Celsius Network paid USD 120 million to pay a debt with lending platform Vauld to avoid liquidating its funds. Fringe Finance and Lido Finance want to solve problems dealing with lack of liquidity, immobility, and accessibility.

Brian Passfield, CTO of Fringe Finance, has ten years of experience in blockchain, cryptocurrencies, FinTech, and DeFi. He considers that liquidity problems arise when the owners of protocols do not plan for unfavorable periods.

He thinks the conditions in the cryptocurrency market are not the best for many players, affecting lending platforms. He says that the liquidity problems of many have caused stress to their users and the crypto space in general.

Market Turmoil Increases Due to Liquidity Problems

In June, Celsius Network suspended all withdrawals due to liquidity problems, which caused great concern in the crypto community. After laying off 25% of their employees due to extreme market conditions, they filed for Chapter 11 bankruptcy of the US Bankruptcy Code.

Similarly, crypto platform Voyager Digital announced the suspension of crypto trading and withdrawals two weeks ago. Representatives of the company stated that the pending loan payment by crypto hedge fund Three Arrows Capital (3AC) led them to that.

Vauld, a Singapore-based cryptocurrency exchange, and lending platform, recently stopped its operations, arguing financial difficulties. The collapse of Terra, the problems of Celsius Network, and the loan default by Three Arrows Capital were the main reasons for that suspension.

The liquidity problems in the crypto ecosystem seem to date back to a precise moment. Although no single event is responsible for what happens, Terra has caused a ripple effect on the market.

Some Attempts to Restore Liquidity without Selling Treasury Tokens

Crypto projects usually use large debt payments to restore confidence in the solvency of platforms and allow withdrawals again. For example, Celsius Network recently paid USD 120 million to pay a debt with lending platform Vauld. That prevents the former from liquidating costs and reduces the probability of having to liquidate funds.

DAO and DeFi projects seek how to make their treasury tokens liquid without selling them. For example, Fringe Finance officially collaborated with Lido Finance to solve problems dealing with lack of liquidity, immobility, and accessibility. They want white-listed altcoins to become more liquid and usable in growing DeFi ecosystems.

The Primary Reason for Liquidity Problems to Occur in the Crypto Market

The main protagonists of the 2020-2021 crypto rally were crypto lending companies. However, they now face many problems regarding tokenomics, algorithms, and liquidity.

These problems arise due to the access to more unlicensed and unregulated complex financial instruments. The developers wanted to create platforms that would bring as much financial gain as possible.

Since the design of most platforms relies on the premise of perpetual growth, the bubble will burst when the growth stops. Due to a ripple effect, there will be destruction in the larger ecosystem.

As this happens, liquidity drains away from the market as people leave crypto or switch to long-term holding strategies. In conclusion, if builders do not consider the worst times when designing their protocols, another crisis might become their end.

By Alexander Salazar

A group of lawyers working for Voyager has already rejected the offer from Sam Bankman-Fried’s entities. The legal team described the proposal as one created to spread more publicity, capable of disrupting the bankruptcy procedures. Bankman-Fried has been trying to rescue all these troubled crypto entities.

Embattled crypto lender Voyager Digital rejected a joint offer from FTX and Alameda Research despite being cash-strapped and crushed by bankruptcy procedures.

Last week, FTX and Alameda generated alarm in the crypto space by bringing a restructuring deal to troubled Voyager. The deal would involve Alameda acquiring Voyager funds at market value except for loans to Three Arrows Capital.

The other branch of this deal was a proposal for Voyager users to open profiles with FTX and receive their share of claims in the accounts, with Alameda Research canceling its loans to Voyager as part of the agreement.

However, a recent court document highlighted that the legal team rejected the offers from entities tied to Sam Bankman-Fried. The rejection may have left dissatisfied users figuring out what to do when trying to make sense of the stance taken by an entity like Voyager.

Voyager offer

The document highlighted that the offer from Voyager was an estimate that sought to pass itself as a rescue move. The AlamedaFTX proposal is just a liquidation of digital assets in a way that benefits AlamedaFTX.

The document reads that the team goes on to claim that the proposal got created to spread publicity instead of offering value to the users and noted that such a proposal could suffocate the already complicated bankruptcy process.

Voyager confirmed that it remains open to more solid offers for a potential restructuring agreement that brings advantages to all its staff of stakeholders. The entity filed for Chapter 11 bankruptcy protection at the start of the month after it acquired a credit line from Alameda.

Sam Bankman-Fried Believes this Offer has a Solid Structure

Bankman-Fried highlighted that the deal was a generous proposal. According to Bankman-fried, this proposal has the same tone as previous offers. He claims that the rejection of this deal happened because of the consultants trying to milk the process to make their fees grow.

In an extended tweet, Bankman-Fried compared the Voyager debacle with the whole Mt. Gox situation and spoke about a long, drawn-out process that could take many years before investors can receive their deserved access to their funds. He stated that the longer the process, the more alternatives users might lose.

Meanwhile, that entire time, various bankruptcy agents are slowly draining frozen assets with consulting fees, said Bankman-Fried. This action can cost customers hundreds of millions of dollars by the time this case gets solved.

Sam Bankman-Fried is one of the wealthiest people in crypto due to his FTX exchange and Alameda Research trading entity. He started by trading ETFs at a quant firm, giving away a juicy part of his salary to charity, and then decided to explore the fields of crypto trading in late 2017.

By: Jenson Nuñez

When asked if it is a good or bad time to invest in these types of assets, it is not always known how to value them, since they do not produce anything, except trust for those who believe in them.

Anyone involved in the world of cryptocurrencies will have suffered the so-called “crypto winter” after the plummeting value, during the last months of the misnamed digital currencies.

The most famous and largest trading volume of all, Bitcoin, began trading in 2008 and its value plummeted more than 70%, from almost US $ 70,000 per unit that came to trading in November 2021. This has been its third major historical correction, along with November 2018 and March 2020.

Why BTC Corrections Have Happened

One of the factors that has been able to influence this correction is the higher cost of mining Bitcoins with Blockchain technology, which implies a large energy consumption, which could be causing the “big whales”, that is, the big Bitcoin holders, to have had to sell their digital assets as it is not as profitable to produce them. With Bitcoin now trading at just over $20,000, experts say the profits from producing it drop significantly because that’s the average amount it costs to produce.

To this has been added that it must be taken into account that some of these “whales” have had to generate liquidity to execute guarantees or repay the debt requested to produce them at an incremental financial cost due to the rise in interest rates in the financial markets.

But perhaps most importantly in this correction is that some players in the ecosystem are starting to assess whether Bitcoin and other denominations are really crypto assets or cryptocurrencies. That is, if they have a reserve of value due to the technology behind them and if they can also perform the function of a currency that could be used as legal tender at some point.

Crypto Assets: Assets or Coins?

On many occasions, one might wonder if it is a good or bad time to invest or divest in this type of asset, to which there is no certain answer since it is difficult to value them, since they do not produce anything, except trust for those who believe in them.

If, on the other hand, shares or bonds are examined, their value depends on cash flows discounted at a risk rate, that is, they depend on the wealth that the asset produces in currency, discounted at the risk of obtaining that wealth.

Perhaps that is why it is worth asking if crypto assets are assets or currencies. If they are assets they should produce money in the discounted future to value them and if they are currency they should be able to be used as liquidity. Both scenarios are difficult to explain.

This world of digital assets and their brutal volatilities create great media attention and have become the dream of many investors eager to get rich on the purest Russian roulette. And they also have a claim effect on all kinds of well-known characters such as soccer player Cristiano Ronaldo who has established a sponsorship agreement with the cryptocurrency platform Binance.

However, it is worth being aware that major platforms such as Coinbase, Gemini, and crypto.com have recently announced layoffs due to slow business hours. In regards to cryptocurrencies, Warren Buffett recently stated that if he were offered all the Bitcoins in the world for $25, he would not buy them.

The collapse of the Luna and Terra tokens is apparently proving him right, as is the decline in the total value of the crypto market, which has gone from $3.2 trillion to less than $1 trillion in a few months. However, freedom is the greatest thing that the markets have and each one is free to invest in what motivates them the most, as long as our performance is the product of analysis.

By Audy Castaneda