Image: Su Zhu, co-founder and CEO of Three Arrows Capital, speaks at Invest: Asia 2019, screenshot from https://www.youtube.com/watch?v=C07X4hBWyHY
On-chain data and rumors on social media suggest that Dubai-based hedge fund Three Arrows Capital or 3AC is facing possible insolvency after bleeding at least $400 million in liquidations and could be the latest crypto-focused company to crash in the bear market.
Su Zhu, the co-founder and CEO of 3AC, has deleted ETH, AVAX, LUNA, SOL, NEAR, MINA and other tokens from his Twitter bio. Launched in August 2021, 3AC has backed Avalanche, Solana, Terra and a $100 million NFT fund, Yahoo Finance reported.
Three Arrows Capital sold at least $40 million worth of stETH — Lido’s staked Ether which has historically traded on par with ETH — early Tuesday, June 14, making it the largest seller of the token in the past week.
Zhu tweeted that his company is “in the process of communicating with relevant parties and fully committed to working this out”. His “ominous” tweet is the latest shock to the market, Muyao Shen reported for Bloomberg.
In January 2021, Zhu predicted that the crypto market will grow long-term as part of a “supercycle” and not experience a major correction. On May 27, he admitted he was wrong, posting on Twitter: “Supercycle price thesis was regrettably wrong, but crypto will still thrive and change the world every day.”
Su Zhu also predicted that Bitcoin will reach $2.5 million in this supercycle, bringing its market cap on a par with gold. Bitcoin reached a record high of $69,000 in November 2021 and this week, was trading at less than $21,000.
“3AC in trouble? rumors swirling” crypto trader MoonOverlord tweeted, referring to its co-founders Zhu, a former securities trader at Deutsche Bank, and Kyle Davies, a former Credit Suisse trader. MoonOverlord offered this rationale: “Kyle and Zhu havent tweeted or liked anything in days. Zhu took every coin and # tag out of his bio. Zhu deleted his instagram an hour ago they dumped 30k stETH and reduced all AAVE positions”.
“Rumor still but seeing more confirmations a fairly large and prominent crypto fund blew up” Lily
tweeted.
3AC’s ETH fire sale has been drawing comparisons to the TerraUSD (UST) stablecoin collapse and the Celsius Network freezing of customer assets.
A centralized, one-stop-shop for crypto investors and traders, Celsius has been pressured to sell its staked stETH holdings to make good on customer withdrawals. The pressure became so heavy that on Sunday, Celsius froze customer assets so it could “honor, over time, its withdrawal obligations.”
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
Three Arrows’ stETH fire sale began in May immediately after the collapse of the Terra UST stablecoin, DeFi analyst DeFiyst reported. According to The Block, $400 million in 3AC positions have already been liquidated. Another $300 million is at risk of liquidation on Aave and Compound if the market continues to tank, crypto analyst Onchain Wizard reported.
“People think Celsius is the biggest stETH dumper but its 3AC and it isnt relatively close,” MoonOverlord
tweeted. “They are dumping on every account and seed round address they have, most looks like its going to payback debts and outstanding borrows they have”.
On-chain analyst MidasTheFool summarized his take on the current #3AC situation in a tweet: “3AC has $245M of $ETH deposited on lending platform @AaveAave. From this, they have borrowed $189M in $USDC and $USDT. This puts their Loan-to-Value ratio at ~77%. They must keep this below 85%”.
Image: Su Zhu, co-founder and CEO of Three Arrows Capital, speaks at Invest: Asia 2019, screenshot from https://www.youtube.com/watch?v=C07X4hBWyHY
