Bitcoin falls 9% again and the crypto market in panic, is Three Arrows Capital Next to Fall? – BTC Direct

The US investment fund Three Arrows Capital may become the next crypto giant to fall after Terra and perhaps Celsius. The big difference is that this investment fund has been widely trusted and respected, not for its ingenious ideas or blockchain applications, but solely for their liquidity. And that’s exactly where it’s going to go wrong.

Meanwhile, bitcoin has fallen by 9% in the last 24 hours and there does not seem to be any end to the pain. Later today, our analysts will share their views on the market and the price.

Is Three Arrows Capital liquid enough?

Three Arrows Capital (3AC) has reportedly failed to meet margin deposits from its lenders, leading analysts and the market to believe that 3AC did not have as much cash as previously thought. The collapse of the crypto market has caused unforeseen liquidations (of financial positions, not of people).

Basically, 3AC is an investment company, they invest their money or borrowed money in crypto companies. For example, they borrow cryptocurrency or money from lenders, but they have to provide security for this. The security can consist of crypto, but also, for example, stack coins or fiat money. If the value of the collateral falls while they have an outstanding loan, the collateral must be replenished. Some lenders do not trust 3AC to meet these margin requirements due to insufficient liquidity.

Investments are growing, but are not liquid

The investment company has made many fantastic investments over the years. For example, they were able to invest very early in various altcoins that were still worthless at the time, but often times 100 and even times 1000. The problem is that many of these coins and investments are locked inside for a long time and not can be sold. The value of these coins is enormous, but they are of little use if they are not liquid.

This means that if 3AC has to deposit money to raise the security of their loans, they can not do so with their investments. Therefore, BlockFi 3AC’s liquidated positions, the investment fund simply failed to provide liquidity.

Has BlockFi closed position for 3AC?

Crypto lender BlockFi is thus one of the companies that, according to the Financial Times, has liquidated at least some of 3AC’s positions. The newspaper used anonymous sources for this, but the information is confirmed somewhat by Zac Prince, the director of BlockFi. Partly because he did not immediately mention the name of 3AC, but everyone knows what company it is.

3AC had borrowed bitcoin from BlockFi but was unable to accommodate a margin call after the bitcoin price collapsed this week.

Finblox in trouble

The problems surrounding 3AC seem to have affected Finblox, a Hong Kong-based platform that allows investors to earn returns on their digital assets. Finblox said it was forced to lower its withdrawal limits on Thursday due to concerns about the company.

Many investments, many risks

Although estimates vary, 3AC has likely incurred $ 400 million in liquidations across multiple positions. 3AC is one of the largest investment companies in the crypto industry. It has made investments in blockchain projects, including Bitcoin and Ethereum, and has invested in DeFi platforms such as Aave and Balancer. It has even invested in the NFT game Axie Infinity.

The company also had significant exposure to Terra and also held large positions in projects such as Solana and Avalanche. Their position in Terra was at one time worth half a billion dollars, but because these coins are locked and therefore could not be sold, 3AC could only with sadness see how the value dropped to 670 dollars.

With so many partners, it is still unclear which other companies were involved in 3AC’s liquidations. No other companies besides the two loan companies have confirmed involvement.

The company survives

Despite speculation that Three Arrows Capital is at risk of bankruptcy following massive liquidations, the company says it will survive.

One of the company’s founders, Su Zhu, shared a hefty thread on Twitter this week. There, he said, 3AC “communicates with relevant parties and is fully committed to resolving this.”

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