Another cryptocurrency giant risks bankruptcy, the carnage continues

Genesis, another cryptocurrency giant, is on the brink. The debacle of the trading company risks dealing another blow to an already fragile industry.

The cryptocurrency industry is struggling to recover from the flash drop of FTX. In the days following the bankruptcy, many players in the ecosystem revealed serious liquidity problems. This is especially the case with Genesis Trading. The New York-based company, which specializes in digital asset speculation, initially tried to put on a good face by assuring that the FTX debacle did not affect its business. The firm was trying to avoid a crisis of confidence, like the one that precipitated the death of FTX.

Subsequently, the subsidiary of Digital Currency Group (DCG) revealed that $175 million was stuck on the FTX exchange platform, now bankrupt. Clearly, it is likely that the company will never recover its assets. As FTX lawyers reveal, the group already does not have enough cash to repay its 50 major creditors.

Read also: Historic cryptocurrency crash – all the info live

Genesis is going through a cash crisis

The confessions of Genesis provoked a wind of panic among investors, mainly institutional, branded with a hot iron by the disaster of the FTX empire. Massive withdrawals of cryptocurrencies were quickly registered.

Late last week, Genesis finally admitted that FTX created unprecedented market turbulence resulting in abnormal withdrawal requests that exceeded our current liquidity ». Like FTX a week earlier, Genesis can’t refund all of its customers. Withdrawals have therefore been frozen for an indefinite period:

In consultation with our advisors and financial experts, we have made the difficult decision to temporarily suspend withdrawals and new loan issuances.”.

Amanda Cowie, vice president of communications and marketing at Digital Currency Group (DCG), parent company of Genesis, credits the exceptional move “ to extreme market dislocation and loss of industry confidence” cryptocurrencies. As a reminder, the trading company had already suffered greatly from the collapse of the investment fund Three Arrows Capital this summer. Genesis had in fact lent $2.4 billion to the fund before its bankruptcy.

To go up the slope, and reimburse its users, Genesis Trading went in search of investors. The firm was initially looking $1 billion to replenish its coffers. Subsequently, she revised her fundraising goal by half. So far, the American company has not found a partner. Binance, the industry leader, refused to invest and support the company.

Collateral damages

The Genesis debacle affects many players in the industry. Indeed, several flagship platforms go through Genesis Trading to offer high returns to their clientele. Let’s quote first the Gemini platform, founded in 2014 by Cameron and Tyler Winklevoss. It was forced to suspend withdrawals of cryptocurrencies deposited under the Earn program.

Coinhouse, the French platform, also relied on Genesis Trading to offer savings and investment products. Following the liquidity crisis of its partner, the company was forced to suspend withdrawals of the currencies invested in the Crypto Books.

This suspension decision follows directly from the communication of Crypto Passbook counterparties to suspend their withdrawals themselves due to the extreme tensions in the market. […] We had no choice but to note the default of these counterparties, and their impossibility to return the crypto-assets entrusted to them. », explains Coinhouse, believing “ that it will take some time for things to get back to normal”.

In this anxiety-provoking context, some players speak up to reassure their customers. Crypto.com, one of the main consumer exchanges, has ensured that it has no exposure to Genenis Trading or Gemini Earn.

Back to the wall, Genesis Trading does not rule out bankruptcy. In a press release sent to our colleagues at Bloomberg, the company specifies not intend to file for bankruptcy imminently”. The American firm believes that it is always possible to avoid launching bankruptcy proceedings in court:

“Our goal is to resolve the current situation in a consensual manner without the need for a bankruptcy filing. Genesis continues to have constructive conversations with creditors”.

The Bitcoin tumble

Unsurprisingly, these new turbulences have pulled the price of bitcoin down. The oldest cryptocurrency briefly fell below $16,000. According to JP Morgan analysts, the currency could soon contract around 13,000 dollars.

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CoinMarketCap

The decline of King Bitcoin penalized the entire crypto-asset market. The market valuation of the industry is currently changing below $810 billion. Note that despite the market crash, Bitcoin’s strongest advocates aren’t worried. Samson Mow, head of strategy at the firm Blockstream, reminds that the fall of FTX has nothing to do with the digital currency of Satoshi Nakamoto, whose fundamentals remain unchanged.

“Other things like this will continue to happen in the crypto world because all of these projects are worthless house of cards. Bitcoin will overcome all problems simply because of its design. […] The failure of any giant is only a temporary setback”explains Samson Mow in an interview with CoinTelegraph.

Source :

Bloomberg

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