Following a rather rough week for crypto exchange FTX, other crypto-related projects are now feeling the pain. Among the contagion-related victims of this collapse turns out to be Gemini, a crypto lender that has reportedly halted its Earn program. This move comes following the temporary suspension of redemptions and new loan originations from Genesis, another key player in this space and a lending partner of Earn.
Both Gemini and Genesis appear to be feeling the impacts of the ongoing FTX debacle. Genesis has cited an “extreme market dislocation” as its rationale for halting withdrawals, though it appears depositors can still withdraw their funds at Gemini. The official Gemini Twitter account tweeted
that “all customer funds held on the Gemini exchange are held 1:1 and available for withdrawal at any time.” That’s good news for investors (for now), though the halting of the company’s Earn program (where users can earn a yield on lending their tokens to the platform) has some investors concerned.
That said, the halting of withdrawals on Genesis is a move that’s gaining more attention among some investors. Such a move has been indicative in the past of other exchanges going under.
Let’s dive into what this means for investors moving forward.
What’s Going on With Gemini Right Now?
A company founded by the Winklevoss twins, Gemini is a prominent player in the world of crypto trading and custodial services.
The company’s Earn program appears to be similar to other yield-generating lending functions that have come under scrutiny by regulators in the past. However, aside from regulatory concerns, the halting of these services does indicate that not all is well under the hood.
While it appears this halt is tied to the move by Genesis to pause withdrawals, it’s unclear how interconnected everything is. FTX has gone down and has been the last shoe to drop. But no one seems to know how many more dominos will fall in this whole ordeal.
I’m of the view that some level of market contagion has led to these issues. Indeed, it’s clear that crypto lending isn’t as simple as it’s been made out to be. Accordingly, investors in any centralized exchange may want to think twice about holding tokens in hot wallets. Cold storage may be a better option for many investors right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
