Another crypto domino falls?
After halting redemptions and new lending last week, Bloomberg reported that crypto brokerage Genesis could file for bankruptcy if fundraising efforts proved unsuccessful. After the rapid blow-up of FTX, speculation has run rampant about the resulting ripple effects.
Representatives for Genesis have since downplayed the Bloomberg reporting saying, "We have no plans to file bankruptcy imminently. Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors.”
Still, the liquidity crunch across crypto exposes the broader vulnerability of this volatile asset class. "The entire idea behind Bitcoin was to have a neutral asset that is non-co-optable by an interested, centralized party and to take custody of it yourself as a bearer instrument," says Crypto Mining analyst Rob Simone in "The Call @ Hedgeye" video above.
"If all you have is an IOU," Simone continues, "implicitly you're making a bet on that counterparty remaining above board or this company does business with other companies that are above board." Genesis has disclosed it had $175 million in exposure to FTX, hence the speculation that Genesis is in trouble.
Hedgeye CEO Keith McCullough adds: "If you want crypto to be a market, you're going to have be able to short-sell that market, understand counterparty risk, etc. These are basic things. Crypto investors need to understand the basics of how markets work."
