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July 5, 2022

Why Cumberland sees more short-term volatility

Cumberland, a prominent liquidity source for institutional crypto traders, predicts more market volatility as more centralized entities are dissolved.

In a Twitter thread, the trading desk said that the crypto assets of these companies would ultimately be liquidated, a move that is certain to increase market volatility.

The majority of these liquidations will occur off-chain, keeping the majority of traders in the dark about the transfer of assets.

Several cryptocurrency exchanges, including Celsius, Voyager, and Vauld, have banned withdrawals, alleging a severe liquidity constraint. Celsius and Voyager are now undergoing reorganization, which might result in the liquidation of their assets.

Cumberland, which has handled cryptocurrency transactions for a number of significant customers, including Goldman Sachs, said that the lack of transparency around such liquidations may discourage traders from engaging in the market.

According to the trading desk, the present range-bound price movement in the market conceals a considerably more turbulent picture under the surface.

It was also emphasized that the situation is not unique to cryptocurrencies; firms with excessive debt have traditionally suffered losses during weak markets.

The pace at which distressed assets are shifted from the balance sheets of the insolvent onto those of the solvent will influence how quickly markets recover to a healthy condition.


However, the trading desk also acknowledged that DeFi systems provided order and transparency throughout the collapse as expected.

Due to unfavorable macroeconomic circumstances, the value of crypto markets has plummeted this year. Bitcoin and Ethereum are down 58 percent and 69 percent, respectively, since the beginning of the year.

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After suffering significant losses, the market is now hovering at its lowest level since the middle of 2020. However, there are a few variables that might aid in recovery.

In recent months, mounting worries of a U.S. recession have been accompanied by a rush of probable crypto bankruptcy.