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GB Market Commentary 18/11/2022

by Will Morris

Good afternoon, Bitcoin is currently trading around $16,700, ETH $1,212 and the total crypto market cap is $833bn.

Aftershocks are being felt across the crypto industry following the collapse of FTX with Genesis facing liquidity issues. Genesis is “the biggest trading desk for professional investors in cryptocurrency markets”. It is also one of the major players in yield-earning products on crypto-assets, generating yield by lending crypto to institutional borrowers. The scope of the spill over is extensive, one affected party is Gemini, who use Genesis as the sole partner for Gemini Earn. Already over 25,000 Bitcoin have been withdrawn from Gemini, 13% of the total held on the platform. Gemini Earn have suspended withdrawals on yield-earning products. Genesis Q4 2021 figures demonstrate the scale of Genesis’ operation:

Q4 Market Activity Snapshot - 18/11/22

Cryptocurrency lender Genesis was seeking an emergency loan of $1bn before telling clients it was suspending redemptions this week. A fundraising document leaked to the Wall Street Journal states Genesis needs access to the credit facility by 10am this Monday. In addition to fallout from the recent collapse of Alameda Research, Genesis also lent $2.4bn to 3AC and is currently seeking $1.2bn in court.

Genesis is a wholly-owned subsidiary of the Digital Currency Group – also the parent company of Grayscale Investments. Grayscale Bitcoin trust hit a record-low discount today trading almost 43% under the Bitcoin spot price. Grayscale is the largest Bitcoin fund of its variety, currently holding 643,572 Bitcoin – with ARK Investment Management holding 0.7% of the BTC Trust. Grayscale has assured Investors that it will continue to do business as usual and that its underlying assets are unaffected.

We are in a period where companies are bracing for what some say could be a long and protracted recession. Cheap capital is no longer available, the focus for many companies is now capital preservation. Finding $1bn to help an impaired crypto lending desk seems like an increasingly difficult task. However, there is the hope of a rally around the distressed lender due to the potential for contagion across crypto as well as the potential to impact traditional markets. Market Maker B2C2, has offered to purchase loans from Genesis and Binance previously extended the offer of finance for distressed crypto companies following the FTX collapse.

Genesis declaring insolvency has even wider-reaching implications for the cryptocurrency market as well as traditional equities than the collapse of FTX. All eyes will be on Genesis for the rest of today and over the weekend.


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