With over 19,000 virtual currencies in existence, the cryptocurrency industry has compared the current state of the market to the early years of the internet. Industry players, however, have said that most of these coins will fall apart.
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Digital asset brokerage Voyager Digital has suspended all trades, deposits, withdrawals and customer loyalty rewards, according to a statement released on Friday afternoon..
“It was an extremely difficult decision, but we believe it is the right one given current market conditions,” said Stephen Ehrlich, CEO of lending company Voyager.
Erlich went on to say that the decision is designed to give the company more time to continue “exploring strategic alternatives with various interested parties” and that it will provide additional information at the “appropriate time.”
Voyager’s announcement comes amid a series of margin calls and industry-wide defaults, making the digital broker the latest collateral damage from the cryptocurrency market’s sell-off. The two most traded cryptocurrencies, bitcoin and ether, are down more than 70% from their highs of last November, and the May collapse of the UST stablecoin sent shockwaves through a already tumultuous market.
The news comes 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 in the industry.
On Monday, the broker posted a notice that prominent crypto hedge fund Three Arrows Capital (3AC) defaulted on a loan worth over $670 million. At the time, Voyager said it intended to continue the recovery of 3AC, and in the meantime said it would continue to operate and fulfill customer orders and withdrawals.
As of June 24, Voyager said it has around US$137 million and owns crypto assets. The company also noted that it has access to a $200 million line of credit in cash and USDC stablecoins, as well as a 15,000 bitcoin ($318 million) revolving line of credit from Alameda. Ventures, which is the quantitative trading company of FTX founder Sam Bankman-Fried.
Alameda last week committed $500 million in funding for Voyager, and the company has already drawn $75 million from that line of credit, but it appears that wasn’t enough to keep business going as it should. ‘habit.
So far, investors in the world’s two largest cryptocurrencies by market capitalization seem unimpressed with the news. Bitcoin is up around 2% and Ethereum is up more than 4% towards the end of normal trading hours on Wall Street.
Voyager is a competitor to crypto lending firm BlockFi, which has also been caught in the crosshairs of the industry’s recent liquidity crunch. FTX has just entered into a $680 million credit agreement to acquire BlockFi, according to The Block.
Voyager’s decision follows that of popular crypto staking and lending platform, Celsius, which also suspended all withdrawals, trades and transfers between accounts due to “extreme market conditions” on June 13. Celsius has yet to announce any tangible guidance on next steps.