Currently, many crypto funds and projects are simultaneously insolvent and at great risk of default. Leading up to the debt chain started with the first collapse of Stablecoin UST from Terra.
In this article, we update 3AC’s status during its crisis so readers can understand their situation.
History And Big Deals of 3AC
The Three Arrows Capital (3AC) fund is said to have defaulted on a loan worth more than $670 million in cryptocurrencies.
Digital asset brokerage Voyager Digital has announced that the 3AC fund failed to repay a $350 million loan in USD-pegged stablecoins USDC and 15,250 Bitcoins worth about $323 million at current prices. The above amounts were previously lent to 3AC by Voyager Digital but did not disclose the specific time.
Three Arrows Capital was founded in 2012 based in Singapore, emerging with many large value investments in digital assets. Last year, the fund made a splash when it bought nearly 39 million shares issued by the Grayscale Bitcoin Trust (GBTC). Each GBTC share can be exchanged for Bitcoin at the rate of 0.001 units. Accordingly, 3AC has collected about 1.3 billion USD in Bitcoin, becoming the largest digital currency purchase ever recorded.
Debt Default Crisis
Voyager Announcement To 3AC
3AC’s insolvency comes after weeks of intense volatility in the virtual currency market, causing hundreds of billions of dollars in capitalization to be “blown away,” according to CNBC. Both Bitcoin and Ether are down compared to 24 hours ago and much lower than the all-time record ever set.
Meanwhile, the total capitalization of the virtual currency market is currently $950 billion, down significantly from the peak of about $3 trillion in November 2021.
Voyager said it expects recovery from 3AC, emphasizing that its platform continues to operate and execute customer orders and withdrawals. This is said to be a move to curb investor fears spreading in the crypto ecosystem.
“We are working hard and urgently to strengthen our balance sheet and pursue options so we can continue to meet our client’s liquidity needs,” said Stephen Ehrlich, CEO of Voyager.
According to Voyager, as of June 24, the company holds a total of about $137 million in digital assets and dollars and has access to $200 million in cash and USDC.
Current Situation Of 3AC
3AC’s crisis comes after weeks of turmoil in the cryptocurrency market, which wiped out hundreds of billions of dollars from many investors. Bitcoin and Ether are both tradings at lows, around $20,000 and $1,200 a unit, respectively. The market capitalization of the entire cryptocurrency market is always below 1 trillion USD, down sharply from about 3 trillion USD in November 2021.
3AC was founded by Zhu Su and Kyle Davies. In it, Zhu is known for his extremely bullish views on Bitcoin. Last year, he predicted that the world’s largest cryptocurrency could reach $2.5 million a coin. But in May of this year, when the cryptocurrency market started to decline, Zhu admitted on Twitter that his thesis was “unfortunately wrong”.
The default of this hedge fund has been rekindled for a long time. Earlier this month, Zhu took to Twitter to post a cryptic status line that said: “We are in the process of communicating with relevant parties and are fully committed to solving this issue.”
He did not specify what the problem was or who the parties involved were. A few days after Zhu’s cryptic tweet, the Financial Times reported that Three Arrows Capital was no longer able to repay its debt to crypto lender BlockFi and Genesis (USA). Some of 3AC’s positions were forced to liquidate when the fund was unable to meet margin calls.
The situation was more serious when stablecoin duo TerraUSD and Luna collapsed. 3AC had previously poured money into Luna. “The Terra-Luna situation caught us very off guard,” 3AC co-founder Davies told the Wall Street Journal in an interview earlier this month.
3AC is still facing a credit crisis that is aggravated by the unstoppable downward pressure on the price of cryptocurrencies. Meanwhile, the US Federal Reserve – Fed (part1, part 2) showed a tough stance in controlling rampant inflation. This makes it even more difficult for the future of cryptocurrencies.
Among the largest crypto-focused hedge funds in the world, 3AC has borrowed large sums of money from various companies and invested in numerous digital asset projects. This raised concerns about a widespread market-wide contagion.
“The problem is that 3AC’s asset value has also dropped massively with the market, so overall that’s not a good sign. What matters is whether any major players have come in contact with them. or not, this could cause further contagion,” Vijay Ayyar, vice president of international and corporate development at crypto exchange Luno, told CNBC.
Currently, a number of crypto companies are facing liquidity crises due to the market slump. This month, crypto lender Celsius Network halted customer withdrawals citing “extreme market conditions. Another crypto lender, Babel Finance, has just announced that it is facing unusual liquidity pressure” and has halted withdrawals.
Newsletter sent to readers updated information from 3AC’s difficult incident, now the possibility of default is quite clear and they will face many legal issues. However, it is the cycle of the market, there will be people leaving and staying, the inevitable of any financial market.
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DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.
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