The opposite of GOAT?

At least DeFi is having a good week…

Happy Friday, folks. Here’s to hoping that your weekend will consist of more than stalking crypto Twitter. In times like these, it’s okay to take your minds off of the markets once in a while. Our distraction of choice? Lindsay Lohan’s new Christmas movie. Popcorn, anyone?

Today: Genesis sparks concerns, DeFi heats up, and more bad news for Tom Brady. Let’s go.

—Vincent & Angelina

Genesis and Destruction

You know the crash is severe when it hits Digital Currency Group, a venture firm with stakes in more than 200 crypto companies. The lending arm of Genesis—a wholly owned subsidiary within DCG’s $50 billion empire—has stopped accepting withdrawals and new loan originations in the face of the FTX collapse.

What happened: Genesis’s trading arm received a $140 million equity infusion from DCG earlier this month after it revealed that it had $175 million locked in its FTX trading account. Genesis probably won’t know if it can access those funds until the end of the FTX bankruptcy proceedings.

Several big questions are still unanswered: 1) Whether DCG will rescue the lender—FYI, one Blockworks report suggests that Binance is making an offer to purchase Genesis and 2) whether Genesis is going to make it once the dust settles (it’s shopping for a $1 billion emergency loan, according to the WSJ).

Where this leaves us:

  • Some changes → Crypto exchange Gemini had parked money from retail customers at Genesis to offer them yield on their crypto. Gemini’s Earn product had to be closed down, which triggered massive withdrawals from the exchange.

  • Some stays the same → DCG has said that this development does not affect Genesis’ trading and custody business. And DCG-owned crypto investment firm Grayscale said it will continue “business as usual” since its assets are separate from Genesis. Stablecoin Tether said it had no exposure to Genesis or Gemini Earn.

Big picture: Genesis’ significance in the crypto markets could eclipse FTX’s, noted Blockworks CEO Jason Yanowitz. That’s because tons of companies and cash-parking institutions use Genesis to help their customers and businesses earn yield.

If the counterparties that Genesis lent to are struggling to repay their loans, then DCG would need to cover the difference. If it can’t, other firms on its balance sheet—such as Grayscale, mining equipment financier Foundry, crypto exchange Luno, and crypto news site CoinDesk—could all be in trouble.

—Vincent

The Run on DeFi

Three hot trends that are making a comeback this season: ultra mini Uggs, pop punk music, and DeFi. Following the downfall of he who shall not be named, investors are flocking to decentralized finance protocols to escape the FTX contagion.

Most DeFi protocols have experienced a double-digit percentage growth in users, according to CoinDesk. Here are the biggest winners:

  • Uniswap. The world’s largest decentralized exchange (DEX) saw user numbers increase by 19% and transactions climb 21% over the last month.

  • dYdX. The DEX which popularized perpetual trading experienced a 99% increase in users and a 136% spike in transactions in just a week.

  • Aave. The decentralized lender grew transactions by 99% and users by 70%.

Hardware wallet providers are having a field day, too. Sunday was Ledger’s biggest sales day ever.

The biggest loser(s)? Centralized exchanges (CEXes) are going through a mass exodus of user funds as investors begin to prioritize self-custody and transparency. All major CEXes (including Binance, Coinbase, and Kraken) are experiencing large outflows of deposited funds.

Caveat: The FTX implosion gives DeFi a major image boost (rightly so, as smart contracts make FTX-style fraud impossible). But let’s not forget that DeFi isn’t perfectly safe either—2022 has been the year of cross-chain bridge hacks.

—Angelina

Taking the Promoters to Court

Crypto investors are taking Larry David, Tom Brady, Shaquille O'Neal, Kevin O’Leary, and even the Golden State Warriors to court.

What’s the charge? Promoting a fraudulent scheme that took advantage of unsophisticated investors—aka cashing in their FTX promotional checks.

The class action lawsuit further alleges that FTX defrauded investors and paid old debts by finding new funding—a practice your professors call a Ponzi scheme. It’s unclear whether FTX’s promotional partners will be found liable. We don’t know a lot about how the suit will play out, but we do know this—it’s got to be the first time all of these defendants have been named in the same suit.

—Vincent

In other news:

  • BlockFi is preparing for potential bankruptcy as the FTX contagion spreads.

  • Circle adds support for Apple Pay, making USDC payments more accessible to both crypto-native and traditional businesses.

  • Nike steps up its NFT game with the launch of its new Web3 platform .swoosh.

  • Binance is readying to bid for bankrupt crypto lender Voyager Digital (again).

  • Ether staking yields jumped to a new all-time high since the Merge.

And that’s what you need on your radar today in crypto. Are you also moving your funds to DeFi protocols (or even hardware wallets)? Reply to this email to let us know. See you back here on Sunday!