Things are getting worse day by day due to the FTX fallout. There is not a day when you would not read bad news about crypto and FTX. It all started with FTX and it might end with Genesis. A few days ago, FTX founder Sam Bankman-Fried filed for bankruptcy which triggered the market’s downtrend movement. This sudden failure of FTX led to another crypto player’s failure.
On Wednesday, 16 November, Genesis Global Capital suspend all its customer redemption in the lending business. If FTX’s failure was a shock to the crypto market, this could be a real shocker because every crypto whale, business, asset, holding, loan, lending, and, project, etc. is somewhat related to Genesis.
And if something happens to it, you know what will happen to the entire market. This could trigger a situation from which no one can think of coming out. Here are a few things you should know about this failure and its impact on you and the crypto market.
What is Genesis?
Genesis is a part of Digital Currency Group which owns CoinDesk, Foundry, Grayscale, and Luno. The DCG is a holding company owned by Barry Silbert. Additionally, it runs a huge VC firm. It all started in 2013 when Genesis with OTC Bitcoin desk and from then onwards it never look back.
At the start of 2021, when the market was all green, it had enormous wealth at its disposal. It had 50 billion dollars in loan originations, $12.5 billion in active loans, $31B in spot volume traded, and $21 billion in derivatives.
What went wrong?
But things started to go down from then onwards. The first big hit was 3AC. It had lent them $2.4 billion and when it filed a $1.2B claim, DCG stepped in and assumed the $1.2B leaving Genesis with nothing. It was the beginning of the end.
In June 2022, Babel Finance was hit hard and Genesis had large exposure to it. Due to this failure, the CEO, Michael Moro resigned in August. In the third quarter of 2022, the number of Genesis had fallen hugely. It had $8.4B in loan originations – $2.8B in active loans – $18.7B in spot volume traded – $9.6B in derivatives traded by Q3 2022.
And when the FTX thing happened, it was hit even harder. Genesis has put a halt on “customer redemptions and new loan originations” The process was explained by the company’s executives to the clients on a phone call this Wednesday morning. It said that “Genesis has three primary business lines: spot and derivatives trading, lending and borrowing, and custody. Our spot and derivatives trading and custody businesses remain fully operational.”
Additionally, the firm’s first priority would be to “serve our clients and preserve their assets.” because of this the firm is going to temporarily suspend the redemption and new loan origination. According to the CoinDesk report, the firm is doing this in order to “at all costs to avoid [bankruptcy]” this is an admirable step but may cost a lot. But how?
How can it impact the market?
The firm provides lending to many yielding exchanges, including Geminin Earn. The Geminin Earn advertises up to 8.05% interest paid on crypto deposits. If Genesis is not able to provide services to Gemini, Gemini would not be able to provide services to its client. There are other such platforms that are backed by Genesis and if any bad happened to it will affect the entire market.
Every whale that is playing in crypto gives money to Genesis and if it is not able to get back its crypto many institutions, family offices, and whales would be affected badly.
