Voyager Announces Significant Exposure to Three Arrows Capital

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Voyager Loan Book Exhibition

Early June 22, 2022, digital travela crypto company that allowed users to deposit on their platform for a return, announced that it had suffered significant losses on loans made to Three Arrows Capital.

Their announcement follows some of our suspicions last week regarding Voyager and their lending counterparties.

Now looking at Voyager’s press release today on 3AC exposure consisting of 15,250 BTC and $350 million USDC, when you mark bitcoin at its value at the end of Q1 you get an approximate value of $1.04 billion or almost exactly the amount lent to counterparties A and B combined. Rookie detective work leads you to discover that 3AC, formerly based in Singapore, moved to the British Virgin Islands last year before moving back to Dubai this spring.

Voyager Digital’s stock price fell on news of the company’s exposure to 3AC.

Unsecured leverage

The last month in the crypto industry should serve as a lesson for both experienced and new entrants. The “yield”, often generated with layers of unsecured leverage on bearer assets, is a ticking time bomb. One of the main reasons why the effects of “contagion” have been so strong is due to this unsecured leverage.

Secured borrowing is one thing: you post to secured bitcoin in order to borrow dollars, and if the BTC/USD exchange rate drops, the borrower must either:

Deposit more guarantees
Repay dollar-denominated debt
Liquidate bitcoin to pay off debt

Unsecured lending and the systemic risk it presents to an entire industry is precisely what bitcoin was created to stop.

“The fundamental problem with conventional money is all the trust needed to make it work. You have to trust the central bank not to depreciate the currency, but the history of fiat currencies is full of breaches of that trust. Banks have to be trusted to hold our money and move it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. — Satoshi Nakamoto