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

Cardano price forecast – price breaks out! Are we near $1.5 soon?

 In our last Cardano price prediction , we wrote that the price could break out soon. The reason for this was a symmetrical triangle. This triangle was performed after the crash, so we expected the price to break down. But now the course has broken out of the triangle in a bullish manner. But how far could the course rise or what is the goal? Today we will explain to you about the Cardano course ! Cardano price broke out of the triangle and was able to rally to the $1.19 resistance. We tested this resistance, and a short time later the price was sold off. The triangle's target was around $1.23, so we now believe the price has completed the target. As a result, we no longer expect a further increase. Instead, the price could now descend and possibly form new lows. If the price breaks the $1.19 resistance, the price could rally to around $1.5. There is the next resistance where the Cardano price could bounce. If Cardano price fails to break the $1.19 resistance, we would expect the p...
Post a Comment
Read more

Tesla Beats Sales Expectations - Bitcoin Holdings Remain Flat

  The car manufacturer presented its report for the fourth quarter on Wednesday evening. Tesla exceeded expectations for sales and profits. Bitcoin holdings, meanwhile, remain unchanged. Tesla (TSLA) published the Q4 report for 2021 last night. Overall, the electric car maker recorded a sales increase of 65 percent in this quarter compared to the previous year. In the automotive sector alone, sales rose to 15.97 billion US dollars. In addition, the US company set a new record profit of 5.5 billion US dollars - an increase of 665 percent over the previous year. Analysts previously expected adjusted earnings of $2.36 per Tesla share. With 2.54, the carmaker was able to significantly exceed this value - with positive effects on the TSLA course, which recorded an increase of almost 4 percent. Tesla's bitcoin holdings, meanwhile, remained unchanged. At the end of the fourth quarter, the value remained stable compared to the previous quarter at $1.26 billion. In February 2021, Elon Musk...
Post a Comment
Read more

Cardano founder doubts Bitcoin's future as world reserve currency

  Cardano's founder doesn't believe Bitcoin has what it takes to become the world's leading currency. Charles Hoskinson stated in a recent interview that he didn't think Bitcoin would become the world reserve currency. According to the founder of Cardano, a cryptocurrency with smart contract features would become the global reserve currency. Hoskinson believes Cardano or Ethereum would become the world reserve currency. A global reserve currency must offer services like smart contracts, metadata standards, and improved throughput that complete enormous transactions per second. According to the Cardano founder , the scarcity of Bitcoin is due to the high cost of production: "If you make paintings, one of which you have to paint by hand and the other by machine, and both look the same and the demand for both is the same, then the effort for one is a thousand times greater than for the other." Hoskinson spoke about Bitcoin's massive energy consumption, addin...
Post a Comment
Read more