Crypto Winter Turns Icy Just Days into the New Year

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Less than a week into the new year, the cryptocurrency winter is turning even more frosty, marked by hundreds of job losses and a seemingly endless bear market that have combined to erode consumer confidence. investors. And there is no indication that the crypto chaos will end anytime soon.

A series of negative and detrimental events have defined the start of 2023 for the cryptocurrency market and its industry. Former FTX CEO Sam Bankman-Fried has filed a request to keep his 56 million shares of consumer trading app Robinhood, worth around $450. million, to pay his legal fees. In the first week of 2023, crypto lender Genesis cut its staff by 30%, crypto-focused bank Silvergate Capital Corp. laid off 40% and crypto exchange Huobi laid off 20% of its employees. Several regulators have stepped up warnings to banks to be aware of the risks associated with crypto. Bankman-Fried tries to keep $450 million stake in Robinhood

Every time the FTX saga seems to die down, another harrowing chapter unfolds. This week, the former Bankman-Fried CEO pleaded not guilty to fraud charges, resulting in a court date set for October 2 later this year. To help pay for his defense, Bankman-Fried filed a request to retain control of his 56 million shares of consumer trading app Robinhood, valued at around $450 million at current prices.

In a filing opposing FTX’s debtors’ claims submitted to bankruptcy court on Thursday, Bankman-Fried argued that the debtors’ claims to get their hands on Robinhood funds should be denied because they failed to shoulder their heavy burden of demonstrating that they are entitled to this form of relief.

Bankman-Fried is not alone in wanting control of Robinhood’s assets, as several parties, including the now-bankrupt BlockFi, also want the few remaining assets to settle their claims against FTX. In a December 22, 2022 bankruptcy filing, FTX argued that due to the large number of creditors seeking ownership of the shares, “the assets should be frozen until this Court can resolve the issues of a fairly to all creditors of the debtor.

Hundreds of jobs cut

Meanwhile, many crypto companies have cut jobs in response to the chaos surrounding FTX. Crypto lender Genesis cut 30% of its staff in its second round of job cuts in recent weeks and is considering bankruptcy after losing $175 million locked in an FTX trading account. Genesis also owes crypto exchange Gemini $900 million, which has criticized Genesis’ handling of the insolvency crisis.

Silvergate Capital Corp., a California-based crypto-focused bank, laid off 40% of its employees after investors rushed to buy back $8.1 billion from the bank following the collapse of the stock exchange. FTX crypto. The collapse affected Silvergate as it held deposits for FTX units and Alameda Research, the trading company behind FTX.

Reflecting the industry trend of cutting costs, China-based crypto exchange Huobi said it plans to cut its staff by around 20%. “With the current state of the bear market, a much reduced team will be maintained going forward,” Huobi said in a statement.

Regulators Warn Banks of Crypto Risks

As if its job losses weren’t bad news, a US court has ruled bankrupt crypto firm Celsius can keep all of its customers’ crypto deposits, meaning no account holder will be able to recover. his funds from the old exchange.

In light of this decision, investors now better understand why crypto experts are pushing the idea of ​​”not your keys, not your crypto”, which essentially means that investors cannot be sure that their crypto holdings are safe. protected unless they keep them in a crypto wallet. that they own and control themselves.

Several federal regulators have also warned banks to be aware of the risks associated with cryptocurrency assets, including legal uncertainties and misleading disclosures. For the first time, the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the United States said in a joint statement that they will monitor banks’ exposure to cryptoassets.

The essential

The crypto market looks gloomy, with no relief in sight. The current layoffs appear to be a spillover from late 2022, when Coinbase announced it would lay off 18% of its workforce, Kraken cut its workforce by 30%, and Singapore-based crypto exchange Crypto.com laid off 5%. .

The deep freeze gripping the global crypto market continues as the value of most major cryptocurrencies remains down or flat from last week, with Bitcoin trading around $16,850 as of midday Friday, New York time.

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