Genesis Global Capital, the cryptocurrency lending unit of Digital Currency Group, is reportedly getting ready to file for bankruptcy, which is another blow to the crypto industry. This news is a great reminder of how important self-custody is for managing and protecting cryptocurrency assets.
Self-custody is the act of taking care of and storing your crypto assets instead of giving them to a third party, like a crypto exchange or lending platform.
When a company as big as Genesis Global Capital, which is in charge of managing and lending out large amounts of cryptocurrency on behalf of its clients, runs into money problems, it affects the entire crypto industry.
Since November, Genesis Global Capital clients haven't been able to get their money out, and the company has said it may have to go bankrupt if it can't get more money for funding.
The writing is pretty much on the wall at this point and it's likely the company will have to file for bankruptcy.
If Genesis goes bankrupt, it could take several years before user funds are restored.
Gemini Exchange & Genesis Banckruptcy
The Winklevoss twins, who run the crypto exchange Gemini, have accused Barry Silbert, CEO of Digital Currency Group (DCG), the parent company of crypto market maker and lender Genesis, of owing them $900 million.
This sum was lent to Genesis as part of Gemini's Earn program, allowing customers to earn up to 7.4% annual yield on cryptocurrencies.
However, due to a significant portion of Genesis' funds being locked in an FTX trading account, the company had to halt withdrawals on Nov. 16.
The halt in withdrawals has caused tensions to mount between the two companies, leading to lawsuits and the termination of their flagship Earn program.
The Importance Of Self-Custody
When you self-custody your crypto asset you have full control over your money and you can be sure that it is safe.
Hardware wallets, which are physical devices that store your private keys to your crypto assets offline, can be used to do this.
By keeping the private keys offline, hardware wallets add an extra layer of security because hackers and other online attacks can't get to them.
I understand that Gemini users were trying to earn some yield on their crypto assets, which is fine. Hopefully, most folks had enough sense to store the majority of their cryptos in their hardware wallets.
Self-custody is not only important for keeping crypto assets safe, but it also gives you full control over your money.
This means you can choose how to invest your money on your own and are not at the mercy of a third-party institution like Genesis and Gemini.
In the end, the fact that Genesis Global Capital might go bankrupt is a solid reminder of how important self-custody is for managing and protecting your crypto assets.
By self-custody of your crypto assets, you can make sure your funds are safe by having full control.
It's also important to remember that self-custody doesn't mean that you should never use institutions run by other people.
Crypto exchanges and lending platforms can still be useful for investing in crypto, but it's important to use them in a way that minimizes risk.
For example, you could use a crypto exchange to buy and sell crypto assets, but then move them right away to a hardware wallet to keep them safe. That's exactly what I do, I buy and immediately move my assets to my Ledger device. When I trade, I only leave a small amount of crypto on the trading platform and take my profits back to my Ledger.
This entire Genesis bankruptcy is just a result of the FTX contagion that has negatively affected the entire crypto space. If you're affected directly by these latest events, I hope you can get your funds back in a timely manner.
Matt is the founder of TechMalak. When he's not buried face-deep in the crypto charts you can find him tinkering with the latest tech gadgets and A. I tools. He's a crypto investor and entrepreneur. He uses a mixture of A.I and human thought and input into all his articles on TechMalak, further merging man with machine.
