CoinLoan lowers the withdrawal amount, and another batch of CeFi enters the countdown to thunderstorm?
Entering July, the risk contagion in the encrypted asset market has not yet ended.
On July 4, CoinLoan, an encrypted asset lending platform, announced that it would reduce the daily withdrawal limit for users from US$500,000 to US$5,000. Payments soared.
CoinLoan is restricting users' withdrawals, while on the same day, Vauld, an encrypted asset lending and trading platform, stopped all withdrawals, transactions and deposits of customers, also because of the recent customer run-out problem.
Earlier on July 1, Voyager Digital, an encrypted asset lending and trading platform, suspended user withdrawals. The company fell into a liquidity crisis last month due to a $665 million loan defaulted by encrypted hedge fund Three Arrows Capital.
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The three platforms are in "difficulty in payment"
On July 4 alone, two encrypted asset lending platforms encountered difficulties in payment.
First Vauld, the Singapore-based platform suspended user withdrawals, transactions and deposits.
"In June 2022, the decline in the cryptocurrency market was triggered by the collapse of Terraform Lab's UST stablecoin, the suspension of withdrawals by Celsius, and the default of loans by Three Arrows Capital." Darshan Bathija, CEO of Vauld, stated in the company's official blog. Conditions, financial difficulties of major business partners have inevitably affected the company, and the current market environment has resulted in platform customer withdrawals exceeding $197.7 million.
In a June 16 statement, Vauld denied any exposure to insolvent Celsius and bankrupt Three Arrows, saying at the time that the firm would continue to "operate as usual." After more than half a month, its promise to customers was broken.
On the day that Vauld suspended withdrawals, Estonia-based crypto asset lending platform CoinLoan reduced users’ withdrawals by a factor of 100 — from $500,000 a day in the past to $5,000.
For platform users, it may be better to limit withdrawals than to suspend withdrawals, but familiar words have appeared again.
CoinLoan declared that it "is probably the only company that is not affected by the controversy over stETH, Luna/UST, Three Arrows Capital, and DeFi protocol issues," and claimed that "the current level of liquidity can meet the needs of our users."
CoinLoan blamed the lower withdrawal amount on competitors operating encrypted lending business, "The turmoil caused by the problems of several other players (BlockFi, Celsius, Voyager, etc.) is affecting the entire industry, resulting in a surge in users withdrawing assets from CoinLoan", The current derating practice is "only a precautionary measure" to "balance the flow of funds and prevent liquidity-related disruptions."
CoinLoan does not disclose the current status of the liquidity of its assets, so it is uncertain whether such claims will stand up to the test. Some KOLs in the encryption circle suggest that users of the CoinLoan platform should not take chances in the case of limited withdrawals, and withdraw from the platform by "withdrawing as much as possible".
Before Vauld and CoinLoan fell into trouble, Voyager Digital, a crypto asset lender and trading platform. The company faced a liquidity crisis last month due to the $665 million owed by Three Arrows Capital. On July 1, Voyager Digital finally announced the suspension of user transactions, deposits and withdrawals.
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Multiple platforms have raised funds before suspending withdrawals
The encrypted asset market has formed a consensus - Terra's thunderstorm with a market value of 40 billion US dollars is the biggest "black swan" event in this round of bear market.
It is like a fuse, which burns and detonates one after another. Risks continue to spread from the suspension of withdrawals on the lending platform Celsius and the breakdown of the capital chain. The serial liquidation and insolvency of the hedge fund Three Arrows Capital in multiple markets have intensified the conduction , as of now, several major cryptocurrency lenders and hedge funds, including CoinFLEX, Babel Finance, BlockFi, Hashed, are facing severe liquidity and repayment problems.
Before the accident, each of these CeFi institutions was called an asset giant whale, and was favored by capital.
Vauld claimed in May 2022 to have over 1 million clients and over $1 billion in assets under management. In July 2021, it raised $25 million in a Series A round led by Peter Thiel's venture capital firm, with participation from other high-profile investment funds including Pantera Capital, Coinbase Ventures, and CMT Digital.
Celsius, which managed $20 billion in assets last year, raised $750 million in a funding round last year and says it has more than 1.7 million clients.
Three Arrows was once considered one of the most successful hedge funds in the crypto world, having grown into a multibillion-dollar company after launching in 2012.
It was only when the crisis came that people discovered that these institutions were connected to each other in terms of business. When a thunder detonated, each of them would make a loud noise. The troubled CeFi platforms began to rescue themselves, including seeking financing and making up for the funding gap, but it seemed useless in the face of market risks. Bankruptcy and sale became the destination they had to face.
On June 17, Hong Kong-based crypto asset lending firm Babel Finance suspended user withdrawals due to liquidity pressures. A month before the company suspended withdrawals, it raised $80 million in a funding round that brought its valuation to $2 billion. It reported 500 customers and an outstanding loan balance of $3 billion at the time.
Voyager Digital, which has been trying to remain solvent amidst the liquidity crisis, received more than $500 million worth of cash and crypto on June 22 from Alameda Research, a market-making firm founded by exchange FTX founder Sam Bankman-Fried. Asset loans to make up for the arrears loophole of Three Arrows Capital. However, judging from the suspension of withdrawals, its liquidity crisis does not seem to be alleviated through financing.
On July 1, the crypto asset lender BlockFi announced that it will be acquired by FTX.US for $240 million and will receive a $400 million rolling line of credit from the exchange. The firm was one of several lenders to liquidate Three Arrows, which lost $80 million in the hedge fund's debacle.
The self-rescue of institutions in crisis continues. As Bitcoin falls below $20,000 again, the crypto bear market is heading for deep water. The risk contagion caused by the Terra crash has not been blocked in July. The CeFi platform involved Maybe not all have surfaced yet.
