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Voyager has become the latest digital-asset domino to fall, with the Toronto-listed broker and lender filing for Chapter 11 bankruptcy late on Tuesday.
Its descent into restructuring came less than a week after it suspended trading and prevented customers from withdrawing funds. Voyager had suffered losses of more than $650mn on a loan to Singapore-based Three Arrows Capital, the failed crypto investor. Three Arrows had bet heavily on the stablecoin Terra, which collapsed in May.
Voyager said in the filing it had more than 100,000 creditors and liabilities of between $1bn and $10bn. It fell into bankruptcy in spite of a rescue loan last month from Alameda Research, the trading firm controlled by Sam Bankman-Fried, founder of the FTX cryptocurrency exchange.
Today’s Big Read identifies parallels for the crypto crash with the dotcom bust in 2000. The total value of all cryptocurrencies peaked in November last year before falling around 70 per cent, cutting $2tn from their value. In the eight months after dotcom stocks peaked in early 2000, publicly traded internet companies are estimated to have lost $1.7tn, or 60 per cent of their value.
That bubble popping led to a more stable and lasting tech revolution, but a growing chorus of critics in the tech world argue that — unlike with the dotcoms — the tech underlying crypto has no redeeming features at all.
Economists and central banks are similarly unimpressed. Martin Wolf looks at the conclusions of the Bank for International Settlements’ annual report, which says that the crash shows that cryptocurrencies are objects of speculation rather than stores of value. That also makes them unusable as units of account. It notes: “The prevalence of stablecoins, which attempt to peg their value to the US dollar or other conventional currencies, indicates the pervasive need in the crypto sector to piggyback on the credibility provided by the unit of account issued by the central bank. In this sense, stablecoins are the manifestation of crypto’s search for a nominal anchor.”
Sadly, the victims of the collapse in prices are often those who can least afford such losses. While their households on average hold less wealth, a quarter of black American investors owned cryptocurrencies at the start of the year, compared with only 15 per cent of white investors, according to a survey by Ariel Investments and Charles Schwab. Black Americans were more than twice as likely to purchase cryptocurrency as their first investment, reports Taylor Nicole Rogers in New York.
“[Black Americans] do not want to be left behind again,” one such investor tells her. “As far as I can tell, the black community sees crypto as a way to even the playing field and get in the game before the gatekeepers prevent others from participating.”
Prominent black Americans such as film-maker Spike Lee have promoted crypto to their communities. Lee appeared in commercials for crypto ATM operator Coin Cloud last year, saying that “old money is not going to pick us up; it pushes us down” and “systematically oppresses”, whereas digital assets are “positive, inclusive”. As many have since learned to their cost, they are also incredibly volatile and risky.
The Internet of (Five) Things
1. Meta presses ahead with NFT plans
Facebook parent Meta is pressing ahead with plans to roll out access to digital collectibles to its 3bn users despite the crash in crypto asset prices. In his first interview in the role, Meta’s new head of fintech Stephane Kasriel told the FT the company would not “in any way” adjust its plans around so-called non-fungible tokens. Our digital assets correspondent Scott Chipolina says crypto evangelists are hoping for an NFT utopia in which the tokens will bridge the gap between our online and real-world lives.
2. Amazon reaches EU antitrust deal
Amazon will share more data with rivals and offer buyers a wider choice of products, as part of a deal with EU antitrust regulators that will close two of the most high-profile probes in Brussels. The news came as the UK competition watchdog said it was investigating Amazon over concerns it may be undermining rivals on its platform. Also, an amendment to the UK’s online safety bill on Wednesday gives powers to order tech companies to redesign their platforms and impose fines if they fail to police child sexual abuse material.
3. JET shares Grubhub stake
Amazon has agreed a deal that could end with it taking a 2 per cent stake in Grubhub, the US business of Just Eat Takeaway, as part of a wider agreement with the online food delivery group. JET shares rose 14 per cent on the news. It has faced criticism over last year’s $7.3bn purchase of Grubhub, but Lex says the deal is less substantial than JET investors might hope.
4. Newport Wafer decision delayed
The British government has delayed for another two months its final judgment on whether to allow the acquisition of Newport Wafer Fab, Britain’s largest semiconductor plant, by a Chinese company. The move comes despite the head of the company publicly calling on Tuesday for a rapid decision to end the cloud of uncertainty hanging over it.
5. Financial system too dependent on Big Cloud, says BIS
The Bank for International Settlements has concerns about cloud computing as well as crypto. In a paper published on Tuesday, the central banker’s central bank argues that a growing reliance among financial institutions on cloud computing software supplied by a handful of companies could have “systemic implications for the financial system”, reports Alphaville.
Tech tools — Ten tennis gadgets
While Wimbledon still has you in its grip, consider these 10 new tennis gadgets served up by FT Globetrotter. They include the Saber, a tennis racket with a shrunken head that trains you to hit the ball on the “sweet spot”, the Slinger Bag ball machine and the SwingVision shot-tracking and analysis app.