Following the over-the-counter (OTC) firm’s Twitter thread on June 14, Cumberland explained on July 5 that “rangebound price action belies a volatile picture below the surface,” while crypto markets consolidated during the past week. Cumberland stressed there’s a growing number of crypto companies feeling financial burdens, and “uncertainty” tied to stressed entities is “hanging over the market like a cloud.”
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.
“This is hardly a novel phenomenon,” Cumberland said. “Excessively levered finance companies have been punished in bear markets for hundreds of years. While this current cycle raises eyebrows because the assets are digital, the underlying economics are no different than the examples in textbooks.”
Meanwhile on-chain, liquidation levels are transparent and comfortably distant from spot. In this sense, [decentralized finance] is fulfilling its promise – forced asset transfers are algorithmic, predictable, orderly, and visible to all.
What do you think about Cumberland’s recent Twitter thread that explains uncertainty hangs over the crypto industry like a cloud? Let us know what you think about this subject in the comments section below.