Evaluating the Situation
Genesis Financial Capital has become the latest crypto firm affected by the collapse of FTX. The company recently announced that it would suspend all new loans and redemptions indefinitely. Given that Genesis had $2.8 billion in active loans in Q3 2022 (1), this is no small matter.
Let’s examine the reasoning behind this decision before considering whether this presents an opportunity to capitalize on potential market volatility.
A Wise Move or Just a Diversion?
Genesis claims that the decision was made in response to fluctuating crypto prices and a lack of confidence following the FTX incident. However, it is important to note that this move does not currently affect Genesis’s day-to-day trading operations.
From a technical standpoint, this makes sense. If Genesis had investments tied up in FTX assets, it’s reasonable to assume that withdrawal requests exceeding Genesis’ liquidity might have led to the suspension. However, it is important to focus on the word “currently” in the previous statement.
Some financial firms are hesitant to fully disclose the extent of their exposure to external negative events and how these might affect their internal finances. The main concern here is whether Genesis is being fully transparent with its clients. Given the negative experiences of those involved with FTX, such skepticism seems entirely justified.
Үлкен суретті түсіну
While Genesis’s actions have sent more ripples through the crypto ecosystem, things may not be as dire as they seem. It’s important to note that this firm is not nearly as large as FTX was at its peak.
For example, Tether has confirmed that it had no exposure to Genesis (2). Other altcoins are likely to make similar statements soon. The key takeaway here is to dispel any rumors that could cause further liquidity withdrawals from the market. So, it’s better to view Genesis’s actions as a temporary setback rather than a major crisis.
Tracking Institutional Investors
Unlike typical crypto traders, institutional investors have access to exclusive news that is not available to the public. This is likely why they are unlikely to be scared away by the current market conditions.
In fact, some may see the situation as an opportunity to capitalize on the very fears that have led to the downfall of major companies. We’re not suggesting that they’ll dive in recklessly, but it’s more probable that they will reassess their short-term positions until market conditions stabilize.
This means that large investors could soon begin taking advantage of the market lows and find prime buying opportunities before Q4. The real question is how long it will take for the crypto market to absorb FTX’s losses and how this will affect liquidity levels in the short term.
Keeping an Eye on the Future
It’s been a tough year for the cryptocurrency market, as the actions of FTX and Genesis clearly show. Nonetheless, it’s important to remember that the bulls will eventually return once a solid support level is found. Just like any other asset, prices are cyclical. This is why we should focus on the future rather than dwell on the current downturn. The likelihood is high that institutional traders have already adopted this perspective. As always, CryptoChipy will keep you updated as the situation unfolds.
