17.11.2022 – Just now the crypto market seemed to stabilize a bit after the FTX disaster. Then a new piece of bad news hits the ticker: The broker Genesis has banned all withdrawals from their lending business. With this, the next domino stone seems to be teetering.
Bitcoin bulls truly need strong nerves at the moment. The four-hour chart of BTCUSD has formed a falling triangle that better not be broken to the downside. The image is known in chart analysis as a continuation formation and signals continued reluctance among buyers.
This is the background: On Oct. 10, according to the financial blog ZeroHedge, Genesis had disclosed that its derivatives business had about $175 million stuck in a trading account at FTX, which has since fallen into disarray. In turn, on Nov. 10, Genesis said it was receiving $140 million from its parent company, Digital Currency Group, to bolster its balance sheet; the goal was to maintain its “position as a global leader in crypto capital markets.”
Genesis halts withdrawals
However, Bloomberg reported that Genesis is halting all withdrawals and new lending, as there is currently an enormous amount of withdrawals. Chief Executive Officer Derar Islim admitted that the wave of withdrawals exceeds the current liquidity situation at the lending firm Genesis Global Capital. At the same time, he reiterated, spot and derivatives trading at Genesis “remain fully operational.” Genesis further assured its clients that there is currently no “ongoing lending relationship with FTX or Alameda.”
As Bloomberg notes, Genesis is one of the most widely recognized cryptocurrency brokers, providing trading and custody services to professional investors engaged in digital assets. For example, he said, the firm has established itself as one of the largest crypto lenders, offering dollars or virtual currencies so that funds or other market makers can leverage their trades.
Gemini Trust also hit
That’s not all. Now Gemini Trust is also feeling the Genesis problems and has stopped withdrawals in its Earn program for now. Gemini is owned by the Winklevoss brothers and announced, “We are aware that Genesis Global Capital, LLC (Genesis) – the lending partner of the Earn program – has paused withdrawals and will not be able to meet customer redemptions within the service-level agreement (SLA) of 5 business days.”
We think: This looks like ongoing problems in the industry. We can’t see any factors that will bring stability back at the moment. But who knows: Maybe the situation will turn around faster than expected and large investors will take advantage of the lower prices to enter the market. This can happen very quickly. In any case, Bernstein Bank wishes traders and investors successful decisions!
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 81% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7