CZ continues to sink competitors. House of cards effect. Where is the crypto market headed?

After the story with FTX and Alameda, the crypto market continues to be in a fever. Not even three weeks have passed since November 8th, and already a wholea series of major market players announced problems inconnection with the liquidity crisis. Yes, Sam Bankman-Fried has sent his tentacles deep into the market, and today we'll try to find out just how much. Let’s look at how the head of Binance, whose tweet started the collapse of FTX, behaves, let’s see what awaits the crypto giant Genesis, and speculate on what awaits the crypto market in the near future. Go!

On November 8, the cryptocurrency market experienced the strongestshock. The native token of the largest exchange FTX fell by more than 90%, which led to a fall in the quotes of all cryptocurrencies. We discussed the situation in detail in two articles here and here. Today we’ll talk more about the consequences of this collapse for the market.

1. Why will the collapse of FTX affect the crypto industry so much?

The hole in assets left by FTX will remain for a long timeinfluence the crypto market, many companies that had close relationships with FTX are trying to sweep the losses under the rug, but one way or another, they will be forced to admit losses.

Alameda Research and FTX are very activeinvested in all top blockchain projects. And the hands of its former leader Sam Bankman-Fried are elbow-deep in altcoins (for example, FTX owns 10% of SOL tokens). Here is a complete picture of the influence of Sam's empire on the crypto market.

The sorry state of BlockFi is already known.They are already preparing to file for potential Chapter 11 bankruptcy, WSJ reports. The landing platform Salt and the Australian crypto exchange Digital Surge have also closed deposits and withdrawals. But this is not the worst thing for the industry. What's happening to Genesis is much scarier.

2 Genesis. This is the end?

To put it into perspective, Genesis started out asthe first OTC platform back in 2013. And now they are the largest crypto-lending company, and are part of DCG – Barry Silbert's holding company, which owns CoinDesk, Foundry, Genesis, Grayscale and Luno.

Dozens of companies use Genesis to help users make money. Among them are the largest exchanges and liquidity providers. How does Genesis work?

You give your cryptocurrency to the exchange → the exchange gives your cryptocurrency to Genesis → Genesis lends your cryptocurrency to the fund. He borrows X+2% from Genesis → Genesis gives the exchange X+1% → the exchange gives you X.

Genesis is in the heart of the marketscrypto capital. Therefore, if they stop, the whole mechanism breaks down, as a result of which not only ordinary users suffer, but also large players, losing the opportunity to withdraw their funds.

On November 16, Coindesk announced a temporary suspension of repurchases and new loan originations by the lending arm of crypto investment bank Genesis Global Trading.

It turned out that Genesis' capital of $175 million remained in the FTX accounts, resulting in a liquidity crisis of $1 billion, which then decreased to $500 million.

Genesis brought in outside experts to handle the cases.We are talking about consulting services from Alvarez & Marsal. They should help the crypto broker overcome the liquidity crisis. Also working with them are lawyers from Cleary Gottlieb and Moelis & Company.

 

Moelis& Company is an independentan investment bank that provides audit and consulting services. They previously worked with crypto lender Voyager Digital after filing for bankruptcy.

3. Binance refused to rescue Genesis.

As we mentioned in the previous article, Binancecreated a support fund for crypto projects affected by the liquidity crisis. They want to help projects that are strong in their fundamentals. But, as practice has shown, not all.

November 21, WSJ portal with a link to itsthe source stated that Genesis has reached out to Binance and Apollo seeking help. And if the latter have not yet commented on their participation in the rescue, Binance refused to invest in Genesis, citing a possible conflict of interest in the future.

Binance's help is not just very selective, there isthere is every reason to believe that it is the infrastructure of the Chinese exchange that will benefit from this crisis. No one knows the conditions under which Binance is ready to inject money into drowning projects. In a hopeless situation, companies that have suffered serious losses from the collapse of FTX may be forced to give large shares of their capital into the hands of Binance.

4. CZ drowning competitors...or cleansing the industry?

The actions of CZ, which raised many questions, do not end there; recently the CEO of Binance posted a tweet discrediting Grayscale and Coinbase with the following content:

“So Coinbase Custody holds 635k.Grayscale fund BTC, 4 months ago there were less than 600k BTC on Coinbase (the exchange I believe). just stating “media reports” without making any claims... Glassnode probably has more recent data.”

In response to this, Coinbase released a message that the funds of the troubled Grayscale fund, which are located in the Coinbase custodial service, are in perfect order.

After some time, CZ deleted this tweet by releasing a new one:

“Brian Armstrong just told me the numbers in the articles are wrong. Deleted the previous tweet. Let's work together to increase transparency in the industry.”

5. Coinbase and Grayscale are the new FTX and Alameda?

Under pressure from the media and CZ, which has a lot of weight in the crypto world, Coinbase Custody revealed Grayscale’s reserves.

As you can see, Grayscale really has a lotbitcoins - 635,235 in the Grayscale Bitcoin Trust and 6,390 BTC in the Grayscale Digital Large Cap Fund. They also have a lot of Ether, SOL, ADA, DOT, MANA and LINK tokens.

Let us remind you that at first (before the tweet of the Head of Binance) the investment fund refused to show its reserves, citing the privacy rules of Coinbase Custody.

In a statement, Coinbase Custody emphasizes that theirCustodial service is not an obstacle in this matter. Each product's digital assets at Grayscale have their own online address. They can be verified on the blockchain and also provide accurate reports on digital assets.

Finally, the company emphasized that digitalGrayscale assets are protected as much as possible from misuse. They cannot be provided by Coinbase or used for loans or other transactions.

However, after disclosing all the debts, it turned out thatthat brokerage company Genesis Global has $2.8 billion in outstanding loans on its balance sheet. About 30% of the loans are to related parties, including the parent company, Barry Silbert's Digital Currency Group.

Lending company Genesis Global Capital borrowed money from Genesis Global Trading.

Doesn't this remind you of anything?

6. The world after FTX. Stability and purity in the assets of centralized exchanges.

Despite the fall in quotes, capitalization andother problems that the liquidity crisis brought to FTX and Alameda Research, there are also positive aspects. A number of crypto exchanges have announced that they will begin publishing regular reports on the transparency of their reserves. This will help restore confidence in the market.

Naturally, CZ was the first to do this.Binance has shared details of its hot and cold wallet addresses. This list includes tokens only on networks such as: BTC, ETH, BSC, BNB, TRX. The full list will be published a little later.

You can verify the exchange’s statements and view the wallets here.

The market leader CEX was followed by the OKX exchange, andthen the largest aggregator CoinMarketCap introduced a new function on its website. Thanks to it, users will now be able to view the reserves of cryptocurrency exchanges directly on the aggregator’s website. Exchanges that have published their reserves will be marked in the rating with a special icon.

7. Conclusions. What's next? Is Crypto Winter Already Here?

Despite the fact that quotes for all cryptocurrenciestoday is much lower than the value investors are accustomed to, many experts believe that the real crypto winter has not yet arrived. For example, former Bitmex CEO Arthur Hayes believes that we should all be preparing for a BTC price of $10,000 in the near future.

According to analytics platform Glassnode, long-term cryptocurrency holders are currently experiencing acute financial stress, holding an average of -33% of unrealized losses.

This is comparable to bear market lows2018, when the peak of unrealized losses averaged -36%. This leads to logical questions, the answers to which will tell you what the market expects next. How long are whales willing to sit in a drawdown? Are they ready for day two? How will whale unloading affect the market going forward?

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