Arcane Research has issued a warning to Bitcoin and Ethereum investors in light of the escalating events surrounding Digital Currency Group (DCG), Grayscale, and Genesis.
In the warning, Arcane Research highlighted the potential risks and uncertainties that these events may pose to the stability and security of Bitcoin and Ethereum investors. The firm advised investors to exercise caution and consider their options before making investment decisions. Arcane Research also urged investors to stay informed about the latest developments and carefully assess the potential impact on their investments.
The company warning states:
Investors should pay attention to the ongoing financial distress related to Digital Currency Group (DCG) as the outcome could severely impact crypto markets.
Arcane Research warns that if Digital Currency Group files for bankruptcy, it may be required to sell off its assets, including its significant holdings in GBTC and potentially its positions in ETHE and other Grayscale trusts. The situation could impact the stability of investments in these assets.
Moreover, analysts at Arcane Research suggested that allowing holders of Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum trust (ETH), and other trusts to redeem their shares at net asset value under a Reg M solution could provide a more “natural, less liquidity-constrained” resolution to the situation.
Arcane highlighted the market threats in the vast arbitrage opportunities:
A Reg M would cause a massive arbitrage strategy of selling crypto spot versus buying Grayscale Trust shares. If this scenario plays out, crypto markets could face further downside.
Positive Aspects Of Arcane Research Findings
Arcane Research terms the current situation as positive market sentiments because the crypto space is “finally relieved from the huge burden” generated by the “Grayscale widowmaker trade.
There is already immense pressure on the Digital Currency Group (DCG) because the founder of Gemini, Cameron Winklevoss, claimed that Barry Silbert’s DCG had been using stalling tactics in bad faith. Winklevoss had already given a deadline of January 08 to refund the $900 million to the Gemini Earn client.
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The situation might culminate in the cooperation of a voluntary DCG chapter 11 filing if Silbert does not comply. Moreover, Fir Tree, worth $3.5 million, and Valkyrie investments could also take the stage.
Valkyrie offered to become the sponsor and manager of GBTC. Valkyrie also launched an opportunistic fund to take advantage of GBTC discounts. Fir Tree filed a lawsuit related to this situation.
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