Why Did Voyager Digital Fall So Badly?

On December 28, Bloomberg reported that Voyager Digital (VYGVF) misled customers. It charged hidden fees on trading. VYGVF at $14 at the time, fell sharply after the news.

VYGVF is an easy target for skeptical investors. The cryptocurrency platform is in the early phases of growth. Coinbase (COIN) is a bigger platform with more assets and users. Voyager will need to ramp up advertising spending and customer promotions to support growth.

Voyager’s chief communications officer, Michael Legg, said that the allegations are without any merit. The company is an easy target. Skeptics question how Voyager may offer 100% commission-free transactions. The answer is obvious: Voyager displays the bid-ask spread. Users are shown the transaction costs indirectly. Similarly, PayPal charges no fee on currency exchange. Yet the astute PayPal user may request a currency exchange conversion in both directions to calculate the spread.

Risks

Voyager’s transaction spreads are wide. The lawsuit may raise awareness of the hidden costs, hurting customer acquisition growth.

Voyager must invest further in the platform. The site’s performance is slow, which will frustrate users. They may defect by joining Coinbase instead.

Users may figure that the company’s crypto rewards are not enough. It is enticing users to buy and hold crypto for staking rewards. Customers may look at Voyager as a broker, not an exchange. They may consider Coinbase pro or binance as an alternative.