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Crypto broker Voyager Digital issued a default notice Monday to the hedge fund Three Arrows Capital for failing to make the required payments on a loan worth more than $ 665 million, the latest sign of financial turmoil that has rocked the cryptocurrency world. of tokens on the market has decreased.
Voyager said it intends to recover funds that were used as $ 15,250 bitcoins and $ 350 million in the USDC stablecoin, a digital token whose value is tied to the dollar.
“We are working hard and expeditiously to strengthen our balance sheet and look for options so that we can continue to meet customers’ liquidity requirements,” said Steven Ehrlich, CEO of Voyager.
Crypto hackers stole $ 100 million from a blockchain bridge
The company said this in discussions with advisers to review legal remedies.
Three Arrows Capital did not immediately respond to a request for comment.
Loan defaults come at a dangerous time for cryptocurrencies as industry players and investors prepare for the “crypto winter” after a price crash, sudden cuts and a renewed and encouraged sense of skepticism that has become a condemnation among critics and market observers. . The high level of interconnectedness of the industry also flashes warning signs. As many companies borrow and invest in each other, the risks for investors increase as failure in one institution can escalate into another.
Investors throughout the industry have suffered huge losses. Bitcoin, the most famous cryptocurrency, traded close to $ 20,700 on Monday, well below its November peak of about $ 69,000. Meanwhile, the market value of all cryptocurrencies was just under $ 1 trillion; seven months ago, that figure approached $ 3 trillion.
Although legacy financial markets have also deteriorated in recent months – due to fears of an impending recession, historically high inflation, prolonged supply shocks caused by the pandemic, and the war in Ukraine – the decline in the crypto world has been much more severe than on Wall Street. The S&P 500, widely regarded as a benchmark for financial performance over time, has fallen 18 percent so far this year.
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The depth of Bitcoin’s decline underscores the highly volatile nature of cryptocurrencies and how such dramatic growth, which has pushed wallets up, can be just as easily reversed.
Three Arrows Capital was founded in 2012 by Ju Soo and Kyle Davis and is known for its bullish moves in cryptocurrency. Ju had taken the position that the value of cryptocurrencies would continue to rise as more people invested in them and their use became more widespread. But he recently admitted he was wrong, saying on Twitter in May that his pricing thesis was “unfortunately wrong,” adding, “but crypto will still thrive and change the world every day.”
In a subsequent tweet earlier this month, Ju’s tone became more frightening. “We are in the process of communicating with the countries concerned and we are fully committed to working on this issue,” he said, without explicitly saying what the problem was or who the countries concerned were. Reports of financial difficulties soon followed.
Days after Zhu’s mysterious tweet, the Financial Times reported that Three Arrows Capital had failed to respond to creditors’ requests for additional funds after his digital currency bets went awry.
The loan was defaulted following a decision by the battered cryptocurrency bank Celsius to stop withdrawals from its nearly 2 million users, sending shockwaves through the crypto market and highlighting fears that the biggest names in the sector do not have meaningful financial supervision. However, the potential for disruption to move to a larger economy seems limited.
Widespread theft has also plagued crypto investors, sparking growing skepticism among critics who question the enduring financial vulnerabilities of digital currencies.
Last week, blockchain company Harmony announced that hackers had seized approximately $ 100 million in cryptocurrency using the company’s ethereum and the Binance Chain bridge. The blockchain functions as a decentralized register, a transaction record that is publicly available and verifiable, but is not maintained by any entity. The blockchain bridge works as a means of decentralized transfers between registers.
As the value and popularity of tokens has grown in recent years, so has the vicious interest among criminals. Cryptocurrency crime reached a new high of $ 14 billion last year, according to a Chainalysis study, compared to $ 7.8 billion in 2020.
Although many investors are flocking to digital currency promises and their sometimes stunning returns for the first time, the market has shifted to a far more pessimistic position.
As interest rates rise and a number of economic difficulties plague fast-growing companies, investors have also shied away from speculative assets such as cryptocurrencies. Some of the biggest players in the industry, including Coinbase and Gemini, have eliminated positions and frozen hiring, reflecting the icy mood that now sets the once-hot market.
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