Renowned billionaires and entrepreneurs, Tyler and Cameron Winklevoss, have recently injected $100 million into their cryptocurrency exchange, Gemini Trust Co., to bolster the company amidst a challenging year for digital assets. This move follows the exchange’s unsuccessful attempts to secure funding from external investors in recent months.
The Crypto Market’s Downturn and Gemini’s Struggles
Venture funding for cryptocurrency startups has seen a massive decline, with an 80% drop to $2.4 billion in the first quarter, as compared to the same period in the previous year.
This downturn comes from the collapse of the crypto exchange FTX and slowdowns in the technology and cryptocurrency industries, as per data from research firm PitchBook.
Gemini, having raised $400 million at a valuation of $7.1 billion in November 2021, has not been immune to these challenges.
Gemini’s Setbacks Stemming from FTX Implosion
The FTX collapse had a domino effect that led to the bankruptcy of crypto lender Genesis Global Holdco, leaving Gemini with significant losses. Genesis Global had been Gemini’s exclusive partner for its Gemini Earn lending product.
When Genesis froze withdrawals in November, Gemini was forced to halt redemptions on Earn accounts, leaving $900 million of customer funds in limbo.
This chain of events ignited a heated dispute between the Winklevoss twins and Barry Silbert, CEO of Digital Currency Group, the parent company of Genesis.
Although an agreement in principle was reached in February to resolve the conflict, the Winklevoss loan is intended for funding operations rather than settling the dispute.
Legal Challenges and Workforce Reductions
Gemini has also faced legal battles, with the Securities and Exchange Commission (SEC) suing both Gemini and Genesis for allegedly violating securities laws with their Earn product.
Additionally, the Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Gemini, accusing the exchange of misleading the derivatives regulator in its effort to launch the first US-regulated Bitcoin futures contract.
Amidst these challenges, Gemini laid off 10% of its workforce in January, following a wave of job cuts in June. The exchange also experienced the departure of its Chief Operating Officer, Noah Perlman, who moved to rival Binance as Chief Compliance Officer.
A Decrease in Market Share and Trading Volume
Gemini’s market share of global spot trading volume has dwindled to 0.13% from 0.20% a year ago, as reported by research firm CryptoCompare.
In the last 24 hours, the exchange recorded $13 million in spot trading volume, whereas Coinbase, the largest US-based cryptocurrency exchange, logged approximately $660 million in the same timeframe, according to CoinMarketCap.
The Winklevoss twins’ $100 million loan to Gemini Trust Co. demonstrates their commitment to supporting their cryptocurrency exchange in a challenging market landscape.
Despite setbacks, such as declining market share and legal hurdles, the substantial financial injection may provide the exchange with the resources it needs to weather the storm and chart a path toward growth and stability.