Crypto firm Cumberland said the market recovery will depend on how quickly distressed assets can be transferred from troubled companies to safer ones.
The company stated that assets belonging to these companies need to be liquidated to offset outstanding debts, and this has a huge impact on crypto prices.
“Uncertainty over the size and timing of these asset sales hangs like a cloud on the market.”
Due to market conditions, some crypto companies began to experience significant difficulties. A month after Terra’s collapse, crypto lending platform Celsius announced that it was halting withdrawals for its customers. Other crypto lending companies have taken similar measures.
After this event, market conditions worsened after crypto hedge fund Three Arrows Capital, BlockFi and Voyager Digital were liquidated by several crypto lending platforms.
According to Cumberland, any market recovery will depend on how the assets of the bankrupt firms are handled.
“Broad and opaque off-chain liquidations will cause people to hesitate when investing. This reduces liquidity and increases volatility.”
