Why Bitcoin Investors Are Nervous After Genesis Bankruptcy Announcement

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Genesis’ bankruptcy filing has rekindled concerns about a potential Bitcoin selloff. However, the bulls charged through the FUD and broke above the $22,000 price level.

Genesis reportedly filed for Chapter 11 bankruptcy after failing to secure enough funds to cover its debt. The company, which was one of the largest institutional lenders at one time, has the potential to unwind all of Bitcoin’s gains [BTC] in January 2023.

How much are 1,10,100 BTC worth today?

Genesis was indebted to several lenders up to press time, including bankrupt exchange Gemini. Apparently, Genesis entered into swap agreements whereby it offered GBTC shares to 3AC. The latter is the same crypto firm that collapsed in 2022, leading to losses that pushed Genesis to its current position.

Genesis Trading filed for Chapter 11 bankruptcy this morning, according to reports from @CoinDesk.

All Genesis Trading wallets appear to have halted on-chain trading 11 hours ago.

Genesis wallets still hold over $280 million worth of crypto, with $220 million and more being pure ETH. https://t.co/wFQsADLUxd pic.twitter.com/Jjdvm3oJy4

— Arkham (@ArkhamIntel) January 20, 2023

The Genesis Connection with Bitcoin

Unfortunately, the collapse of 3AC and FTX pushed Genesis into insolvency, meaning it was unable to repay its borrowed funds. Thus, Genesis could be forced to liquidate the crypto assets in its portfolios in order to pay off its creditors. This course of action could potentially trigger another BTC selloff.

This risk highlighted above could be the reason why BTC had not seen strong institutional demand until press time. This was particularly the case with the Purpose Bitcoin ETF, which continued to decline despite the recovery it witnessed in January.

Source: Glassnode

However, it appeared that the same metric had started to pivot at the time of writing, suggesting a positive shift in favor of Bitcoins despite the aforementioned concerns. The latest trade flow data aligned with the potential for further downside.

BTC trade entries have outpaced trade exits since the middle of the week, suggesting that there may be more inbound selling pressure than buying pressure.

Source: Glassnode

While the conclusion may be selling pressure, it doesn’t have to be. Many Bitcoin holders could move their BTC to exchanges for a potential sale.

However, in good news, the Bitcoin price has continued to climb despite these concerns. It had passed the $22,100 price range at press time.

Source: Trading View

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The press time observation was that Bitcoin bulls had turned a deaf ear to FUD and maintained their dominance. It is possible that the cryptocurrency will experience strong buying pressure during the same period.

This gave credence to the idea that Bitcoin could be in the early stages of the next bull run. Despite this, investors should not err on the side of caution, as the tables can turn quickly.

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