Voyager bankruptcy rocks true believers

Crypto-investors are known for their devotion, but their self-confidence bursts when the recent company collapse rages the industry.

News that customers of the bankrupt broker Voyager Digital Ltd. probably will not get back all the money, has struck a new kind of fear among those already whipped by the sector’s rapid declines.

Crypto-traders often shrug their shoulders at large losses, arguing that they will stay long-term and expect prices to pick up again. But for investors who relied on Voyager with their retirement savings, down payments and emergency cash, the prospect of their investments being gone forever is a wake-up call for those who thought major trading platforms offered some form of security.

Aaron Selenica, 21, says he “fell into cryptocurrency” last fall after hearing about Bitcoin from his friends and joining the University of Connecticut’s crypto club. He saw ads for Voyager at the school’s basketball games and eventually invested around $ 15,000 in Bitcoin on the platform.

Now his holdings are worth around $ 6,900, and he doubts he will even be able to get them back. He knew that investing in crypto came with risk, but he never expected the platform to collapse.

“It feels like I was robbed,” he said. “I just do not understand how this can be legal. I’m not going to invest in another platform. I’m done with crypto. “

The recent cryptocurrency plunge, with Bitcoin down around 70% from the top, is creating widespread financial problems for companies involved in space. Lenders such as Celsius Network, Babel Finance and Vauld have suspended withdrawals, while companies such as Coinbase Global Inc. are cutting jobs. The Voyager implosion is the latest debacle is what is now called a crypto winter.

Broken system
“This type of downside risk can be quite brutal,” said Mike Bailey, research director at FBB Capital Partners. “In some ways, when investors suffer from this type of loss, just as when a bond goes to zero, it can feel like the system is broken. In this case, investors may believe the impression that the system has failed, which leads to a desire to quit. ”

Voyager has just filed for bankruptcy and many legal issues remain unanswered. But the company made it clear in its bankruptcy plan that account holders will be “weakened” by the Chapter 11 process, meaning they are unlikely to get back everything they owe. The platform has around $ 1.3 billion in cryptocurrencies.

Crypto traders who can still get their money from platforms do so quickly. The total balance on stock exchanges has fallen more than 20% from a January 20 high, according to Glassnode. Meanwhile, chain activity for Bitcoin had fallen 13% in early July from its peak in November.

For Telvin Hodo in Georgia, not having access to the money in the Voyager account could jeopardize his recent home purchase. The 29-year-old teacher invested around $ 11,000 last year on the platform in coins such as Bitcoin, Dogecoin and Polkadot, along with some stack coins. Now the value of his holdings has dropped by about half, and he does not even have access to any of the money he needs for prepayment and closing costs for his house.