Cardano is feeling hot

Good morning! Welcome to The Daily Moon. It’s a brand new week. A rising tide lifts all boats. Luna Classic can attest to this tired old proverb. The token's market cap has been rising and the m-cap has now breached $1 billion. You think this is when Do Kwon comes out of hiding?

Moving on, today we talk about what went wrong at Genesis and is an ADA pump coming?

The markets were shaky. Bitcoin was at $20,700 levels and Ethereum fell to ~$1,527. Nasdaq rose on easing inflation concerns in the US. Back home, Sensex and Nifty ended higher on positive global cues.

Genesis Of Another Crisis?

Just 15 days into the new year, there’s another crypto firm on the verge of bankruptcy. Genesis Global Capital, part of the Digital Currency Group’s ~$50 billion crypto empire, is out of cash. The crypto lender owes more than $3 billion to multiple entities. And now the lenders are closing in.

Genesis claims that the collapse of Three Arrows Capital and FTX in quick succession caused this chaos. It paused withdrawals in November after FTX went bust. Since then, the crypto lender has been unable to recover.

It’s gotten worse. Gemini’s Cameron Winklevoss blamed Genesis and DCG for the collapse of its yield-product Gemini Earn. In response, DCG said that Gemini is responsible for its own misfortune.

Tbf, Winklevoss has a point. Almost $900 million of Gemini’s funds are locked with Genesis.

There’s a lot happeningYes, kind of. Apart from the blame-game, what isn’t clear is why Genesis waited for so long. 3AC went bankrupt in July 2022. Six months later, there’s no word on why parent company DCG didn’t infuse capital. It’s a complicated maze but let’s break it down:

1. Algo stablecoin Terra depegged from the US dollar in May. Its sister token Luna crashed soon after.

2. This led to a ripple effect across the crypto industry. One casualty was crypto hedge fund 3AC that went insolvent in July.

3. Genesis had given $1.2 billion worth collateral to 3AC, which had to be written off. The crypto lender laid off 20% of its workforce soon after.

4. DCG was the single largest creditor to 3AC. But the group denied deeper links.

5. Crypto exchange FTX filed for bankruptcy in November. Genesis was hit once again, because $175 million of its funds was locked in FTX.

Following this, Genesis halted trading and paused withdrawals. Though DCG pumped $140 million into its subsidiary, it was probably not enough. Meanwhile, the market has no clue about Genesis’ exact liquidity position. DCG, on the other hand, has blamed “bad actors” in the industry.

The genesis of GenesisDCG’s founder-CEO Barry Silbert wanted to be the Rockefeller of crypto. When he set up Genesis in 2013, it was among the first OTC Bitcoin trading desks for institutions and HNIs. At that time it was part of his venture SecondMarket. So Silbert exited SecondMarket, he kept Genesis under his control. It was relaunched as DCG’s subsidiary in 2015. It offers institutional crypto trading, lending, and derivatives.

Fun fact: In his pre-crypto avatar, Silbert was an investment banker who worked on Enron’s bankruptcy.

Gemini and beyond Genesis largely went under the radar despite its liquidity crisis. The Winklevoss fallout made it public. The bone of contention is the two-year old Gemini Earn product which offered as high as 8% returns for crypto staking. Here, Gemini customers parked their funds with Genesis, which in return paid an interest.

Things ran smoothly till Genesis halted withdrawals. Payments of more than 340,000 Gemini customers are frozen. Winklevoss alleged that DCG took loans from Genesis. Silbert rubbished it and instead said that Gemini didn’t accept a mediation request. The SEC’s gotten involved too. Net net, customers suffer.

There are three questions that remain unanswered:

• How was Gemini Earn able to offer such high returns?

• Did Genesis have enough capital to take on more business?

• Why did Gemini not respond to DCG’s proposal?

Genesis has appointed investment bank Moelis to figure out how to navigate its books. We hope there’s a way out.

Cardano Has A Side Gig

Cardano is growing and increasing its use cases. The token, which was not considered hot property until Solana took a long walk off a short pier, is creating a sidechain to encourage scalability.

Jargon destruction timeWhat is a sidechain? It is an independent blockchain that operates independently of the main blockchain (mainnet) and is used in scaling solutions. The mainnet’s primary focus is decentralisation and security.

What does this mean?For the price of the token, the ADA community hopes this announcement will have a similar impact as when Ethereum announced layer-2 use cases.

ICYMI: Cardano is also going to launch a stablecoin this year. There’s a lot happening at Cardano HQ.

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