The Crypto “Voyager” Crashes! We Didn’t Read the Fine, Bearish Print. We Wrote It
Former crypto broker darling Voyager Digital Ltd. has gone from Boom to Bankrupt AND traders are DONE! But how did this crash even begin?
by Nico Isaac
Updated: July 08, 2022
When I was kid, I remember seeing these TV commercials for a certain kind of cereal. Mind you, I hated the cereal, tried it once and thought I'd rather eat tree bark. That didn't matter; the company was giving away a special prize inside a select few of their boxes: a real-life mood ring. Seeing was believing, as the girl in the commercial slipped the magic bauble onto her finger upon which rainbow-colored lasers shot out from its center, changing in hue with her every innermost thought and feeling.
I convinced my mom to buy a box, then secretly emptied its contents into a waste bin in search of the prize. Nothing. Two, five, and finally 9 boxes and a very overflowing bin later, the precious ring was inside. I tore the wrapper off, put it on my pointer finger, and waited.
Minutes turned into hours into days and the ring never changed from what my brother called a "snot green" hue. According to the included color-decoder, that shade correlated with "frustrated."
You. Don't. Say!?
This, dear readers, is an airtight example of false advertising.
Now, let's turn to the recent debacle concerning disgraced cryptocurrency broker Voyager Digital Ltd. It just warned account holders might not recoup their $1.3 billion in assets after the platform filed for Chapter 11.
This stoked up a tidal wave of shock slash rage among Voyager investors along with an FDIC investigation into the broker's potentially misleading "marketing" language regarding insurance protection of assets in case of default.
Reports Bloomberg News on July 7:
"I'm Done with Crypto': Voyager Bankruptcy Rocks True Believers"
"Crypto investors are known for their devotion, but their confidence is cracking as the latest company collapse rattles the industry.
"It feels like I was robbed," said [one investor]. "I just don't understand how this could be legal. I'm not going to invest on another platform. I'm done with crypto... It's definitely a lesson learned that you have to do your diligence... It's so easy to get lured in, but you have to read the small print."
It's safe to say the color of Voyager investors' collective mood ring right now is pitch black. But the $1.3 billion question is: Were they "robbed" by false advertising, or in this case, teeny tiny fine print warning of the risks of crypto trading?
The answer: The real "robber" here is investor psychology. Since the 1630's Tulip Bulb Mania, investors consistently and reliably repeat a simple pattern of being blindly optimistic on the way up, and then all too aware of the inherent risks they've taken on the way down.
Take Voyager Digital Ltd. After its IPO went from $4 a share in January 2021 to its peak of $27 a share on March 23, 2021, optimism for the earning potential of this unproven, unprofitable, over-the-counter small cap stock was to the moon. Wrote a Seeking Alpha headline of Voyager on March 29: "The Rocket Ship Continues Its Trajectory."
Once prices began to reverse, the optimism didn't falter. On April 22, Seeking Alpha wrote:
"Voyager Digital: Compelling Long-Term Investment... Voyager's selloff will be short-lived."
"While the past week's selloff has obviously been painful for current holders, Voyager is still performing well, still growing at breakneck speed, and represents an exciting investment opportunity with a shareholder-friendly management team in a rapidly growing space."
From there, both Voyager's selloff -- and hope in its future -- continued. Here on May 11, Motley Fool cited Voyager as one of 2 stocks "the Smartest People on Wall Street Are Buying," and said:
"Voyager offers $0 commission trades. And on top of that, Voyager also has a market-leading 58 cryptocurrencies people can buy. The company even offers up to a 10% interest rate on stable coins (crypto that is tied to a reserve asset).
"If you want to invest in crypto, Voyager has a strong sales pitch...While notoriously volatile, I'm convinced these currencies are here to stay. I believe this brokerage is going to continue to take market share from Coinbase and other players, and the opportunity is sizable."
Our analysts, on the other hand, recognized this hope in the exciting new IT market for what it was: a peak in investor psychology, as reflected in a complete, five-wave Elliott impulse on the chart of Voyager Digital.
In the May 2021 Elliott Wave Financial Forecast, we showed this chart of the OTC stock along with this bearish warning for it, and the largest US cryptocurrency exchange Coinbase as well:
"With the euphoria of a final peak sweeping so powerfully through the market for cryptocurrencies, it follows that the shiny exchanges now attracting attention are various cryptocurrency platforms.
"This chart shows a fast rise in the shares of Voyager Digital, a crypto exchange that facilitates trading in 55 different cryptocurrencies... In our view, the completed five-wave form of voyager Digital's ascent suggests something quite different: the decline that started at the March 23 high should continue.
"Trading in Coinbase, the largest crypto exchange, marks an even loftier level of expectation. As its stock came to market in an initial offering on April 14, Coinbase's share price rallied from $250.00 to $429.54, giving it a market capitalization of more than $100 billion, more than the parent companies of the New York Stock Exchange and the NASDAQ combined...In our view, however, there is one thing that the crypto community cannot survive, and that's legitimacy, because it invites scrutiny. When a bear market begins, the focus will shift from crypto speculation to crypto crime and scandal. Another headline calls Coinbase 'Proof of the Industry's Staying Power.' The current state of euphoria says it is the opposite."
Here, in the current July 2022 Elliott Wave Financial Forecast, we illustrate the carnage that has ensued in both Voyager and Coinbase:
Just as I was duped by the shiny, mood-detecting ring at the bottom of a terrible-tasting cereal box -- investors were taken in by the collective excitement surrounding all things crypto.
The only antidote against the pull of the herd is to see that mass psychology for what it is -- and how it unfolds in unbiased patterns directly on price charts. Our Financial Forecast service enables you to do just that.
1 Comprehensive Report: Every Major Economic Sector
Our monthly Elliott Wave Financial Forecast is a publication like no other, because it delivers forecasts you won't see or read elsewhere: Before Voyager Digital came crashing down, subscribers to Financial Forecast were ready.
If you need comprehensive coverage of the leading US stock indexes, currencies, interest rates, metals, energy and more -- the individual Financial Forecast publication, or complete Financial Forecast Service delivers that directly to your screen, for as little as $97 per month.
Follow the fast steps below to get started.
Financial Forecast Service
All month long, Financial Forecast Service helps you stay ahead of the waves in the U.S. markets on the timeframes that matter the most. FFS covers the stock indexes, bonds, gold, silver, the U.S. dollar, as well as market psychology and cultural trends. It is our most popular service.
Comprises the monthly Elliott Wave Financial Forecast, 3x-per-week Short Term Update and at least 12x-per-year Elliott Wave Theorist.
A “Freight Train of Grains” Didn’t Cause Soybeans’ Recent Price Crash. So… What Did?
"Crash," "sink," "runaway freight train," and ever-lowering "limbo pole" are a few of the phrases used to describe the May selloff in grains, particularly soybeans. But before you blame the "bombshell" May 12 USDA supply/demand report for the slide, you'll want to read this first.
Commercial Real Estate: Prepare for a Potential Global Calamity
A lot of the commercial real estate market is faced with a decline in liquidity and falling values. The specter of defaults looms large. In at least one region of the world, there are reminders of the dark days of Q1 2009, as revealed by this chart.
'How people FEEL is how they ACT'
Like all ideas that make you want to slap yourself on the forehead and scream "How didn't I think of that!", the idea behind socionomics is simple: Social mood impels social action. When you know social mood's trend, you can forecast everything from the stock market to culture to politics and more. So, how then do you define the social mood trend? Watch our Head of Global Research touch on that in this video.