One of the biggest crypto lending organizations, Genesis Trading, announced that it is temporarily stopping new loan applications and redemptions. The event reduced the value of bitcoin and dealt another damage to the cryptocurrency credit markets.
The business stated that it is attempting to find a solution for its loan business and is putting out options for consideration next week during a call with clients on Wednesday.
Following Genesis’ statement last week that its operating capital and net positions in FTX were “not material” to its business and the bankruptcy of major cryptocurrency exchange FTX, which this week revealed it may have “more than 1 million creditors,” the announcement is yet another repercussion of those events.
The market has been transformed by the FTX events, leading to unusual withdrawal requests that surpass our available liquidity… Derar Islim, interim CEO at Genesis, gave clients a call on Wednesday morning and explained that the company had made the painful decision to temporarily halt redemptions and new loan origination after consulting with expert financial advisors at counsel.
The temporary pause was delivered minutes after cryptocurrency exchange Gemini declared it will temporarily halt withdrawals for its Earn lending product due to Genesis being as the main lending partner of the company.
Over the past 24 hours, Bitcoin’s price has dropped. Bitcoin has increased in value since Coindesk initially revealed the balance sheet of FTX sister company Alameda Research on November 4, causing suspicion about both firms’ financial difficulties.
Genesis, a division of the Digital Currency Group, revealed last week that funds totaling $175 million were on the platform for its derivatives business before it filed for bankruptcy on Friday.
As previously reported by The Block, Genesis also let clients know last week that Digital Currency Group has contributed a $140 million stock infusion in reaction to the FTX debacle.
The company, which serves as a major conduit for the cryptocurrency credit market, has been adversely affected by a number of significant crypto blowups this year, notably Three Arrows Capital, which defaulted on enormous loans and declared bankruptcy on July 7.
Genesis gave Three Arrows a loan of $2.36 billion. It is the largest creditor with a claim for $1.2 billion in the Chapter 15 bankruptcy of the hedge fund.
After Three Arrows, Genesis declared in mid-August that CEO Michael Moro would retire, lay off 20% of the workforce, and restructure executive management.
Genesis revealed that the amount of new loans during the third quarter plummeted by 80% to $8.4 billion. It had $2.8 billion in active loans during the third quarter.
Don’t miss: WEB3 MARKETING: HOW BLOCKCHAIN FIRMS ARE DOING IT ALL WRONG
