Bitcoin Price Falls to $16.4k on Genesis Troubles as Leaders Defend GBTC
Bitcoin (BTC) fell to intraday lows after the November 16 Wall Street open as the FTX scandal looked set to claim another victim.
Genesis Trading liquidity “exceeded”
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD trading around $16,400 at the time of writing.
The downside had re-entered for the pair amid news that Genesis Global Capital, the crypto-lending arm of Genesis Trading, had halted withdrawals due to liquidity issues.
In a series of tweets on the day Digital Currency Group (DCG), the parent company that counts Genesis Trading among its subsidiaries, attributed the decision directly to the FTX debacle.
“Today, Genesis Global Capital, Genesis Trading’s lending business, made the difficult decision to temporarily suspend redemptions and new loans,” reads part of the thread.
“This decision was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion.”
DCG added that its other operations were unaffected, these included Grayscale and Grayscale Bitcoin Trust (GBTC), the industry’s largest institutional investment vehicle.
“The impact lies with Genesis’ lending operations and does not affect Genesis’ trading or custody operations,” the thread concluded.
“It is important that this interim action has no impact on the business operations of DCG and our other wholly-owned subsidiaries.”
GBTC traded at a near-record discount to the Bitcoin spot price on the day, after breaking below -40% in November, data from chain monitoring resource Coinglass confirmed. Industry commentators were worried about the potential spread of infection to the largest BTC holder.
“The assets underlying $GBTC and all Grayscale products remain safe and secure, held in segregated wallets in deep cold storage by our custodian Coinbase,” Grayscale confirmed on the day.
The limited scope of the problems at Genesis thus allowed Bitcoin to avoid significant new losses. As Cointelegraph reported, several other industrial companies had already signaled that FTX exposure was putting them under financial strain.
Genesis themselves, meanwhile, said their problems had begun thanks to the Terra LUNA debacle and the associated insolvency of trading firm Three Arrows Capital (3AC).
“The 3AC default adversely affected the liquidity and duration profiles of our Genesis Global Capital lending unit. Since then, we have de-risked the book and strengthened our liquidity profile and the quality of our collateral,” part of its own Twitter thread read.
“However, FTX has created unprecedented market turbulence, resulting in abnormal withdrawal requests that have exceeded our current liquidity.”
Old coins wake up after FTX “black eye”
By analyzing the ongoing impact on Bitcoin itself, research firm Glassnode avoided a sense of panic.
Related: Bitcoin Miners Send Less BTC to Exchanges Since 2020 Halving Despite FTX
In the latest edition of its weekly newsletter, “The Week On-Chain”, it described the FTX event as a “real black eye” for the crypto industry.
Among the indicators assessed for the week was the average age of Bitcoins moved on-chain.
At 90 days, this was three times older than in September and October, but not particularly a significant historical anomaly.
“The uptick in older coins being used is notable, and is in line with peaks seen during previous capitulation sell-offs, and even the 2021 bull market gains,” it wrote.
“A sustained uptrend or elevated level of dormancy may indicate that a more widespread panic has taken root among the HODLer cohort.”
As Cointelegraph reported, the general sentiment in analytical circles remains one of “wait and see,” with the potential for a near-term deterioration in price action on the radar.
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