Genesis, a provider of cryptocurrency loans, declares bankruptcy

Following the collapse of cryptocurrency exchange FTX, Genesis, a US-based bitcoin lender, filed for Chapter 11 bankruptcy. Both the parent firm of Genesis Global Capital, Genesis Global Holdco, and another loan branch, Genesis Asia Pacific, have applied for bankruptcy. For the reorganization, Genesis Global Holdco has $150 million in cash on hand. It has stated that one of the options being thought about is a sale. While it attempts to reorganize, a financially challenged firm is shielded from creditors by a Chapter 11 proceeding. Genesis Holdings stated that despite bankruptcy proceedings, its derivatives, spot trading, broker-dealer, and custody businesses will continue to meet the trading needs of its clients. The most recent in a string of failures and significant job losses in the cryptocurrency sector, which have been linked to the sharp decrease in the value of digital assets over the past year, is the bankruptcy filing. [caption id="" align="aligncenter" width="800"] Image credit- Investing.com[/caption]

Months Before Genesis

According to the company's website, Genesis loaned out $130.6 billion in cryptocurrencies last year and exchanged $116.5 billion in assets. According to reports, Three Arrows Capital, a Singapore-based cryptocurrency hedge fund, and Alameda Research, a trading company connected to FTX, were two of its biggest creditors. These three companies—Three Arrows, Alameda, and FTX—have all filed for insolvency. The parent business of Genesis, Digital Currency Group (DCG), took over payment of the debt owing to Genesis by Three Arrows before filing a claim against the cryptocurrency exchange. Two of DCG's portfolio companies are Grayscale, a cryptocurrency asset manager, and CoinDesk, a cryptocurrency news site. During the pandemic, the number of crypto lenders—who acted as de facto banks—rose sharply. Online lenders are not required to keep capital buffers, in contrast to traditional banks. Due to a lack of collateral, some lenders and their clients were forced to absorb large losses this year. [caption id="" align="aligncenter" width="1200"] Image credit- The Financial Express[/caption] But since the FTX drop, Bitcoin's price, the leading digital asset, has recovered. It currently trades for more than $20,000. After circling around $17,000 when one of its rivals crashed, this is now. On Friday morning, January 20, Bitcoin's value rose by nearly 1%, reaching $20,946.

Expert Opinion

Genesis' Chapter 11 filing has already been taken into account by the cryptocurrency markets, according to Professor Carol Alexander of the University of Sussex's Department of Finance. The market, according to her, is already oblivious to Genesis' bankruptcy. In other words, it won't halt the present bull run in bitcoin. Regular investors have been frightened by the recent volatility in the cryptocurrency markets, which makes sense. However, Alexander claims that if and when they observe price movement once more, they will reinvest in cryptocurrency on the presumption that doing so is prudent and secure.