As major players struggled with liquidations and withdrawal freezes, trading halts, and bailouts, the cryptocurrency market meltdown intensified this week.
- Voyager suspends withdrawals; BlockFi receives FTX backing
- The beleaguered sector is roiled by Three Arrows’ woes
Voyager Digital Ltd. announced a suspension in trading, withdrawals and deposits. BlockFi, a leading digital-asset lender, was also supported by FTX USA. Both were impacted by the troubles of Three Arrows Capital Ltd. this week, a beleaguered crypto hedge-fund that was ordered to liquidation by a British Virgin Islands Court and filed for Chapter 15 bankruptcy protection.
In the meantime, crypto markets plummeted, contributing to a decline of $2 trillion in market value. Market participants were uneasy going into the long Fourth of- July weekend.
Aaron Brown, a Bloomberg Opinion contributor and crypto investor, said that he had thought that dominoes had stopped dropping in June. “I believe there will be more bad news by Tuesday morning, but I don’t make any predictions.”
Three Arrows’ recent liquidity problems are largely due to the company’s troubles. Three Arrows suffered large losses after placing big bullish bets in everything from Bitcoin and Luna. This Terra ecosystem part caused a market panic. Three Arrows was founded in 2012 by Zhu Su, an ex-Trader at Credit Suisse, and Kyle Davies. It has been a symbol of the industry’s excesses last year during the bull run. This led to leverage that proved detrimental when the market turned.
#Breaking Crypto hedge fund collapses after defaulting on a $674m loan @3arrowscap downfall is one of the biggest corporate collapses amid the #cryptowinter they have collapsed owing more than half a billion dollars.https://t.co/clCrZyewfa https://t.co/dk2m7Xddx2
— Share_Talk ™ (@Share_Talk) June 29, 2022
Blockchain.com and Deribit (a crypto derivatives exchange) confirmed this week that they were creditors in the Three Arrows liquidation. Blockchain.com spokesperson said that it was also cooperating in ongoing investigations into Three Arrows’ activities. Three Arrows has been reprimanded by Singapore’s central bank for providing false information.
Alex Felix, CoinFund’s Managing Partner, stated that although crypto is still a young industry, there has been intense competition among service providers for the business of a few new counterparties.
Multicoin Capital co-founder Kyle Samani is the managing partner. He stated that there is a need to have appropriate transparency and regulations and that an industry alliance should be formed to protect retail customers.
Stephen Ehrlich, Voyager’s chief executive, stated that it requires additional time to examine strategic alternatives. According to a source familiar with the matter, Celsius Network had previously turned down a bailout request from Celsius.
Ehrlich stated that while it was difficult to make this decision, he believes it was the right one considering current market conditions.
Voyagers, today we made the difficult decision to temporarily suspend trading, deposits, withdrawals, and loyalty rewards. Read more at: https://t.co/bpGFqQtjAs
— Stephen Ehrlich (@Ehrls15) July 1, 2022
Voyager plunged up to 43% in US trading after Friday’s news. This makes it one of the most underperforming crypto stocks. Voyager, which is based in New York, offers crypto trading and staking. This allows you to earn rewards for holding certain cryptocurrencies.
Voyager sent a notice to Three Arrows last month regarding a loan of approximately $675 million. It is actively seeking to recover from the crypto hedge fund. This includes the court-ordered liquidation in the British Virgin Islands. Alameda Research, Bankman-Fried’s trading company, has granted it a credit line.
As he consolidates his influence in the industry, Bankman-Fried is looking to make more acquisitions. He said that he might next be interested in the crypto-mining sector.
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