Skip to main content

3 Arrows Capital: A Bankruptcy For The History Books?

 


Crashes of many crypto projects are plaguing the market, but the greatest danger is the possible insolvency of a crypto veteran: hedge fund 3 Arrows Capital. A bankruptcy on this scale would go down in history with Mt. Gox, the Lehmann Brothers, or GameStop.

Leverage is the borrowing of capital to increase the returns on your investments. This is possible, among other things, on central and decentralized crypto exchanges , but also through credit protocols such as Aave or YFI. Too much borrowed capital or “loose money” in the market is unhealthy, but bear markets often reveal these weaknesses. Such a mistake now appears to have been made by one of the largest crypto hedge funds and borrowers: 3 Arrows Capital, or 3AC for short. 

Rumors about the bankruptcy of 3 Arrows Capital have been spreading on all social media for a few days. As Luna investors, they were already badly hit by its crash. A bankruptcy of 3AC would be another black swan event for the crypto market and would mean billions of dollars in selling pressure and liquidations.

Because 3 Arrows Capital is one of the largest companies in the crypto world. The hedge fund has existed since 2012 and is therefore considered a crypto veteran. Co-founder of the company, Zhu Su (Ex Deutsche Bank), is one of the most well-known crypto personalities with over 500,000 Twitter followers. His partner Kyle Davies (ex Credit Suisse) is also an influential figure. Three Arrows Capital removed all altcoin tickers from their Twitter bio, deleted Instagram accounts and have been conspicuously quiet for the past few days.

A hedge fund blow-up would be catastrophic for the crypto market as the reach of Three Arrows Capital is immense. They act as market makers, traders, invest in many altcoins and NFTs and are involved with other funds (e.g. DeFiance or Starry Night Capital). They have many partnerships and even manage the treasuries of some of their portfolio companies . That's just the tip of the iceberg.


Is 3 Arrows Capital in trouble?

And the depths of this iceberg are slowly emerging. On-chain stats showed that Three Arrows Capital was struggling to repay their collateral. The rumors spread like wildfire and more and more credible voices came to light.

Blockfi, a lending platform, reported that it liquidated 3AC on June 16, 2022. It was further reported that the hedge fund lost a whopping $31.37 million on trading platform Bitfinex in May. The voices of frustrated business partners also sounded on Twitter. Finally, it was revealed that 3AC's (Starry Night Capital) NFT fund transferred over $21 million worth of their assets.

It is speculated that these may have to be sold in order to be liquid. The company is now evaluating various alternatives. These include the sale of assets and a bailout by another company. If all of that fails, we could witness another crash for the history books. In this case, the event around Three Arrows Capital would take on proportions that have only been seen in a few crashes so far. A longer bear market would then be unavoidable.


The bankruptcy of Mt. Gox in 2012

Mt. Gox was one of the largest Bitcoin trading exchanges. It was founded in 2009 as a trading card exchange and converted to a bitcoin exchange in 2010. In an incident in 2013, the exchange lost 850,000 bitcoins in an alleged hacker attack. This bankruptcy triggered a brutal bear market (2013-2015).

This is where the short sellers got hit. As of January 2021, about 140% of GameStop's stock market value was short. The other side of the trade came from the Reddit forum r/wallstreetbets . Hedge funds and sellers had to close their positions, causing the price to surge. Big companies came to the brink of bankruptcy and at least one large and established hedge fund, Melvin Capital, was bailed out.


The insolvency of the Lehman Brothers Bank represented the peak of the real estate bubble. The damage from the insolvency was estimated at 50 to 75 billion USD. Lehman Brothers was the first investment bank not bailed out by the US government at the time. Irresponsible lending was primarily responsible for the real estate bubble. The bear market that followed lasted for a full 3 years.


Disclaimer

All information contained on our website has been researched to the best of our knowledge and belief. The journalistic contributions are for general information purposes only. Any action that the reader takes based on the information found on our website is entirely at their own risk.

My Top Picks
Honeygain - Passive earner that pays in BTC or PayPal
MandalaExchange -The Best no KYC crypto Exchange! 
BetFury - Play And Earn BFG for daily Bitcoin and ETH dividends!
Pipeflare - Faucet that pays in ZCash and Matic, Games pay in DAI
Womplay - Mobile dApp gaming platform that rewards in EOS and Bitcoin
Cointiply - The #1 Crypto Earning Site
Torum - Join the latest Social Network and earn TRM for Free! 
LiteCoinPay - The #1 FaucetPay earner for Litecoin 
LBRY/Odysee - YouTube Alternative that lets you earn Money by viewing videos!
FaucetPay - The #1 Microwallet Platform
FREEBTC - The #1 FaucetPay earner for Satoshi's
FaucetCrypto - An earning/faucet site that pays out instantly
FireFaucet - An earning site that pays better for some than Cointiply
DogeFaucet - Dogecoin Faucet
xFaucet - BTC, ETH, LTC, Doge, Dash, Tron, DGB, BCH, BNB, ZEC, FEY - Claim every 5 minutes
Konstantinova - BTC, ETH, LTC, Doge, Dash, Tron, DGB, BNB, ZEC, USDT, FEY, 25 Claims Daily

Comments

Post a Comment

Popular posts from this blog

The 5 largest platforms for non-fungible token (NFT) collectibles

  Since the beginning of 2021, non-fungible tokens (NFT) have had no holding back and the sector is setting new records almost every day.  More and more artists, stars and brands are realizing the potential - NFT are well on their way to catapulting the crypto space into the mainstream.  But which collectibles are currently the most popular? What are NFT? NFT are unique tokens that cannot be exchanged one-for-one for an equivalent token.  Any asset that is tokenizable can be an NFT.  This includes, for example, (digital) works of art, trading cards, game items and crypto domains.  Theoretically, however, real estate or securities can also be mapped as NFT. NFTs can be used to transparently map ownership structures on a public blockchain.  This allows them to store value just like real objects, even if additional copies are easy to make.  For example, the original picture of the Mona Lisa is significantly more valuable than a photo, as everyone kno...
11 comments
Read more

CARDALONIA: THE CARDANO METAVERSE OPENS THE GATES!

  Have you ever been to Cardalonia? With these words, the Cardano Metaverse called Cardalonia starts the gates. In this 3D world, developers and users can interact with each other. First of all, users have to create an individual character with which they can move online. After that you can enter one of the worlds built by developers with this character. You can also purchase your own land in the Cardano Metaverse via the marketplaces in Cardalonia . This is secured by Cardano's blockchain technology and therefore offers a relatively secure transfer of ownership. Since these are only digital plots of land, it is not yet entirely clear when the plots of land are purchased whether they can also be sold again in the future. A possible profit cannot be estimated at the moment. In Cardalonia, the cryptocurrency Lonia is used. The maximum amount of tokens in circulation is 100,000,000. The team consists of Alice Sand (Co-Founder), Vasil Air (CTO) and Dustan Water (Fullstack Developer). T...
Post a Comment
Read more

Cardano: This is the vision that founder Charles Hoskinson has

  The Altcoin Cardano has tended to decline in recent weeks.  The Alonzo upgrade was supposed to bring improvements, but it soon turned out to be a disappointment.  Cardano founder Charles Hoskinson presented his vision for the cyber motto in a live Twitter video. • Cardano in the last few months under pressure • Charles Hoskinson explains his Cardano vision via Twitter • Security and privacy at the center The cryptocurrency  Cardano  has had a difficult few months.  While founder Charles Hoskinson's cyber motto has had a strong run in 2021, it has been steadily downhill in recent months.  Cardano is faced with some difficulties.  The so-called Alonzo upgrade went live in mid-September, for which crypto fans had high hopes, but which soon turned out to be a disappointment.  The upgrade should make it possible to use smart contracts on the cryptocurrency as well.  It soon turned out, however, that although these were entered into Cardano,...
Post a Comment
Read more