Midweek Update: Genesis Global Halts Withdrawals

• It has been a steady week of continued downwards price movements in digital asset markets following the FTX and Alameda Research collapse. The price of Bitcoin (BTC) is down ~0.49% this week, while the price of Ethereum (ETH) is down ~1.2%.

• Shockwaves from the collapse of mega exchange FTX continue to be felt across the industry. Large institutional lending firm Genesis Global has halted customer withdrawals because of ‘market dislocation’ following ‘chaos’ caused by the FTX collapse.
  

• The company says it is has hired the best advisors in the industry to help it decide on a way forward and plans to deliver a plan for its lending business next week.

• Chapter 11 bankruptcy protection is one option for Genesis and it is proving popular across the sector at the moment. It was reported on Tuesday that crypto lender BlockFi is preparing for a bankruptcy filing due to its significant exposure to FTX.

• Chapter 11 is not a liquidation – instead it gives the failed business court protection from its creditors while it comes up with a plan to return the most value possible to affected stakeholders. A typical Chapter 11 bankruptcy in the US takes between three to five years to resolve.

• In a letter to customers sent earlier this week, BlockFi said it could no “longer operate our business as usual," as the bankruptcies of FTX and its affiliates. They stated that pausing activity was the most “prudent” move they could make given the circumstances.

• In the letter, BlockFi said that rumors that a large number of its assets were held on the FTX exchange were false. The firm did, however, acknowledge that it had ‘significant’ assets on FTX, was owed a large amount by Alameda, and had an undrawn credit line from FTX.

• In a research note, analysts from Coinbase have predicted that the ripples from the FTX and Alameda collapse will extend the crypto winter because it will drive liquidity and large players away from the digital asset market.

• They predict that more counterparties will be revealed and the exit of large players will have lingering effects. Parallel to this will be a push from lawmakers to pass more restrictive regulations across the crypto ecosystem.

Altcoin Watch

• Cronos, the native token of Crypto.com has moderately recovered after a YouTube AMA with Crypto.com CEO CEO Kris Marszalek addressed concerns that it would be another firm dragged to its knees because of FTX over-exposure.

• Rumors began to circulate after Crypto.com users began complaining that withdrawals from the exchange were severely delayed. The AMA has appeared to reduce some fears but a potential bank run remains a risk for Crypto.com – as it does for many other platforms.

• During the AMA Marszalek revealed that the exchange had transferred US$1 billion to FTX earlier in the year but this was returned, he said the company only lost US$10 million in the FTX collapse.

• Marszalek said the delay in withdrawals was down to congestion and an overload in requests. He says that these issues have since been resolved. While CRO is still down 30.9% in the last week, it is up ~19.7% since Marszalek’s AMA.

What we’re looking at: Mr. Wonderful backs Sam Bankman-Fried despite growing concerns of inappropriate and illegal behavior

Shark Tank Investor Kevin O’Leary has said publicly that he would still back disgraced former FTX CEO Sam Bankman-Fried despite fury from users for the role he played in the downfall of the exchange and its connected entities.

O’Leary said in an interview that SBF is one of the “most brilliant traders” in the crypto universe and he would back him if he were to undertake another crypto venture. He went on to state that he liked and felt sorry for the 30-year-old entrepreneur.

US regulators are presently investigating whether FTX mishandled customer funds and the exact nature of its relationship with other companies it was connected to such as Alameda Research.