Three Arrows Capital (3AC), a hedge fund focusing on cryptocurrencies, is facing the risk of defaulting on 670m euros in loans, a development that fears it could have a chain reaction in the market.
3AC is one of the most important hedge funds in the field of cryptocurrencies and is mainly known for its high leverage bets.
However, today, as the digital currency market has lost billions of dollars in recent weeks, the hedge fund is facing liquidity and solvency issues, according to CNBC.
Digital asset brokerage Voyager Digital announced last week that it had lent a total of 12,250 bitcoins to 3AC and an additional $ 350 million in stable USDCins. Based on Monday’s prices, the total amount of the loan exceeded $ 675 million.
Voyager has given 3AC until June 24 to pay $ 25 million in stablecoin USDC and repay the entire loan by today, Monday, June 27.
However, Voyager announced on Monday that it had not received any payment, and added that it was proceeding with a default payment payment, according to Reuters.
Last week, Voyager announced that it “intends to claim the recovery (of the amounts) from 3AC” and that it is already in discussions with its advisers “about the available legal remedies” at its disposal.
Neither Voyager Digital nor Three Arrows Capital were immediately available for comment on the CNBC strike.
Three Arrows Capital was founded in 2012 by Zhu Su and Kyle Davies.
Zhu is known for his extremely ambitious view of bitcoin. Last year, he said the largest cryptocurrency on the planet could be worth $ 2.5 million per currency. But in May of this year, as the cryptocurrency market began to collapse, Zhu wrote on Twitter that “his assessment of a sharp uptrend was, unfortunately, wrong.”
The start of a new so-called “winter” in cryptocurrencies has hit digital currency projects and companies around the world.
Three Arrow Capital’s problems appear to have started earlier this month, with Zhu posting a rather worrying message on Twitter that the company “is in the process of contacting stakeholders” and “is fully committed to resolving it”, without however to be updated.
However, the Financial Times, citing knowledgeable sources, reported after the post that BlockFi and Genesis cryptocurrency lenders had liquidated some of the 3AC positions. 3AC was borrowed from BlockFi but could not cover the margin call.
Margin call is a mechanism for settling valuation differences under which an investor is required to freeze more capital to avoid losses for a transaction made with loan capital.
Then the so-called stablecoin terraUSD algorithm and its brother token luna collapsed. 3AC had an exposure in Luna and suffered losses.
“The Terra-Luna case caught us completely unprepared,” 3AC co-founder Davies told the Wall Street Journal in an interview earlier this month.
Meanwhile, 3AC, according to CNBC, has also borrowed large sums of money from various companies and invested in various digital assets, which due to its recent problems has sparked fears of further spread throughout the industry.
Source: Capital
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
