Crypto Exchanges Lose All Customers After FTX Bankruptcy
2022.11.18 12:49
Crypto Exchanges Lose All Customers After FTX Bankruptcy
Budrigannews.com – The uncertain future of Genesis Global Capital, one of the largest crypto lenders, is fueling fears that the recent collapse of crytpo exchange FTX is having a ripple effect on other players in the highly interconnected market.1
Genesis, which mediates digital assets for financial institutions like hedge funds and asset managers, had nearly 3 billion in total active loans at the end of Q330. On Wednesday, its crypto lending sector suspended new lending and allowed customers to take money as it called the “unprecedented market turmoil” that has rippled the market after the FTX filed for bankruptcy last week.
Genesis is owned by Stanford, a Connecticut-based venture capital firm, digital Currency group.
The contagion concerns have been attributed to Genesis’s excellence in crypto, its links to troubled companies, and its broader reach into the financial world. According to a person familiar with the matter, Genesis’s 2 biggest borrowers were Three Arrows Capital, a Singapore-based crypto hedge fund, and Alameda Research, a trading company closely affiliated with FTX. Both are now in bankruptcy proceedings.
“There was a goal for a few days on Genesis’s back,” said Joseph Edwards, investment partner at Securitize Capital. “This is a signal of bad results” for the crypto market, especially since Genesis deals with brokers, family offices and money managers.
Genesis received an “unusual withdrawal request” from customers over its debt on Wednesday, the company said. Two days ago, it was seeking an emergency loan of$1 billion from investors, the Wall Street Journal reported.
Genesis declined to comment on the journal report, but a spokesman said it had “significantly reduced” its exposure to Alameda after the collapse of Three Arrows. Genesis also said it had “no significant exposure” to FTX’s native digital tokens or those of other crypto exchanges, and that it was hedging its positions on holdings linked to FTX.
Lenders are also caught up in legal proceedings. Genesis had lent more than77 billion to 3 arrows, according to a court filing on May 23. Genesis parent, DCG, filed a請求1.2 billion claim against Three Arrows.
While not offering directly to retail investors, Genesis supports products offered by crypto companies such as Circle Internet Financial and Gemini, the leading operators of the largest stablecoins, which pay yields to customers who deposit certain cryptocurrencies into the platform.
Crypto lenders, which acted as de facto banks in the crypto world, grew rapidly during the pandemic. But unlike traditional banks, they do not need to hold a capital cushion. Earlier this year, a shortage of collateral forced some lenders – and their customers – to shoulder large losses.
Investors are concerned that these losses could pile up. Last year, Genesis extended$130.6 billion in crypto loans and traded11116.5 billion in assets, according to the company’s website.
Knock-on effect
Other companies have distanced themselves from Genesis amid concerns that the trouble could reverberate. Crypto.com The exchange that operates the world’s largest stablecoins, and said Wednesday they had no exposure to Genesis.
Paolo Ardoino, Tether’s Chief Technology Officer, said FTX’s relationship with the institution could have a domino effect on other companies, but we have not yet seen how it will work.
“I don’t know what the size of the cascade effect is – it may be small, it may be large,” he said.
Market participants are sticking to the link between Genesis and FTX.
Genesis also made a loan to Alameda, a trading outfit closely related to FTX, and accepted FTT tokens as collateral, according to sources familiar with the matter. According to Analytics website CoinGecko, the price of its token has fallen by 93% last month.
Genesis has not revealed complete exposure to Alameda.
Crypto experts said some of the industry’s biggest names could still get into trouble with Genesis. Parent company DCG said the suspension of Genesys’ withdrawal had no impact on its business or subsidiaries. DCG also owns crypto asset manager Grayscale.
DCG declined to specify whether to take any of the responsibilities of Genesis. A spokesman for the group declined to comment.
