Crypto Markets in Relative Calm, But Risk of Turbulence Ahead

• Crypto markets have been in a period of relative calm following the tumultuous rollercoaster after the demise of FTX.
• Despite this, there are still several concerning developments around Genesis, Gemini and DCG.
• This period is reminiscent of the low drama environment pre-FTX in October.

Cryptocurrency markets have experienced a period of relative calm in recent weeks, following the tumultuous rollercoaster that occurred in the aftermath of the shocking demise of FTX. Volatility has come down and extreme on-chain activity has subsided, leading to an atmosphere that is more tranquil than has been seen in previous months. While this is certainly a welcome respite for those involved in the crypto space, there are still a few developments that could spark up the market once more.

The most concerning of these is the situation surrounding Genesis Trading and its associated lending arm, Genesis Capital. Last week, the firm laid off 30% of its staff and is reportedly considering bankruptcy as a result of the large financial losses it has incurred. This has also caused major issues for crypto exchange Gemini, as it has $900 million of customer assets stuck in limbo with Genesis, its sole lending partner for its Earn product.

Furthermore, Digital Currency Group (DCG), a major cryptocurrency investment firm, has also been hit by the market downturn. DCG’s Bitcoin-focused fund, the DCG Strategic Opportunities Fund, has seen its assets fall by almost 50% this year, leading to speculation that the company may be facing financial difficulties.

The period of relative calm that has been seen in the cryptocurrency markets is reminiscent of the low drama environment that preceded FTX’s collapse in October of last year. That period was followed by a series of tumultuous events, leading to a heightened sense of fear in the crypto space. While it remains to be seen if the current period of serenity will be followed by a similar chain of events, one thing is certain – the markets could be sparked up once more when the US inflation data is revealed this week.