Cryptofinance: Barry Silbert, crypto boss on the defensive

Welcome to the FT Cryptofinance newsletter. This week we take a look at Barry Silbert, the man in the heart of the Digital Currency Group.

It was two weeks ago that FTX - one of the parademies of the crypto industry - went bankrupt in a spectacular way, and I compared it to the collapse of Lehman Brothers.

When the impact spread to the market, the largest actors tried to stabilize the ship. The Digital Currency Group and founder and CEO Barry Silbert fought the hardest this week.

Silbert has tried to calm the shareholders about the profitability of his conglomerate, as fears appear that part of it, the crypto broker Genesis, will be the next big name that will fall.

simply said, Genesis is a player. Last year, cryptos worth $ 116 billion were traded and loans worth $ 131 billion were awarded. On November 16, however, it announced that it would hire the payments in his loan unit. This week, no was immediately imminent on the edge of the bankruptcy.

Silver's name may be unknown to some readers. Like many managers, he is on Twitter, but does not use it often to spread his thoughts. He does not have countless television or conference appearances.

he-and with it also DCG-does not have the same public profile as personalities as Sam Bankman-Fried, Changpeng Zhao by Binance or Michael Saylor from Microstrategy. Nevertheless, Silbert has an important chapter in the history of crypto that explains the focus of the market.

DCG is the parent company of a portfolio, which the digital asset management company Grayscale, the crypto news page Coindesk, the mining company Foundry, which wallet provider Luno and Genesis includes.

that Genesis from DCG is the youngest company that faltered after an industry shock that was triggered by an article about FTX by Coindesk from DGC, is symptomatic for its reach.

"The fact that the same type Grayscale, Coindesk, Genesis and DCG has..

In the industry, Silbert is a veteran. He was an investment banker in New York before founding Secondmarket, a marketplace for private companies to buy and sell their shares before it was bought by Nasdaq.

Silbert was a "earlier" Bitcoin supporter, the way that jumped on the crypto train in the mid-2010s, even when the emerging industry was shaken by scandals such as Mt. Gox and Silk Road. In particular, he considered Bitcoin to be the greatest chance of his career.

grayscale was of crucial importance for this goal. It operates Grayscale Bitcoin Trust (GBTC), an investment vehicle that offers investors a tradable product that the coin.

"Approved investors" like hedge funds can buy the shares with Bitcoin to the net inventory value of the trust and then sell at the market price after a blocking period, usually six months later.

In 2020, the market price was on average on a surcharge of 18 percent on the NAV, which makes it one of the most lucrative trades in the market. It was so popular that this year it contributed to increasing the new customer funds in GBTC by USD 5 billion. The no longer existing crypto hedge fund Arrows was one of the largest GBTC owners.

But the emergence of several spot bitcoin ETFs in Canada weakened the demand and the premium of the trust became a discount almost overnight.

However,

GBTC shares cannot be exchanged for Bitcoin or hard currency-that is, the only way for investors to get out of trade is to sell the shares to other investors. The discount is still standing and has reached 40 percent, which makes it very unpopular. The biggest owner of GBTC is now. . . Dcg.

The market still puzzles how complicated this arrangement has become. My colleagues Kadhim Shubber, Nikou Asgari and Joshua Oliver revealed this week that DCG borrowed $ 575 million in bar and Bitcoin from Genesis, and some of the means were used to finance the purchase of GBTC units and the buyback of DGC shares.

Silbert informed the investors that the Genesis darling book was confronted with a problem of liquidity and duration incongruity and that the trading and custody stores of the platform were not impaired. But the connections are a further indication of how finely balanced Silver's crypto empire is.

for an industry that reveals the extent of the connections between the FTX crypto tour and the Alameda Research in -house dealer, this is another reason.

Chris Brendler, Senior Research Analyst at Da Davidson, told me this week on a phone call: "It feels a bit like the financial crisis in 2008.. And mostly public companies with all types of supervision, but we had no idea how far this infection spread."

What do you think of Barry Silbert von Crypto? Send me an email to scott.chipolina@ft.com.

on the Crypto and Digital Assets Summit: Winter Edition The FT is discussed what comes after the "crypto winter" and what is expected in 2023. As a FT premium subscriber, you can use the Premium2022 promo code to watch digitally free of charge, or use FT25 to get 25% discount on your personal pass. Register here: cryptowinter.live.ft.com/

Weekly highlights

• On Monday, two Estonian citizens were arrested and charged with a crypto fraud and money laundering program of $ 575 million. In the middle of a growing number of similar cases, the arrests indicate that the law enforcement authorities are familiar with illegal crypto activities.

• In the late Tuesday evening, I moderated a panel discussion about the effects of crypto on the Ukraine crisis. Industry representatives and the deputy Ukrainian Minister of Digital Transformation, Alex Bornyakov, repeatedly told me that crypto can serve as an economic leash if traditional payment rails fail. Bornyakov also predicted that the Russian use of crypto as a means of bypass sanctions would be a "big business" in the future.

• As you may remember, I was on the Bahamas last week to chase stories about FTX. I have found that the government, supervisory authorities and law enforcement authorities desperately put their heads into the sand to protect the "call" of the island in terms of digital assets. Read my story here.

• It's hot in the Hodlnaut-Land. The cryptoplate, which was surprised by the market slump in summer, stopped payments at the beginning of this year and was finally put under preliminary judicial administration. The Singapore police said this week that she examined the platform and its directors "for possible fraud and fraud crimes".

Soundbite of the week: Binance is "no Chinese company"

The co -founder and chairman of Binance, Changpeng Zhao - colloquially known in the industry as "CZ" - said this week that Binance was not a Chinese company.

"Binance is not a Chinese company, we are not related to China at all, I often have to repeat it just because I look Chinese."

Unfortunately, it was another missed opportunity for him to tell the world where Binance actually has its seat. Since the catastrophic breakdown of FTX, CZ " full transparency "in a tweet. We asked Binance - for the n times - where it is based. We let you know when we receive an answer.

Data Mining: Falling trading volume of Gemini

twins are an example of fear of infection. The stock exchange, which is operated by the twins Tyler and Cameron Winklevoss, works with Genesis on a product that pays customers interest on borrowing their crypto-assets. Gemini is now trying to help customers reduce their money as soon as possible.

In addition, the Spothandel volume of Gemini has steadily declined. Gemini said it was an "incredibly challenging and stressful time for our industry". Is certain.