On July 13, 2022, Celsius Network LLC and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. The third company to do so amid the rapidly escalating bear market cycle.

  • Bitcoin and altcoins are trading up over the last 24 hours despite widespread risk aversion and more negative news from crypto lenders.
  • Celsius Bankruptcy; a safety net or the final nail in its coffin?
  • Michael Barr, a former Ripple adviser, becomes vice chairman for supervision at the Federal Reserve
  • Compass Mining CEO and CFO Resign Amid ‘Setbacks and Disappointments’
  • ‘Short Squeeze’ causes Voyager Digital’s token to increase by more than 250%

Last month, in the face of the recent liquidity crisis, Celsius suspended withdrawals, swap, and transfers between accounts. Then on the 13th of July the crypto company filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court in New York. The motion filed allows the company to continue operating “in the normal course,” so it could pay employees and continue benefits. Celsius has hired Kirkland & Ellis LLP to serve as legal counsel, Centerview Partnersas financial adviser, and Alvarez & Marsal as restructuring adviser.

“This is the right decision for our community and company,” said Alex Mashinsky, Celsius co-founder and CEO. “We have a strong and experienced team in place to lead Celsius through this process. I am confident that when we look back at the history of Celsius, we will see this as a defining moment, where acting with resolve and confidence served the community and strengthened the future of the company.”

Prior to announcing bankruptcy, Celsius fully paid off its remaining debt to the decentralized finance (DeFi) lending protocol Compound, freeing up nearly $200 million of pledged collateral. The firm paid down $50 million to Compound early Wednesday in two instances, which released 10,000 wBTC, $195 million of worth at current prices.

The crypto company which according to published reports has 1.7 million customers, $3.25 billion valuation as of November, $11.8 billion in assets as of May and more than $8 billion in loans to customers. Despite the upbeat statement from Alex Mashinsky which implies a definitive return of the ledning giant, Ryan Preston Dahl, a partner at Ropes & Gray LLP insists that it is still too early to tell whether the decision to declare bankruptcy would enable the company to sink or swim.

Bitcoin Staying Afloat Despite Inflation

On Wednesday, the Labor Department released the CPI, the most widely tracked measure of inflation, showing the highest inflation gauge in four decades. The largest cryptocurrency by market capitalization fell 4.5% in the minutes after the CPI was released, dropping to a 10-day low of $18,919. Several analysts commented on this situation saying a continued increase in inflation could mean bad news for digital currencies as there would be an increased preference for interest-bearing securities.

“The Fed is committed to curbing inflation with aggressive rate hikes, which continues to make lower risk securities that produce yield more and more attractive,” said Brett Sifling, an investment advisor for Gerber Kawasaki Wealth & Investment Management. “This shift in liquidity is a big deal for risk-on assets, as it causes a lot of volatility and the wild price swings we’re seeing in most markets,” he noted. “Bitcoin continues to get more correlated to growth/tech equities, which don’t do too well in this environment,” said Sifling.

In spite of this, BTC has since climbed back, up 2% over the past 24 hours and trading at around $19,700. Ethereum (ETH) rose 4.4% over the past 24 hours. The S&P 500 was down 0.1% and the NASDAQ was up 0.1%.

Michael Barr Becomes Fed Topdog

Michael Barr, who was a key Treasury Department official during the administration of former President Barack Obama, will take over as vice chairman for supervision at the Federal Reserve. The Senate confirmed his nomination on Wednesday in a 66-28 vote.

This position is considered to be one of the most important U.S. regulatory roles. As a US central bank supervisor, He will arrive at the Fed with a significant crypto background, having served on the advisory board at Ripple Labs. When he took that job in 2015 he said that he thought “innovation in payments can help make the financial system safer, reduce cost and improve access and efficiency for consumers and businesses alike.”

However, the crypto industry may not be assured that an unabashed ally is taking the wheel. There’s some record of his crypto doubts,a 2020 paper he co-authored cited research that assets such as bitcoin (BTC) “not only generate huge mining costs, but are also inefficient in their long-run design.”

During his tenure, the Fed is also expected to decide whether to issue a digital dollar – a move that could send shockwaves through the crypto industry. Barr’s academic work has suggested a central bank digital currency (CBDC) could boost the government’s financial inclusion aims. If such a CBDC is produced, its effect on private, dollar-based stablecoins could be profound.

Compass Mining Names Interim Co-presidents and CEOs

Effective immediately, CEO Whit Gibbs and Chief Financial Officer Jodie Fisher have resigned from bitcoin mining hosting and brokerage services firm Compass Mining (CMP). Chief Technology Officer Paul Gosker and Chief Mining Officer Thomas Heller have been named by the board as interim co-presidents and CEOs while a search is conducted for permanent replacements.

The company admitted that due to various setbacks and disappointments, it had derailed from its core value to make mining easy and accessible. Further stating that with this restructuring it plans to regain the goodwill of the company’s stakeholders and the community, as well as deliver on the company’s mission of providing best-in-class service for miners of all sizes.

Voyager Digital’s Tokens’ Astounding Increase

A short squeeze refers to a sharp rally fueled by the unwinding of bearish positions or several sellers rushing to take profits. This explains why bankrupt cryptocurrency lending platform Voyager Digital’s native coin voyager (VGX) , which is in a prolonged downtrend marked by extremely bearish investor sentiment, has more than tripled in value. According to data from CoinDesk, VGX has increased by 257% from $0.14 to $0.50 with prices hitting a high of $1.01 in the past 24 hours.

A suspected trigger for the short squeeze would be a restructuring plan proposed by Voyager Digital. On Monday, Voyager’s CEO Steve Ehrlich clarified that the proposed reorganization is subject to change and the exact amount that the customers will receive would “depend on what happens in the restructuring process and the recovery of 3AC assets.” According to CNBC, a federal judge in the New York bankruptcy court has frozen 3AC’s assets.

The Unpredictable Market

With Celsius filing for bankruptcy, there is hope for its $1.7 million users that the company chose a restructuring rather than a liquidation. The company’s plan looks promising but seeing as Cryptocurrency bankruptcy is an uncharted territory in terms of restructuring practices, many experts are skeptical.