In the last few weeks, billions of dollars have been wiped out of the crypto market. Companies in the industry are in pain. Lending and trading companies are facing a liquidity crisis and many have announced layoffs.
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Cryptocurrency-focused hedge fund Three Arrows Capital will repay more than $ 670 million in loans on Monday or face defaults in case it could have a spillover effect on the entire digital asset market. You must meet the deadline.
3AC, as it is also known, is one of the most prominent crypto hedge funds around and is known for its highly leveraged bets.
but, Billions of dollars have been wiped out of the digital coin market in recent weeksHedge funds face potential liquidity and solvency issues.
Voyager DigitalDigital Asset Broker said last week that it lent 3AC 15,250 Bitcoin and $ 350 million stablecoin USDC.. At Monday’s price, the total loan is worth over $ 675 million. Voyager gave Three Arrows Capital $ 25 million in USDC until June 24th and to repay the entire unpaid loan by Monday, June 27th.
Voyager said last week that none of these amounts had been repaid, adding that if 3AC did not repay, it could issue a default notice.
“We intend to pursue recovery from 3AC,” Voyager said, and is discussing “with regard to available legal remedies” with his advisor.
Voyager Digital and Three Arrows Capital were unable to get immediate comments when contacted by CNBC.
Voyager, which is listed on the Toronto Stock Exchange, has its stake plunged 94% this year.
How did 3AC get here?
Three Arrows Capital was founded in 2012 by Zhu Su and Kyle Davies.
Zhu is known for his incredibly bullish view of Bitcoin. He said last year that the world’s largest cryptocurrency could be worth $ 2.5 million per coin.However, in May of this year, as a crypto market The meltdown has started“Unfortunately, the price theory of Super Cycle was wrong,” Zhu said on Twitter.
The beginning of the new so-called “crypto winter” Totally hurt digital currency projects and companies..
The three-arrow capital issue seems to have started earlier this month after Zhu tweeted a rather mysterious message that he was “in the process of communicating with stakeholders” and “we are working hard to resolve this.” is.
There was no follow-up on what the particular problem was.
However Financial Times After the tweet, he reported that US-based cryptocurrency lenders BlockFi and Genesis had liquidated part of 3AC’s position, citing people familiar with the matter. 3AC was borrowed from BlockFi, but couldn’t handle the margin call.
Margin calls are situations where investors have to invest more money to avoid losses in transactions made with borrowed cash.
Then The so-called algorithm stablecointerraUSD And that Sister Token Luna collapsed..
3AC was exposed to Luna and suffered a loss.
“The situation at Terra-Luna was very surprised at us,” said Davies, co-founder of 3AC. The Wall Street Journal In an interview earlier this month.
Transmission risk?
Three Arrows Capital is still facing a credit crunch exacerbated by continued pressure on cryptocurrency prices. Bitcoin It remained at around $ 21,000 on Monday, down about 53% this year.
Meanwhile, the Federal Reserve has signaled further interest rate hikes to curb rampant inflation that has robbed more risky assets of steam.
One of the largest crypto-focused hedge funds, 3AC has borrowed large amounts of money from various companies and invested in various digital asset projects. It has created further threats of transmission to the entire industry.
“The problem is their value [3AC’s] Overall, it’s not a good sign, as assets are declining significantly with the market, “Vijay Ayyar, Vice President of Corporate Development and International Affairs at the crypto exchange Reno, told CNBC.
“What you see is whether or not there are large remaining players exposed to them, which can cause further transmission.”
Already, the downturn in the market has caused many crypto companies to face a liquidity crisis. This month, lending company Celsius, which promised users ultra-high yields to deposit digital currencies, suspended customer withdrawals because of “extreme market conditions.”
Another crypto lender, Babel Finance, has suspended its withdrawal this month, saying it “is facing extraordinary liquidity pressure.”
— — CNBC’s Abigail Ng contributed to this report.
