Fears of a cryptocurrency contagion are growing as another company’s finances fluctuate

In this photo illustration, the FTX logo is seen on a computer on November 10, 2022 in Atlanta, Georgia.

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Michael M Santiago/Getty Images

In this photo illustration, the FTX logo is seen on a computer on November 10, 2022 in Atlanta, Georgia.

Michael M Santiago/Getty Images

Fears that the collapse of FTX will lead to further devastation in the cryptocurrency industry are hitting nearly every investor in the US, from individuals to major Wall Street firms, with many wondering if another cryptocurrency trading platform called Genesis will collapse next.

So far, those concerns have not materialized, and a Genesis spokesperson said in a statement to NPR on Tuesday that “our goal is to resolve the current situation in the lending business without the need for any bankruptcy filing.”

But Genesis reportedly warned potential investors that it may need to file for bankruptcy if it fails to quickly raise a significant chunk of the cash — $1 billion, according to Bloomberg News.

And there are other troubling signs: Gemini has suspended refunds and stopped creating new loans.

“Cryptocurrency contagion” is a real possibility in a decentralized cryptocurrency system, where there are few investor protections. Companies can apparently opt out of following standard accounting procedures and controls, and companies can do just that intertwined with each other in inconspicuous ways.

FTX and its 100-plus affiliates around the world have deep relationships with other companies, and have served more than 1 million clients. This made it easy for me Her financial problems spread quickly.

BlockFi, one of the few companies bailed out of FTX in recent months, has paused customer withdrawals, citing “significant exposure to FTX and its associated corporate entities.” It also asked its customers not to deposit either.

And when asked if the company was on the verge of bankruptcy, the company’s press team told NPR that “there are a number of scenarios” it could follow as it works to “determine the best path forward for our customers.”

At the same time, the collapse of FTX was not limited to companies and investors with direct exposure to bankrupt businesses. The stunning implosion of the stock exchange, which was valued at more than $30 billion earlier this year, sent cryptocurrency volatility and drove the values ​​of cryptocurrency and bitcoin, which were already falling, even lower.

It also caused panic.

Investors pulled more than $400 million from the Gemini exchange, which was founded by the Winklevoss twins, within 24 hours last week, freaking out when Gemini briefly suspended its payout program that was backed by Genesis, Coindesk reported.

According to Coindesk, other large exchanges such as Binance and Coinbase have seen large withdrawals recently.

Trying to figure out how FTX will affect the Genesis

Unlike FTX, which is focused on bringing regular people into the crypto world, Genesis works with large institutional investors, the kind who have more influence over the financial system.

The promise at the top of its website: “Institutional reach. Global reach.”

In a series of posts on Twitter, Genesis claimed that it “has no ongoing lending relationship with FTX or Alameda,” the crypto hedge fund founded by former FTX CEO Sam Bankman-Fried.

But the company is said to own FTT, a cryptocurrency created by FTX. Its value has fallen from an all-time high of $79.53 to less than $1.50. Genesis previously admitted that it had $175 million in a closed FTX trading account.

“FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests that have exceeded our existing liquidity,” Genesis said recently, adding that it is working to “create new liquidity.”

It has been in contact with two companies, Binance and Apollo Global Management, according to The Wall Street Journal and Bloomberg News. Binance declined to comment on the reports and Apollo Global Management did not respond to a request for comment.

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