The recovery of the market will determine the speed at which troubled firms liquidate assets in favor of the more successful players in the industry. This opinion was reached by experts of the market maker Cumberland.
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 (@CumberlandSays) July 5, 2022
In their opinion, the situation that has developed in the cryptocurrency market “is no different from examples in textbooks.” Overleveraged financial companies “have been penalized in bear markets for hundreds of years.”
“Uncertainty about the volume and timing of the sale of assets hung over the market like a cloud”, analysts stressed.
If in DeFi the process is transparent, predictable, ordered by algorithms, then outside the network it is confusing, time-consuming and fraught with legal difficulties. The overhang of liquidations will constrain capital raising, reduce liquidity and increase volatility, experts believe.
Earlier in Cumberland, one of the leading stablecoins collapsed.
Recall, Binance CEO Changpeng Zhao said that the bitcoin exchange is in “rescue talks” for more than 50 companies.
Prior to this, the head of FTX had warned of “hidden insolvency” of some trading platforms.
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