Crypto giant suspends dividend and threatens to go bankrupt

Crypto giant suspends dividend and threatens to go bankrupt

In an effort not to collapse, cryptocurrency giant Digital Currency Group (DCG) has informed its shareholders that it will suspend dividend payments “until further notice.”

The controller of the largest cryptocurrency fund in the world explained in a letter to shareholders this Tuesday (18) that the move was taken in an effort to reduce costs and preserve liquidity to avoid the impact of current market conditions .

“In response to the current market momentum, DCG has focused on strengthening our balance sheet, reducing operating costs and maintaining liquidity. As such, we have made the decision to suspend the quarterly dividend payment until further notice.” the company said.

DCG’s troubles began when its cryptocurrency exchange subsidiary, Genesis Global Trading, froze withdrawals for clients and owed more than $3 billion to its creditors.

Who is the Digital Currency Group (DCG)

Digital Currency Group, also known as DCG, is a venture capital firm founded in 2015 by current CEO Barry Silbert, a veteran of the market who began investing in cryptocurrencies in 2013.

DCG’s portfolio is managed by Grayscale Investments, a company founded by Silbert prior to DCG’s creation, and they jointly manage the news website Coindesk.

DCG also owns major stakes in most of the top companies in the industry such as Blockstream, Coinbase, Kraken, Abra, BitGo, Lightning Labs, Ripple, Xapo, BitPay, Blockchain.com, Circle and many, many more.

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Coin98 Insights

In classic giant industry style, DCG’s control over much of the ecosystem allows them to heavily influence multiple narratives and secure victory regardless of changing outcomes.

In 2015, the exchanges DCG invested in held 40% of all global Bitcoin trading volume, giving the company the ability to partner with exchanges around the world.

But everything changed with the arrival of Binance, which today controls more than 80% of the global cryptocurrency volume.

DCG threatens to break

The company’s recent move to suspend dividends is just the tip of the iceberg of issues that have been dragging on since mid-2022.

When cryptocurrency exchange FTX went bankrupt, the DGC’s Genesis platform experienced liquidation issues that forced them to suspend withdrawals. The company also laid off 30% of its employees earlier this month. It owes its creditors $3 billion and DCG is under pressure to pay the debt.

Other DCG companies – including the world’s largest bitcoin fund Grayscale Investments, news site Coindesk and Bitcoin miner Foundry – are also facing significant problems.

GBTC, the company’s bitcoin-based fund, is trading at a significant discount (about -45%) to the actual bitcoin price.

Grayscale came under fire late last year when it refused to prove its bitcoin ownership, citing “security concerns”. Grayscale said it could not disclose “on-chain wallet information and confirmation details for proof of reservations.”

Based on the history of the cryptocurrency market, DCG seems to share common features with many of the other companies that failed in the past year.

If it breaks, the effects on the market are still uncertain, but it will certainly create another crisis in the sector.

Source: Live Coins

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