Vauld, the Singapore-headquartered cryptocurrency exchange, on Monday suspended all withdrawals, trading, and deposits on its platform. Vauld has become the latest crypto firm to have suspended operations amid a global crypto market meltdown. Vauld CEO Darshan Bathija said in a blog post that the company was facing “financial challenges despite our best efforts,” going on to explain why crypto transactions were suspended. Apart from Vauld, crypto lender Celsius and broker Voyager Digital have also suspended transactions. Why is this happening? How does it affect you? Read on to find out.
Vauld suspends transactions: Why did it pause withdrawals and deposits?
As per Bathija’s blog post, the suspension of transactions “is due to a combination of circumstances such as the volatile market conditions, the financial difficulties of our key business partners inevitably affecting us, and the current market climate which has led to a significant amount of customer withdrawals in excess of a $197.7 million since June 12, 2022, when the decline of the cryptocurrency market was triggered by the collapse of Terraform Lab’s UST stablecoin, Celsius network pausing withdrawals, and Three Arrows Capital defaulting on their loans.”
Why did TerraUSD (UST) collapse?
The Terra ecosystem adopted UST as a stablecoin, leading to the interlinking of Terra (LUNA) and UST. A stablecoin is linked to an underlying asset, such as precious metal such as gold, or the US dollar.
UST in May ‘de-pegged’ to $0.45 from its value of $1. This marked a drop of about 55 percent. Since both UST and LUNA are interlinked, the massive drop in UST value has resulted in LUNA’s overall drop.
LUNA went on to lose nearly all its value, wiping out 95 percent of investors’ wealth.
ALSO SEE: EXPLAINED | LUNA 2.0: What Is It? Will It Help Revive Terra?
What happened to Celsius?
In June, Celsius announced that it is pausing all withdrawals citing "extreme market conditions." The platform — which has lent out more than $8 billion and managed nearly $12 billion in assets as of May — has not announced a timeline for when the withdrawals will resume. This has led to concerns about the solvency of the company, which made a name for itself by offering above-average interest rates on deposits.
Its assets have more than halved in value since October 2021, when it controlled $26 billion of clients' funds, and the value of its flagship cel token has also tumbled 97 percent in the same time.
Earlier this month, Celsius said it has laid off 150 employees, which is a quarter of its workforce.
What happened to Three Arrows Capital and Voyager Digital?
Late last month, Three Arrows Capital, popularly known as 3AC, was formally liquidated by the order of a British Virgin Islands court. Based in Singapore, Three Arrows Capital is among the leading crypto investors who ran into difficult times owing to a sharp sell-off that’s affecting the overall cryptocurrency market over the past few weeks.
Earlier, US-headquartered crypto broker Voyager Digital issued a default notice to 3AC after it failed to make payments on a loan of BTC 15,250, which amounts to roughly $324 million, and nearly $350 million worth of the USDC stablecoin.
On July 6, Voyager Digital filed for bankruptcy, just a week after it announced that it is suspending withdrawals, trading, and deposits on its platform.
Voyager CEO Stephen Ehrlich said in a statement, “The prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital on a loan from the company’s subsidiary, Voyager Digital, LLC, require us to take deliberate and decisive action now.”
Nexo plans to come to Vauld’s rescue
Nexo, a London-based crypto lender, said that it would buy up 100 percent of Vauld in order to “reorganise its future operations with the aim to accelerate its deeper presence in Asia.” Nexo didn't offer any further details on the deal.
Nexo said that it plans to “provide immediate assistance and alleviate withdrawal limitations put in place on Vauld's platform.”
Crypto exchanges pausing transactions: How does it affect you?
The ongoing crypto meltdown has clearly had an adverse effect on investors as well as exchanges as cost-cutting is the current plan among most companies. While most exchanges are halting transactions and laying off stuff, investors can rest assured that none of their digital assets on these platforms will be affected. There has been no announcement from any crypto platforms on the same. However, since trading is halted, daily traders and active investors will have some trouble for a few days until services are restored.
The overall crypto market is also affected by the ongoing ‘Crypto Winter.’ From its all-time high of $3 trillion seen in November 2021, the market cap has now dipped worryingly to around $906 billion as of July 7.
However, this is not the first time that the market is experiencing a Crypto Winter.
There are no definite indicators that can help ascertain when a crypto winter period will exactly be over. However, if we look at historic trends, this isn’t the first time the market has seen a crypto winter. And it’s safe to speculate that the crypto winter will be over at some point in time, when the crypto market will stabilise again. The last crypto winter lasted for about two years, from January 2018 to December 2020, when Bitcoin lost over half of its market cap, as per Forbes.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.