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Vauld Failure Shocked the World! Singapore headquartered crypto company Vauld released a statement that it was suspending all deposits, trades and withdrawals on its platform. So what led Vauld to take such a drastic step?
Before we begin with the topic lets first understand Crypto currency
So what is Cryptocurrency?
- Cryptocurrency is a digital or virtual currency that is secured by Cryptography. Cryptocurrency is not legal in India. Whenever Cryptocurrency is discussed the most important part is which cryptocurrency is successful.
- The cryptocurrency was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto. The currency began use in 2009 when its implementation was released as open-source software.
- Cryptocurrency have the potential to reshape the financial world. Well Cryptocurrency has advantages and disadvantages .
- Best examples of cryptocurrency used today are Bitcoin, Ethereum, Litecoin, Ripple etc.At present the biggest disadvantage of the cryptocurrency is that it is unsecured and also many cryptocurrency have failed miserably.
- Crypto currency crimes are on rise of which scams include Fake websites, Virtual Ponzi Schemes, Celebrity Endorsements.
- Also Cryptocurrency are not government backed currencies. It is completely driven by market demand and supply. This creates a wild swing that produce significant gains for investors or big losses.
- And cryptocurrency investments are subject to far less regulatory protection than traditional financial products like stocks, bonds and mutual funds.
Vauld Suspends transactions
- The Singapore based crypto platform Vauld decided to suspend all withdrawals, deposits on the platform with immediate effect. The company took this decision as it is facing financial challenges despite its best efforts.
- This is due to combination of circumstances such as volatile market conditions, the financial difficulties of key partners, current market climate which led to withdrawals in excess of $197.7 m since 12th June 2022.
- Vauld is a crypto lending platform that allows users to earn fixed deposit interest on their crypto as soon as the funds are deposited. The interest was calculated daily and users were able to make the pay-out weekly. Earlier users were able to withdraw the funds immediately.
- Vauld was incorporated in the year 2018. It encouraged for long term investment by offering SIP options and higher interest on crypto holdings.
- Company used the funds to increase its Asset under Management by 10x and user base by 40x. Majority of the Vauld users were Indians who accounted for 20% of the AUM & contributed to $ 10-15 million volume on the platform.
- Indians are fans of Fixed Deposits and the higher interest rates offered attracted the depositors. Unlike the Banks which offered only 5% Rate of Interest, Vauld offered 12.68% interest which itself is an eye-popping one.
- So Vauld Company took the Bitcoins and promised to pay in return on future specific dates. In the mean while they convert this Bitcoins in to cash and lend this money to individuals who are looking out for finance and in return expected the Rate of Interest along with principal. In return the borrower kept cryptocurrency as collateral.
- So where the problem occurred? These transactions carry a huge risk wherein the Borrowers can default at any time and most importantly as crypto currency value depends on market demand and supply, at any point of time the value can go down.
- Vauld earned very little or brokerage for all such transactions. It could not save itself from the macroeconomic downtrends including the crypto winter, Luna collapse, Celcius sage and bankruptcy of Three Arrows Capital.
- This led to the panic among users and there was a huge withdrawal of funds from various exchanges.
The Road ahead for Vauld
- London based crypto Lending firm, Nexo, has shown its interest in acquiring fellow lender and crypto exchange Vauld for a deal of 100% stake in the company. Nexo aims to become global company in Asia. Nexo has 100% liquidity to meet all its financial obligations.
- Investors are seeing a bit relief , about the acquisition however such process are time consuming and requires lot of due diligences.
Vauld’s Failure Message for the Investor-ALERT
A – Avoid Bad Trade or Investment Strategy :
L – Large Investment in one basket to be avoided
E – Expect the Unexpected
R – Remain careful around mobile wallets
T – To Perform all due diligence
A- Avoid Bad Trade or Investment Strategy
A common mistake for beginner cryptocurrency investors is joining what is known as a “pump and dump” group. Certain social media communities or ‘gurus’ may even promise investment tips regarding a particular coin. One should avoid these types of places at all costs; when travellers go down these roads, they don’t often come back.
L – Large Investment in one basket to be avoided
Common investment wisdom prevails when it comes to cryptocurrency investment: diversification is key. Just as financial advisors recommend taking positions in multiple types of stocks and other investments, diversification is also essential for any healthy cryptocurrency portfolio.
E- Expect the Unexpected
Experienced cryptocurrency investors are accustomed to huge price swings that often don’t find in traditional markets. By mentally preparing for these unfavourable, and occasionally terrifying, investment performances, the intelligent crypto investor will be able to act rationally instead of emotionally in times of unexpected price drops.
R -Remain careful around mobile wallets
Trading or storing large sums of any cryptocurrency via mobile phone is simply too great a risk. Mobile phones are more prone to being compromised electronically or physically. Although convenient, convenience should not surpass the security concerns that abound with executing trades or storing assets on mobile devices.
T – To Perform all due diligence
In this modern digital age, there is even Wi-Fi on the path to crypto investing enlightenment, hence there is no excuse to make an investment with little to no understanding of the underlying asset. Almost every single coin has easily accessible whitepapers online. And just like having maps in the car, the savvy traveller must be prepared.
Conclusion
- Scams and heist are common occurrence in the crypto world. Customers being defrauded in this and other ways remain a common feature of the crypto industry even on major exchanges.
- Given the anonymity provided by cryptocurrency systems, and their worldwide reach, there are questions about how to limit the use of digital currencies for criminal activities.
- In addition, the current fascination with cryptocurrencies has potentially added to the speculative nature of these markets, and has raised concerns around consumer protection.
- Vauld failure has set an example for all investors who once blindly believed crypto and invested huge amounts only to loose them.
- So Lets become Alert and be a smart investor.
