Undoubtedly, the crypto industry is in dire strait now; investors are paying attention, staying alert, and preparing for the next possible worse thing to happen. After the fall of SBF’s FTX empire, Crypto.com got into trouble, and BlockFi is planning for a bankruptcy filing. Now, crypto lender Genesis halts withdrawals completely, affecting its partner Gemini pausing withdrawals for its lending program, Gemini Earn.
Genesis was founded early in the crypto industry, launching the first OTC (over-the-counter) crypto trading desk in 2013 and successfully transcending into one of the world's largest lenders. With such an OG player stopping customers from withdrawals, anyone would be the next to fall. Before diving deep into Genesis’s issue, we must first be clear about the company structure.
Digital Currency Group
Genesis is the subsidiary of Digital Currency Group (DCG), a crypto venture capital company. The founder and CEO of DCG, Barry Silbert, is a crypto early adopter and best known for his diamond hands. The power of HODLing through a few bull and bear cycles of the crypto market helped him to build his fortune, turning DCG into a conglomerate of seven crypto subsidiaries and over 200 investments in other crypto companies.
Besides Genesis, DCG is also well-known for another of its subsidiary, Grayscale Investments. Grayscale Investments is a crypto asset manager which offers funds privately for institutional and accredited investors and publicly-traded products. Its Grayscale Bitcoin Investment Trust (GBTC) is one of the first securities solely invested in and deriving value from the price of BTC. The bitcoin funds gained much traction two years ago during the crypto bull run.
Other than these two companies, not to mention global crypto media outlet CoinDesk, bitcoin mining company Foundry, crypto exchange Luno, trading platform TradeBlock, and wealth management platform HQ.
Genesis’s Failure
We all know that FTX is to blame for Genesis’s decision to halt withdrawal. However, Genesis did suffer a hefty loss earlier during mid-year 2022. According to a news published by the sister company CoinDesk, Genesis is facing hundreds of millions in losses due to the exposure to Three Arrows Capital and Babel Finance. Both vast losses led to Genesis’s current situation.
Aftershock
Gemini, the crypto exchange founded by the Winklevoss brothers, was impacted by this incident. Gemini offers Gemini Earn, a lending program, to its users to lend their crypto to institutional borrowers and earn interest. As one of the major lenders in the crypto space and a sister company, Genesis is, of course, the primary borrower in this program. Following Genesis’s decision to pause withdrawal, Gemini Earn is also affected. Subsequently, Gemini published a press release stating, “this does not impact any other Gemini products and services.” However, the FUD has already begun.
According to blockchain analytics platform Nansen, Gemini has seen a $494.6M net outflow over the past 24 hours. Binance is also heavily affected despite no terrible news spreading around. This data shows that crypto investors now suffered from “CEX phobia” and started withdrawing funds from whichever centralised exchanges despite them claiming to have a 1:1 reserve.
Companies Response
Genesis
The default of 3AC negatively impacted the liquidity and duration profiles of our lending entity Genesis Global Capital. Since then, we have been de-risking the book and shoring up our liquidity profile and the quality of our collateral.
However, FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests which have exceeded our current liquidity.
Our #1 priority is to serve our clients and preserve their assets. Therefore, in consultation with our professional financial advisors and counsel, we have taken the difficult decision to temporarily suspend redemptions and new loan originations in the lending business.
Gemini
Gemini exchange fully back online; all customer funds held on the Gemini exchange are held 1:1 and available for withdrawal at any time.
DCG
The impact lies with the lending business at Genesis and does not affect Genesis’s trading or custody businesses. Importantly, this temporary action has no impact on the business operations of DCG and our other wholly owned subsidiaries.
Binance
Binance does not rely on Genesis or any other 3rd-party for our Earn products. For on-chain staking, Binance uses our own nodes where possible.
Crypto.com
http://Crypto.com has zero exposure to Genesis and Gemini Earn.
Tether
Tether Confirms Zero Exposure To Genesis
What should we do?
Self-preservation is the way. We are not trying to spread FUD here, but there are plenty of examples that company changed their tone overnight, from yes to nay in the blink of an eye. So, it is best to protect ourselves by all means — withdrawing everything while we still can. If you have any investment in Grayscale Investments’ funds, sell it and buy spot BTC or ETH; if you are storing any crypto or cash in Luno, transfer them to hot or cold wallets or simply cash out. Still, “your keys, your coins” is the best crypto investment advice in 2022.
Renowned investor Stanley Druckenmiller, in a recent interview with hedge fund manager Paul Tudor Jones, commended Bitcoin's establishment of its own "brand" over the past decade and a half.
JasperDelve into the ripple effects caused by the untimely death of Yoozoo Networks CEO Lin Qi, touching on the upcoming court case, internal power shifts, and the company's uncertain financial future. It also explores new strategic directions taken by Yoozoo in an attempt to stabilise its position in the gaming industry.
YouQuanGrammy-nominated DJ Steve Aoki is embarking on another digital adventure. He is collaborating with STEPN to introduce an exclusive NFT sneaker collection based on Solana.
JixuThe regulatory body's allegations involving multi-billion-dollar securities fraud, are directed at Do Kwon and his company.
KikyoHong Kong explores the benefits of e-HKD in its digital currency pilots, stresses caution in further implementations.
Hui XinMAS officials emphasised the need for closer cross-border collaboration as the pilots grow in scale and sophistication.
AlexXumm, a self-custodial wallet for the XRP ledger, has unveiled its intent to facilitate an event featuring 0% transaction fees exclusively for Topper-related transactions.
CatherineThe plan is to introduce formal legislation by 2024.
ClementA group of five foreign visitors to Singapore attending the TOKEN2049 cryptocurrency conference found themselves in a baffling situation when they were charged S$100 for a 3km ride from the Sands Expo & Convention Centre to Park Royal Collection Pickering in Chinatown.
JasperThe Darknet, a hidden part of the internet accessed with tools like the Tor Browser, once connected to Bitcoin through Silk Road, an anonymous marketplace for illicit goods. Bitcoin's features attracted criminals, but its immutable ledger aided law enforcement, altering perceptions of its association with crime.
Jixu