Recently, the cryptocurrency market has been facing several challenges. The “winter” month, which started in the middle of 2022, witnessed a snowstorm with the collapse of FTX last November. The collapse of FTX caused a domino effect, causing many crypto companies to suffer. Looking at the latest developments, there are reports that various companies have laid off their employees and are considering filing for bankruptcy. In this article, we will convey the developments for four crypto companies in particular. Here are the details…
DCG shuts down its asset management arm
DCG Group, a conglomerate that manages Genesis, Grayscale, and wealth management service HQ, made an announcement about “HQ.” According to a company spokesperson, HQ will cease all operations as of January 31, although it will consider reopening the branch in the future. The broader financial situation and naturally ongoing crypto winter are stated to be behind the company’s shutdown. The announcement includes the following statements:
Due to the state of the broader economic environment and the prolonged crypto winter that has brought significant headwinds to the industry, we have made the decision to close HQ from January 31, 2023. We are proud of the work the team does. We are looking ahead to potentially reconsider the project in the future.
The first cracks began in November when DCG CEO Barry Silbert told investors 2022 revenues would be lower than expected. Genesis, which laid off 20 percent of its workforce in August, owed approximately $575 million to parent company DCG. As reported by The Information, HQ was still managing around $3.5 billion in assets by December despite the crypto winter. As a result, it was alleged that the partners and investors did not wait for the decision, but were stunned.
Cryptocurrency bank Silvergate lays off 40 percent of its employees
Crypto-focused bank Silvergate Capital is cutting nearly 40 percent of its workforce, meaning it’s laying off about 200 employees, according to the Wall Street Journal report. The news came when the bank’s customers made large withdrawals. Announcing Silvergate’s results for the fourth quarter, the bank said that crypto-related deposits fell 68 percent from $11.9 billion to $3.8 billion.
At the end of 2022, customers filing for bankruptcy protection were holding $150 million of Silvergae’s deposits. There was a cash crunch during this period. As a result, the bank resorted to liquidating the debt it held on its balance sheet to cover withdrawals. In the process, the company lost $718 million—a sum that far exceeded its total profits since 2013.
The California-based company also plans to shelve the launch of its own cryptocurrency project, with $196 million paid to social media giant Facebook to buy the technology it built for the Diem project. Following the job update, Silvergate stock fell more than 47 percent. As a result, FTX’s bankruptcy led to Silvergate’s bank liquidation, forcing the platform to sell assets at a substantial loss to cover nearly $8.1 billion in withdrawals.
Is Genesis filing for bankruptcy?
On the other hand, according to another WSJ article, Genesis is considering filing for bankruptcy. Moreover, cryptocoin.com As we have also reported, approximately 30% of its employees were laid off. Layoffs occurred in several departments with 145 employees. The report said Genesis reached out to investment bank and financial advisory firm Moelis & Co. to evaluate its options for the future. It was added that one of the options in question is a potential bankruptcy filing. A spokesperson for the company told the WSJ:
As we continue to face unprecedented industry challenges, Genesis has made the difficult decision to cut headcount. These measures are part of our ongoing efforts to move our business forward.
Cryptocurrency platform Juno warns its customers
Cryptocurrency company Juno has advised its users to withdraw their holdings and store them in their self-custody wallet or sell their holdings for cash. Behind this advice, he pointed to a state of “uncertainty” in a partner. The company plans to resolve the issues by finding a new partner. Juno explained that his custody partner was experiencing certain issues. Therefore, the company has temporarily stopped cryptocurrency purchases on its platform and automatically converted stablecoins (USDC, USDT, mUSDC) to USD.
It also encouraged customers to withdraw their holdings and transfer them to their own wallets as a safeguard measure. Juno has increased its daily cryptocurrency withdrawal limits by a factor of five as all its major users expect an increase in their transactions. He said all banking and card-related services continue to operate effortlessly. The valuation of crypto assets stored on the platform slid to $1.25 million after the firm shared its advice with customers. The organization aims to restore all operations as soon as possible and collaborate with a new custody partner.