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The crypto market is going through a very tough time right now, and the fall is affecting more than just investors. The crypto crisis, which was already curtailing mining operations around the world more effectively than any government, is also affecting overlapping businesses. The recent digital travel (TSX:VOYG) bankruptcy is an example.
Voyager recently filed for Chapter 11 bankruptcy in the United States. This allows him to stay in business while limiting his debt load and is considered one of the most complex forms of bankruptcy in the United States.
It is important to understand that this situation was triggered by more than the decimated state of the crypto market. It was mainly triggered by Three Arrows Capital, a Singapore-based crypto hedge fund that defaulted on a roughly $650 million loan it took out from Voyager Digital.
Whatever the catalysts that led to this seemingly healthy company, which has approximately $1.3 billion in crypto assets on the platform and $350 million in cash, the bankruptcy filing, the consequences for Voyager and other crypto businesses will be disastrous. Investors strength start withdrawing their investments in crypto companies, even if they have to suffer huge losses just to get back some of their investment.
However, it is a good idea to assess the market before taking drastic action. And if you have a good appetite for risk, you can even invest in current crypto volatility for unprecedented gains.
The first crypto asset you should watch is the crypto leader itself: Bitcoin (CRYPTO: BTC). After a slight recovery in recent days, the crypto is currently trading at over $28,000 per unit. The current reprieve could be just that, a small reprieve from the long-term crisis that Bitcoin is destined to weather, or it could be a sign of a real recovery.
It’s too early to tell, so it’s a good idea to keep an eye on Bitcoin instead of buying it at a discount or selling it at a loss. It is also important to note that other cryptocurrencies like Ethereum and Dogecoin rallied stronger than the leader. If Bitcoin remains above the US$20,000 mark or hits a new milestone like US$25,000, the uptrend could gain a lot of momentum.
A crypto company
Galaxy Digital Backgrounds (TSX:GLXY) is quite different from Voyager in its business model, even though it is equally exposed to the crypto ecosystem. It is a diversified crypto company engaged in five different crypto-related businesses including mining and asset management. Assets under management are just over $1.7 billion and he has developed an impressive network of B2B partners.
The company is getting a pretty aggressive discount and undervalued. It is currently trading at an 86% discount from its peak and the price-earnings ratio is 2.67.
The odds of it declaring bankruptcy might be slightly lower than Voyager Digital, thanks to its integration into the crypto market and its business model. And if a crypto recovery triggers the stock’s rally (even if it’s a little delayed), it can deliver more than sevenfold growth just by hitting its former high.
Even investors with good risk tolerance might find crypto investment dangerous right now. However, this is also the time when fortunes are made. The current crypto crisis and, as a result, the current downfall in publicly traded cryptocurrencies has created strong growth opportunities above and beyond marketing. But the risk of losing everything also exists.