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25 November 2022

In this issue

Weekly price tracker || New kids on the block || If Genesis falls

Hello, Just one tweet to explain how things have been going down in the last week – 

During a bear market when the dominos are falling, if a crypto bro running a centralized platform tells you that your funds are safe with him, it is probably time for you to take your money and run. Every crypto company’s downfall in the past few months, be it FTX, Genesis or BlockFi, has started the same way (with lies), and ended the same way (customers and investors getting robbed).We are here to tell you that the ongoing mess is far from over, because if Genesis falls, three things will happen that will prolong the pain. On this issue, we tell you how we think it will play out.

The newsletter is put together by Giottus Crypto Platform and The News Minute’s Brand Studio. You can read all the previous issues of Cryptogram here.

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WEEKLY PRICE TRACKER

Price movements from last Friday

BTC:  2% post recovery from mid week slumpETH:  3% after FTX hacker liquidates assets midweekLTC: 

23% post increased network activity 9 months before its halving event

CHZ: 

 30% after traders book profit as FIFA World Cup based rally ends

NEW KIDS ON THE BLOCK

Project to watch out for:SONM - A fog computing firm that provides cloud services based on distributed customer level hardware including PCs, mining equipment, and servers.

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THE BIG STORY

What happens if Genesis falls

You will have to find a silent corner and calm yourself down, because Genesis somehow survived the Three Arrows saga. The FTX hit may be a knockout punch. Genesis has now hired investment bank Moelis to explore options including bankruptcy. Genesis balance sheet reveals outstanding loans to the tune of $2.8 billion. Background Genesis Global Capital is a full-service digital currency prime brokerage providing access for select individuals and global institutional investors. The firm offers market participants a fully integrated platform to trade, borrow, lend, and custody digital assets.Earlier in June, due to its exposure to over-leveraged hedge fund Three Arrows Capital and Hong Kong-based crypto lender Babel Finance, Genesis Trading faced potential losses into the hundreds of millions. The lender’s parent company, Digital Currency Group (DCG), assumed some of Genesis’ liabilities related to 3AC. DCG is the parent company of Grayscale, Genesis and also CoinDesk. Following the FTX meltdown, Genesis has declared that the Genesis derivatives business currently has ~$175 million in locked funds in their FTX trading account. DCG provided an equity infusion of $140 million to Genesis Global Trading, a company within its portfolio, and said they had no ongoing relationship with FTX or Alameda. But, soon after, Genesis’ crypto-Lending unit halted its customer withdrawals (surprise! not). The unit, known as Genesis Global Capital, serves an institutional client base and had $2.8 billion in total active loans as of the end of the third quarter of 2022. Now, Genesis Global Trading has mentioned bankruptcy as a potential option as it seeks fresh capital. It is in talks with potential investors for at least $1 billion in fresh capital, according to a Bloomberg report. Genesis’ financial troubles have also affected the Gemini exchange. The latter announced delays in withdrawals from its Earn product, in which Genesis is a lending partner.If Genesis fails, some believe it could be worse than FTX – here’s a thread that lays it down. We think these three things can happen: 1. Digital Currency Group (DCG) forced to sell off assetsThe parent company of Genesis, DCG was founded by Barry Silbert in 2015, is among the largest crypto companies, sporting a valuation of $10 billion last year. With operations in more than 30 countries, it holds investments in some 165 companies, from public companies including Coinbase Global to well-known private shops Ripple and Ledger. Their portfolio in India includes Unocoin (a crypto exchange from Bangalore) and Elemential, a blockchain framework company in Mumbai.DCG already assumed some of Genesis’ liabilities related to 3AC back in June this year and gave $140 million this month on the wake of FTX blowout. DCG is the parent company of Grayscale, Genesis and also CoinDesk. DCG has a liability of $575 million to Genesis.DCG’s crypto portfolio includes Bitcoin (BTC), Ethereum (ETH), Ethereum Classic (ETC), and Decentraland (MANA and LAND) – they will likely be liquidated.2. Grayscale Bitcoin Trust (GBTC) faces uncertaintyGrayscale, a sister company, operates the Grayscale Bitcoin Trust (GBTC), a fund in which investors buy shares in order to gain exposure to Bitcoin (BTC). It holds assets more than $10 billion worth of BTC. GBTC is ring-fenced legally from Genesis fallout. But GBTC is currently trading at a 45% discount to net asset value (NAV) after Grayscale refused to show proof of reserves. Investors are likely trapped in an investment vehicle they can exit only after a six-month lock-in period and with a significant discount. Jokes have started rolling in.

3. Bitcoin hits bottomAll this will likely trigger a market collapse in the short-term which will aid in BTC’s rebuilding phase for the next cycle. Analysts estimate BTC’s low to be around $10,000 to $14,000, a 15-40% discount from today. Altcoins may bleed further.The fall out of this year would be the lack of trust in centralized platforms that are promoting crypto to the masses and institutions. Self-custody of assets, which crypto does allow, will become the most preferred way to hold them hereon. Things may eventually get better for the crypto market, but in the meanwhile, since today is Black Friday, here is an unmissable deal:

That’s all we have for this issue, see you next week! 

If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

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