One of the U.S. and Brazil’s biggest Bitcoin ATM operators, Coin Cloud, filed for Chapter 11 Bankruptcy on Thursday, January 8, after the firm received a severe blow from the crypto winter and the FTX implosion, which left it with millions of dollars in liabilities.
Coin Cloud owes about 10,000 creditors but has between $50 million and $100 million in assets, far below its debts. This imbalance in assets and liabilities has led the firm to take the bankruptcy option. At press time, Coin Cloud has nearly $500 million in liabilities, with the chief cause being its exposure to FTX through Genesis Global Trading.
The Genesis of Coin Cloud Ordeal
The firm was doing well as one of the largest digital currencies machine operators in the U.S., with over 1100 Bitcoin ATMs worldwide. As the crypto business began to boom, the firm intended to expand its operations to top U.S. retail outlets. That was during the COVID pandemic when the demand for Bitcoin ATMs increased beyond Coin Cloud’s expectations.
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Coin Cloud’s Statistics show that it operates over 5,000 automated teller machines in U.S. and Brazil. Its ATMs support over 40 cryptocurrencies, such as Bitcoin, Litecoin, Dogecoin, Bitcoin Cash, Ethereum, and much more.
However, during the 2022 bear cycle, the crypto market suffered a severe downturn that brought crypto asset prices, including Bitcoin, down. As a result, Bitcoin lost over 70% of its valuation and plummeted from its 2021 all-time high of $69,000. That was when Coin Cloud’s business started suffering, as people spent less Bitcoin during the bear market.
Its financial struggles escalated when the FTX exchange imploded and sent ripples of contagion across the crypto industry. Its major creditor, Genesis Global, was severely exposed to FTX and its sister company Alameda. The circumstances surrounding FTX and Genesis’s bankruptcy, plus the low revenue yield during the crypto downturn, adversely impacted the firm, leaving it no option but to surrender.
In the bankruptcy filing, Coin Cloud listed its liabilities, highlighting Genesis Global Trading, Digital Currency Group’s subsidiary, as its largest creditor with over $100 million in debt. Cole Kepro is its second-largest creditor, with approximately $8.5 million in debt.
Outlook For Global Growth of Crypto ATMs
Regardless of the severe crash of the crypto market and firms, the global digital assets industry has expanded considerably from its size around 2018 and 2019. Using the cryptocurrency ATM industry as a case study, the sector has seen tremendous growth despite the woes of crypto service providers.
According to data from CoinATMRadar, 33,281 ATMs in the United States make up 86.8% of all Bitcoin ATMs worldwide. Canada follows closely behind the U.S., with 2,554 ATMs, representing 6.7% of the total ATMs worldwide.
Bitcoin ATMs remain among the leading contributors to the crypto ecosystem growth. Although crypto ATMs are few compared to fiat ATMs, the statistics show that crypto ATMs have high growth potential in the coming years as cryptocurrencies gain mainstream adoption. Therefore, the demand for Bitcoin ATMs is not fainting relative to the challenges plaguing the crypto industry.
Apart from Coin Cloud, no other crypto ATM company has reported financial problems. Instead, crypto ATM provider BitStop has acquired Genesis Coin as it expands its reach, operating over 31.9% of global ATMs.
Featured image from Pixabay, chart from TradingView.com