FTX bankruptcy filing brought another avalanche for the crypto space that seems to be getting destructive with every sliding phase. Slowly the destruction is moving towards the next potential contender, Genesis Global Trading. Following the way ahead, the related firms are likely to experience the burns.
Genesis Global trading is a prominent crypto asset brokerage firm and a known unit of Digital Currency Group (DCG). Given the possibility of Genesis to become another fruit to fall in the wake of FTX collapse, other firms under the umbrella of DCG including Grayscale Bitcoin Trust (GBTC) could face the impact.
Genesis Likely to File Bankruptcy
According to Bloomberg, Genesis put up a warning that it could be required to file for bankruptcy citing the firm’s struggles in order to raise funds.
Given the ongoing conundrum, Genesis is unable to withdraw funds worth 2.8 billion USD for Genesis Global Capital. The latter is the crypto lending unit of the former. The firm was reported to raise about 1 billion USD last week itself as an emergency loan.
Last week, Genesis Global Capital was reported to face a liquidity crunch after the bankruptcy filing of FTX.
The FTX collapse was a two way hit for the firm: the abrupt withdrawals of assets by users and debt to FTX affiliated Alameda Research.
Users flocked to the platform in order to withdraw their crypto assets. Citing the situation becoming critical, it went on to announce “abnormal withdrawals requests” from its customers as these withdrawals were exceeding the contemporary liquidity of the firm.
The other major factor was the loan over the firm. Genesis has facilitated loans to Three Arrows Capital (3AC) and Sam Bankman-Freid’s trading firm Alameda Research. The crypto hedge fund filed for bankruptcy in July itself following the Terra (LUNA) collapse. Now the other defaulter became SBF’s trading firm as it filed for bankruptcy in November 2022.
Issues Emerging for Grayscal
Genesis’ announcement of potential bankruptcy filing created issues for the prominent bitcoin fund Grayscale. Despite the bitcoin fund’s statements and clarifications about no exposure of lending firm’s debts, its stock continued to suffer.
GBTC stock price declined over 5% on Monday given the investor’s losing belief. The rumors stated it might sell off its bitcoin holdings and generate cash to bring Genesis out of the situation. However, Grayscale denied the same and assured that all the bitcoins belong to only GBTC.
Meanwhile, seeking the GBTC stock price drop as an opportunity, Cathie Wood’s Ark Investment went on to purchase bitcoin fund’s shares.
Bitcoin price also witnessed an impact of Grayscale going through the selling pressure. The fund holds approx 3% of the overall BTC supply in the circulation. In a letter shared last week, GBTC revealed that it holds 635,235 BTC overall.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2022/11/22/genesis-bankruptcy-announcement-following-ftx-affecting-grayscale/