Crypto lender and exchange Vauld is the newest to fall into disarray at the behest of the bear market. Continuing a handful of weeks chock full of losses, layoffs and liquidity crises, the company is halting all withdrawals from its platform. As Vauld spins out of control, though, it looks like it could be saved by Nexo through acquisition.
Earlier this week, the global market capitalization of the crypto industry dipped below $900 billion for the first time since January of 2021. Investors have gotten to see just how unstable even the world’s largest projects can be at any time. The collapse of the Terra Classic (LUNC-USD) network — at the time, the eighth-largest coin in the world — has gotten the attention of buyers around the world.
In the aftermath of this event, a massive outflow of money from the market is taking place. Hundreds of millions of dollars is leaving the space every week; late-June saw a single-week outflow of over $423 million.
Some exchanges are suffering at the hands of investors with lower tolerance for risk. As the volatility of crypto continues to rear its head, investor outflows mean lower liquidity for these platforms. Indeed, a great deal of platforms rely on individual liquidity farmers to fuel their trading floors, rather than institutional investors.
One such platform is Vauld, a Singapore-based crypto exchange that has been stirring up controversy recently. The platform is one of several in recent weeks to prevent individuals from pulling their assets from its floor — a move meant to help the exchange preserve its liquidity. As the company continues drastic measures, though, it looks to be receiving a lifeline.
Vauld Prepares Merger With Nexo
Vauld executives justify the recent freeze on withdrawals by pointing out an outflow of nearly $200 million from the platform since mid-June. This comes just weeks after the company slashed its workforce by 30%. The firings are another part of the effort to cut operating costs and prepare for further hardship.
The events are also a likely factor in a recent decision by the Monetary Authority of Singapore (MAS) to pursue more aggressive regulations of the crypto market. Just hours after Vauld’s asset freeze, the MAS chair announced it is pursuing restrictions on retail participation in crypto. Given Vauld’s reliance on individual liquidity farmers, the event could very well be the catalyst for this push.
Luckily for the company, other crypto platforms seem keen on keeping Vauld afloat. Nexo, another crypto lending outfit, is offering to fully acquire Vauld in an effort to rescue it from its distress. The company is tendering a term sheet this week to buy up to 100% of Vauld.
Vauld is signing the term sheet, making the acquisition seem like a real possibility. Indeed, the acquisition could be the fastest way out of its liquidity freeze; it would quickly allow Vauld’s 800,000 members a chance to move their assets at-will once again. Nexo, a Swiss company, receives the benefit of expanding into the Southeast Asian market with the deal. Late last month, it was reported that Nexo teamed up with Citigroup (NYSE:C) to help it buy out its rivals during the downturn.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.