Bitcoin just recovered from the implosion of FTX. Could Genesis bankruptcy push it to a new low?

By Frances Yue

Welcome back to the Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.

As crypto lender Genesis reportedly prepares to file for bankruptcy as early as this week, I spoke with David Siemer, CEO of Wave Financial Group, and Hany Rashwan, CEO of 21Shares, to discuss its potential impact.

Meanwhile, the founders of failed crypto hedge fund Three Arrows are looking for money for a new venture. JP Morgan Chase’s Jamie Dimon criticized crypto again. And the new head of FTX said he is considering restarting the failed digital asset exchange.

As always, find me on Twitter at @FrancesYue_ or email me at [email protected], if you want to share your thoughts on cryptocurrency, this newsletter, or your personal stories about digital assets.

Genesis bankruptcy?

Bitcoin has started the year with a 25% gain so far, pushing the top cryptocurrency above $20,000, the level it was at before the implosion of crypto exchange FTX in November, according to data from CoinDesk.

However, investors are hesitant to bottom out for bitcoin, amid concerns about the macroeconomic environment and contagion from digital asset lender Genesis Global Capital, which is reportedly preparing to file for bankruptcy this week.

Since Genesis has stopped withdrawing since November, its bankruptcy is heavily factored into the price, Wave Financial’s Siemer noted. “I don’t think it would be a bad time to do FTX again,” Siemer told Distributed Ledger in a phone interview. – Everyone assumes that this will happen.

Still, investors are watching closely how Genesis’ bankruptcy might play out and how it would affect its parent company Digital Currency Group, which also owns Grayscale Investments, the issuer of the world’s largest bitcoin fund GBTC ( GBTC ), and others. I wrote about how the bankruptcy of Genesis could be transferred to DCG back in November.

“If something monumental like the Grayscale Bitcoin Trust collapses or something like that, you’d have to concentrate on it being a very controlled implosion to guarantee price stability,” Rashwan of 21Shares said.

Genesis has negotiated a prearranged bankruptcy plan with its creditors who could agree to a filing period of between one and two years for most payments. In exchange, creditors will receive cash payments and equity in DCG.

Dimon’s crypto explosion

Meanwhile, Jamie Dimon, chairman and CEO of JP Morgan Chase, is criticizing bitcoin again.

The biggest cryptocurrency is “a blatant scam, it’s a pet rock,” Dimon told CNBC on Thursday. Dimon also added that he was not surprised by the implosion of FTX.

Crypto is “a decentralized ponzi scheme. The hype around this thing has been incredible,” he said. “Crypto by itself doesn’t do anything,” Dimon said.

This is not the first time Dimon has criticized crypto. In 2021, he called bitcoin ‘worthless’ in an interview with CNN. In 2017, he called bitcoin a “fraud”, although he later regretted his words.

MarketWatch’s Anushree Dave wrote more about it here.

A new venture from the founder of Three Arrow

The founders of Three Arrows Capital, the crypto hedge fund whose bankruptcy in June resulted in potentially billions in losses for investors and creditors, are seeking to raise up to $25 million for their new venture. The move, however, is causing significant backlash from the crypto community.

Kyle Davies and Su Zhu of Three Arrows are teaming up with the founders of crypto futures exchange CoinFlex, which filed for restructuring in the Seychelles in August, to launch a crypto exchange called GTX that trades crypto claims and others, according to a pitch deck that MarketWatch had an insight.

The move comes as Three Arrows’ liquidators have worked for months to return assets to creditors and accused Zhu and Davies of concealing their whereabouts. Some market participants pointed out the irony, while others questioned the prospects for the new exchange.

Restarting FTX?

New FTX CEO John J. Ray III is considering the possibility of relaunching the exchange, according to a Wall Street Journal report Thursday.

Ray has formed a team to investigate the revival of FTX.com, the company’s non-U.S. stock exchange, as it seeks to return money to the company’s creditors and customers, he told the Wall Street Journal. He will assess whether relaunching FTX.com will recover more value for the company’s customers than simply liquidating the company’s assets or selling the platform.

Crypto in the blink of an eye

Bitcoin prices are up 12% over the past week, trading at around $20,930 on Thursday, according to data from CoinDesk. Ether rallied 8.5% to around $1,539 over the same period, according to CoinDesk data.

Biggest Gainers  Price       7-day return 
Bitcoin Cash     $121.21     9.6% 
Axie Infinity    $8.23       9.1% 
VeChain          $0.02       9.1% 
BitTorrent       $0.0000007  8.5% 
Zilliqa          $0.03       8.2% 
                             Source: CoinGecko as of Jan. 19 
Biggest Decliners  Price    7-day return 
Flare              $0.04    -10.8% 
ApeCoin            $4.69    -5.9% 
Trust Wallet       $1.42    -4.3% 
Monero             $161.73  -4.2% 
GMX                $45.4    -2.2% 
                            Source: CoinGecko as of Jan. 19 

Crypto companies, funds

Shares of Coinbase Global Inc. (COIN) gained 1.9% on the week to around $48.47. MicroStrategy Inc. (MSTR) is up 5.6% to $221.95 so far this week.

Crypto mining company Riot Blockchain Inc. ( RIOT ) fell 6.8% to $5.73 on Thursday. Shares of competitor Marathon Digital Holdings Inc. (MARA) rose 1.4% to $7.14 over the past week. Ebang International Holdings Inc. (EBON) has rallied 16% over the past week to trade at $8.85.

Shares of Overstock.com Inc. (OSTK) traded down 6% to $20.05 during the week.

Shares of Block Inc. (SQ), formerly known as Square, is down 1.3% to $70.86 for the week so far. Shares of Tesla Inc. ( TSLA ) rose 3.4% to $127.92.

PayPal Holdings Inc. (PYPL) lost 3.7% for the week, to around $76.85. Nvidia Corp. (NVDA) rose 2.6% to $169.33 in the past week.

Shares of Advanced Micro Devices Inc. ( AMD ) fell 4% to $67.97 on the week.

Among crypto funds, the ProShares Bitcoin Strategy (BITO) rose 15.8% for the week to $13.32 on Thursday, while its counterpart the Short Bitcoin Strategy ETF (BITI) fell 15.2% to $30.60. The Valkyrie Bitcoin Strategy ETF (BTF) is up 16% over the past week to $8.41, while the VanEck Bitcoin Strategy ETF (XBTF) is up 15% to $21.19.

Grayscale Bitcoin Trust (GBTC) has gained over 10.3% in the past five days to $11.25.

– Frances Yue

Required reading

 

(END) Dow Jones Newswires

01-21-23 0914ET

Copyright (c) 2023 Dow Jones & Company, Inc.

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