‘In Big Trouble’ – Leak Reveals $10 Billion Earthquake May Be About to Cause Price Chaos for Bitcoin and Ethereum
Bitcoin
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The bitcoin price has fallen below $17,000 per bitcoin, down from nearly $70,000 12 months ago, while ethereum has collapsed towards $1,000 per ether with JPMorgan warning that the price crash may be just beginning.
Now fears are swirling that $10 billion bitcoin and crypto giant Digital Currency Group (DCG) could be in trouble after crypto lender Genesis was forced to pause withdrawals and reports showed it is seeking a $1 billion emergency loan.
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The price of bitcoin and ethereum has been hit hard by the collapse of the crypto exchange FTX, which pushes … [+]
This week, Genesis, one of the largest crypto lenders that forms part of DCG’s sprawling crypto empire, suspended customer redemptions in its lending business, blaming the sudden FTX meltdown. DCG, last year reportedly valued at $10 billion, also owns bitcoin and crypto miner Foundry, asset manager Grayscale, crypto exchange Luno and news outlet Coindesk.
Ahead of the withdrawal suspension, Genesis requested an emergency loan of $1 billion from investors, it was reported by The Wall Street Journalciting a leaked fundraising document that described a “liquidity crisis due to certain illiquid assets on [Genesis’] balance.”
“There’s been a target on Genesis’ back for days,” Joseph Edwards, an investment partner at Securitize Capital, told Reutersadding that it is “a signal of worse outcomes” for the crypto market due to Genesis’ close connections with brokers, family offices and money managers.
FTX’s sudden collapse this month was partly triggered by reports that a significant portion of its balance sheet consisted of illiquid cryptocurrencies it had created. Just last week, FTX filed for bankruptcy protection in the US and founder Sam Bankman-Fried (SBF) stepped down as CEO.
“Genesis had explored all possible options amid the liquidity crunch resulting from the FTX news,” a company spokesperson said. Journal. “After reviewing a number of options, we made the difficult decision to temporarily suspend redemptions and new loan assignments in the lending business so that we can identify the best solution and outcome possible for customers.”
Coming on the heels of the FTX implosion, the Genesis situation has caused consternation among the crypto community, with crypto skeptics predicting it could be the next domino to fall as rumors fly over the future of crypto exchange Gemini and crypto finance firm Galaxy Digital.
“[Genesis, Grayscale, Galaxy, Gemini are] now everyone is in big trouble and or collapse,” NYU economics professor Nouriel Roubini, known as Dr Doom, posted to Twitter. “From the moon, all the madmen are now plunging down to earth.”
“Obviously doesn’t look good for Genesis,” Cory Klippsten, an outspoken critic of non-bitcoin cryptocurrencies and CEO of bitcoin-buying app Swan Bitcoin, posted to Twitter citing unconfirmed social media rumors that DCG is desperate “to sell Genesis’ loan book.”
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Bitcoin price has been in a steep downward trend for the past year, falling in line with … [+]
However, some in the bitcoin and crypto space remain unfazed by the cascade of negative reports.
“In the long run, the digital asset space is unlikely to be significantly set back by this,” Martin Hiesboeck, head of blockchain and crypto research at Uphold, said in an emailed statement.
“The risk of contagion is now higher than ever, but it is, we believe, negligible. Don’t forget how small the space still is. This is not an Enron or Lehman moment. For most of the firms involved in the scandal, from Sequoia to Tiger and Circle, the sums involved are pocket money.”
