The Next Domino to Fall? Genesis, the largest cryptoasset lender, is seeking bailout financing, warning that if it is unable to raise money it may go bankrupt. Genesis is owned by Digital Currency Group (DCG), which also owns Grayscale, the manager for the Graysale Bitcoin Trust (GBTC). Barry Silbert, CEO of DCG, told investors that Genesis, which has $2.8 billion in loans on its balance sheet, is facing a liquidity crisis. Notably, 30% of the loans outstanding are to related parties, including DCG. The pressure on Genesis has caused the discount on GBTC relative to NAV to hit a record of nearly 50%. For a full breakdown of this and more, check out this week’s episode of DeFi Decoded.

Why Bitcoin ETFs are Good for Investors: GBTC is a closed-end fund that has cratered relative to NAV in the past two years. It recently hit a record discount to NAV of nearly 50% after trading for many years at a premium. Holders cannot redeem their investment and are thus effectively trapped. By contrast, the Ninepoint Bitcoin ETF has traded historically within a few basis points of NAV (See Quantitative Analysis section below). Investors who buy into tracking funds want safe, convenient and inexpensive way to gain exposure to Bitcoin. They also want to know their investment is tracking the underlying asset. With ETFs, they get that assurance. To learn more about the Ninepoint Bitcoin ETF check out: https://digital.ninepoint.com/

Practicing Safe CEX? The collapse of FTX has people rightly asking, “How could this happen?” and relatedly, “What can we do stop it from happening again?” Various solutions have been floated to strengthen the industry’s biggest centralized players and restore some sense of trust: stronger regulation, regular audits, and better corporate governance, to name a few. To be sure, these are all good ideas, and we expect many centralized exchanges will need to go through with them if they want to maintain the trust of users and stay in the good graces of regulators, but there is another option – so-called “proof of solvency” or “proof of reserves” which uses the cryptographic proofs that blockchains afford to show that an exchange has the assets it claims to have. There are limits to this model, namely that an exchange could easily prove its assets while not showing the full extent of its liabilities, but proof-of-reserves is a welcome industry standard more exchanges should adopt.

The White House has its eye on crypto following the FTX Collapse with reports that President Joe Biden led a critical call on FTX and the future of crypto regulation. This may turn out to be a good thing. Policymakers and industry leaders can work together to come up with something akin to the 1996 Telecommunication Act, which created the conditions for innovation to thrive responsibly during the early days of the Web. Any new rules should distinguish between the technology and the companies that build services on top of it.