Fears that rising interest rates will avert an era of cheap money have had a significant negative impact on Cryptocurrency, with Bitcoin, the world’s largest digital asset, falling more than 56% from its highs this year.
Fears that rising interest rates will avert an era of cheap money have had a significant negative impact on cryptocurrencies, with Bitcoin, the world’s largest digital asset, falling more than 56% from its highs this year. Many cryptocurrency companies have either declared bankruptcy or have had to seek a quick capital injection.
Three Arrow Capital
Singapore-based cryptocurrency hedge fund Three Arrow Capital (3AC) filed for Chapter 15 bankruptcy on July 1.
The collapse of 3AC, formerly the dominant of the digital asset market, appears to be related to the company’s bet on the Terra ecosystem, which was the driving force behind the failed stable coin terraUSD. In May, the value of the token almost completely disappeared and in the cryptocurrency market almost entirely disappeared. $500 billion is gone.
Due to the high level of leverage, 3AC was unable to meet the other party’s demand for margin payments. Two cryptocurrency lenders, Blockpie and Genesis Trading, eventually sold their positions to the company. According to court documents, 3AC’s creditors claim to be in debt of more than $28 billion.
On June 12, Celsius, a New Jersey-based cryptocurrency lender, stopped withdrawing and declared bankruptcy a month later with a financial loss of $ 11.9 million as per Chapter 11. When it was set at $50 million, it went through a fundraising round.
Celcius made the mistake of making complex investments in the digital asset wholesale market. Despite promising a high annual return of 18.6% to ordinary investors, the company struggled to meet the repayment as the value of the cryptocurrency declined.
Celcius’ lawyers said the company’s bitcoin mining business could provide a way to repay clients at the first bankruptcy hearing.
According to Reuters, many state regulators are considering Celsius’ move to stop withdrawing customers.
Last year, the emerging cryptocurrency star New Jersey-based Voyager Digital had a market value of $37.4 million. But Voyager, whose exposure to hedge funds was substantial, was badly damaged by the downfall of 3AC. Voyager has filed more than $605 million in claims against 3AC.
Voyager announced on July 6 that it had $101 million in cash and cryptocurrency assets at the time of its Chapter 11 bankruptcy filing. Since then, the U.S. Federal Deposit Insurance Corporation (FDIC) has stated that it has been investigating how Voyager used to promote its savings accounts as FDIC insurance and to purchase cryptocurrencies.
Aside from the liabilities to 3AC, Sam Bankman-cryptocurrency Fried’s exchanges FTX and Alameda Research have proposed to purchase all of Voyager’s digital assets and loans and allow clients to withdraw funds from their FTX accounts. However, Voyager rejected the proposal he submitted to the court as a “low offer.”
After banning withdrawals a few days ago, Singapore-based cryptocurrency lender Volt filed a petition with a Singapore court on July 8 seeking protection from creditors. According to a report by The Block, the company owes creditors $402 million.
Investor billionaire Peter Thiel’s Valar Ventures, Pantera Capital and Coinbase Ventures support Volt.
In a July 11 blog post, Volt stated that it is looking for a possible restructuring option and is also talking about a potential sale to Nexo, a London-based cryptocurrency lender.
Cryptocurrency lender BlockPie signed an agreement with FTX on July 1 for a $400 million revolving credit loan and the option for FTX to acquire Blockpie for up to $204 million. At the time, Blockpie was facing an increase in withdrawals and a blow to 3AC.
Severely impacted by the cryptocurrency crisis, Blockpie introduced a number of cost-cutting measures in June, including a 20% reduction in employment and a reduction in CEO remuneration. At last year’s investment round, the business was valued at $3 billion.