Deeply Insolvent

In crypto land, numerous “brokers” and financial intermediaries seem to be in trouble. I use quotes because they are not setup / regulated like public equity brokers (e.g., Schwab), in that if one of these goes bankrupt, customer assets will potentially get tangled in the bankruptcy versus being sheilded.

Voyager Digital, a crypto trading platform, just got bailed out by the crypto kingpin CEO of FTX (another trading platform), who is in his late 20s and was on the cover of the latest Forbes 400:

Voyager is publicly traded and its shareholders are effectively a candle in the wind at this point:

Someone posted some supposed numbers of Voyager’s capital position, which if true, are truly shocking to the unfamiliar to crypto (~$250m of equity on $6b in assets):

The latest domino:

Voyager Digital had ~$6 billion in assets and an equity cushion of $258m as of March, when Bitcoin was at ~$45,000.

Surely its assets had already declined with the market, but with today’s admission of ~$655m of 3ac exposure, $VOYG is likely deeply insolvent. pic.twitter.com/I7AhHea6mh

— Nate Anderson (@NateHindenburg) June 22, 2022

Furthermore, as mentioned in the above tweet, a multi-billion dollar hedge fund named 3AC has gone insolvent blowing a hole in the side of Voyager and likely others in the crypto ecosystem – hence the bailout from a competitor. It is TBD if the credit facility will be enough, but the overall point is there is deep leverage in the crypto ecosystem.

How in the world was everyone getting an 8-20% yield “risk free” in the crypto space while the rest of the world was at 0%? We’re finding out now.