The recent collapse of well-known platforms and organizations in the bitcoin sector is an unsettling trend that has been observed. Two well-known cryptocurrency exchanges, Voyager and Bittrex, are the most recent additions to this worrying trend. Investors have experienced uncertainty and losses as a result of these events, raising concerns about the long-term viability of the digital finance industry and the regulatory framework that supports it.
On July 6th, 2022, Voyager Digital, a well-known cryptocurrency broker, filed for Chapter 11 bankruptcy protection, succumbing to the volatility in the online financial markets. The Southern District of New York’s US Bankruptcy Court is where the paperwork was filed. Assets and liabilities of $1 billion and $10 billion, respectively, were disclosed in the application. According to Voyager, it has approximately $350 million in fiat currency and $1.3 billion in digital assets.
Voyager’s exposure to Three Arrow Capital, a fledgling cryptocurrency hedge fund that failed a week before the company declared bankruptcy, served as the downturn’s spark. Three Arrow Capital missed payments on a number of loans, including a substantial $650 million debt owing to Voyager. Despite making an effort at a comeback with a buyout from FTX and subsequently Binance U.S., Voyager was unable to gain any momentum, which caused both agreements to fall through.
Nearly a year after all accounts were frozen, stakeholders are anticipated to get around 35% of their assets in cash or cryptocurrency in the next months as part of the ongoing legal struggle. Investors are very concerned as a result of the recent bankruptcy cases of Voyager and Bittrex, two well-known cryptocurrency exchanges, which have prevented them from accessing their money or assets.
The Bittrex situation in particular has drawn attention because it shows how unstable and risky the world of digital money is. Bittrex Inc. formally for Chapter 11 bankruptcy protection from the US Federal Court in Delaware on May 8. According to the filing papers, the platform had obligations between $500 million and $1 billion, and more than 100,000 creditors were still waiting for payments.
It’s important to remember that Bittrex already announced the termination of its subsidiary business in the United States on April 30 due to Securities and Exchange Commission (SEC) regulatory concerns. Even though the most recent changes have no effect on Bittrex Global, business as usual is anticipated for clients outside of the US.
Investors are concerned about the failures of Voyager and Bittrex, which highlight the need for enhanced oversight and care in the cryptocurrency industry. Many experts think that in order to safeguard the security of cash and assets, stronger regulatory frameworks from digital financial policy bodies must be implemented. Despite the volatility of the cryptocurrency market, traders and investors have a right to demand transparency from brokerages. By establishing explicit norms and regulations, exchanges and cryptocurrency platforms would be encouraged to put shareholder asset protection first or risk facing legal repercussions.
The recent insolvencies of Voyager and Bittrex should serve as a warning to those thinking about investing in the cryptocurrency market. These failures are the latest in a string of recent liquidations that also includes the FTX exchange, Celsius, Silvergate, Silicon Valley, and other companies. Financial experts underline that the best course of action to safeguard investors and promote a secure and long-lasting cryptocurrency sector is the implementation of thorough regulatory frameworks.
