The FTX crisis continues to spread. After the collapse of the famous cryptocurrency exchange FTX, many platforms that have invested heavily in the company are experiencing terrible days. The fact that FTX-affected trading firm Genesis has stopped customers from withdrawing has been considered a state of concern for the entire crypto space. Right now, the fiasco doesn’t seem to be over. Here are the latest developments on the subject…
Bankruptcy on the horizon for two major cryptocurrency companies?
It all started with the massive FTX fallout, triggered by Binance’s announcement that it would sell its FTT holdings. This forced BlockFi to file for bankruptcy. At the same time, Genesis created massive panic in the space: It stopped customers from withdrawing. Now, all eyes are on Genesis. Because speculations about its bankruptcy have been floating around in the crypto space for a while. In a recent update, as we reported on cryptokoin.com, Gemini founder Cameron Winklevoss wrote an open letter to Billy Silbert, founder of DCG Group, parent company of Genesis and Grayscale.
Cameron blamed Silbert for having funds from Gemini’s Earn stuck with Genesis. The exchange has locked the client’s wealth funds to Genesis, according to some reports. This too was credited to DCG. In addition, funds were sent to Grayscale, which continues to hold substantial assets. Now Genesis and DCG are unable to repay the client’s funds. Some experts predict that Grayscale may soon liquidate its assets. If that happens, a new bearish wave could kick in, causing a major pullback. This could create new lows of the current bear market.
What if Grayscale has to sell its assets?
Grayscale is a platform that offers GBTC shares, where the user invests in share value rather than holding the asset. The platform is supported by Bitcoin trust, Ethereum trust, etc., which has been expanded since the markets jumped in 2021. It includes many trusts such as However, fear of Genesis filing for bankruptcy now roams the crypto space. In parallel, other Bitcoin and many altcoins may also face selling pressure. Genesis may not have left a huge amount to offer back to customers. If Grayscale is liquidated, a new wave of declines that could start also scares investors.
ETHE trades at record discount
Meanwhile, Grayscale’s Ethereum Trust fund (ETHE) is trading at record lows. The market price of the investment product is currently down 85.26 percent year-to-date. The Grayscale Ethereum Trust (ETHE) is in steady decline and is currently trading at a notable 60% discount to its Net Asset Value (NAV). This marks the lowest premium rate since its inception. As investors seek to sell their shares at discounted rates, current data underscore a general investor capitulation and a decline in market sentiment.
CryptoQuant certified author JA Maartun recently highlighted the bearish trend the investment product is experiencing. After a gradual recovery in September of last year, ETHE’s premium rate slumped to new lows amid ETH’s poor price performance in October that tested investor confidence. The FTX debacle in November was the final nail in the coffin, triggering a wave of capitulations that sent the fund’s premium rate into a steady decline.
Alongside the underlying bear market, the unique issues facing Grayscale’s parent company, Digital Currency Group (DCG), have added to the fund’s woes. Grayscale’s affiliation with Genesis has contributed to more fear of investors. As reported last month, this has also affected Grayscale’s largest product, the Grayscale Bitcoin Trust (GBTC). GBTC’s premium rate suffered massive drops which eventually led to record discounts.