The Wolf Den #647 - The Winklevii Vs. Barry Silbert
In This Issue:
The Winklevii Vs. Barry Silbert
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Basic Tips For Investing In A Bear Market
Italy Passes New Tax Laws
Binance Looks To Expand In Korean Market
Su Zhu Blames Everyone But Himself
Sponsors
The Winklevii Vs. Barry Silbert
Members of the Crypto Billionaire Boys Club (or Real Housewives?) are back at it again, arguing publicly on twitter for everyone to see. This time it's not SBF and friends, but rather Cameron Winklevoss and Barry Silbert.
There is a lot happening with Digital Currency Group (DCG), Genesis, and Gemini, so let's clarify the facts before discussing the story.
DCG, headed by Barry Silbert, owns Genesis and other companies. Gemini, which is owned by the Winklevoss twins, Cameron and Tyler, is not owned by DCG nor affiliated with it. However, Gemini has partnered with Genesis as its primary lending partner for its high-yield Earn service. This partnership is the starting point for today's story.
Gemini, an established cryptocurrency exchange founded in 2014, is known for its high-end security and ease of use. It is also known for its Gemini dollar, the creation of the first-ever daily Bitcoin auction, and a full range of products, including the controversial EARN product.
As mentioned earlier, Gemini enlisted Genesis to enable its EARN service, but it has now backfired. On November 16, Gemini halted all withdrawals from its EARN program because Genesis, which had exposure to FTX, paused its own withdrawals. It has been reported that Genesis and its parent company, DCG, owe approximately $900 million to Gemini customers.
Now, let's look at a public statement from Gemini.
As previously stated, all assets are "held 1-to-1" according to established protocol. However, the situation does not end here. On December 27th, disgruntled investors filed a class-action lawsuit against Gemini for fraud and violations of the Exchange Act in the U.S. District Court in Manhattan. Additionally, DCG owes a $1.1 billion promissory note to Genesis by June 2032 and has a newly disclosed liability of $575 million to Genesis.
These struggles are interconnected by a trail of money potentially contaminated by contagion. In other words, Cameron Winklevoss is alleging that DCG owes Genesis money that it has not repaid, leading to Genesis' inability to pay Gemini. If this is true, it could potentially cause a domino effect.
Now that we have a full understanding of the situation, we can examine the open letter Cameron Winklevoss sent to Barry Silbert yesterday.
It is evident that the open letter sent by Cameron Winklevoss to Barry Silbert expresses the frustration and pain felt by those involved. However, Silbert does not agree with the accusations made in the letter and has publicly stated that DCG did not borrow $1.675 billion from Genesis, has never missed an interest payment to Genesis and is current on all outstanding loans, with the next loan maturity set for May 2023. Silbert also mentioned that DCG delivered a proposal to Genesis and its advisors on December 29th, but has not received any response.
It seems that the parties involved have reached a stalemate and several things may need to happen for the situation to progress. One possibility is that the market moves significantly in either direction, causing the fate of the situation to be decided quickly. The second and third options involve resolving the dispute through legal action, such as Gemini suing DCG or DCG declaring bankruptcy and having its assets seized by the law.
It is unfortunate that some innocent individuals (investors and users) may be harmed in this situation. There is also speculation that Grayscale may have to bear the burden of DCG's debts in order for DCG to pay Genesis, which would then be able to pay Gemini.
While it is hoped that this situation will be resolved peacefully, it is likely that there will be difficulties and challenges until it is resolved in 2023. According to the letter from Cameron Winklevoss, DCG has until January 8th to find a solution. It is uncertain what will happen if a solution is not found by this deadline. Hopefully, this will be the final phase of this contagion.
Bitcoin Thoughts And Analysis
DAILY CHART
Some days I question whether to "analyze" Bitcoin at all, but this section has long been a staple of the newsletter.
Once again, price is sideways, testing the 50 MA. Revisit tomorrow.
Legacy Markets
"Investors are kicking off 2023 with tempered expectations after sharp swings last year saw 20% in value wiped out from global equities, the worst showing since the financial crisis. Bonds also declined as central banks hiked interest rates to slow inflation.
“Hopes that supply chain issues in China will continue to ease, which could help bring down inflation, may be feeding into sentiment,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. Traders are “seizing onto glimmers of hope that once the winter waves die down, China’s recovery could be back on track.”
The main markets moves are:
Stocks
The Stoxx Europe 600 rose 1.8% as of 9:59 a.m. London time
S&P 500 futures rose 1.1%
Nasdaq 100 futures rose 1.3%
Futures on the Dow Jones Industrial Average rose 1%
The MSCI Asia Pacific Index was little changed
The MSCI Emerging Markets Index was little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.7%
The euro fell 1.1% to $1.0545
The Japanese yen rose 0.3% to 130.45 per dollar
The offshore yuan rose 0.2% to 6.9139 per dollar
The British pound fell 1% to $1.1920
Cryptocurrencies
Bitcoin was little changed at $16,736.31
Ether fell 0.2% to $1,217.03
Bonds
The yield on 10-year Treasuries declined 14 basis points to 3.74%
Germany’s 10-year yield declined nine basis points to 2.35%
Britain’s 10-year yield declined 12 basis points to 3.55%
Commodities
Brent crude rose 0.3% to $86.14 a barrel
Spot gold rose 0.8% to $1,838.66 an ounce"
Basic Tips For Investing In A Bear Market
Investing in a bear market can be intimidating, as it often feels like the value of your investments is consistently decreasing. However, it's important to remember that bear markets are a natural part of the economic cycle and can present opportunities for long-term investors. Here are a few things to consider when investing in a bear market:
Don't panic: It's easy to get caught up in the fear and sell off your investments in a bear market, but this is often the worst thing you can do. Remember that bear markets are temporary and the market will eventually recover.
Look for value: Bear markets often present opportunities to purchase high-quality assets at discounted prices. Keep an eye out for companies whose stock prices are undervalued relative to their fundamental value.
Diversify your portfolio: Don't put all your eggs in one basket. By diversifying your portfolio across different asset classes and industries, you can reduce your risk and potentially weather the storm of a bear market better.
Consider dollar-cost averaging: Instead of investing a large sum of money all at once, consider spreading out your investments over time through a strategy called dollar-cost averaging. This can help reduce the impact of market fluctuations on your portfolio.
Have a long-term perspective: It's important to remember that investing is a long-term game. While it may be painful to watch your investments decline in value in the short term, a bear market can present opportunities for long-term growth.
Ultimately, investing in a bear market requires patience and a long-term perspective. By focusing on value, diversifying your portfolio, and using strategies like dollar-cost averaging, you can potentially come out ahead in the long run. So, don't be afraid to invest in a bear market, but do so with caution and a solid understanding of the risks involved.
Italy Passes New Tax Laws
Italy's Senate has approved a budget for 2023 which includes a 26% tax on capital gains from crypto asset trading above €2,000 ($2,140). The bill defines crypto assets as "a digital representation of value or rights that can be transferred and stored electronically, using distributed ledger technology or similar technology." Previously, such assets were treated as foreign currencies in the country, with lower taxes. Taxpayers will have the option to declare the value of their digital assets as of January 1, 2023 and pay a 14% tax as an incentive to encourage declarations. The budget also includes tax amnesties, fiscal incentives for job creation and a reduction in the retirement age, as well as €21bn in tax breaks for businesses and households affected by the energy crisis.
Binance Looks To Expand In Korean Market
Binance, the world's largest cryptocurrency exchange, has completed due diligence on South Korean exchange Gopax, according to Decenter. Binance plans to acquire a 41.2% stake in the exchange from CEO Lee Jun-haeng. The acquisition will allow Binance to enter the Korean market, where it has struggled with regulatory requirements. Gopax is one of the top five exchanges in South Korea, but suffered a liquidity crunch after the FTX bankruptcy. If the acquisition is successful, Binance's prospects of entering the local market in East Asia will increase, and the local market will be exposed to more foreign investment. Upbit currently dominates 80% of the Korean market, while Gopax has just 0.1%.
Su Zhu Blames Everyone But Himself
Three Arrows Capital (3AC) founder Su Zhu has accused Digital Currency Group (DCG) and FTX of conspiring to attack and profit from Luna Classic (LUNC). Zhu claimed that DCG had a role in the collapse of LUNA2, now known as LUNC. The allegations have been met with skepticism from the crypto community, with some suggesting that Zhu should focus on his own role in the 3AC bankruptcy. The bankruptcy process has been complicated by the fact that Zhu and 3AC co-founder Kyle Davis may be located in Indonesia and the United Arab Emirates, which could make it difficult to enforce court orders. Lawyers representing liquidators have also accused the founders of failing to cooperate with the process.
These guys need to take accountability and then disappear.
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