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Bitvavo to prefund locked DCG assets worth $296.7M amid liquidity crisis

December 17, 2022No Comments


Digital Currency Group and its affiliates (DCG), which manages $296.7 million (280 million euros) in crypto exchange Bitvavo's deposits and digital assets for off-chain staking services, suspended payments citing liquidity issues amid of the bear market. However, Bitvavo announced that it would pre-finance the locked assets, avoiding DCG-induced service disruption for users.

With users proactively exploring self-custody options as a means of safeguarding their funds, an acute liquidity crunch is expected to loom over exchanges. DCG cited liquidity problems when it suspended payments, temporarily preventing users from withdrawing their funds. Bitvavo, on the other hand, decided to pre-fund the locked assets to ensure that none of its users are exposed to DCG liquidity problems.

โ€œThe current situation at DCG has no impact on the Bitvavo platform,โ€ the post said. advertisement since the company did not guarantee any interruption of service to its users. According to Bitvavo, DCG intends to share a plan to repay outstanding deposits over time.

In addition, Bitvavo maintains that DCG's debt will not have a negative impact on its day-to-day operations, as the company "has been making a profit since its inception and is in a strong financial position." The company further secured the status quo even if DCG reneged on its end of the deal.

Bitvavo manages nearly $1.7 billion (โ‚ฌ1.6 billion) in deposits and digital assets, which are held 1:1 and fully redeemable by users.

Related: Bitcoin Takes Liquidity Near $17K as US Dollar Shows Weakness Ahead of CPI

Due to the massive outflow of funds from exchanges, Binance, the crypto exchange with the highest trading volume, suffered from decreased liquidity.

According to Nansen technician Andrew Thurman, the drop in liquidity may have been caused in part by the exit of the big market makers from the stock market.