Compilation of the original text: Deep Tide TechFlow
Compilation of the original text: Deep Tide TechFlow
Genesis, the only full-service prime broker in the crypto space, has played a key role in enabling large institutions to acquire and manage cryptocurrency risk. Genesis is one of the most important pieces of the puzzle in DCG's portfolio, but there's no telling where Genesis will go from here.
DCG is now facing a $1 billion hole, what are they going to do? I decided to break down their assets as externally as possible.
We know that when they are sold to SoftBank in 2021, they will be valued at $10 billion, and GBTC will charge about $500-750 million for that year, with an AUM of $38 billion.
This gives us a rough idea of each component in the empire by value.
Assuming DCG's favorable terms of $500 million in annual fees, each component is worth 8x -- that would give Grayscale a valuation of about $4 billion. Let's say Genesis's other big businesses are probably around $3 billion as well.
We can also guess that their Luno buyout book value is at least $1 billion.
Their historical investments, I'd guess it would be $200 million in cash investments and maybe $800 million on paper at the time of the investment because it was a bull market.
So I guess we're looking at something like this for segmentation.
From the outside, these are ballpark numbers, but it gives us a gauge of what their venture portfolio looks like.
Now we know a few things:
Liquidity has dropped by more than 70%;
VC markdowns are severe and slow;
they seem to be in a hurry;
Advertising revenue has also fallen sharply in this area.
So let's reevaluate:
Grayscale asset management is down, so revenue is more like $200M/yr, multiples are lower, so it might be worth $2B.
If you look at the changes in private placements, Luno may also be down 50%.
If we check the largest holders of each currency (except BTC/ETH) in which they hold liquidity, we assume they are the top 10 holders, which is about $50 million, and possibly another 50 million ETH/BTC in USD.
We know they hold at least $250 million in GBTC, so let's assume fees have accrued to that amount.
We know that CMC sold to Binance for $400m in the bull market - Coindesk probably has 1/10th the traffic and added value, so unless someone buys it for branding, we can cut it down to 4000 Ten thousand U.S. dollars.
And to be honest, don't know if Foundry is making money now, or if it still exists, and to be conservative, I'd call it $0.
These external analyzes bring us this overview, with a valuation of $4.4 billion:
That still seems optimistic given the way the market is crashing right now, no wonder they can't raise $1 billion on it. So let's assume they want to save Grayscale, Genesis, and Luno in order of priority.
But they probably can't because they're dealing with $500 million on paper.
With a thin market for liquid positions in GBTC, ZEC, ETC, ZEN, and everything else, I'd also be surprised if they got 75%+ of the book value of many of these assets, and their sale would cause a huge selloff in this shaky market pressure.
Their risky portfolio is so low because many of their best investments have been exited in the previous cycle -- the current portfolio is a bit underwhelming.
So, in order to raise $1 billion, they seem to have to:
sell some shares;
Sell all venture capital;
sell all liquidity
Sell Luno/Coindesk/Foundry (if it's worth anything).
And hopefully their value will be high.
Maybe they got lucky and someone paid a premium for it, or maybe they managed to sell a portion of Grayscale or Genesis to a big company like Fidelity. However, there is a chance that they will have to give up everything else to save themselves.
My guess: if they don't close a funding round this week, most of the stuff will be sold. If they can't secure financing in time, then they'll have to consider spinning off Grayscale itself.
This is an interesting risk model as we still don't know if they are indebted/financed.
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