Vauld Halts Withdrawals
Vauld, a cryptocurrency exchange, announced on Monday that it has immediately suspended deposits, withdrawals, and trading on its platform. The Singapore-based company stated that it is exploring reorganization options with the help of financial and legal advisors. The company’s management reported experiencing financial struggles due to various factors in the cryptocurrency sector.
Vauld revealed that consumer withdrawals amounted to $197.7 million in the last two months. Withdrawals began on June 12th, following the collapse of Terraform Lab’s UST, which triggered a ripple effect throughout the crypto market. The situation worsened with the recent suspension of withdrawals by Celsius Network and the loan defaults by Three Arrows Capital.
The management of Vauld has been consulting with financial and legal experts to explore all available options. According to the company’s statement, the potential solution could involve a reorganization designed to serve the best interests of the company’s stakeholders.
As feared, crypto trading volumes in India sharply declined last week after the government implemented a long-anticipated 1% transaction tax. The trading volume on the country’s largest exchanges halved within days of the tax’s enforcement on July 1. The Indian government aims to discourage cryptocurrency trading as part of a broader regulatory effort.
Meanwhile, Vauld is seeking a resolution, and an upcoming announcement could address user withdrawals. The company stated that it is currently in talks with potential investors to join the Vauld group.
Celsius Files for Bankruptcy
On Thursday, Celsius Network filed for bankruptcy, as reported by Reuters, after considering various options including acquisitions and debt refinancing.
Earlier this month, Celsius froze withdrawals and transfers, citing extreme market conditions, leaving its 1.7 million customers unable to access their funds.
The digital asset market has faced heightened volatility recently, driven by investors liquidating riskier assets due to concerns that aggressive interest rate hikes to combat inflation could push the economy into a recession. The European Union recently agreed on new regulations to monitor crypto assets, as lawmakers responded to the ongoing Bitcoin crash and increased pressure to regulate the sector.
Since the collapse of TerraUSD (UST), a leading stablecoin tied to the US dollar, in May, crypto assets have lost over $400 billion. A further 6% drop on Thursday saw Bitcoin fall to $18,866.77, a 70% decline from its peak in November last year. Similar to banks, Celsius took crypto deposits from retail customers and invested them in the wholesale crypto market, including decentralized finance (DeFi) platforms offering blockchain-based services like loans and insurance outside traditional finance.
Celsius promised high returns to retail investors, sometimes up to 19% annually, leading many individuals to invest in Celsius and similar platforms seeking high yields. With the bankruptcy, investors in crypto yield platforms will likely see reduced returns, but other firms may step in to fill the gap.
Three Arrows Capital Faces Liquidation
A leading cryptocurrency hedge fund, Three Arrows Capital, has been liquidated, according to CryptoChipy, marking it as one of the most significant casualties of the ongoing “crypto winter.” Teneo has been appointed to manage the liquidation process, which is still in the early stages. As the assets of Three Arrows Capital are realized, the restructuring company will set up a website with details on how creditors can submit claims.
The drop in digital asset prices has affected Three Arrows Capital, revealing a liquidity crisis. On Monday, Three Arrows Capital defaulted on a $350 million loan from Voyager Digital, which included $350 million in USDC (a stablecoin tied to the US dollar) and 15,250 Bitcoin, worth approximately $304.5 million at current exchange rates. Three Arrows Capital had exposure to the now-defunct algorithmic stablecoins terraUSD and luna.
US-based cryptocurrency lending companies BlockFi and Genesis reportedly liquidated part of Three Arrows Capital’s positions earlier this month. BlockFi had extended a loan to the firm but could not fulfill its margin call, which is when investors are required to add funds to cover potential losses on borrowed capital.
As Three Arrows Capital winds down, there are growing concerns about the impact on other areas of the market that may have been exposed to the firm.
Liquidity issues have also been reported by other cryptocurrency firms. Celsius and the CoinFlex exchange were forced to halt withdrawals due to the harsh market conditions. CoinFlex faced a further issue when a client failed to repay a $47 million loan, exacerbating the liquidity crisis.
