Following the recent collapse of FTX, the fallout spread to Genesis, which had already been bailed out by parent company Digital Currency Group (DCG) earlier this year following the failure of Three Arrows Capital.
There are growing concerns over the possibility of the contagion spreading to Greyscale Bitcoin Trust and Digital Currency Group but are these fears valid?
Genesis & Digital Currency Group
According to Nathaniel Whittemore, speaking on the CoinDesk podcast, The Breakdown, DCG is a $1.2 billion creditor of Three Arrows Capital. For the sake of transparency, CoinDesk is owned by DCG.
Genesis recently announced that it would be suspended withdrawals for its Genesis Earn program. Further, news then began to circulate that the company may be in debt to the tune of $1 billion. According to a Wall Street Journal article, the company sought a $1 billion loan following the collapse of FTX, but no deal was made.
Adam Cochran, a partner at VC firm Cinneamhain Ventures, broke down DCG’s assets to assess whether a potential $1 billion hole in its balance sheet was likely to cause further pain in the crypto markets.
Specifically, DCG-owned companies could be at risk of further contagion with their portfolio, including crypto custodians, BitGo, web3 browser, Brave, USDC issuer, Circle, crypto news organization, CoinDesk, and many other core crypto projects that form the heartbeat of the industry.
Should DCG continue to struggle, the impact on the entire industry could be catastrophic. Andrew Parish, Co-Founder of ArchPublic, claimed on November 20 that there had been “zero takers” for Genesis’ request for finance, including rejections from the significant crypto-focused VC firms.
B2C2 – “No”
Fortress – “No”
Jump – “No”
Galaxy – “No”
Apollo – “No”
**and there are no crypto-centric funds with any meaningful appetite, much less the liquidity of scale
— Andrew (@AP_ArchPublic) November 20, 2022
Parish posted an update some hours later alleging that B2C2 “might” be open to a “very small” investment to cover part of Genesis’s lending book.
A collapse of Genesis could be much more impactful on the entire crypto industry than FTX. Genesis is a critical part of the institutional infrastructure currently in place within the crypto industry. The company was the first OTC Bitcoin trading desk created in 2013. In 2020, then-CEO Michael Moro claimed that Genesis was on track to become “on par with the world’s top financial…