Dominoes falling and question marks with bitcoin

Genesis suspends withdrawals amid digital currency industry meltdown

Another domino has officially fallen in the digital currency crash sparked by FTX earlier this month.

Confirming rumors that began earlier this week, Genesis Global Capital has suspended withdrawals. It’s the latest digital currency lending program to do so since Celsius NetworkVoyager Digital, and others filed for bankruptcy in early 2022.

Genesis’ interim CEO Derar Islim told investors the firm is exploring options and seeking fresh liquidity. He confirmed that the meltdown of digital currency exchange FTX had led to a wave of withdrawals that the Digital Currency Group-owned firm could not meet.

A series of tweets by Genesis confirmed that its lending business was impacted but that its trading and custody businesses were not.

The FTX debacle continues to wreak havoc in the industry

Ever since Sam Bankman-Frieds’ FTX exchange and associated trading firm Alameda Research imploded last week, rumors have been flying about the next dominos to fall.

The last time this happened, when hedge fund Three Arrows Capital went down, lending platforms like the Celsius Network and Voyager Digital shortly followed. It seems that Genesis’ announcement signals a similar situation may be about to unfold, with concerns about BlockFi and some exchanges looming.

Will this be the crash of all crashes that CoinGeek and others have been predicting for years? Time will tell, but if the second-largest exchange in the industry can essentially evaporate overnight, it’s safe to say that confidence will be shaken, and the Genesis announcement will only intensify the wave of customer withdrawals at the heart of the crisis.

What does this mean for the wider digital currency industry?

Ultimately, what this means for the future of the industry is speculation, but we can make a few educated guesses.

First, there’s the likelihood of further contagion. While players like Galaxy Digital and Tether have announced that they are unaffected by Genesis’ decision, they both took hits in the FTX bankruptcy, and industry leaders have a history of making false and misleading statements to reassure investors and traders. Firms like and BlockFi are rumored to be struggling, and even if they survive, it’s most likely that a few others are preparing for bankruptcy.

Second, regulators are highly likely to speed up the process of penning laws and rules for the industry. SEC Commissioner Hester Peirce recently told Bloomberg she’s disappointed with how the regulator has handled things so far, and with yet more innocent speculators losing money to blatant fraud and criminality, the pressure on regulators to speed the process up will be intensified.

Lastly, and most certainly of all, confidence in the industry will weaken. Large institutional players will be taking note of how easy it is to lose your shirt in the industry and will be deploying capital elsewhere. Influencers like Peter McCormack and Anthony Pompliano, both of whom promoted BlockFi for years, will lose credibility, and those who followed them will begin to question the narrative.

Finally, if the crash is big enough, the cracks that have been appearing in the popular narratives that drive the industry will widen to the point where nobody can continue to ignore them.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to BinanceBitcoin.comBlockstreamShapeShiftCoinbaseRipple,
EthereumFTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.

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