DCG Investor Report: Q4 2023 Highlights, Fiscal Year

Digital Currency Group (DCG) report for Q4 2023, highlights significant changes in crypto asset prices, growth in revenues, and EBITDA.

In a letter sent to investors on Monday morning, Digital Currency Group (DCG) shared its results for the fourth quarter and fiscal year 2023. The complete version is provided below.

To Whom It May Concern,
We are happy to share with you our Q4 2023 Investor Report, which covers important business developments and financial performance information of DCG. Looking ahead to this next chapter for DCG and the future growth of our industry, we are encouraged by the rally in crypto asset prices that began this year, which coincided with significant milestones such as DCG repaying over $1 billion in debt and Grayscale’s GBTC beginning to trade as an ETF on NYSE Arca.
Rest assured, we kindly request that you maintain the utmost confidentiality regarding the contents of this email and Investor Report. Please refrain from sharing them with your fund LPs or any other unauthorized parties.

Annual Report for the Fourth Quarter of 2023 (not include Genesis’ results)

The prices of crypto assets kept going up and hit yearly peaks of above $40,000 in the fourth quarter. The average price of one bitcoin was around $37,000 in Q4, up 29% from around $30,000 in Q3.
DCG Consolidated revenues for Q4 2023 were $210 million, an increase of 12% from the previous quarter. This growth was driven by higher asset values, which resulted in $156 million in sales at Grayscale, an increase of 24% from the previous quarter, and $38 million at Foundry, a decrease of 22% from the previous quarter due to reduced mining revenues. Compared to $132 million in Q42022, DCG’s revenues in Q42023 were up around 59% year-over-year. In Q42023, the average price of one bitcoin increased by around 101% from $18,000 in Q42022.
After losing $7 million in the fourth quarter of 2022, EBITDA increased to $99 million in Q42023, a 41% quarter-over-quarter increase.

FY 2023 Income Statement (without including Genesis’ results)

With combined revenues of $749 million and EBITDA of $275 million, DCG had a successful fiscal year in 2023. A minor decrease in revenues compared to $813 million in FY 2022 was offset by an increase in EBITDA from $261 million, marking a 463 basis point improvement in margin year over year. This improvement was made possible by the sale or winding down of less lucrative operations.
At the end of 2023, DCG had around $975 million worth of investments, which included tokens, Grayscale trust shares, venture/fund investments, and public equities.

One-Time 409A Evaluation

We provide an impartial 409A valuation of DCG’s stock every year at the end. For this reason, DCG once again retained Anvil Advisors. With a share price of $55.87 as of December 31, 2023, the resulting valuation of DCG common equity is $4.4 billion. Compared to the worth of $2.2 billion as of December 31, 2022, this is a rise of 102%.

Developments in Crucial Business Areas Genesis Creditor Negotiations

The bankruptcy court authorized the change to the Partial Repayment Agreement (PRA) that DCG & Genesis filed on November 28, 2023, and it was finalized on December 21, 2023. Thanks to this agreement, we were able to transfer some Grayscale trust shares to pay down the principal of our debt and gain a lot of operational freedom.
Additionally, as mentioned in early January, we have paid off all of Genesis’s short-term loans with a final payment. In a little over a year, DCG has settled all of its debts, including approximately $700 million owed to Genesis, and more than $1 billion in total to its creditors.

The objection to the modified Genesis bankruptcy plan was filed last week by DCG. Creditor committees agreed to deal structures that would have helped Genesis creditors gain from an increase in equity value at DCG and Genesis—options that DCG had been proposing nonstop for over a year—before the committees changed their minds. The proposed plan, which was devised without DCG’s input, violates US bankruptcy law and favors a tiny controlling group of creditors over others. We have already stated that DCG would support a plan that pays creditors a 100% recovery. An illegal scheme that would strip DCG of its corporate governance rights is not something DCG can back.

An Update from the New York Attorney General

Last week, the civil action complaint that was first filed on October 19, 2023, was revised by New York Attorney General Letitia James to include all creditors of Genesis as victims and to demand more than $3 billion in damages. The lawsuit was originally filed against Gemini, Genesis, DCG, and individuals. Creditors can anticipate complete repayment based on the value of their claims, and this amount reflects the overall claims pool in the Genesis bankruptcy.

Furthermore, this is not an innovative topic. For the purpose of creating fresh headlines, this is the identical unfounded allegation being distributed again. DCG has always operated honestly and within the law.

After Genesis suggested a settlement with the NYAG, which would have effectively given the NYAG all residual assets in the Genesis estate after creditors were paid, the lawsuit was revised. Genesis, in a similar vein to the revised bankruptcy plan, drafted this proposed settlement in secret from DCG in an effort to sidestep bankruptcy law and pay creditors more than what is allowed by law for their claims. We will not give up until this effort to dismantle the law is stopped.

Bitcoin ETF Approval in Grayscale Patterns

On January 10, 2024, Grayscale was granted approval by the U.S. Securities and Exchange Commission to list GBTC on NYSE Arca as a spot Bitcoin ETF. This is a watershed event for our industry. The next day, GBTC started trading on NYSE Arca.

With over $22 billion* in AUM and hundreds of millions of dollars in daily trading volume, GBTC has grown rapidly since its 2013 launch as the first Bitcoin fund in the US. The fund has attracted almost one million investors. The legalization of spot Bitcoin ETFs in the US is a huge step toward the widespread acceptance of digital currencies, following Grayscale’s historic court triumph last year.

Coindesk sale

CoinDesk was sold to Bullish, an institutional digital assets exchange run by Tom Farley, on November 20, 2023. In 2016, DCG bought CoinDesk because they thought the cryptocurrency market required a top independent news outlet. We are pleased to have played a part in its growth into a leading digital asset information platform and an award-winning media and events organization.

Your continuous support is greatly appreciated.
Very best, Relations with DCG Investors