Cumberland Says Financially Burdened Crypto Firms Are ‘Hanging Over the Market Like a Cloud’

Following the over-the-counter (OTC) firm’s Twitter thread on June 14, Cumberland explained on July 5 that “​​rangebound price action belies a volatile picture below the surface,” while crypto markets consolidated during the past week. Cumberland stressed there’s a growing number of crypto companies feeling financial burdens, and “uncertainty” tied to stressed entities is “hanging over the market like a cloud.”

OTC Firm Cumberland Says Markets Will Return to a Healthy State Once Distressed Assets Are Transferred From the Insolvent to the Solvent

In mid-June, the cryptocurrency OTC trading desk Cumberland, a subsidiary of DRW, explained how it witnessed significant volume on June 13. In fact, the company recorded a previous year-to-date high on May 13, and the volume on June 13 outpaced the mid-May high by 30%. In recent times, Cumberland wrote about the Securities and Exchange Commission (SEC) rejecting Grayscale’s spot exchange-traded fund (ETF) bid. Cumberland also spoke about the Federal Reserve, Fed chair Jerome Powell, inflation, a recession, and today’s macroeconomic backdrop.

The following day, DRW partner and the global head of Cumberland, Chris Zuehlke, appeared on CNBC and detailed why he thinks the downturn is a sign of a maturing market. A few days later, Cumberland published a thread that discusses the recent financial hardships spreading across crypto companies. Cumberland noted that while markets are quiet, things could get volatile again due to burdened crypto companies “halting withdrawals, reducing headcount, and hiring restructuring firms.” Cumberland added:

The assets of these companies will, at some point, need to be liquidated in order to partially offset their outstanding liabilities. Uncertainty around the size and timing of these asset sales is hanging over the market like a cloud.

Cumberland: ‘Excessively Levered Finance Companies Have Been Punished in Bear Markets for Hundreds of Years’

In 2022, thousands of crypto employees have been let go from a slew of well known crypto-asset and blockchain companies. Firms that have reduced staff include Coinbase, Gemini, Etoro, Robinhood, Bitso,, 2TM, and Buenbit. The crypto lender Celsius halted withdrawals on June 12, and Voyager just recently paused withdrawals on the platform as well. The crypto firm Vauld has stopped withdrawals, and a few companies are contemplating working with restructuring firms. Moreover, the billion-dollar crypto hedge fund Three Arrows Capital (3AC) has filed for Chapter 15 bankruptcy after various sources detail that 3AC faced massive liquidations.

“This is hardly a novel phenomenon,” Cumberland said. “Excessively levered finance companies have been punished in bear markets for hundreds of years. While this current cycle raises eyebrows because the assets are digital, the underlying economics are no different than the examples in textbooks.”

Cumberland’s Twitter thread explains that behind the scenes and off-chain, the financial hardships are not very transparent. The OTC firm’s statement is similar to the commentary FTX CEO Sam Bankman-Fried made on June 19, when he said issues like 3AC’s meltdown “couldn’t have happened with an on-chain protocol that was transparent.” Cumberland remarked that “as long as large and opaque off-chain liquidation flows are looming in the backdrop, participants will be hesitant to commit capital. This reduces liquidity and increases volatility.” Cumberland concluded by stating:

Meanwhile on-chain, liquidation levels are transparent and comfortably distant from spot. In this sense, [decentralized finance] is fulfilling its promise – forced asset transfers are algorithmic, predictable, orderly, and visible to all.

What do you think about Cumberland’s recent Twitter thread that explains uncertainty hangs over the crypto industry like a cloud? Let us know what you think about this subject in the comments section below.

Earning Passive Income With Crypto

Related Posts

Fractional NFT Markets Slide 76% in Value in 7 Months, Diced-up Doge NFT Still Leads the Pack

When non-fungible token (NFT) collectibles became popular, the fractionalized NFT market grew past the $200 million range seven months ago in December 2021. Since then, the fractionalized…

Bored Ape Yacht Club (BAYC) NFT Sales Test New Higher-Low Slipping More Than $290M

Similar to more than 90% of NFTs, BAYC saw a significant reduction in sales volume due to negative market sentiment during the seventh month of the year. …

Crypto Use in Metaverse Could Threaten Financial Stability, Says BoE

The prospective widespread use of cryptocurrencies within a fully developed metaverse could pose a systemic risk to financial stability, according to Bank of England researchers. Were the…

Troubled CoinFLEX Files for Restructuring in Seychelles

On Tuesday, the troubled Cryptocurrency exchange, CoinFlex, filed for restructuring in a Seychelles court to resolve a shortfall due to a counterparty failing to make a margin…

Elon Musk Sells Tesla Shares Worth Nearly $7 Billion — Plans to Buy TSLA Stock Back if Twitter Deal Falls Through

Elon Musk has sold nearly 8 million Tesla shares worth almost $7 billion. “It is important to avoid an emergency sale of Tesla stock” if Twitter forces…

Citadel CEO Ken Griffin Spills Beans on Why He Outbid ConstitutionDAO

Citadel CEO Ken Griffin opens up on what prompted him to outbid ConstitutionDAO last year to obtain a rare copy of the U.S. Constitution. The prized document…