Bitcoin

Will a Genesis bankruptcy push bitcoin to new low? 

Welcome back to Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.

As crypto lender Genesis reportedly prepares to file for bankruptcy as early as this week, I caught up with David Siemer, chief executive at Wave Financial Group and Hany Rashwan, chief executive at 21Shares, to talk about its potential impact.

Meanwhile, founders of bankrupt crypto hedge fund Three Arrows are seeking money for a new venture. JP Morgan Chase’s Jamie Dimon lambasted crypto again. And FTX’s new chief said he’s considering restarting the failed digital asset exchange.

As always, find me on Twitter at @FrancesYue_ or email me at frances.yue@marketwatch.com, if you’d like to share any thoughts on crypto, this newsletter, or your personal stories with digital assets.

Genesis’s bankruptcy?

Bitcoin started this year with a 25% rally so far, pushing the largest cryptocurrency above $20,000, the level it saw before crypto exchange FTX’s implosion in November, according to CoinDesk data.

However, investors are hesitant to call a bottom for bitcoin, with concerns around the macroeconomic environment and contagion from digital asset lender Genesis Global Capital, which is reportedly preparing to file for bankruptcy this week. 

As Genesis has ceased withdrawals since November, its bankruptcy is largely priced in, noted Wave Financial’s Siemer. “I don’t think it would be a FTX-again kind of bad moment,” Siemer told Distributed Ledger in a phone interview. “Everyone’s assuming it’s going to happen.”

Still, investors are closely watching how Genesis’s bankruptcy might unfold and how it would affect its parent company Digital Currency Group, which also owns Grayscale Investments, issuer of the world’s largest bitcoin fund GBTC
GBTC,
+8.77%
,
and others. I wrote about how Genesis’s bankruptcy might spill over to DCG back in November. 

“If something monumental like the Grayscale Bitcoin Trust is unwound or something like that, you would have to concentrate on that being a very controlled implosion in order to guarantee price stability,” said Rashwan of 21Shares. 

Genesis has been negotiating a prepackaged bankruptcy plan with its creditors who may may agree to a forbearance period of between one and two years for most of the payments. In exchange, the creditors will receive cash payments and equity in DCG.

Dimon’s crypto blast 

Meanwhile, Jamie Dimon, chairman and chief executive of JP Morgan Chase, is lambasting bitcoin again. 

The largest cryptocurrency is “a hyped-up fraud, it’s a pet rock,” Dimon told CNBC on Thursday. Dimon also added that he wasn’t surprised by the implosion of FTX. 

Crypto is “a decentralized ponzi scheme. The hype around this thing has been extraordinary,” he said. “Crypto itself doesn’t do anything,” Dimon said. 

This is not the first time Dimon has criticized crypto. In 2021, he called bitcoin ‘worthless’ in an interview with CNN. In 2017, he referred to bitcoin as a “fraud,” though later regretted his words.

MarketWatch’s Anushree Dave wrote more about it here. 

Three Arrow founders’ new venture 

Founders of Three Arrows Capital, a crypto hedge fund whose bankruptcy in June resulted in potentially billions of losses for investors and creditors, are seeking to raise up to $25 million for their new business. The move, however, is drawing significant backlash from the crypto community. 

Three Arrows’s Kyle Davies and Su Zhu are teaming up with founders of crypto futures exchange CoinFlex, which filed for restructuring in Seychelles in August, to start a crypto exchange called GTX that trades crypto claims and others, according to a pitch deck seen by MarketWatch.

The move comes as liquidators of Three Arrows have worked for months to recover assets for its creditors, and accused Zhu and Davies of concealing their whereabouts. Some market participants have pointed out the irony, while others questioned prospects for the new exchange.

Restarting FTX? 

FTX’s new chief executive John J. Ray III is looking at the possibility of restarting the exchange, according to a report by the Wall Street Journal Thursday. 

Ray has set up a team to explore reviving FTX.com, the company’s non-US exchange, as he strives to return money to the company’s creditors and customers, he told the Wall Street Journal. He would evaluate whether restarting FTX.com would recover more value for the company’s customers than just liquidating the company’s assets or selling the platform. 

Crypto in a snap

Bitcoin prices rose 12% during the past week, and was trading at around $20,930 on Thursday, according to CoinDesk data. Ether
ETHUSD,
+1.81%

 gained 8.5% over the same stretch to around $1,539, CoinDesk data shows.

Biggest Gainers

Price

7-day return

Bitcoin Cash

$121.21

9.6%

Axie Infinity

$8.23

9.1%

VeChain

$0.02

9.1%

BitTorrent

$0.0000007

8.5%

Zilliqa

$0.03

8.2%

Source: CoinGecko as of Jan. 19

Biggest Decliners

Price

7-day return

Flare

$0.04

-10.8%

ApeCoin

$4.69

-5.9%

Trust Wallet

$1.42

-4.3%

Monero

$161.73

-4.2%

GMX

$45.4

-2.2%

Source: CoinGecko as of Jan. 19

Crypto companies, funds

Shares of Coinbase Global Inc.
COIN,
-2.21%

gained 1.9% for the week to around $48.47. MicroStrategy Inc.
MSTR,
+1.04%

rose by 5.6%, to $221.95 thus far on the week.

Crypto mining company Riot Blockchain Inc.
RIOT,
+1.49%

went down 6.8%, to $5.73, as of Thursday. Shares of rival Marathon Digital Holdings Inc.
MARA,
+5.28%

were up 1.4% at $7.14, over the past week. Ebang International Holdings Inc.
EBON,
+8.50%

rallied 16% over the past week and was trading at $8.85.

Overstock.com Inc. shares
OSTK,
+0.75%

were trading down 6% to $20.05, over the week.

Shares of Block Inc.
SQ,
-1.00%
,
formerly known as Square, dipped 1.3%, to $70.86 for the week thus far. Tesla Inc. shares
TSLA,
-0.82%

were up 3.4% to $127.92.

PayPal Holdings Inc.
PYPL,
-0.38%

lost 3.7% over the week, to trade at around $76.85. Nvidia Corp.
NVDA,
-2.53%

were up 2.6% at $169.33 for the past week.

Advanced Micro Devices Inc. shares
AMD,
-3.17%

declined 4% to $67.97 for the week.

Among crypto funds, ProShares Bitcoin Strategy
BITO,
+1.79%

advanced 15.8% over the week to $13.32 Thursday, while counterpart Short Bitcoin Strategy ETF
BITI,
-1.74%

declined 15.2% to $30.60. Valkyrie Bitcoin Strategy ETF
BTF,
+1.56%

rallied 16% over the past week to $8.41, while VanEck Bitcoin Strategy ETF
XBTF,
+1.33%

went up 15% to $21.19.

Grayscale Bitcoin Trust
GBTC,
+8.77%

gained over 10.3% for the past five days to $11.25.

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