Following an OTC (over-the-counter) firm Twitter thread on June 14, Cumberland explained on July 5 that while crypto markets consolidated over the past week, “range-bound price action below the surface belies an unstable picture,” he explained. Cumberland highlighted the growing number of crypto firms feeling the financial strain and said that the “uncertainty” associated with stressed entities is “hanging over the market like a cloud.”
OTC firm Cumberland said the market will return to health once distressed assets are transferred from insolvent to insolvent
In mid-June, cryptocurrency OTC trading desk Cumberland, a subsidiary of DRW, explained that it witnessed significant volume on June 13. In fact, the company’s previous yearly high was recorded on May 13, and the June 13 volume was 30% higher than the mid-May high. Recently, Cumberlandwroteabout the Securities and Exchange Commission’s (SEC) rejection of Grayscale’s spot exchange-traded fund (ETF) bid. Cumberland also spoke about the Federal Reserve, Fed Chairman Jerome Powell, inflation, the recession, and today’s macroeconomic backdrop.
The next day, DRW partner and Cumberland global head Chris Zuehlke appeared on CNBC toexplain in detailwhy he believes the downturn is a sign of market maturity. A few days later, Cumberlandpublished a threaddiscussing the recent financial woes spreading to crypto companies. Cumberland noted that while the market is quiet, things could become volatile again due to burdensome crypto firms “stopping withdrawals, cutting jobs, and hiring restructured firms.” Cumberland added:
At some point, the assets of these companies will need to be liquidated to partially offset their outstanding liabilities. Uncertainty about the size and timing of these asset sales hangs over the market like a cloud.
Cumberland: “Overly leveraged financial companies have been punished in bear markets for hundreds of years.”
{2022} thousands of crypto employees were let go from many of the well-known crypto asset and blockchain companies. Companies that have cut staff include Coinbase, Gemini, Etoro, Robinhood, Bitso, Crypto.com, 2TM, and Buenbit. Crypto lender Celsius suspended withdrawals on June 12, and Voyager also suspended withdrawals on its platform just recently. Crypto firm Vauld has suspended withdrawals, and several firms are considering working with restructuring firms. Additionally, billion dollar crypto hedge fund Three Arrows Capital (3AC) has filed for Chapter 15 bankruptcy after various sources detailed that 3AC is facing a major liquidation.
“This is hardly a new phenomenon.” Cumberland said. This current cycle is frowned upon because the assets are digital, but the underlying economy is no different than a textbook example.”
Cumberland’s Twitter thread explains that behind the scenes and off-chain, financial struggles are less transparent. The OTC firm’s remarks are similar to comments made by FTX CEO Sam Bankman-Fried on June 19, when he said that issues such as the3AC meltdown “could not have happened with a transparent on-chain protocol.” Cumberland remarked that “participants will be hesitant to commit capital as long as a large and opaque off-chain clearing stream looms in the background. This will reduce liquidity and increase volatility.” Cumberland concluded by stating.
On the other hand, on-chain, clearing levels are transparent and comfortably off the spot. In this sense, [decentralized finance] delivers on its promise. Forced asset transfers are algorithmic, predictable, orderly, and visible to everyone.
What do you think about Cumberland’s recent Twitter thread describing uncertainty hanging over the crypto industry like a cloud? Let us know what you think about the subject in the comments section below.
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