Cryptobroker Voyager Digital issued a default notice on Monday to hedge fund Three Arrows Capital for failing to make required payments on a loan of more than $665 million, the latest sign of the financial turmoil that has rocked the world of cryptocurrencies as the value of tokens across the world. market.
cash crunch
Voyager noted that the hedge fund has loans of 15,250 bitcoin and $350 million, worth about $670 million at current prices.
"We are working hard and quickly to strengthen our balance sheet and pursue options so that we can continue to meet clients' liquidity requirements," said Stephen Ehrlich, CEO of Voyager. The company said it was in discussions with advisors to review legal remedies.
cryptocurrency winter
The loan default comes at a perilous moment for cryptocurrencies, as industry players and investors prepare for “cryptocurrency winter,” after a price crash, sudden layoffs, and a renewed and hardened sense of skepticism that has turned into condemnation among critics and market watchers.
The high level of interdependence in the industry has also given rise to warning signs; Since many companies borrow from each other and invest in each other, the risks to investors are magnified because failures in one institution can be passed on to others.
Heavy losses for investors
Across the industry, investors have incurred huge losses. Bitcoin, the most prominent cryptocurrency, on Monday traded near $20,700, well below its November peak of nearly $69,000. Meanwhile, the market capitalization of all cryptocurrencies was just under $1 trillion, seven months ago that figure approached $3 trillion.
Although the old financial markets have also worsened in recent months; Due to fears of an upcoming recession, historically high inflation, ongoing supply shocks triggered by the pandemic, and the Russian war in Ukraine, the downturn in the cryptocurrency world has been much more severe than Wall Street.
The Bitcoin drop has highlighted the highly volatile nature of cryptocurrencies and how this astounding growth that has triggered portfolios can easily be reversed. Indeed, a number of cryptocurrency companies are facing liquidity crises due to the market downturn, as the market downturn has damaged cryptocurrency projects and companies in all fields.
This month, lending company Celsius Network, which promised users ultra-high returns for depositing their cryptocurrency, temporarily suspended withdrawals to customers, citing “harsh market conditions.”
Another crypto lender, Babel Investments, said this month that it was "facing extraordinary liquidity pressures" and halted withdrawals.