Bitcoin Quickly Drops to Two-Year Low on Monday Bloomberg reported that Genesis, a lender and digital asset brokerage, has told investors it could be forced to file for bankruptcy if its current fundraising efforts fail.
Bitcoin price
BTCUSD,
fell to $15,615 on Monday after Bloomberg released its report, the lowest level since November 2020, according to CoinDesk.
A Genesis representative downplayed Bloomberg’s report in a statement shared with MarketWatch, claiming that the company is continuing to have “constructive” conversations with its creditors.
“We have no immediate plans to file for bankruptcy. Our goal is to resolve the current situation by consensus without filing for bankruptcy. Genesis continues to have constructive conversations with creditors,” Genesis said.
Speculation has increased in recent days about the financial problems facing Genesis, which halted new acquisitions and lending last week. After a pause, the Wall Street Journal reported that Genesis has until Monday morning to secure $1 billion in funding. Genesis has also publicly disclosed that they have $175 million exposure to FTX is now bankrupt.
Genesis has a number of businesses including lending, custody and trading of spot cryptocurrencies and a decentralized derivatives market.
In recent days, social media has been buzzing about more bankruptcies in the crypto space following the crash of FTX. Some in the crypto industry have focused on Genesis’ ability to weather the crypto storm, several sources told MarketWatch.
One result of this has been reflected in one of the more popular bitcoin-linked products, the Grayscale Bitcoin Trust.
GBTC,
The trust fund, which is the only exchange-traded product in the US with direct exposure to bitcoin (although an exchange-traded fund with bitcoin futures exposure also trades), has sold out, causing it to decrease the net worth of bitcoin. holding to expand shortly to over 50%.
BERNSTEIN
According to Charles Hayter, CEO of CryptoCompare, a company that provides data on the digital asset market, the extended price drop reflects traders’ worry that problems at Genesis could spread expanded and influenced its parent company, Digital Currency Group. DCG is also the parent company of Grayscale, the asset management arm of the Grayscale Bitcoin Trust.
Bernstein analysts Gautam Chhugani and Manas Agrawal wrote in a note Monday that “crypto investors continue to speculate on the spillover of Genesis to DCG and thus, strategic options. potential on Grayscale, its most valuable business. Cryptocurrency investors also fear indirect reputational damage to GBTC due to the recent leverage that occurred between Genesis, Three arrows and Alameda.”
DCG is considered one of the “blue chip” companies of the crypto world, as well as one of the most valuable in the space, several sources told MarketWatch.
However, the Bernstein team, along with analysts at Bloomberg Intelligence, have said that the Genesis bankruptcy will likely not have a broader impact on GBTC or DCG.
According to Bernstein, Digital Currency Group and Genesis own about 10% of all GBTC shares outstanding, and the company can choose to sell these shares to meet its liquidity needs. Analysts say that equates to about $560 million early Monday, although the market values of bitcoin and GBTC fluctuate.
BERNSTEIN
CoinDeskalso owned by DCG, reported over the summer that DCG shouldered more than $1 billion that Genesis gave to Three Arrows Capital Ltd. Genesis borrowed. is said to be one of 3AC’s biggest creditors.
For years, GBTC traded at a sizable premium to its bitcoin value as it was one of the only channels for institutional and accredited investors to get direct exposure to bitcoin.
