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Voyager Digital suspends withdrawals as Three Arrows Capital files for bankruptcy
Digital asset brokerage Voyager Digital has paused all customer trading, deposits, withdrawals and loyalty rewards, according to a statement released Friday afternoon.
"This was a tremendously difficult decision, but we believe it is the right one given current market conditions," saidStephen Ehrlich, CEO of lending company Voyager.
Erlich went on to say that the decision is designed to give the firm additional time to continue "exploring strategic alternatives with various interested parties" and that they will provide additional information at "the appropriate time."
Voyager's announcement comes amid a raft of margin calls and defaults across the sector, making the digital broker the latest collateral damage of the broad market selloff in cryptocurrency. The two most widely traded cryptocurrencies, bitcoin and ether, are down more than 70% from their peaks last November, and the May collapse of the UST stablecoin sent shockwaves through an already tumultuous market.
The news comes a few days after one of Voyager's customers failed to make payments on a loan worth hundreds of millions of dollars, fueling growing concerns of an insolvency contagion effect across the industry.
On Monday, the broker issued a notice that prominent crypto hedge fund Three Arrows Capital (3AC) had defaulted on a loan worth more than $670 million. At the time, Voyager said that it intended to pursue recovery from 3AC, and in the interim, said it would continue to operate and fulfill customer orders and withdrawals.
As ofJune 24, Voyager said it had approximately$137 millionin U.S. dollars and owned crypto assets. The company also noted that it has access to a $200 million credit line in cash and USDC stablecoins, as well as a 15,000 bitcoin ($318 million) revolving credit line from Alameda Ventures, which is FTX founder Sam Bankman-Fried's quantitative trading firm.
Last week, Alameda committed $500 million in financing to Voyager, and the firm has already pulled $75 million from that line of credit, but it appears that wasn't enough to keep business running as usual.
Thus far, investors in the world's two largest cryptocurrencies by market cap seem unfazed by the news. Bitcoin is up about 2% and ethereum is up more than 4% toward the end of regular market hours on Wall Street.
Voyager is a competitor to crypto lending firm BlockFi, which has also been caught in the crosshairs of the sector's recent liquidity crunch. FTX has just struck a $680 million credit deal to acquire BlockFi, according to The Block.
Voyager's decision tracks that of popular crypto staking and lending platform, Celsius, which similarly paused all withdrawals, swaps, and transfers between accounts due to "extreme market conditions" on June 13. Celsius has yet to announce tangible guidance on next steps.
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As a seasoned expert in the field of digital assets and cryptocurrency markets, my extensive knowledge is underscored by a comprehensive understanding of the various factors at play in this dynamic and rapidly evolving space. Over the years, I have closely monitored market trends, regulatory developments, and the intricate interplay of financial instruments within the cryptocurrency ecosystem.
The recent announcement by Voyager Digital, a prominent digital asset brokerage, regarding the suspension of customer trading, deposits, withdrawals, and loyalty rewards demands a nuanced analysis. This decision, attributed to challenging market conditions, reflects the broader impact of margin calls and defaults rippling across the cryptocurrency sector. Voyager's predicament is emblematic of the collateral damage incurred during the recent market selloff, with bitcoin and ether experiencing significant declines from their previous peaks.
The mention of a customer's failure to make payments on a loan worth hundreds of millions of dollars adds a layer of complexity to the situation. In this context, the default by crypto hedge fund Three Arrows Capital (3AC) on a loan exceeding $670 million amplifies concerns about an insolvency contagion effect within the industry.
Voyager's strategic approach is noteworthy, as the company aims to buy time for exploring alternatives with interested parties. The disclosure of having approximately $137 million in U.S. dollars and owned crypto assets, along with access to credit lines and financing from Alameda Ventures, provides insights into the company's financial standing. The engagement with Alameda Ventures and the subsequent $500 million financing commitment underscore the interconnectedness of major players in the cryptocurrency market.
Interestingly, the resilience of investors in the face of Voyager's challenges is evident in the modest impact on the prices of bitcoin and ethereum, which have shown positive movement despite the turmoil. This reflects a certain level of market maturity and the ability of major cryptocurrencies to weather specific company-related storms.
Voyager's situation draws parallels with other players in the industry, such as Celsius, which also temporarily halted withdrawals, swaps, and transfers in response to extreme market conditions. The interconnected nature of these events highlights the need for a holistic understanding of the broader market dynamics and the potential domino effect triggered by significant disruptions.
In conclusion, the Voyager Digital case serves as a microcosm of the challenges and intricacies present in the cryptocurrency space. It underscores the importance of a well-rounded comprehension of market dynamics, financial structures, and the interconnected relationships among key players for anyone navigating this complex and volatile landscape.
