A Short Squeeze Causes Voyager Digital’s Native Token to Triple in Three Days
- On July 6, Voyager Digital filed a chapter 11 bankruptcy protection. It cited the insolvency issues of the now-defunct crypto hedge fund, three arrows capital (3AC).
The price of VGX, the native token of Voyager Digital, rose by nearly 300 percent in the last 72 hours. However, a top market analyst believes that a short squeeze may have caused the VGX rally. Between Tuesday, July 12, and today, July 14, VGX’s price has soared from $0.14 to $0.50, an increase of about 257 percent.
Coingecko data shows that the price rose to $1.01 in the last 24 hours. An investment analyst with defiance capital, CK Cheug, said it is becoming a norm to ‘pump’ tokens of insolvent crypto firms. He added that the same happened to CEL (Celsius’ native token) and Terra’s LUNC token.
Voyager Token on Short Squeeze
A short squeeze happens when a token’s price rises sharply because most sellers are taking profits and exiting their positions. Digital assets such as VGX usually suffer from short squeezes when they have been in a downtrend for an extended period. Such prolonged downtrends usually cause many investors to be highly bearish about such tokens or the market in general.
Many holders usually square off their sell trades when there is a huge short-selling of an asset and a slight price increase. Squaring off a sell trade means a trader would sell a certain amount of the asset. Then, reverse the transaction later in the day. Some traders use this trading style hoping to earn a profit.
This move caused a short price bump. The primary cause of this price bump can be fundamental news. However, it mainly occurs when an influential trader profits from a short position. VGX price hit a new low on Tuesday after trading at $0.14. That price represents a 97 percent drop from its price of $5.81 last November.
The decline of the VGX token price since the beginning of the year has been caused by two factors—the liquidity issues of crypto firms, especially crypto lenders, and the general downturn in the crypto market.
An Uncertain Future
On July 6, Voyager Digital filed a chapter 11 bankruptcy protection. It cited the insolvency issues of the now-defunct crypto hedge fund, three arrows capital (3AC), as its reason for the bankruptcy filing. The action confirmed the fears of many market participants and investors over the liquidity issues facing the Toronto-based crypto lender.
The same day after filing for bankruptcy, the crypto lender released a restructuring plan. That plan may have been the catalyst for the recent short squeeze. It is noteworthy that 60 percent of Voyager’s loans are to 3AC. The plan proposes that Voyager customers earn a pro-rata share of assets from four different sources.
They are various cryptos, shares in the restructured company, 3AC repayment funds, and current VGX tokens. Earlier in the week, the lender’s CEO, Steve Ehrich, explained that there could still be a change to the proposed restructuring. He also said events during the reorganization and recovery of 3AC loans will determine the exact amount each customer would receive.
However, a CNBC report states that a New York federal judge has ordered a freeze of 3AC’s assets. In addition, a tweet from a Twitter account (Metaform Labs) may have also triggered the VGX price pump.
Rebecca is a Senior Staff Writer at BitcoinWisdom, working hard to bring you the latest breaking news in the cryptocurrency market. In the words of Elon Musk “Buy stock in several companies that make products & services that *you* believe in. Only sell if you think their products & services are trending worse. Don’t panic when the market does. This will serve you well in the long-term.”
