The effects the FTX hacker is having on the crypto market are negligible in comparison to those caused by the uncertainty around Genesis global.
Possibly you know that Genesis provides crypto trading services to institutions, this is why the crypto market panicked when Genesis announced that it had stopped withdrawals for its clients earlier this month.
Since that time the trading firm has been trying to secure the funding it needs to avoid bankruptcy, an amount that’s believed to be somewhere between 500 million and 1 billion USD.
It seems that Genesis has been having a hard time finding investors because last week it was reported that the trading firm had hired an investment bank to help restructure the company to avoid bankruptcy.
At the same time DCG CEO Barry Silbert finally broke his silence on the situation by explaining to investors that DCG had already bailed out Genesis when it lost 350 million dollars from the collapse of failed crypto hedge fund Three Arrows Capital and basically wouldn’t be doing so again.
Barry simultaneously revealed that DCG itself was two billion dollars in debt which although not that big of a deal given.
The company’s 800 million a year revenue definitely didn’t help calm the situation, recall that Grayscale another DCG subsidiary has also faced scrutiny about its Bitcoin reserves.
Now if all that wasn’t bad enough Genesis is reportedly being investigated by regulators in seven US states which alleged that the company offered its services to retail investors.
More importantly the regulators allege that Genesis offered unregistered securities to retail investors, now this is significant because any cryptocurrency that is considered to be a security is at risk of a crackdown by the Securities and Exchange Commission or SEC.
As we’ve seen with other cryptocurrencies that the SEC has labeled Securities D listings and price crashes tend to follow.
In theory the SEC C considers a cryptocurrency to be a security if the expectation of profit from buying the coin or token comes from an identifiable third party, in practice however it seems the SEC has been picking and choosing which crypto projects to go after.
Seeing state regulators designate certain cryptocurrencies as securities could be enough to entice the SEC to go after these coins and tokens.
The only problem is that we don’t currently know which cryptocurrencies these State Regulators take issue with, it doesn’t help that Genesis offers them all.
One thing that is for sure though and that’s that Genesis seems to be on its last legs without a fresh injection of capital the trading firm will likely file for bankruptcy.
At that point whatever cryptocurrencies it has will likely be sold to compensate creditors causing their prices to crash and some could go to zero.
The same is true of the cryptocurrencies held by FTX and Alameda Research.
Many tokens in Solana ecosystem are at risk of going to zero because of their exposure to FTX and Alameda.
One of these cryptocurrencies that’s at risk of going to zero is Ren protocol.
Now you’ll recall that the FTX hacker has been using Ren protocol’s trustless Ren BTC to swap from ETH to actual BTC.
It was actually purchased by Alameda back in early 2021.
Unfortunately Ren protocols high exposure to Alameda has resulted in the project only having enough runway until the end of the year.
Now this is extremely unfortunate because Ren protocol is a genuinely good project, so much so that I once held it as part of my personal crypto portfolio.
Fortunately there are rumors floating around that Binance is planning on saving the Ren protocol as part of its multi-billion dollar crypto recovery fund.
Now this would make sense given that Binance seems to have a history of supporting promising trustless cross-chain crypto protocols: Thor, Chains brings to mind here.