The price of bankrupt Digital Voyager tripled; Understanding leverage selling pressure is the key to this puzzle
The price of the VGX token, or the token of the Voyager Digital platform, which operated in the field of digital currency lending and declared bankruptcy a while ago, has more than tripled in the last three days. One of the experts believes that the reason for this is the short squeeze in the trading market of this token.
To Report CoinDesk, since Tuesday, the price of this token increased by 257% from $0.14 to $0.50 and even reached $1.01 in a period.
CK Cheung, an analyst at Defiance Capital, says in this regard:
As it seems, cryptocurrency pumping of failed projects is now widespread. Similarly, the same thing happened to Terra Network’s Luna Classic Token and Celsius Token. The reason for this price pump is the pressure of borrowing sales.
Short squeeze occurs when short (bearish) traders are forced to exit their trading positions due to a sudden price increase in the market.
Short selling pressure usually occurs for assets such as Voyager Digital that have been in a long-term downtrend. When shorts become too numerous for an asset, usually a small jump in price will cause these traders to exit. This causes an upward trend in prices. The catalyst for this initial price jump can be fundamental news or even a prominent trader who has profited from his short position.
Voyager Digital Token reached its lowest price level of $0.14 earlier this week, thus recording a 97% drop from its November peak of $5.81.
Factors such as widespread stagnation in the digital currency market and concerns about the solvency of digital currency-related companies, especially lending platforms, have affected the price of the VGX token in the first half of this year.
Earlier this month, it became clear that the fear in the market was not unfounded, and the Canada-based lending platform filed for bankruptcy on July 6, citing the default of Three Arrows Capital hedge fund. under chapter 11.
Chapter 11 bankruptcy is a legal process by which a business may file for bankruptcy; But continue with your business under specific supervision.
On the same day, Voyager Digital, which according to data had 60% of its loans funded by Three Arrows Capital (3AC), proposed a price restructuring plan in the hope of creating leveraged selling pressure in the market.
Also read: Celsius will soon declare bankruptcy
According to this plan, investors will receive a share consisting of 4 different assets, including recovered funds from Three Arrows Capital, existing Voyager Capital tokens, shares in the newly restructured company, and other digital currencies.
According to CNBC, it was on Monday that Steve Ehrlich, CEO of Voyager Digital, announced that the proposed plan may change and the exact amount paid to customers will depend on the process of restructuring and recovering the assets of Three Arrows Capital. After this incident, a federal judge in the bankruptcy court of New York froze the assets of Terry Arrows Capital.
In addition to the above, another reason for the VGX token pump is a tweet attributed to MetaForm Labs, which may have caused the initial increase in the price of this token.
Based on this plan, named as “PumpVGXJuly18”, Metaform Labs plans to increase the price by about 7 times compared to the current price of $0.6, targeting a price level of $5. According to Metaferm Labs, the starting time of this plan will be July 18 (July 27). The company’s goal seems ambitious right now, considering the problems Voyager is dealing with.
In addition, such price pump schemes have a bad reputation for market whaling strategies as well as the involvement of fraudsters and trapping small investors on the wrong side of the market.