Analysts fear a domino effect after the bankruptcy of FTX, the second largest exchange in the world
The worst year in the history of cryptocurrencies could get even more complicated. After the fall of the second largest exchange center for this type of asset, the exchangeFTXdue to a liquidity crisis, the fear of analysts and investors is now that it occurs a contagion effect to the rest of the industry. Everything indicates that it is already happening and that the next piece to fall could be Genesis cryptocurrency investment bank.
The bank, which is part of the Digital Currency Group (DCG), has a division focused on cryptocurrency loans that would have been affected by the fall of FTX.
The division, Genesis Global Capital, had earlier this month over $2.8 billion in active loans. The company works somewhat like a conventional bank: it allows people with large reserves in cryptocurrencies to deposit their fortune and makes loans with them to financial institutions interested in having this type of product in their portfolio.
The fall of FTX and the crash of cryptocurrencies in general this year, however, has left the group exposed. On November 16, I announced that the clients of the loan unit they will temporarily be unable to withdraw their money until you manage to solve the liquidity problem. “This decision has been made in response to the extreme market situation and the loss of confidence in the industry that the implosion of FTX has caused,” he said. Amanda Cowie, vice president of communications and marketing for DCG. The decision has locked up the collateral reserves of many Genesis line of credit customers.
Since then, Genesis has tried to find investors willing to inject capital into the company to be able to continue operating. “We have hired the best advisors in the industry to explore all possible options,” they explained from the company. But so far these advisers have not been very successful.
One of the companies contacted has been Binance, the largest exchange of cryptocurrencies in the world. Binance was the company that rejected in extremisthe purchase of FTX, a move that could have helped stabilize the market but which Changpeng Zhao, CEO of the company, considered unwise given the balance sheet of his rival. Since then, Zhao has tried to find cryptocurrency or blockchain companies and projects to support them in case they run into liquidity problems.
Genesis has also tried to convince Apollo Global Management, the US investment fund that took over the Santander real estate company, Altamira, and the EVO bank in 2013.
Neither of these two firms seems to be willing to rescue the entity, which has triggered rumors of a possible bankruptcy. Cryptocurrency Portal Sources The Block They have revealed that the company was looking for 1,000 million dollars to meet its obligations, but that it has recently reduced the amount to 500 million dollars.
The feeling of uncertainty has once again hit the price of the main cryptocurrencies that have already caused huge losses so far this year due to different scandals and scams. Bitcoin reached a price of around 15,200 euros a few hours after the Genesis financing problems were known, 63% less than it was worth at the beginning of this year. Analysts and experts warn that the bankruptcy of the division will in turn affect other projects and companies that depend on Genesis capital for their operations.