US cryptocurrency broker and lender Voyager Digital filed for bankruptcy protection due to “volatility and contagion” in the market
On Wednesday, the Guardian reported that US cryptocurrency broker and lender Voyager Digital filed for bankruptcy protection. The company became the latest victim of a chain reaction affecting the whole industry.
Last week, the brokerage suspended all withdrawals and trading. It was forced to file for Chapter 11 due to “volatility and contagion” in the market. The main reason is the liquidation of a crypto-focused hedge fund, Three Arrows Capital, which defaulted on an almost $700 million loan to Voyager.
In its bankruptcy filing, Voyager estimated that it had more than 100,000 creditors, somewhere between $1bn and $10bn in assets and liabilities worth the same value. The company’s largest single creditor, with unsecured loans of $75m, now is a cryptocurrency trader Alameda Research.
The crypto market shrank from its $3tn (£2.5tn) peak last November to less than $1tn this May after the Terra collapse. Crypto winter has forced several companies to lay off workers while investors continued to sell growth stocks, technology stocks, cryptos and other risk assets.
Rising interest rates and fears about the U.S. economy amidst unprecedentedly high inflation battered crypto performance. Moreover, the upcoming SEC regulatory framework for the crypto market may outlaw some existing crypto businesses. It seems crypto winter is going to be severe.