The end of Genesis?

January 20, 2023 Stan

Good luck to everyone dealing with “I heard Crypto’s not doing too well” questions during Thanksgiving dinner.

Today We’ll Be Covering:

Genesis needs money or it may face bankruptcy.
Following the FTX hacker: They’re dumping right now.
DeFi bites. Apple pay accepts USDC, the community rejects Cosmos 2.0, and more.

Let’s dive in!

📉 THE MARKETS

Total Crypto Market Cap: 860B
BTC Price: $16,467.23 (-2.5%, 7 days)
ETH Price: $1,164.63 (-7.0%, 7 days)
TVL in DeFi: $41.58B
Fear & Greed: 22 (EXTREME FEAR)

Is this the End for Genesis?

FTX was a large domino.

The next to fall? It might be Genesis. (I miss those times when the only Genesis I knew was Sega.)

Key companies to consider:

Digital Currency Group: A Venture Capital Company owned by Barry Silbert whose subsidiaries include Coindesk, Genesis, and Grayscale.
Genesis: A digital asset brokerage owned by the Digital Currency Group.

When FTX first started unraveling, concern quickly turned to which companies might be affected next. Especially since the crypto space is still dealing with the contagion effects and aftermath of Terra Luna.

Genesis trading originally assured everyone that everything was entirely fine and dandy a few weeks ago.

With regard to today’s market events, we have managed our lending book and have no material net credit exposure. In addition, Genesis has no exposure to any tokens issued by centralized exchanges. We continue to meet the needs of our clients around the world across all products.

— Genesis (@GenesisTrading) November 8, 2022

But, of course, crypto Twitter always remains skeptical (and probably for good reason). We have heard similar statements that “everything is fine” from Celsius, Do Kwon, and FTX.

And – surprise, surprise! On November 11, Genesis disclosed that they had a whopping $175MM locked up in FTX.

As part of our goal in providing transparency around this week’s market events, the Genesis derivatives business currently has ~$175M in locked funds in our FTX trading account. This does not impact our market-making activities.

— Genesis (@GenesisTrading) November 10, 2022

According to the company’s website, they had around $2.8B in active loans in Q3.

And five days later, Genesis suspended all withdrawals due to a liquidity crunch.

Genesis has already taken one huge L this year. Remember 3 Arrows Capital over the summer? Genesis lent them $2.36B. And they’re definitely not getting those funds back.

But the negative news didn’t stop there.

Following Genesis’s pause on withdrawals, Gemini, a close partner to Genesis, stopped their Earn program on November 16.

What is Gemini: It is a centralized crypto exchange and token custodian that enables users to trade, store, and earn digital assets. It was started by the Winklevoss Twins of Facebook fame. They offer a feature called Gemini Earn, a lending program that allows users to lend their crypto to others institutions (Genesis) to earn interest on their holdings.

Do you see where this is going? Gemini hands your crypto over to Genesis to earn yield. But if Genesis doesn’t have any money, then Gemini doesn’t have any also.

Now, Genesis is looking for creditors.

On November 22, Genesis asked Binance for a $1B emergency loan as a last resort.

This was expected as Binance had announced an “Industry Recovery Fund” following FTX’s collapse. According to a Bloomberg report, Genesis is currently on the verge of bankruptcy and unable to drum up funding.

Binance turned down their request because some of Genesis’s deals could create a conflict of interest.

Genesis claims that they’re not planning to file for bankruptcy soon. Their hunt for creditors is ongoing.

FTX “hacker” is dumping

Remember how FTX was hacked last week?

FTX HACK! 🚨

$600 million in cryptocurrencies taken out of FTX wallets in unauthorised transactions on Friday night – CoinDesk

— Bitcoin Archive 🗄🚀🌔 (@BTC_Archive) November 12, 2022

Well, the mysterious FTX hacker is now on the move!

This week’s on-chain investigations show that the hacker has moved around 200,000 ETH (~$220MM) to renBTC.

They’ve gone from ETH to renBTC. And from renBTC they can go on to native BTC.

~6,000 ETH are currently sitting in the hacker’s wallet.

To give you context, Ren is a platform that can bridge to the BTC network. According to CoinDesk, RenBridge has already been used to launder at least $500MM of stolen funds.

Here’s the thing: Ren has a close relationship with Alameda Research.

That’s why CT labels this “hacker” a likely insider with access to FTX wallets.

Well, fren, this saga is far from finished!

Expect months of volatility and fallout from this cascade effect.

🍿 DeFi Bites

USDC is now available on Apple Pay. This means that businesses can choose to accept USDC through Apple Pay going forward which shows that, despite the crash, BUIDLing is ongoing at full speed.

Terra spent a whopping $3.4B to defend the UST peg. This was accidentally revealed in an audit meant to clarify how LFG handled BTC deposits.

Sam Bankman-Fried pocketed $300M from a $420MM funding round in October 2021. He claims this was to partially reimburse him for the money he had spent to buy out Binance’s stake in FTX.

John Ray, the new FTX CEO, is being paid $1300 an hour. While this might be an eye-catching figure, it is comparatively small in the world of corporate restructuring. To compare, unwinding Lehmann Brothers cost a whopping $2B.

Solana lost 70% of its TVL, primarily as a result of the FTX crisis. At one point, Solana was considered a possible ETH killer.’ Now, many L2s have taken over Solana in TVL.

Multicoin Capital lost more than half its crypto fund’s capital. Two primary reasons were the FTX saga and bullish bets on Solana and Solana-based assets, such as Mango.

Cosmos Community rejected the ATOM 2.0 whitepaper. On crypto Twitter, this proposal was considered and welcomed as a significant improvement to the Cosmos ecosystem. However, community members cited a lack of clarity and the too broad nature of the proposal as the primary reasons for the vote of no confidence.

Uniswap Labs, the team behind Uniswap, said that it collects certain on-chain and off-chain data from users. The data collection is meant to improve user experience and doesn’t include any personal information. Still, the revelation is making waves on crypto Twitter.

Cardano is releasing a new privacy-focused blockchain called Midnight alongside a new token, Dust. The system includes a backdoor which will give access to regulators and auditors.