Lending Company Voyager CEO Stephen Ehrlich made a difficult decision: suspend all customer trading, withdrawals, and deposits. However, the company believes it would help the current market conditions.
What’s Behind the Trading, Deposits, and Withdrawals Suspension?
CEO Ehrlich says, “This was a tremendously difficult decision, but we believe it is the right one given current market conditions.”
According to the statement released last Friday, Ehrlich decided to suspend all trading, withdrawals, and deposits to give the company extra time to continue the exploration of the strategic alternative with different interested parties. He also stated that they would provide further information at the right time.
The action will give Voyager enough time to strengthen its balance sheet to preserve and protect the platform’s future and its customers.
This announcement came amid margin defaults and calls all over the sector, making Voyager the latest crypto market sell-off damage. Bitcoin and Ethereum, the two most traded cryptos, slumped over 70 percent from their peaks in November 2021. Plus, the UST stablecoin collapse resulted in shockwaves across the already rowdy market.
Voyager Pursues Recovery from Three Arrows Capital
The decision came a few days after one of Digital Voyager’s customers unsuccessfully made payments on a hundred-million-dollar loan, which fueled the growing concerns regarding the liquidation contagion effect in the industry.
Voyager issued a notice on Monday that Three Arrows Capital, a crypto hedge fund, has defaulted on over $670 million worth of the loan. The crypto broker stated they would pursue recovery from Three Arrows Capital while constantly operating and fulfilling customer withdrawals and orders.
A British Virgin Islands court reportedly ordered Three Arrows Capital’s liquidation after the broker filed a notice of default. The broker still has no information on when it will restore its withdrawal, deposit, trading, and loyalty reward services.
Three Arrows Capital became famous around two years ago when the cryptocurrency bull market emerged that year. On the other hand, the company suffered from the impacts of the terra network crash. Other crypto companies that were exposed to that crash also suffered the same fate.
After the insolvency issues, other crypto lenders like BitMex, Deribit, and Finblox exited their positions in Three Arrows Capital to minimize losses. Voyager reduced the daily withdrawal limit by more than 50 percent a few days ago.
Every customer can only withdraw a maximum of $10,000 in comparison to the $25,000 previously. The firm share price slumped by 26 percent within hours after the announcement, which was an 87 percent drop in the last 30 days.
As of June 2022, the broker owned crypto assets and had around $137 million in US dollars. It also has access to a credit line of $200 million in USDC stablecoins and cash. The firm gained access to a revolving credit line of 15,000 Bitcoin from Alameda Ventures.
Access to Additional Capital
Last month, Digital Voyager also signed an agreement with Alameda Ventures, focusing on the revolving credit line. This agreement gives the broker access to additional capital necessary for meeting the liquidity needs of customers, especially since crypto prices are currently taking a hit.
According to Voyager, the company holds a $685 million value of crypto assets in comparison to over $1.12 billion in crypto-asset they have loaned.
The company stated that it lent 15,250 Bitcoins and $350 million to Three Arrows Capital. The decision of Voyager regarding the withdrawals, deposits, and trading suspension came less than a month after Celsius Network, its crypto lender rival, cited extremity in market conditions. The rival company is still not opening withdrawals back up for the customers.
The recent issues in the crypto industry can be traced to the collapse of TerraUSD stablecoin in May 2022. This collapse resulted in the loss of stablecoin almost its value alongside its paired token.
Furthermore, the most well-known and largest crypto, Bitcoin, dropped 58 percent in the first half of the year, which is the worst first six months of 2022 showing ever.
Based on the press release of Voyager, it is noted that the company will still be using the services of its legal and financial advisors. The firm’s advisors helped them with the best possible options as well as potential liquidity injection.
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