When Voyager Digital (VYGVF) lent over $660 million to Three Arrows Capital, a hedge fund, it threatened the company’s solvency. The notice of default to 3AC is a severe blow for the platform. It will spook Voyager customers into liquidating assets and closing their accounts.
Voyager suffered when 3AC failed to meet its margin calls. 3AC’s crypto wagers turned against it. This led to losses for Voyager’s $350 million in USD Coin holding. USDC is a stablecoin pegged to the U.S. dollar. In addition, Voyager had exposure to 3AC’s 15,250 bitcoins. The total loss is $664.2 million.
Poor stock market conditions will prevent Voyager from selling stock to sustain its liquidity.
Coinbase (COIN) is a bigger firm. This is not stopping short-sellers from betting against it. Short interest is 21.79%. Bears are betting that a severe drop in crypto trading volumes will sink Coinbase to losses this quarter. Furthermore, Coinbase spent heavily on expanding globally. When it realized it spent too much, it halted hiring and laid off staff.
Coinbase will have heavy expenses. Unless it halts stock-based compensation for executives, the leading platform will perform poorly in the markets. The disclosure that it sells geo-location data to U.S. immigration enforcement is a breach of trust. This will further accelerate customer asset withdrawals.
Voyager has bankruptcy risks while Coinbase shares may continue to struggle.