The entire crypto market, and especially Bitcoin, have been badly affected by the unexpected collapse of the FTX crypto exchange weeks ago. Bitcoin price has gone as low as $15,800 within that time even though it sold at nearly $70,000 just about a year ago. And Ethereum, on the other hand, has also fallen toward $1,000 and JP Morgan has predicted a further crash.
There are now fears that the $10 billion crypto and Bitcoin giant, Digital Currency Group, might be having serious troubles. This comes after its top lender, Genesis, got forced to put a hold on withdrawals. There are also further reports that it seeks an emergency loan of $1 billion.
Genesis, which is one of the biggest crypto-lending platforms and is part of Digital Currency Group, placed a halt on customers’ withdrawals on its platform this week. The firm blamed it on FTX’s sudden collapse.
Digital Currency Group, which was valued at $10 billion in 2021, is also the owner of the Bitcoin and crypto-mining firm, Foundry. It equally owns Grayscale, Luno crypto exchange, and the Coindesk new outlet.
Before Genesis placed a halt on withdrawals, it first requested a $1 billion loan from its investors, as reported by Wall Street Journal. Wall Street Journal, in turn, cited a leaked fundraising document that talked about a liquidity crunch as a result of illiquid assets on the firm’s balance sheet.
Probably the best decision
Securitize Capital’s Joseph Edwards told Reuters that Genesis has had a target on its back for days. He added that it signifies that worse things are to come for the crypto market because of Genesis’ close connection with money managers, family offices, and brokers.
Part of what caused FTX’s crash was a report that a lot of its balance sheet contained illiquid cryptocurrencies that it created. FTX filed for bankruptcy protection in the US two weeks ago while its founder and CEO, Sam Bankman-Fried, resigned.
A spokesman from the company spoke with the media and said Genesis is exploring options in the midst of its liquidity crunch. He said the difficult decision of suspending withdrawals was made after considering all options. This would help the company come up with the best solution for clients, he concluded.
The new situation involving Genesis, right after FTX, is causing consternation in the crypto space. Crypto critics are saying it might be the next entity to fall as rumors go around.