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Jan 2023

Another strong week for crypto as markets shrug off Genesis bankruptcy

by Hashdex Research
2 min read
Jan 23, 2023

Another strong week for crypto as markets shrug off Genesis bankruptcy

Last week marked yet another strong period for crypto, with the Nasdaq Crypto Index (NCI) closing Sunday (01/22) 8.0% above its prior weekly close. Bitcoin (BTC) held strong at the $22,000 level (up 9.2% in the week) while ether (ETH) was able to reclaim the $1,600 mark, closing Sunday with 5.8% upside in seven days.

Most crypto assets were on a positive trend until Wednesday, when markets faced a downturn as investors braced for the impact of the announcement by the US Department of Justice (DOJ) of a joint enforcement action against an international crypto entity. In a live press release at around noon on Wednesday, officers disclosed that the founder and majority owner of Bitzlato, a small Hong Kong-based cryptocurrency exchange, was charged with unlicensed money transmitting. Before this news went live, BTC dipped to around $20,500 and ETH fell close to $1,500. Both assets recovered most of the losses over the next hours as investors realized that the DOJ’s action didn’t explicitly involve a more significant player in crypto.

Wednesday also brought weaker-than-expected US retail sales figures, showing a drop of 1.1%. Also, producer prices softened, with the Producer Price Index (PPI) falling 0.5% over the last month, which along with a month-over-month decrease in the last CPI reading, contributes to the possibility of a slower interest rate hike by the Fed in the next meeting. Although this is positive news for risk assets, markets are also worried that, judging by current macro data points, a recession is likely underway.

After two months of speculation, on Thursday Genesis Global Holdco, a lending arm of the Digital Currency Group (DCG), filed for Chapter 11 bankruptcy alongside two of its lending subsidiaries. The estimated number of creditors of the three companies exceeds 100,000, with total liabilities in the range of $1 billion to $10 billion. This announcement happened after several weeks of noise around the financial situation of Genesis, which halted withdrawals and suspended new loan obligations in the wake of the FTX fallout in November. While the Genesis bankruptcy is yet another failure within centralized finance (CeFi), it seems as though markets had already fully priced in the likelihood of the company filing for Chapter 11, with BTC, ETH, and other crypto assets shrugging off the event and continuing to rally as if nothing major had occurred. This anticipation may be very much justified, since Genesis could be the last large player involved in the “high yield” products that marked last year’s CeFi busts to go bankrupt, following Three Arrows Capital, Celsius, and Voyager.

Crypto had fully recovered its weekly gains with a strong rally extending from late Friday through Saturday morning, taking BTC over $22,000 for the first time since September, with ETH climbing over the $1,600 mark. The uptrend continued on Saturday, with BTC reaching its weekly high of just over $23,000 mark, followed by ETH coming close to the $1,700 mark. On Sunday, markets were mildly down, with BTC trading shy of $23,000, and most crypto assets maintaining the majority of their strong weekly gains.

The next several weeks will show us a clearer picture regarding whether Genesis and its lending subsidiaries were the only troubled DCG companies after 2022’s crypto winter, or if there are still more cards to fall.

 

US Charges Crypto Exchange Bitzlato With Laundering $700M

https://www.coindesk.com/policy/2023/01/18/us-disrupts-bizlato-crypto-exchange-arrests-founder/

 

Weak US Retail Sales, Factory Data Heighten Recession Concerns

https://www.bloomberg.com/news/articles/2023-01-18/us-retail-sales-slide-by-more-than-forecast-in-broad-decline  

 

Bank of America Says CBDCs Are the Future of Money and Payments

https://www.coindesk.com/business/2023/01/17/bank-of-america-says-cbdcs-are-the-future-of-money-and-payments/          

 

Digital Currency Group's Genesis Global files for Bankruptcy Protection

https://www.theblock.co/post/190311/digital-currency-groups-genesis-global-files-for-bankruptcy-protection

 

National Australia Bank Becomes Second Australian Bank to Build Stablecoin

https://www.coindesk.com/business/2023/01/19/national-australia-bank-becomes-second-australian-bank-to-build-stablecoin/



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