Crypto Contagion Is Spreading, Fast

To keep Genesis from suffering losses, its parent company, Digital Currency Group (DCG), rescued itBut since then, Genesis has cut 20% of its workforce. reduce costs Longtime CEO Michael Moro has resigned.

Genesis has once again found itself on the wrong side of the collapse earlier this month. For FTX filing for bankruptcy On November 11th, the company lost $175 million stored on exchanges. Again he had DCG step in and inject $140 million in cash.

However, despite multiple DCG rescues, Genesis was unable to escape the effects of FTX. Samson Mow, a prominent cryptocurrency commentator and former chief strategy officer of cryptocurrency infrastructure firm Blockstream, says he is struggling to fund the surge in customers seeking to redeem cryptocurrencies. rice field. This could lead to suspension of withdrawals, exacerbating the general trust crisis and increasing the likelihood of a flood to other lenders (such as BlockFi and Voyager Digital), spreading the contagion.

But Mow says it’s important to understand that this is a liquidity issue, not a solvency issue. In other words, Genesis has enough assets to pay its debts, but not readily available in the form of cash, which makes bankruptcy “unlikely,” Mow said.

Aimed at DCG downplay the situation He tweeted that the decision to suspend redemptions and stop issuing new loans was a “temporary measure” and that the issue was limited to Genesis’ lending division, trading and custody divisions usually This means that it will continue to function as intended.

Nonetheless, the situation is so dire that Genesis seeks additional funding, enlisting cryptocurrency exchange Binance and private equity firm Apollo Global Management. be used as a potential investor.

Attempts to secure funding have so far been unsuccessful. reports suggestThis is due to concerns over financial relationships between Genesis and other DCG-owned entities. About 30% of the $2.8 billion outstanding loans on Genesis’ balance sheet are to his DCG or one of its subsidiaries, as they played a pivotal role in the FTX debacle. , Currently, intercompany loans are treated with particular suspicion.

DCG CEO Barry Silbert told investors that this kind of business-to-business lending is nothing special. We survived the previous crypto winter. This year may be tougher, but we will be stronger overall.

Yet, for all that certainty, Silbert’s rallying cry didn’t stop speculation. Cryptocurrencies recently burned by false guarantees from FTX founder Sam Bankman-Fried (who tweeted “FTX is fine” on Nov. 7, days before the company went bankrupt) Investors are also preparing for the bankruptcy of Genesis.

One of the potential collapse consequences has already unfolded. Cryptocurrency exchange Gemini, whose yield farming product sits on top of Genesis, announced that Earn customers would no longer have access to funds after withdrawals were suspended.

November 22nd, Exchange explained I was working to “find a solution”, but until then, $700 million worth of customer funds I remained trapped. Similar to FTX, some of these funds may not be returned if Genesis goes bankrupt. Also, customers of other exchanges related to Genesis could suffer the same fate.