The Wolf Den #536 - The Voyager Saga Continues
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In This Issue:
The Voyager Saga Continues
Bitcoin Miners Sell, But Have They Fully Capitulated? From IntoTheBlock
Bitcoin Thoughts And Analysis
Legacy Markets
Epic Roundtable Today
FTX Integrates With Ledger
Binance Suspends Bitcoin Trading Fees
Bitstamp Will Not Charge 'Inactivity' Fees
Bitcoin & Ethereum Will Never Die | 99% Of Tokens Will | Jeff Garzik, Co-Founder Of Bloq
My Recommended Platforms And Tools
The Voyager Saga Continues
I have done an extremely deep dive into the Voyager Chapter 11 filing, reading it in its entirety and speaking to lawyers, people close to the situation and others with knowledge of similar proceedings.
I have come to the conclusion that almost everything being presented on social media is purely false interpretation, lack of understanding, or half truth based on facts that are taken out of context.
Your favorite analysts are throwing out random facts and statistics about debts owed and corporate moves that are meaningless without context.
Welcome to the world where everyone is an expert on everything.
I do not blame them, but advise that you dive in yourself and gather as much information as possible before drawing conclusions. The same goes for what you read here.
Everything I am writing here is based on public information that I felt was pertinent. I have no more base information than the public. I have merely sought multiple professional opinions of what has been shared and am sharing then with you.
In Voyager's PR announcements, they have stated that there are up to 20 potential strategic partners taking a look at the company. This would indicate that a buyout, partnership or other restructuring with another entity is on the table. This can happen in a number of ways, so it's not worth taking guesses. Many obviously believe this could be Alameda and SBF, who are now at the top of the unsecured creditors list due to Voyager drawing 75M of the credit line that was provided. That is pure speculation, as there is clearly more than 1 potential interested party.
Remember, Voyager has 1.2M customers and had a vibrant business as a broker dealer before ever offering yield. I started using the platform in 2019 for this reason - because they sourced liquidity from multiple exchanges and it was easy to use. They did not even offer yield, so there was a viable business there without any of the loan nonsense.
So why file Chapter 11? While the word "bankruptcy" is scary, all filings are not created equal. Chapter 11 is specifically for companies that intend to restructure and reorganize and is not appropriate for companies looking to liquidate.
The companies that Voyager has hired to assist, including the lawyers and new advisors and directors are all specialists in restructuring businesses to move forward as viable companies. None of them are specialists in liquidations.
Whatever happens, it is clear that the intention here is for Voyager to move forward, not liquidate. That does not mean they will succeed.
There are a number of reasons to file Chapter 11. The most likely in this scenario is to give Voyager protection while they restructure, and to offer concrete assurances to interested parties that there are no significant claims against the company. All existing liabilities are dealt with during the process, and no new liabilities can be added.
By filing immediately after suspending withdrawals, they closed the window on lawsuits and claims from the public or other counter parties. That means that they are free and clear to restructure and that a company looking to buy them would do so with a clean slate. This is very common and is actually preferred by many companies who are looking to buyout a competitor. It's effectively a rubber stamp from the government for a clean bill of health coming out the other side. It forces due diligence in the process and saves massive headaches for the suitor.
Every person I have spoken to who is an expert in Chapter 11 has immediately referenced a "stalking horse plan."
A stalking horse bid is an initial bid on the assets of a bankrupt company. The bankrupt company will choose an entity from a pool of bidders who will make the first bid on the firm's remaining assets. The stalking horse sets the low-end bidding bar so that other bidders can not underbid the purchase price. This entity can be the company itself.
What is EXTREMELY likely is that the plan presented yesterday by Voyager is their stalking horse. If you have not read it, here is the summary from CEO Stephen Ehrlich.
Twitter is having a field day with this press release, based on the false assumption that this is THE plan, rather than just A plan.
What does this mean for holders?
What is presented above is effectively the worst case scenario, and at current crypto prices would likely result in customers getting 60-70 cents on the dollar on crypto assets held on the platform. This could change if the crypto market moves significantly or if more information on the balance sheet comes to light.
When they filed Chapter 11, they had to present this stalking horse as the scenario where no deal is executed with another company and Voyager proceeds on their own through the process.
There should be NO scenario where customers lose all of their assets based on what is currently available on the balance sheet, so anything you read about your money being completely gone is false. Most analysis of the balance sheet that I have seen is completely incorrect as well.
That said, there are valid questions as to how you will be paid back.
In the worst case scenario presented above, the announcement says the following:
"Customers with crypto in their account(s) will receive in exchange a combination of the crypto in their account(s), proceeds from the 3AC recovery, common shares in the newly reorganized Company, and Voyager tokens."
Not ideal if you are holding BTC, ETH and other assets for the long term. I personally have almost my entire Ethereum stack that I have dollar cost averaged into for years on Voyager, and would hate to be paid back in common stock of a struggling company.
I asked experts how this would likely proceed, and they said that NOBODY knows at the moment. This would be subject to litigation and decided by a court - the court would either order that Voyager liquidate all crypto into USD and distribute cash, or pay back in kind. Remember, this is in the worst case scenario.
The best case scenario is a robust and successful partnership with a willing company and proceeding with a revamped business model. It could happen, although the likely outcome is somewhere in between. There is a reasonable chance that all assets are recovered. Voyager still has a lot of money and crypto.
One of the other major questions I asked was regarding USD held on the platform.
Voyager claims that USD accounts are FDIC insured, up to 250K.
Let’s look at their TOS, copied directly from the site. I am sorry this is long, but every word counts here.
Cash deposited into the Customer’s Account is maintained in an omnibus account at Metropolitan Commercial Bank (the “Bank”), which is a member of the Federal Deposit Insurance Corporation (“FDIC”). Voyager maintains an agreement with the Bank whereby the Bank provides all services associated with the movement of and holding of USD in connection with the provision of each Account. Therefore, each Customer is a customer of the Bank. All U.S. regulatory obligations associated with the movement of, and holding of, USD in connection with each Account are the responsibility of the Bank. For purposes of clarity, any services pertaining to the movement of, and holding of, USD are not provided by Voyager or its Affiliates. Cash in the Account is insured up to $250,000 per depositor by the FDIC in the event the Bank fails if specific insurance deposit requirements are met. FDIC insurance does not protect against the failure of Voyager or any Custodian (as defined below) or malfeasance by any Voyager or Custodian employee. Voyager is not a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) or the Securities Investor Protection Corporation (“SIPC”), and therefore Cash is not SIPC-protected
There is a lot to unpack from this wording specifically, so I will keep it concise.
Cash movements in and out of the account are conducted through Metropolitan Bank
Voyager never holds USD and is merely a pass through
Voyager does not have access to your USD, meaning it has not been loaned
Voyager is not FDIC insured: Metropolitan Bank is
“FDIC insurance does not protect against the failure of Voyager”
Metropolitan Bank released a statement saying that their FDIC doesn’t kick in unless they themselves are bankrupt
To add to the confusion, Voyager has publicly said in the past that, “all customers’ USD held with Voyager is now FDIC insured.” The evidence now shows this is factual but a bit misleading. For your reference, you can see it HERE.
Everyone I spoke to believes that USD held on the platform will likely be safe and accessible in the near future. Again, this is conjecture but makes sense.
It should be clearly stated the USDC is NOT USD. It is a crypto asset like any other and treated as such in these proceedings.
Also, the 250K FDIC insurance is common on any platform. What is missing here is SIPC insurance, which protects against the loss of securities. This is not Voyager's fault. As you know, regulators have never given a concrete definition as to what crypto is classified as, so there's no way to insure those assets.
Welcome to the wild west.
I suggest you read these materials if you are affected:
Blog Regarding FDIC By Voyager
Metropolitan Commercial Bank Letter
It is important that you do your best to gather information on your own, rather than listening to soundbytes on twitter. Again, even what I am writing here is conjecture, and things could change quickly.
I will keep you updated.
Bitcoin Miners Sell, But Have They Fully Capitulated? From IntoTheBlock
In this report, we bring to you the latest in on-chain cryptocurrency analysis. We look at the blockchain directly and analyze balances, transactions, and the overall activity of market participants. This gives us a unique insight into the future of the market.
This section is written in conjunction with IntoTheBlock (ITB). ITB is an intelligence company that leverages machine learning and advanced statistics to extract intelligent signals tailored to crypto-assets. IntoTheBlock tackles one of the hardest problems in crypto: to provide investors with a view of a crypto asset that goes beyond price and volume data.
The Wolf Den research team uses IntoTheBlock to dig deeper and get the most important insights about the crypto market.
Bitcoin Miners Sell, But Have They Fully Capitulated?
Bitcoin miners are feeling pressure from the current market conditions. While Bitcoin’s price is down 40% over the past year, Bitcoin’s hash rate is 86% higher. This means that the total amount of resources contributed to mine Bitcoin and secure the chain have nearly doubled, making mining more competitive.
Via IntoTheBlock’s Bitcoin mining indicators
Despite Bitcoin’s price crashing in the first half of 2022 and late 2021, Bitcoin’s hash rate kept climbing up until early June 2022.
Since this all-time high was set, the hash rate has dropped 30% as the drop below $20k left many miners unprofitable on a per unit basis
The network’s average difficulty has since dropped, but remains twice as high as it was a year ago
This has led to miners selling off some of their Bitcoin holdings in order to cover their costs
Via IntoTheBlock’s Bitcoin mining indicators
Notably, one of Bitcoin’s largest miners Core Scientific sold over 7k BTC for $167 million throughout June.
Since June 1st, the aggregate value of all miners’ holdings has fallen by 20k BTC
From its 2022 high of 2.08M BTC, miner reserves have decreased by 5.3% (101k BTC)
This decrease in miner reserves remains significantly smaller than those seen in previous bear markets: -8.2% in 2014/15 and -9.7% in 2018
The smaller magnitude in the change of Bitcoin miners’ reserves suggests that miner capitulation might not have yet occurred
Bitcoin Thoughts And Analysis
DAILY CHART
It is encouraging to see Bitcoin holding 20K amidst all of the FUD and bad news, but nothing meaningful has really happened from a technical perspective. I shared this pennant/symmetrical triangle yesterday. We need to wait and see which way it breaks.
Simple, right?
Legacy Markets
What to watch this week:
EIA crude oil inventory report, Thursday
Fed Governor Christopher Waller, St. Louis Fed President James Bullard, scheduled to speak, Thursday
ECB account of its June policy meeting, Thursday
US employment report for June, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 1.2% as of 10 a.m. London time
Futures on the S&P 500 rose 0.2%
Futures on the Nasdaq 100 rose 0.4%
Futures on the Dow Jones Industrial Average rose 0.2%
The MSCI Asia Pacific Index rose 1.1%
The MSCI Emerging Markets Index rose 0.9%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro rose 0.1% to $1.0194
The Japanese yen fell 0.1% to 136.12 per dollar
The offshore yuan rose 0.1% to 6.7057 per dollar
The British pound rose 0.3% to $1.1962
Bonds
The yield on 10-year Treasuries advanced three basis points to 2.96%
Germany’s 10-year yield advanced nine basis points to 1.30%
Britain’s 10-year yield advanced seven basis points to 2.16%
Commodities
Brent crude rose 0.1% to $100.80 a barrel
Spot gold rose 0.2% to $1,742.32 an ounce
Epic Roundtable Today
I rarely promote my livestreams in the newsletter, but felt compelled to because of the all star lineup. This conversation will be live at 9:30 AM EST, with Caitlin Long, Jeff Booth, Simon Dixon and Dave Weisberger.
In April, I hosted Caitlin, alongside Mashinsky, Bill Barhydt and Mike Alfred. She flat out confronted Alex Mashinsky and warned of the likely outcome for Celsius. It was prophetic. Now we have her speaking with legends, including Simon Dixon who is working to help restructure Celsius.
This should be incredible.
Of course, Jeff Booth is one of my favorite authors, thinkers and general human beings on the planet.
Just watch it!
FTX Integrates With Ledger
You can now swap over 120 coins on Ledger Live, thanks to a partnership with FTX. In the U.S., Ledger Live's full functionality around swaps was missing but FTX has seemingly filled the gap. U.S. customers don't have the full suite of options, but do have 50 coins to swap with 1200 combinations, a huge improvement. This eliminates the need to take coins off of your Ledger and rely on exchanges or swapping platforms that simply aren't as reliable.
"There is no better combination in crypto than the combined security and ease-of-use brought when FTX and Ledger join forces. Ledger secures 20% of the world’s crypto assets on more than 5 million Ledgers. Combined with FTX, one of the world’s leading crypto exchanges, our new partnership will combine the best of both worlds: low fees when swapping your crypto, with self-custody and world-class security” - CEO of Ledger, Pascal Gauthier.
Binance Suspends Bitcoin Trading Fees
Starting July 8th, , Binance users worldwide will enjoy zero trading fees on Bitcoin and all of its pairs. This huge move comes in celebration of Binance's 5 year anniversary, happening this month. Binance continues to look healthy.
Bitstamp Will Not Charge 'Inactivity' Fees
Bitstamp's announcement to charge inactive users with a 10 Euro inactivity fee per month was met with strong backlash, prompting Bitstamp to change their mind. The fee was aimed at users with less than 200 Euros in their account and at users who haven't been active in one year.
This was a bad idea on many fronts. It's similar to outdated banking tactics that disproportionately impact those who can least afford it.
It's understandable that exchanges want their customers to be "active," but penalizing them after the fact is not a solution.
Bitcoin & Ethereum Will Never Die | 99% Of Tokens Will | Jeff Garzik, Co-Founder Of Bloq
99% of tokens and chains will die, but Bitcoin and Ethereum will prevail. What other tokens and chains will come out on top? Only time will tell. Jeff Garzik, Co-Founder of Bloq and contributor to Bitcoin Core, joined us for an incredible discussion about our future. We talked about the current state of the Metaverse, whether or not crypto is ready to scale, and how humans are exploring further and further into space every single day. Jeff continues to push boundaries as he helps develop infrastructure and applications for Web3 at Bloq.
Why Jeff got in early on Bitcoin
How Jeff helped develop Bitcoin through the open-source process
Satoshi: a self-taught genius
The yin and yang of building on Bitcoin
Autonomous Generalized Intelligence is coming
Our future and a look at Dear Alice by Chobani (https://www.youtube.com/watch?v=z-Ng5ZvrDm4)
Favorite book: Zodiac by Neal Stephenson
Where we stand with the Metaverse
Shitcoins and other sh**ty crypto languages
UI/UX and other crypto problems
Is crypto ready to scale?
99% of chains and tokens will die
Self-regulation
Scams happen everywhere
Guidance vs Enforcement
Passive tribalism and healthy competition
Creating the first open-source satellite
Next up: To The Moon
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.
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