Venture capital investment in crypto is drying up, according to a recent article published by market data house PitchBook. After a “breakthrough year” in 2021, in which $21 billion in capital flowed into the industry, the appetite for crypto investment is rapidly collapsing. In the third quarter of 2022, funding was down 34.3% year-over-year and transaction volume had fallen to its lowest level in two years.
In the case of Genesis, investors were discouraged by the lack of clarity about the size of the cash injection needed to plug the hole, says David Bailey, Genesis CEO. Bitcoin Magazinewho also leads an activist group that represents the interests of investors in Grayscale Bitcoin Trust, a subsidiary of DCG. He describes the deficit as “massive and of unknown magnitude.”
Brad Harrison, who leads the team behind decentralized lending protocol Venus, paints a similar picture. A Genesis bankruptcy would not be a surprise following the “tectonic” events that have rocked the crypto industry over the past year, he says. But when it comes to details, “we’re just guessing what’s going on behind closed doors.”
Bailey also claims that potential white knights were scared off by the murky financial relationship between Genesis and DCG. Specifically, “improper intercompany loans” that were “disclosed only after everything had gone wrong.” These loans mean that “DCG has direct exposure to Genesis,” he explains. The parent company is “struggling with the consequences,” making it “difficult to raise the funds it needs.” (DCG has been contacted for comment; Silbert has previously suggested that these intercompany loans are nothing out of the ordinary.) Genesis declined to comment.
Gemini, the crypto exchange founded by Cameron and Tyler Winklevoss, is also “hooked.” The company’s yield farming service, which allows customers to earn interest on their crypto, sits atop the Genesis platform. But when the lender halted withdrawals, $900 million of Gemini customers’ assets remained stranded — and will remain so if Genesis declares bankruptcy.
On January 2, frustrated by the lack of progress, Cameron Winklevoss issued an ultimatum to Barry Silbert, founder of DCG. In a open letter Posted on Twitter, Winklevoss accused Silbert of “engaging in bad faith blocking tactics” and implored him to “commit to working together to resolve this issue by January 8.” Money retaliatedclaiming that Winklevoss had misrepresented the situation, but did not acknowledge the ultimatum. Neither Gemini nor Winklevoss returned a request for clarification on what might happen if that deadline is missed.
