If this is really the end for Genesis, this could be more impactful than FTX.
FTX hurt liquid funds and consumers. Genesis impacts nearly every company in crypto.
Let's dig in.
FTX hurt liquid funds and consumers. Genesis impacts nearly every company in crypto.
Let's dig in.
1/ For those who aren't familiar, Genesis started as the first OTC Bitcoin desk in 2013. They're now crypto's largest lending desk.
Genesis is part of DCG, Barry Silbert's holding company that owns CoinDesk, Foundry, Genesis, Grayscale, and Luno. DCG also runs a huge VC firm.
Genesis is part of DCG, Barry Silbert's holding company that owns CoinDesk, Foundry, Genesis, Grayscale, and Luno. DCG also runs a huge VC firm.
2/ At the height of the market, Genesis was moving SIZE.
Check out these Q4 2021 numbers:
- $50B in loan originations
- $12.5B active loans
- $31B spot volume traded
- $21B derivatives traded
Check out these Q4 2021 numbers:
- $50B in loan originations
- $12.5B active loans
- $31B spot volume traded
- $21B derivatives traded
3/ Then 3AC happened.
Genesis was the biggest creditor to 3AC having lent them a whopping $2.4 billion.
Genesis then filed a $1.2B claim against 3AC. DCG (parent co) stepped in and assumed the $1.2B claim, leaving Genesis with no outstanding liabilities tied to 3AC.
Genesis was the biggest creditor to 3AC having lent them a whopping $2.4 billion.
Genesis then filed a $1.2B claim against 3AC. DCG (parent co) stepped in and assumed the $1.2B claim, leaving Genesis with no outstanding liabilities tied to 3AC.
4/ But then things continued to unravel.
Genesis also had large exposure to Babel Finance, the CeFi platform that got hit hard in the June unwind.
In August, longtime CEO Michael Moro resigned. Nearly everyone I know who was at Genesis is no longer there.
Genesis also had large exposure to Babel Finance, the CeFi platform that got hit hard in the June unwind.
In August, longtime CEO Michael Moro resigned. Nearly everyone I know who was at Genesis is no longer there.
5/ By Q3 2022, their numbers had fallen drastically.
- $8.4B in loan originations
- $2.8B active loans
- $18.7B spot volume traded
- $9.6B derivatives traded
Still, everyone felt like they were crypto's safest counter-party.
- $8.4B in loan originations
- $2.8B active loans
- $18.7B spot volume traded
- $9.6B derivatives traded
Still, everyone felt like they were crypto's safest counter-party.
6/ So why is the downfall of Genesis so bad?
Dozens of companies like Gemini use Genesis to help their consumers earn yield.
If you're a CeFi platform that offers yield, you probably use Genesis.
Using some rough numbers and simplifying the process a bit, here's how it works..
Dozens of companies like Gemini use Genesis to help their consumers earn yield.
If you're a CeFi platform that offers yield, you probably use Genesis.
Using some rough numbers and simplifying the process a bit, here's how it works..
7/ You give your crypto to Gemini → Gemini gives your crypto to Genesis → Genesis lends your crypto to a fund → the fund borrows from Genesis X+2% → Genesis gives Gemini X+1% → Gemini gives you X%
Voila! You now earn yield.
Voila! You now earn yield.
8/ But! This only works if the counter-parties that Genesis lent to can actually repay their borrow.
If Genesis can't get their crypto back, they can't give the crypto back to Gemini (or insert any other crypto CeFi platform), which means Gemini can't give you your crypto.
If Genesis can't get their crypto back, they can't give the crypto back to Gemini (or insert any other crypto CeFi platform), which means Gemini can't give you your crypto.
9/ Beyond that, nearly every whale I know that plays in crypto gives money to Genesis.
Instead of earning yield on the BlockFis and Geminis of the world, they give direct to Genesis to earn yield.
Now those institutions, family offices, and whales can't get their crypto back.
Instead of earning yield on the BlockFis and Geminis of the world, they give direct to Genesis to earn yield.
Now those institutions, family offices, and whales can't get their crypto back.
10/ And this is why Genesis halting withdrawals is so bad.
They sit at the direct center of crypto capital markets. They custody funds. They help institutions earn yield. They are the yield product for CeFi platforms.
It's not good.
They sit at the direct center of crypto capital markets. They custody funds. They help institutions earn yield. They are the yield product for CeFi platforms.
It's not good.
11/ Where do we go from here?
Hopefully DCG has the funds to backstop this. I would assume they don't and that they're racing to raise money right now.
They raised at $10B in Nov 2021. I'd guess they raise at a valuation roughly 10-20% of that.
Hopefully DCG has the funds to backstop this. I would assume they don't and that they're racing to raise money right now.
They raised at $10B in Nov 2021. I'd guess they raise at a valuation roughly 10-20% of that.
12/ Stay safe out there.
If you have funds on a CeFi platform, think about going to cold storage using Ledger.
If you really don't want to go to cold storage, use Coinbase.
Long live DeFi.
If you have funds on a CeFi platform, think about going to cold storage using Ledger.
If you really don't want to go to cold storage, use Coinbase.
Long live DeFi.
13/ Subscribe to our free newsletter to give even deeper insights into the Genesis and FTX contagion.
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14/ @0xfoobar joined @santiagoroel and me to discuss the unfolding Genesis situation.
Would highly recommend this one to understand who is (and could be) impacted.
Listen 🔊 sptfy.com/Mi0P
Would highly recommend this one to understand who is (and could be) impacted.
Listen 🔊 sptfy.com/Mi0P
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