Genesis Trading, the first BTC OTC (Over The Counter) platform, grew like a monster during the 2021 bull run and achieved huge milestones. Meanwhile, exactly a year later, the fractals are completely different, as the platform has recorded more than an 80% drop in its lending services.
Furthermore, the FTX exposure is expected to have a significant impact on every segment of the crypto space, including traders, exchanges, and even whales.
Why Genesis Collapse is Diverse Than FTX
In a recent update, the platform suspended withdrawals and stopped issuing new loans. If this can be considered as the downfall of the platform, then it is believed to be more impactful than FTX. FTX had impacted the liquid funds and consumers but Genesis could impact every company in the crypto space.
Firstly, what is Genesis? It is the first OTC Bitcoin desk that started in 2013, and now it is the largest lending desk. It is a part of the Digital Coin Group (DCG), Barry Silbert’s holding company that owns Foundry, Genesis, Grayscale, & Luno.
After the 3AC crisis, Genesis recovered most of the funds lent but having the largest exposure to Babale Finance, blew up all. The platform recorded a huge drop in their numbers, the funds in loan organizations dropped from $50B to $8.4B. Alongside, active loans dropped from $12.5B to $2.8B, the spot volume traded plunged from $30.8B to $18.7B and total derivatives traded tanked down from $20.7B to $9.6B as of Q3 2022.
Why Crypto Space Will Be Badly Affected?
Dozens of companies like Gemini use Genesis to help their customers to earn yields. The user who lends his crypto on Gemini is further lent on Genesis. Genesis lends your crypto to a fund borrowing X+2% of which 1% is given to Gemini and the user gets X%. Only if Genesis gets back the crypto, it can repay Gemini and further the platform may send it back to you.
Beyond this, nearly every whale that plays in crypto gives funds to Genesis, instead of earning yield on BlockFi or Gemini. Now those institutions, family offices, and whales can’t get their crypto back and hence platforms like Gemini have suspended redemptions.
What Can You Expect In the Coming Days?
It is believed that DGC has some funds as a backup, and if they don’t, they may run around to raise funds. However, considering the current market conditions, it is extremely difficult to predict whether Genesis will be saved from being insolvent. Hence, it is very important at this time to play it safe and use a cold wallet or any DEX.