The Gemini exchange founded by the Winklevoss twins, faced a sharp withdrawal of funds, which is the consequence of the bankruptcy of FTX-Alameda.
The domino effect
Data from the Nansen analytics platform shows that the Gemini exchange recorded a net outflow of $485 million in 24 hours since Nov 16, the largest among cryptocurrency exchanges. The outflow was $563 million, offset by an inflow of just $78 million. Gemini has experienced a total net outflow of $684 million in the past seven days – a difference of $866 billion in inflows and $1.55 billion in outflows, suggesting that most of the withdrawals occurred on Wednesday, November 16.
According to Arkham Intelligence’s data platform, digital asset balances on crypto wallets identified as Gemini fell to $1.7 billion from about $2.2 billion a day ago. It has to be kept in mind that Arkham and Nansen do not cover bitcoin blockchain data and may not include all Gemini wallets.
The sharp outflow of funds came after the Gemini exchange suspended withdrawals earlier Wednesday from its EARN program. This is a product that allows Gemini customers to lend assets to institutional borrowers and earn income.
Gemini is a centralized exchange registered in the United States. According to CoinGecko, it is ranked 9th most reliable among crypto platforms. The platform has a daily trading volume of $120 million. The statement said that the restriction imposed on the EARN product will not affect Gemini’s other products and services.
The suspension of EARN came after the announcement that the credit division of crypto investment bank Genesis Global Trading temporarily suspended payments and new loans. Interim CEO Derar Islim told customers by phone that Genesis is exploring solutions for the lending unit, including finding a source of fresh liquidity. He said Genesis intends to lay out its plan in detail to customers next week. Genesis Global Capital serves an institutional client base, and as of the end of the third quarter of 2022, it had $2.8 billion in total active loans.
The Gemini exchange also experienced outages on Nov 17, which were soon resolved but increased concerns about its stability. Gemini did not respond to inquiries from journalists, but the firm earlier said on Twitter (banned in Russia) that all assets deposited by customers were available for withdrawal at any time.
Investors are concerned – withdrawals from exchanges are on the rise
Pressure is mounting on cryptocurrency exchanges and lending firms to liquidate cryptocurrency exchange FTX and its corporate sibling, trading firm Alameda Research.
Cautious investors are trying to pull digital assets from centralized exchanges amid “growing concerns about the solvency of other centralized exchanges,” crypto research firm Delphi Digital wrote in a report this week.
According to Nansen, Binance, Coinbase, and KuCoin have all experienced large deposit drawdowns recently. Some smaller platforms such as AAX, Liquid and Lender Salt have stopped withdrawals in the last few days.
A number of exchanges have tried to alleviate widespread fear by sharing or promising to release their crypto holdings. High-ranking industry officials are advocating for proof of reserves and independent audits of crypto holdings on a regular basis.
