Rapture #256: Potential Further Contagion
Well, it looks like I might have spoken too soon regarding the major crypto native contagion being finished.
In the past 48 hours, information is being disseminated that indicates one of the largest institutional trading platforms in east Asia might be going bankrupt. Furthermore, crypto lender Genesis owes creditors far more than initially thought. Finally, Orthogonal Trading defaulted on $36 million worth of debt via Maple.
Let's dive into each item.
Amber Group might be in trouble
While I do not consider the evidence conclusive by any means, there is information being disseminated that Singapore based Amber Group, one of the top market making firms and trading platforms, might have solvency issues. Lookonchain, a Twitter account that closely follows on-chain activity, recently tweeted that Amber Group might be on the verge of bankruptcy considering 6 Ethereum wallets linked to Amber only held $9.64 million in assets total. Larry Cermak of The Block and Jason Choi (one of the top researchers in crypto) chimed in with a few more wallets likely linked to Amber.
Still, the assets under all the addresses covered only total $10.8 million, a paltry sum considering their home page claims that Amber has $5+ billion on their platform. A new dune dashboard was recently created to track the net in/outflows of Amber's addresses.
Furthermore, Amber layed off 30 - 40% of their workforce in September and layed off hundreds of more peopled in December.
Clearly, something seems to be going wrong.
Even more disconcerting, just a week ago one of the Co-Founders of Amber Group died unexpectedly at the age of 30.
Amber has received lots of legitimization from major players, having raised $328 million from Pantera, Coinbase Ventures, Sequoia, China Renaissance, Tiger Global and Temasek, Singapore's Sovereign Wealth Fund. Many of these institutions had exposure to FTX as well.
Genesis might not be out of the woods
As of four days ago, I thought Genesis was going to survive. Now I am not so sure. Yesterday, the world learned that Genesis still owes debtors $1.8 billion. Last week, people were speculating that the hole was only $500 million based on the recent raise the company was pursuing.
In this market environment, the likelihood that Genesis will be able to raise $1.8 billion if that is indeed the size of the hole is quite small. This announcement puts Grayscale risk and Genesis' client risk back into play, which both could be bearish headwinds for the crypto market.
Orthogonal trading defaults
Finally, Orthogonal Trading, a market making firm to my knowledge, defaulted on $36 million of debt because of their exposure to FTX. This default affected approximately 30% of the active loans on Maple finance. Maple reacted by severing ties with Orthogonal Trading, removing Orthogonal Trading as a borrower and removing Orthogonal Credit as a delegate.
While this default likely does not have systemic impact potential, it did adversely affect Maple Finance, one of the last remaining centralized lender players left in crypto. MPL, Maple Finance's token, is down more than 40% in the past two weeks.
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