As Execs Defend GBTC, Bitcoin Price Drops to $16.4K Due to Genesis Issues


Bitcoin (BTC) hit intraday lows after Wall Street opened on November 16 after another victim of the FTX scandal emerged.

BTC/USD 1 hour candlestick chart (Bitstamp). Source: TradingView

Genesis Trading “exceeded” liquidity

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD trading around $16,400 at the time of writing.

The downside has re-entered the pair amid reports that Genesis Global Capital, the crypto lending arm of Genesis Trading, has stopped withdrawing funds due to liquidity issues.

One series of tweets That same day, Digital Currency Group (DCG), the parent company that counts Genesis Trading among its subsidiaries, attributed the decision directly to the failure of FTX.

“Today, Genesis Global Capital has made the difficult decision to temporarily suspend Genesis Trading’s lending business, payments and new lending,” he said.

“This decision was taken in response to the extreme market dislocation and loss of industry confidence caused by the FTX explosion.”

DCG added that its other operations remain unaffected, including Grayscale and the industry’s largest institutional investment vehicle, Grayscale Bitcoin Trust (GBTC).

“The impact is on the credit business at Genesis and does not affect Genesis’ trading or storage business,” it said.

“Importantly, this interim measure has no impact on the business operations of DCG and our other wholly-owned subsidiaries.”

GBTC traded at a record discount to Bitcoin’s spot price during the day, down from -40% in November, data from the chain monitoring resource Coinglass confirmed. Industry commentators were worried about the potential contagion spreading to the largest BTC holder.

“$GBTC and the assets underlying all Grayscale products remain safe and secure, held in separate wallets in deep cold storage by our custodian, Coinbase,” – Grayscale confirmed on the day

BTC/USD chart of GBTC premium vs assets. Source: Coinglass

The limited scope of issues in creation thus allowed Bitcoin to avoid significant fresh losses. As Cointelegraph reported, many other industries have already reported that exposure to FTX has put them under financial strain.

Genesis itself said at the time that its problems began thanks to the bankruptcy of Terra LUNA and the bankruptcy of trading firm Three Arrows Capital (3AC).

“The default of 3AC has had a negative impact on the liquidity and maturity profiles of our credit institution, Genesis Global Capital. Since then, we have been de-risking the book and strengthening our liquidity profile and collateral quality.” Twitter thread to read

“However, FTX has created unprecedented market volatility, resulting in abnormal withdrawal requests that have exceeded our available liquidity.”

Old coins wake up after FTX “black eye”

Analyzing the ongoing impact on Bitcoin itself, blockchain analytics firm Glassnode avoided a sense of panic.

Related: Bitcoin Miners Send Less BTC to Exchanges Since 2020, Despite FTX

In the latest issue of its weekly newsletter, The Week On-Chain, FTX described the incident as a “real black eye” for the cryptocurrency industry.

Among the indicators evaluated during the week was the average age of bitcoins moving on the chain.

At 90 days, this was three times as old as September and October, but not a particularly significant historical anomaly.

“The increase in spent old coins is remarkable and consistent with peaks seen during previous surrender selling events and even profit-taking in the 2021 bull market,” he said.

“A sustained upward trend or an elevated Dormancy level could indicate that a more widespread panic is taking root among the cohort of HODLers.”

Animated supply bitcoin weekly amount annotated chart (screenshot). Source: Glassnode

According to Cointelegraph, the general sentiment in analyst circles remains one of “wait and see” and there is potential for price action to deteriorate in the short term.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading action involves risk, you should do your own research when making a decision.