Will Genesis Bankruptcy Transform Crypto Lending Business?

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One of the industry’s leading crypto lenders, Genesis Global Capital, filed for bankruptcy protection on January 19, 2023. Digital Currency Group wholly owns the crypto lending company.

The crypto lender opted to file for bankruptcy protection as it was continually in trouble after the third-largest crypto exchange, FTX, filed for bankruptcy on November 11, 2023.

Genesis is not the first crypto lender to file for bankruptcy; Earlier, Celsius Network, Voyager Digital, and BlockFi opted to file for bankruptcy protection to shield themselves from bankruptcy.

In conversation with renowned crypto news outlet, Edward Moya, Senior Market Analyst at Oanda, noted, “The demise of crypto lender Genesis has reminded traders that there is still a lot to clean up in the crypto-verse. You don’t need to be exposed to FTX to fade, and this theme could continue for a while for many struggling crypto companies.

The CEO of Kadena Eco, a layer 1 blockchain, Francesco Melpignano, believes that contagion from these collapses continues to reverberate this year and possibly the next.

Duke University finance professor Campbell Harvey was asked: Is crypto lending kaputt? He replied: I don’t think so. He believes that the economic model remains solid and that it has its place in future finance.

Campbell is an author and has also written a book DeFi and the Future of Finance.

What could explain this disregard for basic risk management practices? To the second question posed by the finance professor, he responded by saying, “It’s easy to start a business when prices go up.

A director of venture capital firm Collider ventures, Eylon Aviv, saw cryptocurrency lending as an essential primitive for the growth of the crypto ecosystem.

Meanwhile, speaking to crypto outlet, Eylon noted that We are currently caught in a transitional limbo between centralized players [Genesis, 3AC, Alameda Research] who have a scalable solution with poor risk management and failed handshake agreements; and decentralized actors [Compound, Aave] which have a resilient but not scalable solution.

On January 6, 2023, a crypto news outlet reported that Genesis laid off 30% of its workforce in their second round of layoffs to cut costs amid a downward trend.

The crypto market has been struggling since the end of 2021, with several companies filing for bankruptcy throughout 2022. Among the major failures in crypto is one of the largest and most disastrous events that continuously disrupts the market after its bankruptcy.

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