Three Arrows Capital, 3AC, is a hedge fund founded in 2012 by Su Zhu and Kyle Davies, and invests heavily in crypto markets.
Hedge fund 3AC is blaming the collapse of the crypto market
It has recently been discovered that they have lost millions of dollars with these investments.
On Bitfinex, for instance, they lost more than $30 million through trading in May alone, losing the top spot in the crypto ranking. During the course of 2022, they had already lost $40 million.
It was also discovered that they had an open position on Aave of $235 million, and a debt of $183 million.
The address marked as Three Arrows Capital has a collateral position of 211,999.12aWETH (worth $235 million) on Aave V2 and a total debt of $183 million USDC+USDT. If ETH falls near $1014, the collateral position will face liquidation. It is actively repaying the debt now.
— Wu Blockchain (@WuBlockchain) June 15, 2022
Should the price of ETH fall below $1,014, these positions would be liquidated. The price of ETH today fell to just below $1,020.
In the last 24 hours, they have sold about 50,000 ETH.
3AC also has equity-backed NFT funds. The entire collection of NFTs was moved to SuperRare without the news being disclosed. Since these funds hold several NFTs from different collections, they can sell them to cover part of the debts. However, the market demand for NFTs at the moment is low, so it will be difficult for them to collect much from these sales.
The fund manager, Zhu Su, said that they are working to try to resolve the situation, and there is speculation that they are trying to attract funds from potential investors to cover part of the debt.
Now, as was the case with Celsius on Monday, many other crypto funds or operators are denying that they have funds invested with Three Arrows Capital, but the news of its possible bankruptcy is further weakening already very unstable markets.
How 3AC’s bankruptcy could affect the cryptocurrency market
3AC is one of the largest hedge funds in the crypto sector, and its eventual collapse could still have serious consequences in the sector.
To be fair, the problem related to Celsius seems to have quickly receded, although they have not yet rehabilitated withdrawals. However, in such a bleak picture the fear of the consequences of another bankruptcy could itself have negative consequences.
The fact is that the fund has already suffered forced liquidations of several million dollars, so the risk of bankruptcy seems more than justified.
SCOOP: After facing hundreds of millions of dollars in liquidations, Three Arrows Capital's future is uncertainhttps://t.co/yg9jHVj0UQ
— Frank Chaparro (@fintechfrank) June 15, 2022
According to some anonymous sources, the company managing the fund is struggling to repay investors. Three of them stated that the payout has already been at least $400 million.
Part of these losses were accumulated last month during Terra’s implosion, so much so that Zhu himself had to admit on Twitter that he was wrong about his bullish “supercycle” hypothesis.
Supercycle price thesis was regrettably wrong, but crypto will still thrive and change the world every day
— Zhu Su 🔺 (@zhusu) May 27, 2022
In such a bear market it is really difficult for situations like this to realistically work out for the best.
Nonetheless, the crypto market’s pain resulting from this news now seems to have stopped momentarily.