Genesis Bankruptcy Is “Imminent,” But There’s A Catch
Crypto brokerage firm Genesis reduced its fundraising target from $1 billion to $500 million after facing difficulty raising fresh capital. Ram Ahluwalia, CEO of Lumida Wealth Management, believes Genesis is not just facing liquidity issues, but also insolvency. DCG and Grayscale are facing the contagion effect as a result of Genesis.
Genesis Facing Liquidity and Insolvency Issues
During an Unchained interview on November 22, Ram Ahluwalia claims Genesis is likely insolvent, as it’s illiquid and faces trouble raising fresh capital following the FTX crisis.
“There’s a run on the bank, the bank here being Genesis. Genesis as a bank makes money by originating loans. They lend to counterparties, institutions, family offices, and high net-worth individuals, but they’re not actually a bank. So they can’t fund with deposits, they have to fund by borrowing and using equity capital. Genesis will have around 5% of its assets backed by equity capital, as compared to banks’ 10%.”
According to the Q3 report, Genesis has active loans of $2.8 billion outstanding, down from $10 billion loan outstanding in Q2. It raises concerns over reduction in loans outstanding as a result of Genesis issued fewer loans. However, less access to funding remains the primary issue for Genesis.
Genesis has to fund and issue liabilities on their balance sheets to fund these loans. Gemini Earn program and Circle Yield are the two primary sources of funding. Clients of these companies are offered access to invest in Genesis secured loans and then users turn the loan to another party. Therefore, Genesis is facing both liquidity issue and also insolvency issue.
He believes Genesis Lending will surely file for bankruptcy, whereas Genesis Trading will continue to operate. However, troubles in raising fresh capital still persists.
DCG and Grayscale in Crosshair
Genesis also approached players like Binance and Apollo Global Management for fresh capital. However, Binance has denied from invest in Genesis at this point.
Genesis’ parent DCG and Grayscale are facing the contagion effect, with some believing that GBTC or ETHE can be dissolved. Moreover, Genesis has denied imminent plans to file for bankruptcy.
- First Spot XRP ETF Hits Milestone as CME Flags Institutional Interest
- Can Hype Price Hit $50 After Robinhood Listing?
- XRP News: Ripple Unveils ‘Ripple Prime’ After Closing $1.25B Hidden Road Deal
- Traders Price In Two More Fed Rate Cuts This Year After Soft Inflation Data
- Crypto.com Joins Ripple in Banking License Bid Amid Industry Push for Market Structure Bill
- HBAR Price Targets 50% Jump as Hedera Unleashes Massive Staking Move
- Chainlink Price Outlook: Analyst Predicts $100 as Reserve Adds 63K LINK
- SUI Price Prediction as TVL and Monthly DEX Volume Hit All-Time Highs- What’s Next?
- PUMP Price Prediction as Whales Accumulate 4.2B Tokens- Is 135% Rally Next?
- Dogecoin Price Crash Looms as Flag, Death Cross, Falling DOGE ETF Inflows Coincide
- Solana Price Prediction as Osprey’s S-1 Filing and Hong Kong’s ETF Launch Fuel Reversal Hopes- Is $250 Next?
Why Trust CoinGape
CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights Read more…to our readers. Our journal analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
