Genesis Global Trade, One of cryptocurrency’s oldest and best-known institutions is in dire straits. In November, after the collapse of cryptocurrency exchange FTX, the company’s lending arm was forced to freeze customer withdrawals — never a good sign. Nearly two months later, Genesis is reportedly on the verge of bankruptcy.
While Genesis hasn’t said publicly that bankruptcy is imminent (interim CEO Derar Islim said he remains “focused on finding a solution”), the company has reportedly laid off 30% of its workforce this week — the latest sign of its financial failure. unhealthy.
Founded in 2013, Genesis has become central to the day-to-day operations of the crypto industry. In 2021 alone, the company originated $131 billion in loans and established $116.5 billion in deals. To fund these loans, Genesis borrows from individuals and institutions (also known as whales) with large holdings of tokens, in return for a cut of their profits.
While cryptocurrency hype runs unchecked, Genesis is riding the wave — but its luck runs out in 2022. The bank has been in trouble since July, when hedge fund Three Arrows Capital collapsed, losing $1.2 billion of the $2.36 billion it had borrowed from companies. Genesis once again found itself on the wrong side of the fall crash; when FTX filed for bankruptcy on Nov. 11, the company lost $175 million it had parked on the exchange.
Genesis’ parent company Digital Currency Group (DCG) bailed out both times. Despite aid, “Unprecedented market turmoil” caused by the FTX situation, forcing Genesis to freeze withdrawals and start looking for emergency funds. But like FTX, Genesis’ rescue package has yet to materialize.
The bubble in the cryptocurrency market in 2021 has investors who have attracted huge sums of money worrying about missing out. But FOMO is now long gone, replaced by doubts about the promises and accounting practices of big cryptocurrency companies in light of FTX’s fraud allegations.
Venture capital investment in cryptocurrencies is drying up, according to a recent paper by market data firm PitchBook. After a “breakout year” in 2021, with $21 billion pouring into the industry, interest in investing in cryptocurrencies is rapidly declining. By the third quarter of 2022, the amount of financing fell by 34.3% year-on-year, and the transaction volume fell to a two-year low.
In Genesis’ case, investors were put off by a lack of clarity on the size of the cash infusion needed to plug the hole, CEO David Bailey said. Bitcoin Magazine, who also leads an activist group representing the interests of investors in DCG subsidiary Grayscale Bitcoin Trust. He described the gap as “huge in size and unknown in scope”.
Brad Harrison, who leads the team at decentralized lending protocol Venus, paints a similar picture. He said it was no surprise that Genesis went bust after the “tectonic” events that rocked the cryptocurrency industry over the past year. But as for the specifics, “we’re all just guessing at what’s going on behind the scenes.”
