Luna, 3AC, GBTC, ETHE, WETH, Genesis, Gemini Earn, FTX, Block-Fi, and Other Matters

In the wake of 3AC, FTX, Block-Fi, Celsius, etc, many crypto lenders and exchanges are in trouble. Given this, let’s quickly cover GBTC, ETHE, WETH, Genesis, Gemini Earn, FTX, Block-Fi, and other matters (like if Coinbase is in trouble; HINT: all official signs and documents say it’s fine).

I’m going to cover this in a super quick style so we can shake off those bad vibes and get to the boring part of the bear market where we stop losing money and start just not caring.

To double-check any data mentioned, feel free to Get Onchain Data For Free With CryptoQuant: Get your first month free at CryptoQuant to see metrics like exchange inflow and outflow with referral link https://cryptoquant.com/sign-up?my-friend=fapeyhv5. Otherwise, a quick Google search or time spent on Twitter with the right accounts will offer lots of info on any subject below. This page is like a super quick rundown of the past X months.

Luna: Was the yield-generating wonder coin of Crypto and ETH competitor with its own stablecoin… that got attacked and dumped to zero as UST their stablecoin depegged. Most crypto traders, coins, and companies lost money when this happened. Although someone probably made some money.

Block-Fi and Celcius: Crypto lenders who basically went bust due to Luna. FTX tried to bail them out. This left Block-Fi in a zombie state until its recent chapter 11.

3AC: Wonder boys of the last crypto cycle. Took lots of loans, then got absolutely rekt when Luna went to zero, which directly or indirectly caused trouble for entities including Genisis/Digital Currency Group (DCG)/Greyscale (the company that owns GBTC and ETHE), Block-Fi, FTX, etc.

FTX: Turns out FTX leveraged the entire industry against their FTT token. CZ from Binance dumped on them (to avoid losing another 350 billion like he did in Luna basically) and everyone subsequently lost billions when FTX filed chapter 11. In theory, we may see pennies on the dollar for FTX and dollars on the dollar for FTX.US, if the money that is there makes it back to users. Yikes, Alameda to be fair also lost tens of billions.

GBTC, ETHE, Genesis, Barry, etc (and ETCG): Barry Silbert, the CT Billionaire who helped launchpad crypto into the public sphere with his cash machine GBTC… also apparently took a bunch of loans and lost money on big GBTC holder 3AC. Unfortunately, the impact seems to be systemic in his companies which include Genesis, Greyscale, and DCG. This means no one can withdraw from Gemini Earn, since it was Gemini doing the earning. it also means GBTC (and all the other trusts) that once traded at massive premiums now trade at massive discounts. This really stings for the average American who had only GBTC to invest in if they wanted to invest in Bitcoin in their 401k. So super unclear how anyone was protected here by SEC. It is currently unclear if people will get Gemini Earn assets back or how GBTC and other trusts will be impacted. The current discount implies the market has known for some time things are bad and now thinks things are worse. Oof. Anyway, I guess it’s probably fine because Coinbase says they have proof of GBTC Bitcoin, as that Bitcoin is kept with Coinbase Custody.

Coinbase: Their public on-chain data shows massive Bitcoin withdrawals. This I think is because their wallets aren’t public and they are shutting down Coinbase Pro (which is the only public wallet I think, Glass Node and Crypto Quant aren’t big on notes). That said, as a public company, their filings show they have billions in BTC, and one could argue public filings are actually the best proof of reserves since public filings also show liabilities. As noted above, Coinbase has also stated GBTC is backed. So in theory, if you have GBTC and some crypto on Coinbase, which is very common in the US, you are good. The problem is, if Coinbase ends up having an issue, then you are in real trouble. So the logical thing to do is to dump GBTC and go from Coinbase to say Ledger or Trezor. This means there is some fear here too of a bank run like FTX. This shouldn’t matter as Coinbase is backed 1:1, but also if a bank run bankrupts Coinbase due to fees, then technically we could be looking at a “not your keys, not your coins” type case where the company who holds your fully backed crypto goes bankrupt (remember FTX had pennies on the dollar to return when they filed chapter 11, they didn’t literally lose all the money!). Anyway for the time being Coinbase and GBTC should be good, but on-chain data shows liquidity leaving Coinbase and going into Binance (this makes sense, as FTX money is going to go to something like Binance, Bybit, or BitMEX and not Coinbase; as FTX money is typically leverage traders, not spot Coinbase investors).

Binance: Binance is the place to be right now.  Meanwhile, many small exchanges are quietly going belly up. This is all fine and good if we recover from here. But like with Coinbase, if Binance did have an issue, so many people are now filtered into it, it would cause massive issues.

WETH and WBTC: People were bugging out about a WBTC depegg. In theory, it’s fine, it is just that the WBTC machine is slow and apparently somewhat hard to arb. That panic led to a meme about WETH. Which basically can’t “depegg”. The logic here is WBTC is kept by a company people trust, whereas WETH is wrapped ETH handled by a basic on-chain contract trusted trustlessly. In simple terms, a company might lose BTC backing WBTC, but the smart contract isn’t going to forget about the ETH it holds, since its code.

In summary, WETH is fine. WBTC, Coinbase, and Binance are probably fine. GBTC is probably maybe fine. Gemini Earn might be fine. Maybe we will see pennies on the dollar for money lost to FTX and Block-Fi and such. 3AC and Luna are def for sure rekt, although funnily enough the creator of Luna still got to cash out a bunch and got to launch Luna 2, so many did worse.