Shalini Nagarajan

<div id="highlights-block_62b9533f16ccb" class="highlights">
 <ul>
 <li>FTX’s proposal gives it the option to acquire BlockFi at a price of zero, Mark Yusko told investors</li>
 <li>He said he’s working on securing an equity offer for BlockFi</li>
 </ul>
 
</div>



Asset manager Morgan Creek Digital wants to compete with FTX’s support for troubled crypto lender BlockFi.



The investment firm is looking to raise $250 million from investors to acquire a majority stake in BlockFi, <a href="https://www.coindesk.com/business/2022/06/25/morgan-creek-is-trying-to-counter-ftxs-blockfi-bailout-leaked-call-shows/" target="_blank" rel="noreferrer noopener">CoinDesk</a> reported on Sunday, citing a leaked investor call. 



Morgan Creek, a longtime BlockFi backer, reportedly came up with this plan after FTX last week announced a <a href="https://cms.blockworks.co/blockfi-inks-250m-credit-deal-with-ftx-to-ease-liquidity-fears/" target="_blank" rel="noreferrer noopener">$250 million credit line</a> for the lender. According to the leaked audio, Morgan Creek Digital’s Managing Partner Mark Yusko said he had been “making calls all day.”



Crypto billionaire and FTX CEO Sam Bankman-Fried has been labeled a “lender of last resort” for attempting to rescue the struggling industry. In a <a href="https://twitter.com/SBF_FTX/status/1539268638791696385" target="_blank" rel="noreferrer noopener">tweet</a> on Tuesday, he said his company is committed to protecting the digital asset ecosystem and its customers.



Multiple venture capital funds are reportedly casting around for ways to provide BlockFi with funds and bolster its balance sheet amid the shaken market.



According to Yusko, FTX’s $250 million credit deal with BlockFi raises a point of concern for existing shareholders, including Morgan Creek — it provides FTX with the option to acquire BlockFi at no cost. If the crypto exchange goes ahead with this option, then BlockFi’s existing equity shareholders, investors in prior venture rounds, management and employees with stock options would all be liquidated.



If FTX were to exercise that option after extending its credit line, only investors in the most senior tranche of BlockFi’s latest fundraise would recover a minimal amount on their investment, Yusko said. Morgan Creek would be among those caught in a tight spot.



This might make the FTX deal look tricky. But there was a rational reason BlockFi’s founders accepted the terms, Yusko said, according to CoinDesk. Of the many emergency financing offers the firm reportedly received, FTX’s deal was the only one that wouldn’t diminish the role of client assets.&nbsp;



That means if BlockFi went ahead with another offer, its depositors would have to stand by until the new lender was repaid first. Yusko didn’t mention which other firms approached BlockFi with bailouts. Furthermore, the lender hadn’t received any equity financing options by then.



The only other option, Yusko told investors on the call, is for BlockFi to raise an equivalent amount in equity. He said he expects a 10% chance for this idea to work out, “but not zero.”



Yusko also told an investor he’s open to a deal that would allow FTX and Morgan Creek to each put up a portion of their capital.&nbsp;



So far, Yusko has reportedly spoken to an investor that could issue a $100 million check and two others who could finance up to $50 million. He warned that efforts toward securing an offer are far from certain.



Morgan Creek declined to comment. BlockFi didn’t immediately return Blockworks’ request for comment.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

BlockFi

BlockFi Has a New Bidder in Morgan Creek, Report Says

Jacquelyn Melinek

<div id="highlights-block_6196767d4865a" class="highlights">
 <ul>
 <li>The round was led by Morgan Creek Digital with participation from DeFi firm ParaFi Capital</li>
 <li>This year has proven to be the strongest year for crypto capital, with $15 billion in global blockchain funding during the first nine months of 2021, up 384% vs. the entirety of 2020</li>
 </ul>
 
</div>



Crypto exchange Gemini has raised $400 million in funding to bring its valuation to about $7.1 billion, according to the company.



Morgan Creek Digital led Gemini&#8217;s first-ever round of outside funding with participation from 10T, ParaFi, Newflow Partners, Marcy Venture Partners, and the Commonwealth Bank of Australia, among others, according to the press release.



Gemini and Morgan Creek Capital did not respond to immediate requests for comment by Blockworks. ParaFi Capital, when reached by Blockworks, declined to comment.



“We are leading the first outside investment in Gemini because of our shared conviction in crypto and belief in the company that Cameron and Tyler are building,” said Sachin Jaitly, General Partner of Morgan Creek Digital, in a press release announcing the funding. “Their vision for the role of crypto in redesigning money, the financial system, art, and the Internet, and their track record of incubating and scaling innovative technologies, gives us confidence in Gemini’s ability to continue to be an industry leader.” 



The seven-year-old company was founded by twin brothers and early Bitcoin investors, Cameron and Tyler Winklevoss. Gemini offers services to trade over 50 cryptocurrencies, earn up to 8.05% APY on about 40 different tokens and get up to 3% on crypto rewards through its <a href="https://cms.blockworks.co/gemini-mastercard-to-launch-crypto-rewards-card/" target="_blank" rel="noreferrer noopener">credit card</a>.



At the end of August, the company <a href="https://www.gemini.com/blog/total-crypto-in-gemini-earn-crosses-usd3-billion" target="_blank" rel="noreferrer noopener">wrote</a> that its customers were earning interest on over $3 billion in loans through its Gemini Earn product.&nbsp;



The brothers are <a href="https://www.forbes.com/sites/michaeldelcastillo/2021/11/18/gemini-raises-400-million-to-protect-the-metaverse-from-meta-facebook/?sh=2a14306a5f57" target="_blank" rel="noreferrer noopener">expected</a> to keep 75% ownership of Gemini after the capital raise, increasing their total net wealth 75% from $6 billion in April to $10.5 billion today.



As bitcoin’s spot price hit a new all-time high on November 10 around $69,000, companies and investors alike are taking advantage of current market conditions by pumping tons of capital into the crypto space.&nbsp; This year has proven to be the strongest year for crypto capital, with $15 billion in global blockchain funding during the first nine months of 2021, up 384% vs the entirety of 2020, CB Insights’ blockchain <a href="https://www.cbinsights.com/research/report/blockchain-trends-q3-2021/" target="_blank" rel="noreferrer noopener">report</a> for Q3 2021 showed.



This story was updated on November 18, 2021, at 5:10 pm ET.



<hr class="wp-block-separator">
Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.
<hr class="wp-block-separator">

Funding

Gemini Raises $400M to Bring Valuation Over $7B

<div id="highlights-block_615e0c6ea8714" class="highlights">
 <ul>
 <li>“If you look at the migration of talent into this space, it’s like nothing I’ve ever seen except one other time in the 90s, coming into the internet, people were leaving great jobs,” he said</li>
 <li>“The money has been flowing (into crypto) for years and the talent is flowing, you have to embrace it and you have to have exposure to digital assets,” he said </li>
 </ul>
 
</div>



Mark Yusko, CEO and chief investment officer of Morgan Creek Capital Management, sat down with Blockworks for an interview at our Digital Asset Summit: NYC conference after he spoke on the closing fireside chat with Pantera Capital’s Dan Morehead and 10T Holdings Founder and CEO Dan Tapiero. 



In the interview, Yusko shared his thoughts on digital assets and discussed:



<ul class="wp-block-list"><li>Increased institutional exposure to digital assets</li><li>Migration of talent and money into crypto</li><li>Solving risks associated with digital assets</li><li>Future regulatory framework </li><li>Disruption of financial services through blockchain technology</li></ul>



Watch the full interview below and all of the panel videos from DAS <a href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/#videoslider0" target="_blank" rel="noreferrer noopener">here</a>. 



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="DAS NYC 2021: Morgan Creek Capital’s Mark Yusko Says You Have to Have Exposure to Digital Assets" width="1024" height="576" src="https://www.youtube.com/embed/RSt-GTYNHWI?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



<hr class="wp-block-separator"/>



Are you a UK or EU reader that can’t get enough investor-focused content on digital assets? <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a> in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket. <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.



<hr class="wp-block-separator"/>

DAS 2021

Morgan Creek’s Yusko: You Have to Have Exposure to Digital Assets

Ben Strack

<div id="highlights-block_61435b111102e" class="highlights">
 <ul>
 <li>Pantera CEO Dan Morehead noted that while bitcoin’s market cap could grow by 10 times in half a decade, he expects other crypto segments to go up even more</li>
 <li>Executives counter argument of Bridgewater Associates CIO Ray Dalio that governments will “kill” bitcoin if it becomes successful </li>
 </ul>
 
</div>



The cryptocurrency market capitalization could continue to roughly double in size each year over the next half decade to reach $40 trillion by that time, <a href="http://v" target="_blank" rel="noreferrer noopener">Pantera Capital</a> CEO Dan Morehead said during a panel at Blockworks’ Digital Asset Summit (DAS) on Wednesday.



While he noted that bitcoin could grow by 10 times during that span, he expects other crypto segments to go up even more. More than 100% of the returns in the cryptocurrency industry have come outside of bitcoin over the last six months, Morehead added.



“Money protection or a digital gold is one of the things blockchain does, but there’s hundreds and hundreds of different use cases — NFTs, DeFi, all that and that’s why it’s so exciting,” he said. “It’s going to go through so many different industries and end up being worth so much value because it’s disrupting things that weren’t touched. Basically all of finance wasn’t touched by the internet.”



The global cryptocurrency market cap today is $2.28 trillion, according to <a href="https://www.coingecko.com/en" target="_blank" rel="noreferrer noopener">CoinGecko</a>, as cryptocurrency trading volume in the last day was at $144 billion, as of 12:30 p.m. eastern on Thursday. The market caps of bitcoin and Ethereum were at about $900 billion (39.8% of overall market) and $425 billion (18.7%), respectively, the data shows.



Morehead was joined on the Manhattan event stage by Mark Yusko, founder and CIO of <a href="https://www.morgancreekcap.com" target="_blank" rel="noreferrer noopener">Morgan Creek Capital Management</a>, and Dan Tapiero, founder and CEO of <a href="https://10tfund.com" target="_blank" rel="noreferrer noopener">10T Holdings</a>.&nbsp;



Yusko, who estimates a $25 trillion crypto market in five years, said he expects a burst in the crypto market value over the next 24 months, followed by a bust.&nbsp;



“People will [say] it’s over, it’s the end,” he told the crowd. That’s the beginning.”



Yusko noted that he also expects the dominance of bitcoin to decline to about 20% of the overall crypto space, perhaps reaching $5 trillion by 2026.



Meanwhile Tapiero estimated that the crypto market value could hit $20 trillion and said bitcoin reaching a price of $500,000 is “very reasonable” within five years.



Bitcoin’s price was above $48,000 on Thursday afternoon, according to CoinGecko, up 4.3% in the last seven days.&nbsp;&nbsp;&nbsp;



“I don’t know that bitcoin dominance will fall … because there is a world in which things start getting built on bitcoin,” Tapiero explained. “There’s so much innovation happening at such a fast pace that, at least for me, I find it hard to be specific on the bet.” 



<h3 class="wp-block-heading">Can crypto be stopped?</h3>



Ray Dalio, CIO of hedge fund manager Bridgewater Associates since 1985, said Wednesday in an <a href="https://twitter.com/SquawkCNBC/status/1438122407965954054?s=19" target="_blank" rel="noreferrer noopener">interview</a> with CNBC that though he has a small allocation to bitcoin relative to other investments, the growth of crypto could lead to its end.&nbsp;



“It’s an amazing accomplishment to have brought it from where that programming occurred to where it is,” he said. “&#8230;I think at the end of the day if it’s really successful, they’ll kill it. They’ll try to kill it and I think they will kill it, because they have ways of killing it.



“It doesn’t have intrinsic value,” Dalio added. “If you put cryptocurrencies, or let’s say bitcoin, in the historical perspective, there are so many things in a historical perspective that didn’t have intrinsic value and had perceived value and then became hot, and then became cold.”



Taperio called Dalio’s comments “ridiculous” during the DAS panel, noting that older investors who are choosing to ignore the benefits of crypto are having their wealth devalued.&nbsp;



Yusko called bitcoin the “greatest money ever invented,” noting that it and gold are the only two forms of actual money.



“That money … will displace all of the bad, crappy money, and that is inevitable and there’s no way to stop it,” Yusko said. “Ray Dalio is crazy to say they can shut it down. No, you can’t.”



The Morgan Creek founder noted China’s first crackdown on bitcoin in 2013, which sent its price tumbling.&nbsp;



“The price fell from $1,400 to $1,000 in two weeks,” Yusko noted. “Where is it today? Is it higher than $1,000? Last time I checked it was, right?’



<hr class="wp-block-separator"/>



Are you a UK or EU reader that can’t get enough investor-focused content on digital assets?<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.



<hr class="wp-block-separator"/>

Morgan Creek Capital Management

Newsletter

Blockworks Research