Grenzo, Dungeon Warden + Grafdiggers Cage


I was in a Commander game today (match 258949190, game 838961318), where one player had a Grafdiggers Cage, Another player was running Grenzo, Dungeon Warden and they were able to activate Grenzo repeatedly. Given that Cage says "Creature cards in graveyards and libraries can't enter the battlefield." I would have assumed Grenzo would be shut off, since the cards are going from the library, to the graveyard, and then entering the battlefield. Is this a bug or am I misunderstanding something that is very counterintuitive?