According to a person with knowledge of the matter, Three Arrows Capital, a major crypto hedge fund, has plunged into liquidation. This is one of the biggest casualties to have occurred in this ‘crypto winter’. The individual disclosed that 3AC had called Teneo on board for helping it deal with the liquidation process.
A restructuring firm called in
The person close to the matter said that Teneo had just started the liquidation process on behalf of Three Arrows Capital. The restructuring company was still in steps to figure out what assets are owned by the crypto hedge fund. Once it has done so, it will set up a website in the next couple of days where it will provide creditors with instructions to come forward and make their claims.
Co-founded by Kyle Davies and Zhu Shu, 3AC is one of the most notable crypto hedge funds and is renowned for its highly leveraged bets. Zhu’s views on bitcoin are extremely bullish. However, the hedge fund has been suffering because of the slump in prices of digital currencies.
The crypto market has seen billions of dollars wiped out in recent weeks and this has taken a toll on 3AC, as it has resulted in a liquidity crisis. On Monday, the hedge fund was unable to pay off a loan it had taken from Voyager Digital worth $350 million in the form of USDC, the stablecoin pegged to the US dollar, and 15,250 bitcoin, which were worth $304.5 million at the time of writing.
3AC had taken a hit because of its exposure to the algorithmic stablecoin TerraUSD (UST) as well as its sister token LUNA. The two had recently imploded in the previous month, which meant more losses for the hedge fund.
It had been reported earlier this month that some of 3AC’s positions had been liquidated by crypto lenders Genesis and BlockFi. The hedge fund had also borrowed from the latter, but was unable to meet the margin call.
The liquidation of 3AC has resulted in contagion fears because there are several parts of the market that are exposed to the crypto hedge fund. It has invested in a number of decentralized platforms that could also get in trouble.
Moreover, there are other cryptocurrency companies that are also dealing with liquidity problems. These include crypto lender Celsius Network that had frozen withdrawals and transfers on its platform. Similarly, crypto exchange CoinFlex had also paused withdrawals for customers. Both platforms had cited the extreme conditions of the market as their reason.
The volatility in the crypto market is also affecting companies. Crypto exchanges like Coinbase have seen their share price drop. As a matter of fact, low trading volumes has forced several companies in the market to fire their staff in order to keep their costs under control. Bitcoin has taken a massive beating this year and has gone below the $20,000 threshold, which is the lowest it has been seen 2020 and things seem to be getting worse.