A central cryptocurrency hedge fund known as Three Arrows Capital has reportedly been forced into liquidation, according to a source familiar with the situation who spoke with CNBC. This marks one of the most notable fatalities of the most recent so-called “crypto winter.”
The individual who spoke anonymously because they were not permitted to discuss the topic publicly stated that Teneo had been brought on board within the past few days to cope with the liquidation process. CNBC attempted to get in touch with Three Arrows Capital, commonly known as 3AC, but the company did not respond to a request for comment.
According to the information provided by the source, Teneo is now in the very first phases of the liquidation procedure. The restructuring company is taking action to realise the value of the assets that 3AC has. After that, within the next day or two, it will establish a website with information on how creditors may get in touch with the company to make any claims they may have, according to the source.
3AC, co-founded by Zhu Su and Kyle Davies, is one of the most special crypto hedge funds available and is well-known for its highly leveraged bets. Crypto hedge funds are financial vehicles concentrating on digital assets such as cryptocurrency investments. Zhu is an enthusiastic proponent of bitcoin and its potential. However, a decline in the pricing of digital currencies, which has resulted in the loss of billions of dollars from the market in recent weeks, has been detrimental to 3AC and has brought to light a liquidity issue at the firm.
On Monday, 3AC failed to make payments for a loan from Voyager Digital that comprised $350 million in the USDC stablecoin, which is tied to the US dollar value, and 15,250 bitcoin, which would be worth around $304.5 million in today’s deals. 3AC was exposed to the algorithmic stable coin terraced, which ultimately failed, as well as its sister token luna.
The United States-based cryptocurrency lenders BlockFi and Genesis reportedly liquidated part of 3AC’s positions, according to a report published earlier this month by the Financial Times, which cited persons familiar with the situation as its source. 3AC had taken out a loan from BlockFi, but they could not satisfy the required margin. A circumstance known as a margin call occurs when an investor must make a more significant financial commitment to avoid incurring losses on a deal that was executed using borrowed money. Fears of an industry-wide contagion have been created due to the dismantling of 3AC in market segments that might be exposed to the corporation.
There have been problems with liquidity experienced by other cryptocurrency organisations as well. The lending company Celsius and the cryptocurrency exchange CoinFlex were compelled to stop customer withdrawals, claiming “extreme market circumstances” as the reason for their actions. CoinFlex, on the other hand, ran into another snag when one of its customers refused to clear a debt of $47 million, which caused the firm to run into liquidity issues.