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Singapore-based Vauld on Monday became the latest cryptocurrency platform to pause customer withdrawals as a result of the nascent market’s steep decline over the past month, telling customers it will also explore restructuring options as analysts warn the market downtrend will likely continue until broader recession fears subside.
Coinbase-backed Vauld has started exploring restructuring plans—becoming the latest casualty of a … [+]
Key Facts
In a blog post early Monday, crypto lender and trading platform Vauld said it “made the difficult decision to suspend all withdrawals, trading and deposits… with immediate effect” as a result of “financial challenges” stemming from volatile market conditions.
The four-year-old startup, which has raised about $27 million from investors like Coinbase Ventures, blamed bearish sentiment—fueled by the collapse of Terraform Lab’s UST stablecoin, other platforms pausing withdrawals and Three Arrows Capital defaulting on its loans—for sparking “significant” customer withdrawals of $197.7 million since June 12.
As a result of the weakness, Vauld also said it has enlisted financial and legal firms to explore restructuring options that will “best protect the interests of Vauld’s stakeholders,” and claimed freezing customer withdrawals would help “facilitate” the efforts.
Just last month, the company’s CEO Darshan Bathija announced the firm would lay off about 30% of its more than 100 employees, while tempering concerns by saying the cuts would not affect the firm’s services, products or client investments.
Vauld’s announcement comes three days after New Jersey-based crypto brokerage Voyager Digital announced it would also suspend withdrawals after hedge fund Three Arrows Capital failed to make the required payments on roughly $660 million worth of bitcoin and stablecoin loans; 3AC filed for bankruptcy the same day.
The collapse of Three Arrows Capital has led to a “tragic contagion” in the crypto market and triggered the downfall of other firms, GlobalBlock analyst Marcus Sotiriou said in emailed comments Friday, noting some companies have struggled to keep up with customers trying to cash out their funds “at an extraordinary rate.”
What To Watch For
Though he says the fear and uncertainty has led bitcoin to become “extremely cheap” according to several indicators, Sotiriou warns the crypto market downtrend is likely to continue until there is a slowdown in inflation. For months, consumer prices have surged at the highest level in 40 years—pushing the Federal Reserve to hike interest rates and unwind economic support while investors worry the aggressive actions might start a recession.
Surprising Fact
The world’s cryptocurrencies have lost some $300 billion in value over the past month—pushing the market to an 18-month low of $890 billion and piling on to losses nearly $2 trillion since November.
Key Background
Historically low interest rates and government stimulus measures fueled skyrocketing cryptocurrency prices during the pandemic, but Fed interest rate hikes to curb rising inflation have since battered overall market sentiment. Highlighting industry troubles, popular brokerage Coinbase last month laid off about 18% of employees while the firm’s billionaire CEO, Brian Armstrong, warned investors that a potential recession could lead to a prolonged bear market for cryptocurrencies. The price of bitcoin, at roughly $19,500, has fallen more than 70% from an all-time high of about $69,000 in November.
Further Reading
Court Reportedly Orders Liquidation Of Crypto Hedge Fund Three Arrows Capital, Threatening More Market Turmoil (Forbes)
Crypto Funds Post Record $423 Million Outflows As Bitcoin Plunge Rattles Market (Forbes)
