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First Mover Americas: Bitcoin at $20.1K as Crypto Lender Voyager Files for Bankruptcy

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Good morning, and welcome to First Mover. I’m Lyllah Ledesma, here to take you through the latest in crypto markets, news and insights.

  • Price Point: Crypto markets are trading in the green Wednesday morning as on-chain data shows Celsius has paid down $183 million of its collateralized debt to Maker.

  • Market Moves: All the latest on crypto lender Voyager's bankruptcy filing.

Price point

Crypto markets were mostly trading in the green on Wednesday morning even as another crypto lender declared bankruptcy.

Voyager Digital, a crypto lender, filed for bankruptcy late Tuesday, becoming the second high-profile crypto firm to do so in the last week.

The Toronto-based company filed for Chapter 11 bankruptcy protection in the Southern District Court of New York, estimating that it had more than 100,000 creditors and somewhere between $1 and $10 billion in assets. It also recorded the same range for its liabilities. (More on this down below in Market Moves.)

This comes after hedge fund Three Arrows Capital filed for bankruptcy a few days ago after weeks of speculation about the company's solvency.

Bitcoin (BTC) was up 2% on the day, trading at $20,000. Ether (ETH) was trading up on the day slightly at $1,100. Altcoins took the lead, with Avalanche’s AVAX up 6% on the day. The virtual gaming ecosystem, Sandbox (SAND), was up 10%.

Meanwhile, CoinDesk’s Krisztian Sandor reported that the crypto lender Celsuis has been aggressively repaying debt on one of the largest decentralized finance protocols, blockchain data shows.

This is perhaps in effort to get back bitcoin-equivalent tokens that had been posted on the platform as collateral. Since July 1, according to the on-chain data, Celsius has paid down $183 million of its collateralized debt to Maker.

The troubled crypto lender is also reportedly cutting jobs to stave off its liquidity crisis.

Over in traditional markets, the pound has slid to a two-year low against the dollar. On Tuesday, the sterling fell below $1.19 for the first time since March 2020.

Futures tied to the S&P 500 shed 0.2% and the Nasdaq-100 slipped 0.3%.

Market moves

By Nikhilesh De and Danny Nelson

Crypto lender Voyager Digital filed for bankruptcy late Tuesday, becoming the second high-profile crypto firm to do so in recent days.

The Toronto-based Voyager filed for Chapter 11 bankruptcy protections Tuesday in the Southern District of New York, estimating that it had more than 100,000 creditors and somewhere between $1 and $10 billion in assets. It also recorded the same range for its liabilities.

The company believes that “funds will be available for distribution to unsecured creditors,” according to the filing.

Voyager Digital Holdings, Inc., Voyager Digital, LLC and Voyager Digital Ltd. all filed for bankruptcy.

Crypto companies – and lenders in particular – have faced solvency issues in recent weeks, with several stopping customers from withdrawing their funds. Celsius kicked off this trend last month, announcing in mid-June that it would suspend withdrawals. CoinLoan, CoinFLEX and Voyager itself all announced restrictions or outright halts on withdrawals in recent days.

Voyager joins Three Arrows Capital in filing for bankruptcy. Three Arrows, however, filed a Chapter 15 petition tied to an ongoing liquidation effort ordered by a court in the British Virgin Islands.

According to writer Frances Coppola, Voyager’s loan book accounted for nearly half of its total assets, and nearly 60% of that loan book was composed of loans to Three Arrows.

In a statement posted online after this article was published, Voyager CEO Steven Ehrlich said reorganizing the company "is the best way to protect" the company's assets, and pointed the finger at Three Arrows for some of its woes.

Following that statement, Ehrlich posted on Twitter that "Customers with crypto in their account(s) will receive in exchange a combination of the crypto in their account(s), proceeds from the 3AC recovery, common shares in the newly reorganized Company, and Voyager tokens."

‘FDIC’ protections?

The filing comes as industry observers increase their scrutiny of Voyager’s business practices, particularly how the Canadian-listed firm said in marketing materials that investors' deposits were protected by Federal Deposit Insurance Corporation (FDIC) insurance.

While FDIC insurance would indeed protect bank-held cash deposits up to $250,000, it would not cover cash converted to stablecoins. Commentators including Coppola have called Voyager’s marketing around its handling of deposits misleading.

Moreover, the FDIC insurance kicks in in the event of a bank failure – in this case, Voyager was banked by Metropolitan Commercial Bank. There is no protection in the event of a Voyager failure.

Read the full story here: Voyager Seeks Bankruptcy Protection Amid Crypto Credit Crisis.

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Today’s newsletter was edited by Bradley Keoun and produced by Stephen Alpher.

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