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The cascade of bankruptcies in crypto continues. After the fall of FTX, a large number of related projects are in big trouble. Journalists are trying to guess who is next in line for FTX to go bankrupt. Bloomberg published FTX’s close affiliations, and J.P. Morgan also published its list of investors, but the biggest concern in the crypto market right now is Grayscale.
To assess the extent of Sam Bankman-Fried’s influence on the cryptocurrency industry, Bloomberg published an infographic of the company’s close connections. It shows investors in yellow, investments and acquisitions in blue, and companies that have financed each other in green.
Looking at this visualization, you can try to estimate the overall network of companies dependent on FTX (in tabular form, much of this data is available at this link):
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But among all these potentially troubled companies, Grayscale, which is a major player in the crypto world, is now the most feared in the crypto community.
Grayscale Investments is the largest and unique digital asset management fund that attracts accredited investors from the stock market into cryptocurrency through its flagship Grayscale Bitcoin Trust (GBTC) product.
Essentially, an investor legally buys financial instruments without having to actually own cryptocurrency by delegating their custody to Grayscale. This is of interest to qualified investors who cannot move money from the stock market directly to a crypto exchange, so Grayscale here acts as a “bridge” between the traditional and digital markets.
At the moment there are three reasons for concern, let’s cite them in escalating levels of danger:
Journalists found out the fact that Genesis Trading applied for $1 billion in emergency funding. If the money is not found, what will prevent DCG from closing the hole with the cryptocurrency of its customers? The temptation to solve all their problems at the expense of clients is great, especially the fresh example in the form of FTX that everyone is aware of.
J.P. Morgan also compiled its list of FTX clients, investors and creditors, who disclosed their connection with this cryptocurrency exchange and named the volumes of their own positions, so that counterparties and experts could assess the mutual risks.
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