't just sitting at the adults table, they're leading the prayer.
Genesis had $2.8b in total active loans at the end of Q3 2022 and DCG owns some of the biggest companies in crypto (Genesis, Grayscale, and Coindesk).
But last Wednesday in the FTX aftermath, Genesis said they were pausing loan originations and customer withdrawals.
Since then, we've heard nothing but bad news.
Here's what we now know:
1/ Genesis needs $1b emergency funding
A lot of crypto lenders are in trouble, and Genesis is no different.
Just look at this:
- Lent $2.4b+ to now bankrupt 3AC and probably aren't getting any of that back
- In August, Genesis cut 20% of its staff and the CEO Michael Moro quit
- Lost $175m when FTX blew up
And now, Genesis is seeking an emergency $1b capital infusion to plug what appears to be a 10-figure hole.
2/ That $1b may or may not be owed to their parent company Digital Currency Group (DCG)
It's not just the fact Genesis needs $1b, it's that the $1b could be owed to its parent company DCG.
They say actions speak louder than words, and g*ddamn these actions aren't inspiring:
- DCG deleted their βAboutβ page. Now it's just a 404
- In August, DCG removed management bios from the website
- GBTC discount is at 45%. Itβs 45% cheaper to buy GBTC than BTC, which means investors are losing confidence in Grayscale and GBTC
- It's been 2 weeks since Barry Silbert, CEO of DCG, has tweeted
DCG is also the parent company of Grayscale, the cryptocurrency trust manager and provider of GBTC. The GBTC trust owns 635k Bitcoin, about 3% of the world's supply.
These actions have left us fearing the worst...what would a DCG / Genesis collapse do to crypto?
Here's what the smart people are saying:
If DCG is unable to raise capital and sells Grayscale to a trad firm like a Fidelity would be positive for 3 reasons: 1) DCG concern overhang gone 2) Higher likelihood of ETF conversion 3) Trad firms will feel more comfortable with trad infrastructure after the FTX blowup
β Will Clemente (@WClementeIII)2:56 PM β’ Nov 21, 2022
Guys - Iβll say this one more time. All Grayscale trust assets are at Coinbase and untouchable. If they were touched, it would be fraud by Coinbase, Grayscale, and negligence by both companies auditors. The assets are there. Itβs the rest of the trust structure that is broken.
β Ryan Selkis π₯· (@twobitidiot)12:26 PM β’ Nov 21, 2022
Fiction: + Grayscale trust assets aren't accounted for + DC is working to ban crypto + Contagion is just getting started Fact: + Most crypto lenders have been wiped out + SEC won't approve a spot ETF under Gensler (sorry GBTC holders) + Scrutiny will turn to Binance & Tether
β Ryan Selkis π₯· (@twobitidiot)11:39 AM β’ Nov 21, 2022
$1B is 0.12% of crypto marketcap (~$837B at CMC). If @GenesisTrading fails, it would impact crypto way more β 5%? 15%? More? FTX was ~20%. Massive Public Bad. Crypto could coordinate a raise.
β Juan Benet (@juanbenet)11:38 PM β’ Nov 19, 2022
14/ Genesis source of funding included borrowing via the Gemini Earn program and the Circle Yield program. These are short-term sources of funding. If those sources of funding dry up, then Genesis is forced to liquidate its loan book (at unattractive prices or not at all)
β Ram Ahluwalia (@ramahluwalia)2:20 AM β’ Nov 20, 2022
The Milk Man is hoping for the best but prepared for the worst.
A LEGENDARY INVESTOR'S CRYPTO THESIS
Bill Ackman ...
Legendary hedge fund investor.
Manages over $18b.
Made $2b from COVID credit default swaps.
Model of, "Just For Men", Touch of Gray.
Yesterday, Bill got on Twitter to share his thesis on crypto.
Like many of us, initially he was a crypto skeptic. But after some research he:
- Compared crypto to the telephone and internet
- Believes issuing tokens to incentivize participants in a venture will enable the formation of useful businesses and technologies
- Used Helium Network and Dimo to prove the utility of blockchain technology. While both projects are good use cases in theory, both have had a difficult time getting users.
Bill said he is an investor in Dimo, 7 VC funds, and multiple other crypto projects, but crypto investments make up less than 2% of his total assets.
TODAY'S EDITION IS BROUGHT TO YOU BY AMBIRE WALLET
Right now, all you hear in crypto is, βnot your keys not your cheese.β
If your crypto is still on an exchange this phrase makes you nervous.
But getting a self-custodial wallet ainβt easy. And most self-custodial wallets are too complicated and make the DMV feel like a good user experience.
But now, Ambire Wallet exists.
Ambire Wallet is a self-custodial wallet that is built for everyone, even people whoβve never used a wallet before:
- Easy signup: You can register using email only
- Security: Assets protected by robust security platform and 2 factor authentication
- Easy to trade: You can swap, lend, borrow, margin trade and anything else that you can do on a centralized exchange using a credit and debit card
Start managing your crypto with Ambire Wallet today. P.S. You earn airdrops just by becoming an early user.
CHARTS OF THE DAY
Year to date bitcoin is down 65%.
You got Mark Cuban giving up on crypto, Paul Graham tweeting crypto FUD, and the third largest exchange hitting the roulette table with our deposits.
But don't let the FUD get to you.
Will Clemente shared a chart over the weekend that made us bullish on Bitcoin.
Long-term holder supply is at all-time highs.
The tourists are skipping town but the locals are ordering another round.
MILKY MEMES TO MAKE IT ALL BETTER
Thanksgiving this year π π
That's a wrap for this week. Stay thirsty & see ya next week!
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A ROADERS REVIEW
VITALIK PIC OF THE DAY
Sending over some good Monday morning vibes
β The Milk Road (@MilkRoadDaily)5:29 PM β’ Nov 21, 2022
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own researchBut
