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DeFi and crypto firms which have declared bankruptcy in last two years owing to global recession and inflation.
The young cryptocurrency industry has been devastated this year by the effects of the global recession and the worst inflation in more than 40 years, which have unleashed a severe crypto winter that has driven once-high-flying companies into bankruptcy and investors into panic-selling mode. Nearly $2 trillion in market value, billions of dollars in frozen funds, and thousands of jobs have all been lost as a result of the unrest, but these losses could only be the beginning of the storm. During the pandemic, low interest rates and government stimulus programmes drove up cryptocurrency prices, but the Federal Reserve’s decision to tame inflation by raising interest rates has since battered investor confidence, ushering in some of the biggest losses in the history of the cryptocurrency market. The cryptocurrency market saw its worst first half ever after reaching a record value of almost $3 trillion in November 2021, plunging more than 70% through July. According to CoinGecko, the market has since increased by roughly 33%, but it is still down by more than 60% from its high. The DeFi and crypto industries have experienced significant growth, however the current coin meltdown has devastated the financial standing of numerous crypto companies. The following cryptocurrency businesses have lately had financial issues.
In February, Compute North announced a $385 million capital investment that was made up of a $85 million Series C equity round and a $300 million debt financing. However, it failed due to miners’ struggles to subsist in the face of falling bitcoin (BTC) prices, rising power prices, and record mining challenges. The filing is anticipated to have detrimental effects on the sector. One of the biggest data centre providers for miners is Compute North, which also has other agreements with other bigger mining firms.
On Monday, Vauld, a Singapore-based cryptocurrency loan and investment company with operations in India, declared that it has stopped accepting withdrawals and deposits from its more than 8, 00,000 customers. This information was first reported by Business Today. In a blog post, Vauld’s CEO Darshan Bathija said that the company was facing “financial issues” as a result of the unpredictable market conditions. The CEO also disclosed that over $197 million had been taken out by investors in the previous three months.
The organization responsible for the most recent crypto meltdown was Terraform Labs. They developed the algorithmic stablecoin TerraUSD, which became de-pegged from the US dollar and caused the crash of Terra Luna, another ecosystem token, sparking a large sell-off in the cryptocurrency markets. The reconstruction of TerraUSD such that it is backed by reserves rather than relying on an algorithm to preserve its 1:1 dollar peg was part of the “recovery plan” that Terra co-founder Do Kwon revealed in May.
The American cryptocurrency lender announced its bankruptcy filing on July 6. Voyager reported having over a million creditors, assets worth between $1 billion and $10 billion, and liabilities in the same range in their Chapter 11 bankruptcy case.
Three Arrows Capital (3AC)
Just two days after getting a notice of default on a cryptocurrency loan from lender Voyager Digital for failing to make payments on an approximately $650 million crypto loan, the Singapore-based cryptocurrency hedge business declared bankruptcy on June 29. On July 1, the business submitted a petition under Chapter 15 of the US bankruptcy code asking for protection from its creditors. This part of the legislation enables foreign debtors to protect their assets located in the United States.
Celsius Network also suspended withdrawals and transfers last month due to “extreme” market conditions. They also hired consultants in preparation for a future bankruptcy filing. The American-Israeli business reportedly disclosed on July 4 that a quarter of its workers had been let go.
The Hong Kong-based cryptocurrency lender stated on June 17 that it had temporarily halted crypto-asset withdrawals as it scrambled to reimburse consumers. According to the company, “Babel Finance is suffering unprecedented liquidity issues due to the current market situation,” emphasizing the severe volatility of the market for cryptocurrencies.