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Voyager’s Loan Book Exposure
Early on June 22, 2022, Voyager Digital, a crypto company that enabled users to deposit on its platform for yields, announced that it had suffered a major loss from loans extended to Three Arrows Capital.
His announcement follows some of our doubts around Voyager and their lending counterparts last week.
Now, look at the Voyager press release today on 3AC’s exposure, which includes 15,250 BTC and $350 million USDC. Is. Amount lent jointly to counterparty A and B. Entry-level Detective Work brings you to find out why 3AC, formerly based in Singapore, relocated to the British Virgin Islands last year before relocating to Dubai again this spring.
The final month in the crypto industry should serve as a lesson for seasoned and newcomers alike. The “yield,” often generated with layers of unsecured leverage on bearer assets, is a ticking time bomb. This unsafe leverage is one of the biggest reasons why the effects of the “transition” are so strong.
Borrowing collateral is one thing: you post the collateral on bitcoin to borrow dollars, and if the BTC/USD exchange rate falls the borrower has to either:
- post more collateral
- Pay off dollar denominated debt
- Liquidate bitcoin to pay off debt
Unsecured lending, and the systemic risk that it manifests across the industry, is exactly what bitcoin was created to prevent.
“The fundamental problem with traditional currency is all the trust that is needed for it to work. The central bank must be trusted not to deface the currency, but the history of fiat currencies is full of breaches of that trust. Money must be trusted to hold and transfer it electronically, but they lend it in waves of credit bubbles with barely a fraction of that in reserve.” — Satoshi Nakamoto
As for the industry and the bitcoin exchange rate, one can expect that we have heard second and third order effects of the contagion.