Fall of Bitcoin: Three Arrows Capital (3AC) liquidated by 5 cryptocurrency platforms

The harder the fall Bitcoin, queen of all cryptocurrencies, is experiencing a severe bear market. Bogged down, the BTC price failed to recover. Stuck under the $ 20,000, this hell is rocking the investment world. The giants of the crypto universe are not spared. In this disaster, Three Arrows Capital (3AC), pushed by the fall in cryptocurrencies, timidly announced difficulties. They were confirmed last weekend by 8 Blocks, FTX, BitMex and Deribit.

Three Arrows Capital in liquidation hell

Many are the victims of the markets that are liquidate. In cryptocurrency parlance, “going into liquidation” means losing all of your investment. Trading positions a ” lever “ make havoc. They are one of the risks incurred when engaging in this risky trading exercise. So, now, what’s the leverage would you tell us?

Let’s face it. We would like to invest in $ 100 in Bitcoin. We decide to leverage x10 on the upside (we could decide to trade downwards with the same principle). Our business worth $ 1,000 if the price of BTC rises. On the other hand, if it drops by as much as 10% of the price, our initial bet vanishes and we lose our investment.

It is also possible to be cleared with crypto loansoften referred to as loan on DeFi (Decentralized Finance).

Three Arrows Capital is therefore a hedge fund created almost 10 years ago by Su Zhu and Mr. Davies, former classmates. The funds of the company and its clients are then deposited on various centralized and other decentralized platforms (FTX, BitMex, etc.). At its peak last April, it still was 3 billion in assets under management.

This type of investment fund often uses loan loans and other leverage to benefit from juicy returns commensurate with the millions of dollars in cryptocurrency it manages.

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Bitcoin and cryptocurrencies in decline: it’s time to take stock

At the end of last week, platforms partnering with 3AC announced the liquidation of the company’s trading positions. So, 5 trades leave the ship:

  • BlockFi: The liquidation of the positions of 3AC, a major BlockFi client, was announced on Thursday. 3AC appearing to CEO Zac Prince as a “a large client who has failed to meet his obligations on an overly secured margin loan”. Despite the margin calls, 3AC was unable to save its portfolio.
  • BitMex: According to our information, 3AC had a $ 6 million debt on BitMex. A spokesperson for the company believes that this so-called “collateralized” debt has no impact on the company’s management. The guarantees given by 3AC to benefit from the loan have been liquidated.
  • Deribed : CEO John Jansen confirms Three Arrows Capital has been a shareholder since 2020 and has had to liquidate some of 3AC’s positions.
  • FTX : The American cryptographic giant has not released any further comments concerned about respecting the data protection policy and information about its customers.
  • Bitfinex: The approach is different on this platform as 3AC has not been liquidated. However, the venture capitalist liquidated its losing positions.

Beyond the collaborators, 3AC’s customers also look gray. Danny Yuan CEO of 8 Blocks Capital expresses his questioning in the face of unclear communication and mismanagement of his funds by 3AC which would have resulted in a loss of 1 million dollars. The leader had also called for the freezing of the company’s funds from the crypto platforms that partner with 3AC.

Three Arrows’ first losing bet was with the Luna Foundation Guard. To put it simply, LFG is a non-profit organization created by Do Kwon, the founder of TerraUSD. The main mission of the LFG was to keep the funds, bitcoin reserves that allowed to keep the value of the TerraUSD at 1 dollar.

According to the information we have gathered, Three Arrows has invested $ 200 million in the LFG. This sum went up in smoke when the MTS and the LUNA collapsed. We must also not forget that during this cataclysm the LFG just sold Bitcoin to try to stay on course. This solution was obviously not the right one. The drop in the price of Bitcoin took root in this choice, it brought 3AC with it.

Beyond the Earth affair, the crux of the problem is therefore in the bitcoin price drop and cryptocurrencies. Indeed, in this period of scarcity, cryptocurrency platforms have tightened the general conditions of their loans. Some lenders then asked for the latter to be repaid. For lack of refunds, they were cleared. The inflationary context that complicates the trend and makes projects fall back on themselves.

It would appear that investment giant Three Arrows Capital, through the voices of its co-founder Davies and that of his lawyer, is studying different options. Sales of assets, bailout by another company, it is up to the venture capitalist to find common ground with his creditors. Customers await statements in the face of these rumors of collapse which are confirmed. 3AC is not the only company in difficulty in this delicate context. Recall that the platform Celsius still blocks withdrawals and exchanges for a week.

Another bites the dust. Another giant of the crypto ecosystem bites the dust. Avoid leverage for a while and everything will be fine. Register without delay on the FTX reference cryptocurrency exchange platform. In addition, you will benefit from a lifetime reduction on your trading fees (affiliate link, see conditions on the official website).

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