Gemini Struggles with Declining Market Share Amid Regulatory and Financial Challenges

Gemini Struggles with Declining Market Share Amid Regulatory and Financial Challenges

Gemini, a cryptocurrency exchange, encountered difficulties starting in November 2022 when its Earn Program partner, Genesis, declared bankruptcy and failed to pay $765 million owed. In response, Gemini discontinued the program on January 10.

Shortly after, both Gemini and Genesis were sued by the U.S. Securities and Exchange Commission (SEC), which alleged that the Earn Program involved the sale of unregistered securities. However, Gemini and Genesis recently filed a motion to dismiss the case, arguing that the program does not qualify as a security offering.

To mitigate financial strain caused by the broader market downturn, the Winklevoss twins, who own Gemini, loaned the company $100 million.

Reports suggested that JPMorgan sought to end its partnership with Gemini due to profitability concerns. However, Gemini Trust Lawyer Charles Harder denied these claims, stating that the relationship with JPMorgan remains intact.

Gemini has faced challenges in terms of market share. Analysis conducted by CCData and reported by Bloomberg revealed a significant decline in the exchange’s cumulative trading volume from January to April 2023, decreasing by almost 50% compared to September to December 2022. In February, Gemini’s monthly trading volume reached a record low of 0.07% of the global spot trading volume. Although there was a slight improvement in April with a volume of 0.12% ($747 million), it still represents a nearly 50% decrease compared to the previous year.

Meanwhile, competitors such as Coinbase, Kraken, and Binance have increased their market share, with Binance holding 46% of the global market compared to 31% a year ago.

Looking ahead, Gemini has been expanding its operations overseas to navigate the challenging regulatory landscape in the United States. The exchange recently launched its derivatives platform, Gemini Foundation, in 30 countries. Additionally, the Winklevoss twins announced that Dublin, Ireland, will serve as the company’s new European base.

However, Gemini faces regulatory hurdles abroad as well. The Securities and Exchange Commission in the Philippines warned that Gemini’s derivatives platform is operating without proper approval.

Finance Professor Campbell Harvey from Duke University suggested that Gemini could potentially benefit from being acquired by a larger competitor. He highlighted the strong brand associated with the Winklevoss twins, raising the possibility of a merger with Coinbase or Kraken. Nevertheless, the exchange’s regulatory challenges may hinder any potential deals.