News broke yesterday that crypto broker Genesis had suspended withdrawals.
There is no confirmation on the company’s official channels, but no denials of the news have been published either. Moreover, the same was reported by reliable sources, so it is safe to assume that it is correct.
The situation of crypto broker Genesis
The crypto broker Genesis filed for bankruptcy in January this year, getting it to fall under the U.S. Chapter 11 bankruptcy procedure that allows it to restructure its debt and continue operating.
In addition, some companies in the group to which Genesis belongs have filed for bankruptcy, while others continue to operate.
On their official website they write that they are working on strategic actions to reach a solution aimed at all stakeholders with the goal of strengthening their business for the future. So it is assumed that they are trying to save the company, and not liquidate it.
Nevertheless, yesterday they again had to suspend withdrawals.
The assumption they are working on is a refund of up to 90 percent of their customers’ claims, but apparently the situation is more difficult than expected.
The freeze on withdrawals
Since some activities of the group to which Genesis belongs are continuing to operate, the freeze on withdrawals is not a good sign at all.
It probably means that what has been done so far is not enough to allow the business to continue, so much so that there are no longer enough funds in the cash to cover all the receivables from customers that are still active.
A distinction must therefore be made between activities that have been closed due to the January bankruptcy, and those that are still open. The freeze on withdrawals should refer to the latter, and gives the idea that these also have liquidity problems.
The situation is therefore still evolving, and it does not seem possible to rule out the possibility that there may be further news soon.
What is most surprising, however, is the company’s silence about yesterday’s withdrawal freeze, which does not bode well for the future at all.
The crisis in the crypto sector
To all of this should be added that the crypto winter is not over yet.
Genesis’ new withdrawal freeze does not seem to have had a negative impact on the crypto market, not least because it is still a group of companies some of which have been bankrupt for months, although they are trying to restructure.
The real problem is that the crisis is much broader, as the NFT market literally imploded this year, for example, attests.
For example, a year ago, at the height of the crypto bear-market, there were still more than $300 million in monthly trading volumes on OpenSea, while now we are well below $100.
Trading volumes on the cryptocurrency markets have also dropped quite a bit, despite the end of the bear-market.
The bottom was in November last year, which was in the wake of the FTX fiasco, but while prices have since rebounded (especially on Bitcoin) volumes, on the other hand, are still latent.
The number of cryptocurrencies and tokens that are still losing more than 90% from the highs is staggering, and among them are some major ones, such as Dash at -98%, EOS, Algorand and CAKE (PancakeSwap) at -97%, SAND (The Sandbox) at -96%, MANA (Decentraland), CRO, BCH and HT (Huobi) at -94%, Avalanche at -93%, and so on. Bitcoin is at -60% and Ethereum at -67%.
Beyond crypto broker Genesis: will there be more bankruptcies?
As we wait for a new hypothetical bullrun to begin, it cannot be ruled out that such a crisis could lead to further failures.
The worst is probably over, with the implosion of the entire Terra/Luna ecosystem and the failure of FTX, but it is by no means certain that the crisis will be over anytime soon.
Moreover, the macroeconomic situation is also not helping at all, with markets struggling with liquidity shortages due to very restrictive monetary policies of central banks.
Much will depend on what happens in early 2024, when spot Bitcoin ETFs should be approved by the SEC, and when the halving of Bitcoin will take place.
It will probably be almost another year before the crypto markets can revive, and in the meantime other players may have problems.
