As more and more lenders continue to run into issues and have to suspend withdrawals and/or face insolvency crypto faces a moment that is very similar to what was faced during the 2008/2009 recession. To let these platforms fail and possibly have people lose vast sums of money or allow both players in the industry and possibly legacy finance come in and rescue these companies in distress. Since the list continues to grow and bigger and bigger names are getting involved it really does bring back memories and situations of the Great Recession.
I think that many people, myself included, thought that 3AC and BlockFi’s issues were going to be the peak of the issues and everything was going to settle down more it appears not to be the case. With how big these two companies are it should have probably given the industry more pause than it did when these two companies cracked but it really did not. Looking at the price it appears that it was really already priced in due to the rumors that had been coming out over the last few weeks.
Many people see Coinbase as the exchange that it has however there is another part of it that honestly might be the most important part of it and that is Coinbase Ventures. Coinbase Ventures invests in different projects and tokens taking either an ownership stake or getting a bunch of tokens at a big discount. Well the most recent company to halt withdrawals involves not only Coinbase but also Peter Thiel who has become known as a huge investor in the tech and crypto space as well. Vauld, a crypto lender backed but both Coinbase and Thiel, and based out of Singapore has halted withdrawals after having over $200 million pulled from the platform in the last couple of weeks.
Vauld unlike others crypto companies did seem to see issues coming in the future. In June they had announced plans to lay off 30% of their staff AND something that I typically have not seen is that leadership compensation is being redone due to the companies situation. This means that whatever compensation that they had agreed to when crypto was doing much better is now going to be redone with the company struggling and this is a pretty important thing to see. The company has also brought on new advisors to help it through this and possibly restructure the company. From what I get from all of this information is that maybe the company is not in as dire straights as other are.
By pausing withdrawals now and slimming down the company they might be able to save it and not have it either be liquidated like 3AC is currently undergoing or have to be sold off like BlockFi appears to be even though all of the news about that continues to be mixed. It would be interesting to see if Coinbase or Peter Theil possibly step in to save this lender from going belly up if this continue to look worse and worse for the lender.
The reason why I say this is a critical moment is the industry itself is eventually going to have to decide when enough is enough and to start bailing out these failing platforms. If the decision is made to let them fail and thousands of people lose a serious amount of money it could lead to regualtors being forced to step in. For now it appears everyone is waiting to see what transpires and at least for now that seems to be something that is working. I am of the belief that we need the industry to consolidate to move forwards. We need to better a lot money and investments into products that work and arnt just blowing smoke. Eventually the straw will break the camels back and that will lead to a huge unknown. Right now we seem to be on the edge that is going to decides the next few years and that should make any and every investor a little nervous.
Please know I am not a financial advisor and make sure you do your own research! If you enjoyed this article and would like to further support me below are a few referral links that if you used when signing up I would appreciate it! Also, follow me on Twitter @Cje95_
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