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The size of Grayscale’s Bitcoin Trust (GBTC) could pose a potential problem for the entire market — at least according to a UBS report. 

Grayscale’s Bitcoin Trust, which passively invests in bitcoin, holds over 633,000 of the coins, which at today’s prices equals nearly $11 billion and represents 3.3% of all coins mined.  The sheer size would “spell trouble for the entire market, as bitcoin still comprises more than 45% of the space ex stablecoins,” UBS wrote. 

The bank’s analysis comes as questions swirl around the health of Grayscale’s parent, Digital Currency Group. Concerns first cropped up when DCG’s Genesis Global Capital said it had a $175 million exposure to FTX following the exchange’s collapse. Genesis has reportedly been looking to raise $1 billion or it may file for bankruptcy protection. There have also been reports of DCG putting cryptocurrency news site CoinDesk up for sale, and the New York Times said DCG hired Moelis & Company to explore options. 

One possible option mentioned by UBS was for DCG to tap into its GBTC investment.

DCG is the largest holder of GBTC shares with almost 10%, based on Bloomberg data. It could potentially decide to sell its holdings to raise cash, Ivan Kachkovski, a strategist at UBS wrote in a note.

“This stake is presently worth $600m, 12 times greater than the three-month average of the trust’s daily trading volume,” he said.

Backing up a bit

Shares in Grayscales bitcoin and ether products don’t grant holders access to the underlying assets. Therefore, a disparity exists between these products’ trading prices and net asset value (NAV). This is known as the premium or the difference between the value of the underlying holdings and the market price of the assets. The premium flipped to a discount in 2021.

“The negative basis widened further recently when crypto prime broker Genesis—Grayscale’s sister company within Digital Currency Group —admitted a $175m exposure to the now-bankrupt FTX and suspended withdrawals from its high-yield deposit platform. It also warned of bankruptcy unless it gets $1b in new capital,” the analyst wrote.

GBTC’s discount to NAV has widened throughout the week. The product is trading at a discount of -42.5% today, down from -40.54% on Monday, according to The Block’s data.

The discount to NAV of Grayscale’s other structured product, ETHE, reached an all-time low of -45.66%.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Teneo, the advisory firm overseeing the liquidation of crypto hedge fund Three Arrows Capital (3AC), has taken control of some of its assets, according to a presentation deck obtained by The Block.

The deck, presented by Teneo at a court hearing today in the New York Southern Bankruptcy Court, states that the liquidators have made some progress in the 3AC case in terms of assets realization.

“Liquidators have taken control of fiat currencies totaling USD $35.6 million, which were held by Singapore banks and/or held by the Company’s pre-appointment lawyers,” reads the deck. “Proceeds from forced redemptions of investments of USD $2.751 million” have also been realized.

As part of the process, Teneo has taken control of 3AC’s Starkware tokens, with liquidators purchasing the tokens on original deal terms. 3AC invested in Starkware’s $75 million Series B round and $50 million Series C round.

Teneo is now in control of 3AC’s exchange accounts. The firm has also received transactional history and identified more than 60 types of tokens, according to the presentation. Teneo is holding recovered tokens in a crypto custody account under its control and converted to USD as necessary. Ether holdings were converted at an average price of $1,810.

Extracting Value 

Teneo has identified around 180 simple agreements for future equity (SAFE), simple agreements for future tokens (SAFT) and equity investments of 3AC “which are understood to be illiquid and may be subject to lock up and/or vesting periods, automatic rights of redemption, right of first refusal, etc.”  The firm said it continues to explore options for extracting value from these investments.

3AC founders Su Zhu and Kyle Davies have repeatedly failed to engage with Teneo, the presentation alleged. “Founders’ limited cooperation has led to only cursory disclosures of assets and certain agreements. Founders appear to be in Bali, Indonesia and/or UAE – jurisdictions known for difficulties in enforcing foreign court orders.”

Teneo declined to comment to The Block when reached. Davies did not immediately respond to a request for comment. 

In October, Teneo sought court approval to serve the founders with subpoenas via their Twitter and email accounts due to their alleged failure to cooperate with requests for information. According to a source with direct knowledge of the matter, Chief Judge Martin Glenn today approved a motion to subpoena 3AC’s founders as well as subpoenas requiring them to turn over communications. However, the judge did not rule on a motion to serve those subpoenas via Twitter.

3AC, once one of the largest and best-known crypto hedge funds, collapsed amid liquidity troubles in mid-June. The fund filed for Chapter 15 bankruptcy in New York on July 1.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Ngrave, a crypto hardware wallet manufacturer, is aiming to raise $15 million in a Series A funding round, according to a pitch deck obtained by The Block.

Binance Labs is leading the round, a source with direct knowledge of the matter said, adding that the pre-money valuation of the round was $60 million. Binance first announced last week that it had made a strategic investment in Ngrave and would be leading the startup’s upcoming Series A round.

Ngrave declined to comment to The Block about the pitch deck, round and valuation.

Belgium-based Ngrave sells crypto hardware wallets that compete with those made by rivals Ledger and Trezor. Ngrave’s flagship product, called zero, bills itself as “the coldest wallet” and features an operating system the company says has “the world’s highest security certification.” Zero has been sold in 90 countries to date with total cumulative sales of $2.2 million, according to the pitch deck. 

Rising Sales

In the wake of collapse of the FTX crypto exchange, Ngrave’s sales increased five-fold in November from the previous month, a person with direct knowledge of the information told The Block. The zero wallet currently shows as “sold out” on Ngrave’s website. Its other product — Zero + Graphene (a stainless steel backup tool) — is also sold out. Both are expected to be back in stock soon, according to the website.

Ngrave rivals Ledger and Trezor have also seen a jump in sales recently. Ledger reportedly had the biggest sales day and week in November, and Trezor saw demand for its product jump by more than 300% in mid-November.

Ngrave projects its sales to reach $400 million in 2026 in a “realistic scenario,” according to the deck, and it aims to protect 500 million users by 2032.

With crypto heists continuing to plague the industry, over $2.6 billion worth of funds have been stolen from DeFi protocols alone to date, according to The Block’s Data Dashboard. Ngrave expects more users to join the crypto space in the future, which could increase demand for its security products.

‘Space for everyone’

Ngrave co-founder and CEO Ruben Merre told The Block last week that “the market for hardware wallets is far from a saturated one,” adding that “there really is enough space for everyone” given the growing demand of security products.

There are currently 25 people working for Ngrave, and the startup plans to more than double the team size next year, according to the deck.

As part of its growth plans, Ngrave also plans to focus on additional revenue streams with offerings including staking, token swaps and white labeling, according to the deck.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

A key House lawmaker has an idea for the next stop on Sam Bankman-Fried’s apology tour: Capitol Hill. 

House Financial Services Committee Chair Maxine Waters lauded Bankman-Fried’s “candid” comments about the FTX collapse in a tweet on Friday, and invited him to come to a committee hearing on Dec. 13. 

“We appreciate that you’ve been candid in your discussions about what happened at #FTX. Your willingness to talk to the public will help the company’s customers, investors, and others. To that end, we would welcome your participation in our hearing on the 13th,” Waters wrote.

Bankman-Fried resigned as CEO of FTX when the firm filed for bankruptcy protection last month. Since then, the former billionaire has posted on Twitter and spoken with a number of media outlets to explain what led to the collapse of his crypto empire. In recent days, Bankman-Fried has said he doesn’t remember some details about how he ran FTX.

Waters’ committee will hold its first hearing on the FTX crash later this month. The Democratic chair and ranking Republican Rep. Patrick McHenry, R-N.C., said they expect to hear from Bankman-Fried and others involved in the catastrophe, including former executives from his Alameda Research trading firm and representatives of rival exchange Binance, which helped kick off the collapse.

Bankman-Fried did not respond to a request for comment.

The former FTX boss hinted this week that he may appear at future congressional hearings, but did not specify whether he will accept Waters’s invitation. It’s also unclear whether Bankman-Fried, who has been speaking with media from The Bahamas, would come to the U.S. for a hearing. 

“I, you know, would not be surprised if, you know, sometime I am, you know, up there talking about what happened to our representatives or, you know, wherever else is most appropriate,” Bankman-Fried said during the New York Times DealBook summit this week.

Both chambers are taking a close look at FTX. The Senate Agriculture Committee held its first FTX hearing this week, and the Senate Banking Committee is working to schedule a hearing of its own.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The International Committee of the Red Cross (ICRC) is testing concepts for distributing aid to people in conflict zones through blockchain technology. 

The charity organization is in the prototype stages of developing a crypto alternative to cash-and-voucher assistance through a partnership with layer one blockchain Partisia that began earlier this year. If successful, it could result in the ICRC providing assistance via a “stable utility token,” the value of which would be pegged to the price of an asset in a manner similar to that of a stablecoin. 

The project’s development has been funded both internally by the ICRC and by Partisia, whose CEO Kurt Nielsen told The Block that it has raised $55 million to date through selling its native tokens. 

Vincent Graf Nabel, head of the ICRC’s data protection office, said in an interview with The Block: “Our activity in a humanitarian context is what we call assistance, and over the 20 years or so, a growing part of our assistance is what we call cash-and-voucher assistance. … Instead of giving goods to an affected population, we give the means by which they can decide themselves.” 

Currently, this is distributed through paper vouchers or cash. To complement these existing measures, the ICRC is developing a solution where recipients may receive aid via tokens in jurisdictions with the necessary internet and smartphone infrastructure.

The advantage over cash or vouchers is that the ICRC would be able to better manage the inflow and outflow, Graf Nabel said. 

The project is still in development and it’s not clear what asset would back the tokens  — local currency, the U.S. dollar and even gold have been floated as possibilities by Graf Nabel and the Partisia team. The Red Cross stressed that it would be the sole provider and redeemer of the tokens. 

In practice, they would be sent to a wallet app held by beneficiaries assigned as redeemers of tokens. They could be transferred to others via QR codes, with the possibility of being cashed out by certain individuals. 

“It’s really the option of redeeming these tokens that creates the value,” said Partisia’s Nielsen. “I could go to the bank and cash out, so I can see this is real money and not just numbers.” 

Crypto and charity

The organization decided to use blockchain technology because it wouldn’t have to share personal data with third parties, and it found Partisia’s privacy focus appealing.

Partisia uses a protocol based on multiparty computation (MPC) technology, which enables assessments and evaluations based on a group of users’ private data — without revealing that data — to deposit and withdraw the tokens. 

Nielsen plans to develop the project by using a combination of public and private smart contract tools. He said this would also ensure transparency, meaning that the ICRC could be aware of the transactions while disguising patterns of recognition that might otherwise be discerned from on-chain transaction data.

While the prototype project will be presented on Saturday at a Partisia event, it’s likely to be a long road ahead until it is deployed. It may take years, Graf Nabel said. 

There are regulatory issues, he noted, as certain countries ban cryptocurrencies. A timeline for deployment also must take into account the ICRC’s responsibility as a humanitarian aid provider. 

“We have a moral obligation to not be totally closed to new technologies, as there’s always going to be more need than resources in humanitarian [work],” he said. “But firstly, we have to have a very cautious approach. We cannot have a mantra that says move fast and break things, because these are vulnerable people that we have to protect.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Cryptocurrencies dropped in line with equities, while U.S. Treasury yields rose after U.S. jobs data for November beat expectations. 

Non-farm payrolls for the month came in above estimates at 263,000. Economists had predicted 200,000 new jobs.

Bitcoin experienced a sharp sell-off following the news, falling below $17,000 by 9:45 a.m. to $16,918, according to TradingView. 

BTCUSD chart by TradingView

Ether was flat over the past 24 hours, trading around $1,284.

Other cryptocurrencies were pressed following the news: Binance’s BNB fell 4.4%, Ripples XRP dropped 3% and Cardano fell 1%. Dogecoin and shiba inu were both down over the past day, dropping by 5.6% and 0.8%, respectively. 

The DXY — which measures the U.S. dollar versus a basket of other currencies — jumped around 0.42%, to 106.060. Bitcoin’s price in dollars tends to move lower when the dollar strengthens.

DXY chart by TradingView 

Crypto stocks and structured products

The Nasdaq 100 fell around 1.5% following the better-than-expected jobs figures, while the S&P 500 dropped 1.1%. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The World Economic Forum (WEF) denied it invited Shiba Inu to work with it on global metaverse policy following claims that it had from the meme coin’s development team last week.

While there was an exploratory call with the organizers of Shiba Inu, it did not extend them an invitation, the WEF told The Block.

On Nov.22, Shiba Inu’s lead developer, who goes by Shytoshi Kusama, took to Twitter to ask the community whether to accept the supposed invite. Out of almost 23,000 votes via a Twitter poll, 62.3% expressed interest in Shiba Inu working with the WEF, although some comments did express concerns about how a collaboration would mesh with the community’s ethos of decentralization. 

The WEF’s metaverse initiative, launched at Davos this May, states its mission as defining and building an open inclusive metaverse. To date, it has partnered with over 100 companies, including Meta, Decentraland, Animoca Brands, Polygon and Somnium Space. It also works with VR companies, banks, government agencies, universities and Interpol. 

But, for now, it doesn’t plan to add Shiba Inu to that roster. Branded the “Dogecoin killer” in its halcyon days, the dog-themed token launched in 2020 and became one of the most popular meme coins, amassing a loyal following that calls itself the Shib Army.

Since then it has continued to develop its ecosystem. Earlier this year, it revealed plans for a metaverse platform called SHIB: The Metaverse, which remains under development.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Galaxy Digital agreed to purchase high-security custodian GK8 from bankrupt crypto lender Celsius. 

Galaxy will support GK8’s self-custody solution in the ongoing development of GalaxyOne, a new prime offering for institutional investors combining trading, lending, cross-portfolio margining and derivatives with the company’s risk-management processes.

Mike Novogratz’s firm said the acquisition represents a “crucial cornerstone” in the firm’s effort to build a full-service financial platform for digital assets. 

“Adding GK8 to our prime offering at this pivotal moment for our industry also highlights our continued willingness to take advantage of strategic opportunities to grow Galaxy in a sustainable manner,” he said. 

Celsius filed for Chapter 11 bankruptcy protection in July following the collapse of Terra’s ecosystem. The lender froze customer withdrawals in June as it faced mounting liquidity issues. At the time, FTX had considered a deal with Celsius but walked away after seeing the firm’s finances. 

In September, Celsius CEO Alex Mashinksy resigned, and last month FTX filed for bankruptcy protection, after which Celsius said it held around 3.5 million mostly locked Serum tokens on FTX along with $13 million in loans to Alameda Research it said were under-collateralized.

Celsius acquired GK8 late last year. GK8’s founders lead Galaxy’s new custodial technologies business. Galaxy’s headcount will grow by around 40 people, including cryptographers and blockchain engineers. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

A series of connected attacks ended up costing infrastructure provider Ankr and stablecoin issuer Helio Protocol a total of $20 million, according to on-chain analysis by security firm BlockSec.

The first attack targeted a liquid staking token product run by Ankr, resulting in a loss of more than $5 million. An unknown hacker leveraged a vulnerability in Ankr’s smart contract to mint trillions of aBNBc, a reward token tied the price of Binance’s exchange token BNB, as noted by BlockSec and other analysts.

Once the attacker minted those tokens, they sold and drained all of its liquidity across decentralized exchanges on BNB Chain to get away with more than $5 million. Ankr acknowledged the exploit, adding that it was working with exchanges to stop deposits from addresses connected with the attacker.

As the hacker sold off a large number of aBNBc on decentralized exchanges, the price of the aBNBc token collapsed by more than 99%. This opened the room for the second exploit.

In this second instance, someone acquired some 12.6 million aBNBc tokens with 300 BNB ($87,000), BlockSec detected. The attacker then deposited the tokens into a BNB Chain-based stablecoin issuer Helio Protocol to drain funds.

The attacker was able to borrow $16 million in the HAY stablecoin with merely $87,000 in aBNBc collateral as the oracle system used by Helio Money failed to update aBNBc prices after its rapid crash. The attacker swapped their HAY stablecoin for $15 million Binance USD (BUSD), resulting in a massive loss for the protocol. 

BlockSec noted that $15 million of the stolen funds in the second attack moved to crypto exchange Binance. So far, $3 million of the funds have been seized, according to Binance CEO Changpeng Zhao.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Episode 120 of Season 4 of The Scoop was recorded live with The Block’s Frank Chaparro, and Drew Forman, Managing Partner and Head of Cowen Digital.

Listen below, and subscribe to The Scoop on Apple, Spotify, Google Podcasts, Stitcher or wherever you listen to podcasts. Email feedback and revision requests can be sent to podcast@theblockcrypto.com.

In 2020, Cowen Digital formed to allow institutional customers of the investment bank Cowen to trade digital assets. The digital arm has been growing steadily in its eight months of existence, despite the onset of crypto winter.

In this episode of The Scoop, Cowen Digital managing director and head Drew Forman explains how the crypto industry can rebuild in the wake of FTX’s meltdown, as well as what it will take to repair trust in the space among institutional investors.

According to Forman, many of Cowen’s institutional clients are “getting the pipes ready” to take part in crypto’s next wave. But regulatory clarity is still needed before large, sophisticated institutions get involved. Forman explains:

“I welcome a set of rules ahead of time that we all look to abide by — and hopefully that allows the big institutional investors with the trillion dollar balance sheets to start allocating to the space.”

The SEC and DOJ are currently examining FTX’s case, and the CFTC chair’s is set to appear before the Senate Agriculture Committee on December 1 to testify on the exchange’s collapse.

During this episode Chaparro and Forman also discuss:

• Why talent consolidation is good for the space
• How Cowen Digital manages risk and volatility
• Cowen’s history with Mt. Gox

This episode is brought to you by our sponsors Tron, Ledn

About Tron
Founded in 2013, Huobi Global is one of the largest virtual asset exchanges in the world. Huobi Global serves millions of users across international markets. Since its establishment, Huobi Global has committed to providing first class virtual asset investment services. Huobi Global’s robust infrastructure, product innovation and capital strength provides a truly customer-centric and secure trading environment to help our international users to achieve their investment objectives. Please refer to Huobi’s official website for more information: huobi.com.

About Ledn
Ledn was founded on the unshakeable conviction that digital assets have the power to democratize access to the global economy. We help you to experience the real life benefits of your Bitcoin without having to sell it. Start a savings account, take out a loan, or double your Bitcoin. For more information visit Ledn.io

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.