After the FTX collapse, a series of projects have been suffering, and some of the largest declines have come in the form of institutional lending desks. Now Genesis (one of the largest companies in the entire space) has now found itself in the crossfire, and after weeks of trying to unsuccessfully raise capital they are now entering into bankruptcy proceedings.

Genesis declares bankruptcy

Genesis has now filed for chapter 11 bankruptcy, and have stated that they owe approximately $3 billion to a series of different investors, including over $700m to Gemini.

Now that Grayscale has entered in to the bankruptcy process, it remains to be seen how exactly they will be able to restructure their business in order to make their creditors whole, if this is even possible.

Will DCG unwind the Grayscale fund?

There has been a lot of speculation that DCG may now be forced to unwind the Grayscale fund. Genesis is a subsidiary of DCG, which is headed up by Barry Silbert.

A lot of people had been blaming Barry Silbert for the meltdown of Genesis and their lending practices, which now appear to have been somewhat irresponsible.

However, others have made the case that a former bankruptcy specialist would never be so silly, and that the reason DCG has found itself embroiled in these issues is because the firm simply became far too large for everyone to track what was happening at the company – there were too many subsidiaries with too much autonomy and not enough oversight.

How much longer will this extend the bear market?

Many people believe that this could continue to extend the bear market significantly, especially if DCG are forced to unload a lot of the Bitcoin in the Grayscale fund.

The Grayscale fund currently holds approximately 3% of all Bitcoin, which means that there would be a significant and concerning price decline if Silbert decided that it was prudent to offload them. Despite the fact that he most likely make these trades over a relatively long time, and the sells would be coordinated via OTC desks, the news would still set the markets on a further bearish decline.

The SEC starts to clamp down

The SEC has continued to clamp down on a range of different cryptocurrency companies, and has been working in collaboration with various law enforcement authorities such as the US Department of Justice.

Yesterday, the US DOJ declared that they were pressing charges against the Russian founder of the Bitzlato exchange, after it emerged that he had been responsible for playing a significant role in laundering over $700m from the Hydra market, a dark net market that sells illicit substances.

It remains to be seen how much further the collateral damage will go, and which other firms may be caught in the damage.

The one thing that people can be certain of is that the bankruptcies aren’t all over yet.

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