Three Arrows Capital, a cryptocurrency hedge firm that had been struggling owing to the decline in cryptocurrencies for some years, issued a notice of default for a $670 million loan on June 27, 2022. In fact, Three Arrows Capital was unable to repay a $670 million loan, according to a news release issued by the digital asset brokerage firm Voyager Digital on Monday morning, 27. Since the demise of cryptocurrencies LUNA and the stablecoin TerraUSD, the hedge fund has been known to struggle. One of the biggest cryptocurrency ETFs is in danger of failing. More damage to the cryptocurrency ecosystem.
Debt for Three Arrows Capital is 670 million.
The crypto hedge fund Three Arrows Capital is well-known. The symbolism is potent in these difficult times for cryptocurrencies because it represents a dying behemoth. Voyager Digital, a digital asset brokerage firm, broke the news. This was significant because it revealed that 3AC (Three Arrows Capital) had been unable to pay back a debt of 350 million dollars in stablecoins USDC and 15,250 bitcoins (BTC), which would have been equivalent to 320 million dollars by the end of June 2022.
How did they arrive to Three Arrows Capital and what is it?
It is among the largest cryptocurrency hedge funds. 2012 saw the founding of Three Arrows Capital by Zhu Su and Kyle Davies. The problems at Three Arrow Capital seems to start in early June 2022. Initially, Zhu Su tweeted that the business was “communicating with appropriate parties.” she was “completely dedicated to tackling this problem” as well. The fund was additionally exposed to LUNA, the token’s collapse, and the UST stablecoin. A downward spiral was subsequently started as a result. In an interview with the Wall Street Journal in early June, 3AC co-founder Kyle Davies stated, “The Terra Luna incident took us off guard.”
The Stations of the Cross at Three Arrows Capital
The condition of 3AC was not good. There were rumors going around, and information was recently validated. In fact, the business consulted with financial specialists in June 2022 to address the enormous losses it had incurred. In this circumstance, the corporation requested an extension of the collection period so that its creditors may weigh all of their options. There appeared to be two choices in this situation. Specifically, the selling of its assets or an acquisition by another business.
Due to the collapse of the cryptocurrency market, 3AC is currently insolvent.
After several weeks of unrest in the cryptocurrency market, 3AC is now facing a solvency problem. The market’s value has dropped by hundreds of billions of dollars as a result of this catastrophe. In fact, the market for cryptocurrencies is presently around $950 billion, down from its peak value of $3 trillion in 2021. More than two trillion dollars have been lost. By value, this is the largest cryptocurrency crisis. And certainly one of the toughest obstacles the cryptocurrency sector will have to face. New explaining theories have lately been proposed in relation to the triggering event, the collapse of the UST. This catastrophe might have been precipitated by a hostile organization or person.
How creditors viewed Three Arrows Capital
Notably, the broker Voyager announced its intention to pursue the recovery of 3AC. The broker emphasized that the platform will continue to run and carry out client orders and withdrawals in the interim. The business wished to reassure. Most likely an effort to control a fearful wave sweeping the crypto sector. Stephen Ehrlich, CEO of Voyager, stated, “We are working hard and swiftly to strengthen our balance sheet and seek options so that we can continue to meet client needs for liquidity.
a dangerous scenario impacted by the pressure of the liquidity demand
The business claimed to own cryptocurrency assets worth over US$137 million. The business also said that it had access to $200 million in cash, USDC revolving credit, and a 15,000 bitcoin (about $311 million) Alameda Ventures revolving credit. Voyager Digital received a $500 million investment last week from Sam Bankman-trading Fried’s company, Alameda, the founder of FTX. From this line of credit, Voyager Digital has already withdrawn $75 million. According to the Alameda statement, “3AC’s default does not constitute a default under the Agreement with Alameda.”
