Galaxy Digital Holdings CEO Mike Novogratz has hosed down fears over the crisis facing Digital Currency Group (DCG) and Genesis, saying while itâs ânot good news,â it wonât âinclude a lot of selling.â
In a Jan. 10 interview on CNBCâs Squawk Box, Novogratz said he expects the current debacle facing DCG and its related companies to âplay outâ over the next quarter.
“The outlook for #crypto is not horrible but it’s not great. We’ve got regulatory headwinds we didn’t have before. People are going to cut costs and survive this transition period,” says @novogratz. “Crypto is not going away. It’s a pretty clean market right now.” pic.twitter.com/k57ITlRFOV
— Squawk Box (@SquawkCNBC) January 10, 2023
âThere are still some overhangs â DCG and Genesis and Gemini â that will play out in the next quarter. Thatâs not going to be great,â said Novogratz, adding:
âI donât think it will include a lot of selling, itâs just not good news.â
DCG is a major crypto conglomerate known as the owner and operator of Grayscale Investments, the worldâs biggest digital asset manager.
It also owns institutional lending company Genesis, advisory company Foundry, crypto exchange Luno and crypto media company CoinDesk.
Novogratzâs opinion is in stark contrast to a Jan. 4 report from Arcane Research warning investors to pay attention to the âongoing financial distressâ at DCG as the outcome âcould severely impact crypto markets.â
It argued if DCG were to enter bankruptcy the company could be forced to liquidate assets and sell sizeable positions in its Grayscale Bitcoin Trust (GBTC) and other crypto-related trusts, which would put pressure on crypto prices.
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 (@ArcaneResearch) January 4, 2023
However, Novogratz argued that both Bitcoin (BTC) and Ether (ETH) have held âpretty steadyâ despite âa lot of bad newsâ over the last few months and have even seen an uptick over the last few days.
âItâs a pretty clean market right now,â said Novogratz, referring to investors who have sold or reduced leverage in recent months.
Alarm bells first began ringing for DCG and Genesis late last year, after Genesis halted withdrawals on Nov. 16 citing âunprecedented market turmoilâ caused by the collapse of FTX and Three Arrows Capital.
In an open letter directed to DCG CEO Barry Silbert on Jan. 2, Gemini co-founder Cameron Winklevoss alleged that DCG-owned Genesis was yet to pay back a $900 million loan it owes to Gemini, which was due to DCG owing Genesis $1.675 billion.
On Jan. 10, Winklevoss penned a second letter, this time toward DCGâs board of directors, claiming Silbert and DCG only âpretendedâ to fill a $1.2 billion hole in the Genesis balance sheet. He said Silbert was âunfitâ to run the company and called for his removal, effective immediately.
— Cameron Winklevoss (@cameron) January 10, 2023
Coinbase layoff was âthe right thingâ
The Galaxy CEO also commented on Coinbase CEO Brian Armstrongâs recent decision to cut another 20% of its workforce in a bid to further reduce operating costs.
Last year âwas a grand washout for growth stocks and for crypto, and so anything associated with it […] that had big costs and revenue shrinking â got hammered,â said Novogratz.
âI think CEOs [including] Brian at Coinbase, and any rational CEO, is doing the right thing.â
Novogratz said the outlook for crypto isnât horrible, but itâs also ânot great.â
âWeâve got regulatory headwinds that we didnât have before. Weâve got time to heal and rebuild narrative and so people are going to cut costs and survive this transition period,â he said, adding:
â2023 is a year you want to survive and catch the uptick.â