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Crypto contagion: Genesis may be next after FTX bankruptcy

Bitcoin is now trading around a fresh two-year low, as the crypto world braces for a further fallout from the FTX saga.

Crypto contagion: Genesis may be next after FTX bankruptcy

 

Despite the relatively limited drop in prices, make no mistake, contagion fears are being compounded by the latest headlines emanating out of the crypto space.

Brokerage firm, Genesis, has reportedly warned that it too could be filing for bankruptcy if its unable to raise US$ 1 billion in fresh funds needed for its lending unit.

After all, there is a liquidity crunch in the wake of FTX’s collapse, with Genesis also halting withdrawals. A couple of weeks ago, Genesis tweeted that its derivatives business has US$175 million trapped in a trading account on FTX.

 

But it doesn’t stop there.

Because of Genesis halting withdrawals, another crypto exchange, Gemini, has also halted withdrawals of its own product called Earn. And that’s apparently because Gemini has some US$ 700 million of its customers’ money stuck in Genesis.

Gemini is helmed by the billionaire twins, Tyler and Cameron Winklevoss, who are perhaps best known to many as the twins who sued Mark Zuckerberg over the origins of the idea for a Facebook-type social media platform.

 

Even crypto lender BlockFi, which was once valued at US$3 billion back in March 2021, is also reportedly close to filing for bankruptcy.

BlockFi had a US$ 400 million revolving credit line with FTX US from back in July, while BlockFi also had issued loans to Alameda Research, the now-bankrupt trading arm of FTX.

BlockFi had already said it was unable “to operate business as usual” and halted withdrawals the same week as FTX’s meltdown.

 

Such is the contagion effect: from FTX, to Genesis, to Gemini, to BlockFi, with potentially more big names to follow.

What’s clear is that contagion risks are still very much in play, with hundreds of millions of dollars stuck in limbo.

And perhaps crypto traders are waiting for the next domino to fall, before prices potentially move another leg lower.

 

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