According to Galaxy Digital Holdings CEO Mike Novogratz, Digital Currency Group’s ongoing financial difficulties are unlikely to put much more pressure on crypto prices.
Galaxy Digital Holdings CEO Mike Novogratz has allayed fears about the Digital Currency Group (DCG) and Genesis crisis, saying that while it is “not good news,” it will not “include a lot of selling.”
Novogratz stated on CNBC’s Squawk Box on January 10 that the current crisis confronting DCG and its related companies will “play out” over the next quarter.
“There are still some overhangs — DCG, Genesis, and Gemini — that will play out in the coming quarter. “That’s not going to be good,” Novogratz said, adding, “I don’t think there will be a lot of selling, it’s just not good news.”
DCG is a major cryptocurrency conglomerate that owns and operates Grayscale Investments, the world’s largest digital asset manager.
It also owns the institutional lending company Genesis, the advisory firm Foundry, the cryptocurrency exchange Luno, and the cryptocurrency media company CoinDesk.
Novogratz’s viewpoint contrasts sharply with a Jan. 4 report from Arcane Research, which warned investors that the “ongoing financial distress” at DCG “could severely impact crypto markets.”
It argued that if DCG declared bankruptcy, the company would be forced to liquidate assets and sell significant positions in its Grayscale Bitcoin Trust (GBTC) and other crypto-related trusts, putting pressure on cryptocurrency prices.
However, Novogratz argued that despite “a lot of bad news” in recent months, Bitcoin and Ether have held “pretty steady” and even increased in value in recent days.
“It’s a pretty clean market right now,” Novogratz said, referring to investors who have recently sold or reduced leverage.
The alarm bells first rang for DCG and Genesis late last year, when Genesis suspended withdrawals on Nov. 16 due to “unprecedented market turmoil” caused by the collapse of FTX and Three Arrows Capital.
In an open letter to DCG CEO Barry Silbert dated January 2, Gemini co-founder Cameron Winklevoss claimed that DCG-owned Genesis had yet to repay a $900 million loan to Gemini, despite DCG owing Genesis $1.675 billion.
On January 10, Winklevoss wrote a second letter, this time to DCG’s board of directors, claiming Silbert and DCG “pretended” to fill a $1.2 billion hole in Genesis’ balance sheet. He claimed Silbert was “unfit” to run the company and demanded his immediate removal.
The Galaxy CEO also addressed Coinbase CEO Brian Armstrong’s recent decision to cut another 20% of its workforce in order to reduce operating costs even further.
“Last year was a grand washout for growth stocks and for crypto, and so anything associated with it […] that had big costs and shrinking revenue — got hammered,” Novogratz said.
“I believe Coinbase’s CEO, Brian, and any rational CEO are doing the right thing.”
The outlook for cryptocurrency, according to Novogratz, is “not great.”
“We’ve got regulatory headwinds that we didn’t have before. We have time to heal and rebuild the narrative, so people will cut costs to survive this transition period,” he said, adding:
“2023 is a year you want to survive and catch the uptick.”
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