Ahead of the curve - Nov 22 2022Falling activity and falling pricesThe crypto market continues to face headwinds as Genesis halts withdrawals while seeking an emergency raise due to illiquid assets on Genesis’s balance sheet. In the current shaky environment, BTC has stabilized but reached new multi-year lows on Monday and has seen a 5% downside in the last week.ETH underperforms BTC and is down 13% over the last seven days, driven by FTX-related market activity. The unidentified FTX hacker who stole funds amid the chaotic meltdown of FTX has started to sell his ether position by swapping ETH to renBTC, exiting to on-chain BTC. The hacker has converted $72m worth of ETH to BTC and has $200m more to deploy. The hacker will likely use coinjoins to obfuscate the origin of the BTC holdings and, over time, convert BTC to Monero before selling Monero to stablecoins on a different exchange to hide his trails. Genesis and Digital Currency Group seeks emergency fundingThe digital asset brokerage firm Genesis, owned by Digital Currency Group, seeks financing. Genesis suspended withdrawals, in addition to seeking an emergency loan due to certain illiquid assets on Genesis’ balance sheet. Bankruptcy has emerged as a potential outcome if the financing efforts fail. Genesis has reportedly slashed its raise target from $1bn to $500m, indicating that the firm struggle to shore up its liquidity profile. Digital Currency Group owns a myriad of companies, with Grayscale being the flagship company holding. Grayscale offers crypto exposure through close-ended funds and holds 3.3% of the circulating BTC supply and 2.5% of the circulating ETH supply. Traders are now fearing that bankruptcy will lead to a dissolution of Grayscale’s crypto funds. Alternatively, the trusts may be acquired by traditional finance behemoths due to the attractive fee structure. Grayscale’s trusts trade at an all-time high discount to NAV. Due to its close-ended structure, the trust does not trade on par with NAV. Grayscale aims to turn the BTC trust into an ETF in the future. Previously, the trusts traded at a premium to NAV, but since early 2021, the trusts have traded at discounts. GBTC currently trades at an enormous -45% discount to NAV. Based on Grayscale’s 2% annual management fee, the market is currently pricing in that the fund will remain close-ended until 2051. All-time high open interest on CMECME’s open interest has surged to a new all-time high in notional terms of 98,725 BTC, surpassing October 25, 2021, highs of 93,628 BTC. The growth coincides with a growing presence from direct market participants, representing 56% of the open interest, up from 39% on November 3. The growth also coincides with bearish positioning, as elaborated on page 4. CME dominates the BTC futures market, accounting for 56% of the market. This is the highest CME dominance within BTC futures seen in the last year. OKX is the largest offshore futures venue, representing 25% of the futures OI. OKX also has a material market share in perps, accounting for 20% of the total perp OI. OKX faced a wave of difficulties in 2021 related to Chinese crypto bans, leading its market share to plunge to 5% by December 31, 2021.