- Voyager reveals Three Arrows Capital is at risk of defaulting on a $657 million loan
- The sell-off comes as Senators weigh the likelihood of a recession
Crypto-related stocks fell on Wednesday — along with the broader market — as investors continue to analyze contagion risks from credit firm Celsius’ liquidity crunch.
“Unfortunately, when either crypto or technology, or both, fail, crypto stocks are penalized,” said David Tawil, President and Co-Founder of Prochain Capital. “However, I expect the same will ultimately hold true on the upside…if we bottom or have bottomed in crypto and/or stocks, I think that’s a good entry point.”
crypto broker Voyager Digital led the decline, falling as much as 60% during Wednesday’s trading session after it was revealed the company had investments in potentially bankrupt hedge fund Three Arrows Capital.
According to Voyager, Three Arrows currently has an outstanding loan of approximately $657 million, and the agent may default on payment if the full amount is not paid by June 27.
“This new revelation may have some investors wondering if these unscrupulous lender-borrower commercial practices are commonplace in the industry, with more issues yet to be announced,” said Josh Olszewicz, head of research at crypto fund manager Valkyrie Investments. “Several crypto lenders that have reported liquidity issues over the past few weeks have also sparked broader fear in the market, leading to an overall drop in available credit.”
Exchange Coinbase, business intelligence firm MicroStrategy and digital asset mining firm Marathon Digital also posted losses on Wednesday. Coinbase temporarily lost 7%, while Microstrategy, which has been in a downtrend for several months, lost as much as 8.5%.
The sell-off comes as markets react to Federal Reserve Chair Jerome Powell’s testimony before the US Senate Banking Committee on Wednesday. If interest rates rise at a steep pace too quickly, senators could warn, a recession could result.
“It’s certainly a possibility, it’s not our intended outcome at all,” Powell said. “We’re not trying to provoke a recession and I don’t think we need to provoke a recession.”
Market turmoil is unlikely to abate until a change in monetary policy occurs, analysts said.
“Slacking stock market rallies will remain Wall Street’s main business until economic data weakens dramatically and the Fed pivots so it can ease its monetary tightening strategy,” said Edward Moya, senior market analyst at OANDA.
For crypto-related stocks in particular, Tawil added that contagion fears need to be eased first and foremost.
“The market definitely needs to see at least a week without any further explosions or cracks to declare that the contagion is over,” Tawil said. “Debt reduction will continue and there will continue to be weakness at companies with remaining stability issues, but the forced sale for this round will be over.”
Voyager Digital’s 60% Slide Leads the Sell-off for Crypto Equities post is not financial advice.
Source: Crypto News Austria