RIP Voyager

Welcome to The Daily Moon. Global regulators are closing in on Do Kwon. South Korea and the US have agreed to share their investigation on Kwon’s Terra. The two countries will exchange notes on everything that went wrong with Terraform Labs. This will be the first such global collaboration on crypto crime.

It was a good day for the markets, with Bitcoin reclaiming $20,000 levels, and Ethereum holding onto the gains. Nasdaq stayed flat ahead of the June payroll data. Back home, Sensex and Nifty posted marginal recovery amidst buying in auto, FMCG, and financial services stocks.

America’s Got A Soft Spot

The US commodity regulators are warming up to Sam Bankman-Fried. His crypto exchange FTX wants approval for individual investors to use derivatives to place Bitcoin bets using leverage. This means crypto users can directly deal with FTX instead of involving a broker. Evidently, brokers are displeased.

What’s the problem?So far, investors had to go through a broker to invest in crypto derivatives. Bankman-Fried wants to cut the middlemen. The Commodities Futures Trading Commission is considering his proposal. However, legacy players call this risky. This is because users would post margin requests directly to FTX. Here:

1. The exchange would monitor markets 24/7, 365 days.

2. It will settle users’ profits and losses every 30 seconds.

3. If a user falls short of the margin, FTX will begin to close out their trades.

4. A large market turn would trigger auto liquidation.

This means that naïve investors could lose their funds overnight if there is a big movement in crypto prices. FTX has said that it will alert investors during such incidents, but not everyone is convinced.

Tax breaks While we are on the US crypto market, most of the US states are now reconsidering the plan for accepting tax payments in crypto amidst bear markets. Colorado and Utah are going ahead with their plan, but they’ll have to solve some logistical challenges.

This confusing stance on digital assets reflects in the country’s plan to launch CBDCs, too. Economists and Fed Reserve officials see no urgency to launch a government-backed digital currency.

Voyager Has Sunk

A week after freezing all activity, crypto lender Voyager Digital has filed for bankruptcy. It is the second crypto entity after Three Arrows Capital (3AC) to declare insolvency. Toronto-listed Voyager will use this period to restructure its debt and prepare a turnaround plan.

What caused this?Voyager had suspended all trading activity on July 1 after 3AC collapsed. 3AC owes Voyager more than $650 million. At present, Voyager has assets worth over $350 million in cash and $1.3 billion in crypto.

In addition, it has over 100,000 creditors and between $1 billion to $10 billion in crypto assets. But its list of creditors is growing. Voyager has to pay $75 million to Sam Bankman-Fried’s Alameda and $960,000 to Google.

Insured future?Even though its stock is trading below $1, Voyager believes it can pay back all its unsecured creditors. The promised $250,000 insurance may also be denied.

Voyager had promised insurance for all investor deposits via the government-backed Federal Deposit Insurance Corporation. But here’s the catch. Voyager customer funds held in Metropolitan Commercial Bank are insured only against the Bank’s failure. So if Voyager fails, there’s no insurance.

Recession-free Meta?

The US markets are getting feelers about an impending recession. Analysts, however, claim that Meta Platforms (formerly Facebook) are recession-proof. The belief is that the slowdown has already been reflected in Meta’s stock price. But is it really the outlier?

Going gets tougherMarket experts may call Meta a top buy. But, its CEO Mark Zuckerberg is not very optimistic. He is preparing for a downturn by curtailing hiring. Zuckerberg also hinted at layoffs by stating that “there are a bunch of people at the company who shouldn’t be here”.

Meta has a lot to worry about. The metaverse project is likely to bleed, user numbers are staying flat and crypto ambitions are on a pause.

Any ray of hope?Too early to say. The market will closely watch Meta’s second-quarter earnings on July 27. For now, Meta has impressed Wall Street by keeping expectations low. But sustaining daily users, and therefore user revenue, will be the key to survival.

Inactivity Is Costly

A crypto crash is forcing exchanges to remodel. Europe-based crypto exchange Bistamp will soon start charging users for inactivity. If your crypto sits idle, you’ll be charged a €10 fee per month from August 1 onwards.

What’s the hit?Crypto accounts on Bitstamp with a balance of less than €200 lying idle for the last 12 months will be slapped with this penalty.

However, if there have been any transactions or asset staking, these charges won't apply. To avoid charges, customers need to:

• Buy or sell crypto worth €25/$25/£25.

• Make a deposit in crypto or fiat currency worth €25/$25/£25.

• Stake assets on the Bitstamp Earn platform.

There are others tooBitstamp says that maintaining dormant accounts is expensive, hence the fee. But they are not the only ones doing it. Trading firm eToro charges an inactivity fee of $10 per month from its 26.9 million users if they remain inactive for more than a year.

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