Before stopping redemptions, Genesis sought a $1 billion loan.
Genesis, a cryptocurrency lending company, unsuccessfully tried to reserve a $1 billion emergency loan from investors earlier this week and stopped withdrawals on Wednesday.
Genesis Requested a Loan Immediately
Before stopping withdrawals earlier this week, Genesis Global Trading looked for a critical loan. According to a confidential internal document it saw, the Wall Street Journal reported today that Genesis tried to receive a $1 billion credit line by Monday, November 14, but ultimately was unsuccessful in doing so.
The request’s justification was given by the company as a “liquidity crunch due to some illiquid investments on its balance sheet.” Deposits from Genesis’ retail counterparts, particularly the interest-bearing Gemini Earn program from the cryptocurrency exchange Gemini, apparently saw a run.
The document’s continued relevance was refuted by a Genesis spokesperson. The firm is now engaged in “good dialogues,” the spokesman told the Wall Street Journal, with investors. During the suspension of service, she continued, the company is “exploring all potential possibilities” and striving to “find the best solution and outcome possible for customers.”
On Wednesday, Genesis made its initial report about stopping withdrawals. Gemini declared that its Gemini Earn program will be ending.
At the time, Genesis stated that their decision to halt services was motivated by “severe market disruption and loss of industry confidence” brought on by FTX’s end. However, it didn’t say anything at the time about its liquidity.
Genesis had stated that it only had $175 million in cash guaranteed with FTX as of November 10. Additionally, the business stressed that it has “no material exposure” to the FTT token issued by FTX or any other steady exchange tokens.
Therefore, the firm’s problems seem to be linked to more effective movements in the cryptocurrency market—or possibly unrelated investments that have not yet been made.
The collapse of Three Arrows Capital (3AC) this summer affected Genesis because of its exposure to that company. In the upcoming weeks, the cryptocurrency company Multicoin expects that the FTX pandemic will destroy several trading organizations.
Multicoin Capital, a cryptocurrency experience firm, wrote to investors on Thursday and explained that the fund’s performance this month has decreased by 55% as a result of the end of FTX and general price declines in the market. The company added that a decline in the market is expected before an upturn.
Multicoin expects writing off those assets as being worthless despite the possibility that it may receive some of its money back from FTX given that those assets are currently the subject of bankruptcy proceedings. For the five-year-old Multicoin, which in July unveiled the third and largest fund it had ever raised, at $430 million, it represents a sharp turnabout.
The 3,400+ word letter was received and stated that Multicoin managing partners Kyle Samani and Tushar Jain “placed altogether too much trust in our partnership with FTX.” “Too many assets were on FTX,”
In a letter released last week, the company alleged that while it had been able to retrieve about one-fourth of the fund’s assets from FTX, the remaining 15.6% were still there. Multicoin revealed at the time that it had traded on three different exchanges: FTX, Coinbase, and Binance. All of its assets right now—those not “trapped on FTX”—are kept on Coinbase or in wallets under the owner’s control.
John Robert Reed, a Multicoin representative, refuses to respond to questions for this article.
The cryptocurrency industry is not expected to reverse anytime soon, claims Multicoin. This is because subsequent collapses will be caused by the quick end of FTX and its sister hedge fund Alameda Research, both of which were owned by Sam Bankman-Fried. Both businesses’ bankruptcy proceedings began on Friday.
The letter stated, “We expected to have contagion impact from FTX over the next two weeks.”The elimination and closure of multiple trading firms will put pressure on volume and liquidity throughout the whole crypto ecosystem. There have already been a few announcements on this front, but there will probably be more.
Multicoin stated, “We are looking to buy dislocated assets at favourable valuations. Other companies that own assets connected to FTX are looking for emergency funding.
Multicoin suffered yet another sizable loss as a result of its sizable holding in the Solana token and FTX’s bankruptcy. Bankman-Fried was a crucial supporter of Solana, and Alameda held a sizeable part of the coinage. This relationship has caused Solana’s value to drop by 64% over the past 12 days.
Due in part to Solana having “one of the most vibrant developer communities,” Multicoin stated that it is maintaining its position and continues to believe in cryptocurrency. The cryptocurrency market has fallen and risen multiple times over the past few years.
According to the firm’s experience between 2018 and 2020, “it is not advisable to sell an asset during a short-lived crisis if the fundamental premise is not impacted.”
Multicoin asserts that “FTX won’t be the end of the crypto sector,” just as Lehman Brothers and Enron did not put an end to the banking and energy sectors, respectively.
As the system is cleansed of leverage, “we anticipate seeing green shoots next year,” the letter stated. We are aware that the builders in this field and our portfolio rank among the hardest-working individuals. They also won’t give up. And we won’t either.
Edited by Prakriti Arora
