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ETH liquidations could bankrupt Three Arrows Capital fund

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Three Arrows Capital (3AC), a venture capital fund that has invested in several cryptocurrencies, is in danger of becoming insolvent. This possibility gained strength after the fund suffered liquidations in the order of US$ 400 million.

3AC withdrew this amount in Ether (ETH) and also in a synthetic token (stETH) during the market crash. The fund would then have sold the tokens on the market to reimburse its investors.

But because of the strong correction, 3AC had to sell at a loss – and this should impact the sustainability of its operations.

Is the fund Three Arrows Capital in danger of going bankrupt?

Apparently, the loans that 3AC had on cryptocurrency platforms were liquidated and the tokens returned. The fund is currently in the process of repaying creditors and other counterparties, according to reports.

3AC’s main investments include Ether (ETH), Solana (Sol) and Luna (Luna). However, the prices of these cryptocurrencies have dropped by 77%, 90%, and 99.7% from all-time highs, respectively. In fact, 3AC has also made huge investments in blockchain Terra.

The 3AC wallet is also exposed to various NFT gaming projects and decentralized finance (DeFi). All of them suffered from strong market corrections in recent weeks.

During the bull market, 3AC founders Su Zhu and Kyle Davies were two of the most active members of the community. Under the duo’s leadership, the fund has expanded its participation in various sectors and protocols, many still in the early stages of development.

Now that the market is down, rumors about the fund’s insolvency have increased. And Zhu approached the topic indirectly. on Tuesday (14), he wrote the following statement on his Twitter account.

“We are in the process of communicating with relevant parties and fully committed to resolving this.”

However, the founder of 3AC did not provide any concrete guidelines or solutions. His speech echoed the speech of Celsius, the cryptocurrency lending company that blocked customer withdrawals earlier this week.

After the lockdown, Celsius customers also raised the hypothesis that the company may be insolvent. This hypothesis was reinforced when the company hired a law firm specializing in corporate restructuring.

While it was active, Celsius managed billions of dollars in funds from 1.7 million customers. But literally overnight, none of them were able to withdraw their money.

One of the strategies Celsius used involved using stETH, which is a derivative token tied to Ether (ETH) – the same one adopted by 3AC. But when stETH lost its “parity” with ETH, the result was problems in the operations of the two companies.

Meanwhile, data on the blockchain suggests that 3AC is selling its cryptocurrency holdings to reduce collateral requirements for certain loans. One of the portfolios linked to the fund has debt totaling $183 million.

3AC has not commented on the insolvency risks at the time of writing.

Coinbase, BlockFi, – shame on you!

All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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