Crypto Market Slides After Genesis Withdrawal Halt, but Big Investors May Hunt for Bargains
Digital assets extended losses on Wednesday after the crypto financial firm Genesis Global Capital announced that it was temporarily suspending redemptions and new loan originations, the latest industry player to struggle in wake of crypto exchange FTX's meltdown.
Bitcoin (BTC) dropped 3.5% to $16,456 during U.S. morning trading hours on Wednesday, according to CoinDesk data, erasing some of the prior day’s gains. At press time, bitcoin was changing hands at $16,473.
The cryptocurrency also appeared buffeted by an economic data release showing that U.S. retail sales rose 1.3% in October, a sign that consumers are resilient going into the holiday season. That might mean the Federal Reserve will maintain its aggressive campaign to tamp down economic activity to combat inflation – typically a negative factor for risky assets like stocks and cryptocurrencies.
“We don’t expect any sharp drops or selling pressure due to contagion fears alone since the bulk of the move is likely to be priced in already,” said Joe DiPasquale, CEO of BitBull Capital, a firm that manages crypto hedge funds. “At this point, any new development will result in temporary drops, but we don’t expect investors to be shocked by more FTX-related ramifications either. That being said, recovery from these lows may need time, both in terms of market capitalization and general sentiment.”
Will Tamplin, a senior analyst at technical research firm Fairlead Strategies, said that if bitcoin can’t get back above its long-term support near $18,300 by Sunday’s weekly close, “a major breakdown would be confirmed in a bearish message from the market, which would increase risk to next support near $13,900.”
Altcoins struggle along with bitcoin
The CoinDesk Market Index (CMI), which measures the performance of 162 major digital assets, lost about 1.8% over the past 24 hours.
Smart-contracts platform Solana’s native SOL token slid 0.2% to around $14 after the Solana Foundation confirmed in a blog Wednesday that FTX entities are in control of around 50 million SOL tokens.
The blog said the tokens were sold from Solana Foundation to FTX and Alameda Research in three transactions between August 2020 and January 2021. The second and third transactions had a linear monthly unlock mechanism, meaning that as the SOL token tranches are to be paid out evenly once a month to FTX, the entities could gradually gain access to millions of tokens up until January 2028.
Aptos, the new layer 1 blockchain established by former employees of Facebook parent Meta Platforms, was one of the few winners Wednesday. The APT token was up 11% to $4.70 in recent trading.
Interest from institutional investors
While FTX’s collapse and its ramifications for the broader crypto industry are a serious blow, it won’t scare away institutional investment from entering the market, according to Sheraz Ahmed, managing partner of Storm Partners.
“General speculation and panic will continue,” Ahmed told CoinDesk, but he said that institutional investors’ “choices are more likely to be informed by how innovation and technology could benefit them."
“They will most likely rethink their short-term strategies as the market infrastructure remains unstable.”
Once all the stakeholders directly and indirectly affected by the fall of FTX absorb the losses, “we could see institutions swoop in at the lows with their heavy pockets,” he added.