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What happened

The value of cryptocurrency altcoins surged Friday despite one of the biggest names in the industry filing for bankruptcy. Crypto firm Genesis filed for Chapter 11 bankruptcy on Thursday evening and could eventually put its parent company Digital Currency Group (DCG) out of business.

Ironically, this pushed many altcoins higher today. Aptos (CRYPTO: APT) was up 26.2% in trading as of 5 p.m. ET; Hedera Hashgraph (CRYPTO: HBAR) jumped 30.7%, and Lido CAD (CRYPTO: LDO) jumped 15.9%.

So what

The bankruptcy of Genesis may seem like bad news, but can be positive for the crypto market. This will bring some certainty to the situation, especially if DCG eventually becomes insolvent. DCG runs the Grayscale funds, which have effectively locked up billions of dollars worth of cryptocurrency and are currently trading below their values.

Not only is crypto locked in Grayscale, but there are also billions of dollars in Ethereum locked until Shanghai upgrades from Ethereum (CRYPTO:ETH) takes place in March 2023. This upgrade could unlock value for tokens like Lido DAO (a DAO is a “decentralized autonomous organization”).

Aptos co-founder Mo Shaikh said big upgrades are expected for the blockchain in 2023. The cryptocurrency burst onto the scene last year, but has yet to reach a high utilization rate, which investors are currently speculating will soon change.

Now what

While this news may have had an impact on valuations, a buying rush that began Friday morning is likely to have the biggest impact on crypto prices today. The impact was first seen in these tokens, but by mid-afternoon Friday there were more than a dozen tokens up by double-digit percentages.

Weekends can often be wild for trade because part of the market liquidity is taken offline; if a big move happens, there can be quick liquidations.

I think the theme for the start of 2023 has been a return of certainty to the market. Yes, the bankruptcy of a big name like Genesis is bad, but we are getting more clarity on what the outcome of this company will be. When Three Arrows Capital collapsed last summer, it was unclear what the ultimate fallout in crypto would be. Now we are probably witnessing the end of the contagion.

Is it time to get back to cryptocurrencies? I think it’s worth buying some, but don’t speculate on tokens like these that have few users or developers. Instead, choose high-quality blockchains and projects to invest in, because that’s where you’ll find network effects for developers and users.

But make no mistake, 2023 will continue to be a volatile year for cryptocurrencies. In the past two weeks alone, moves have been in the double digits almost daily – so buckle up for the ride.

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Travis Hoium has positions in Ethereum. The Motley Fool holds positions and recommends Ethereum and Lido DAO. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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