Cumberland flags risk of asset liquidations by troubled firms

Market recovery will determine how quickly the assets of troubled firms are liquidated to the benefit of stronger players in the industry, according to Cumberland, the market-maker.

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 view, the situation in the crypto markets is “no different from textbook examples.” Financial firms with excessive leverage “have been punished in bear markets for hundreds of years.”

“Uncertainty regarding the volumes and timing of asset sales has hung over the market like a cloud,” — the analysts noted.

If the DeFi process is transparent, predictable and algorithmically ordered, off-chain it is tangled, time-consuming and fraught with legal complexities. The looming liquidation burden will deter capital-raising, reduce liquidity, and amplify volatility, the experts say.

Earlier, Cumberland allowed обвал одного из ведущих стейблкоинов.

Binance CEO Changpeng Zhao said the bitcoin exchange is in «переговоры о спасении» более чем 50 компаний.

Earlier, FTX head Sam Bankman-Fried warned of “hidden insolvency” among some trading platforms.

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