Better known as 3AC, 3 Arrows Capital was until recently one of the most important crypto investment funds. But in recent days, reports on its financial health have raised fears of bankruptcy.
After the collapse of the Terra blockchain projects and the freezing of withdrawals on the platform of staking Celsius, it’s the turn of 3 Arrows Capital to experience a very bad patch, according to several observers. But since mid-June, more and more analysts are reporting problems in 3AC’s accounts. Some don’t hesitate to use the term insolvency — and in an interview with the Wall Street Journal, the founder confirmed the poor health of the company.
3 Arrows Capital, abbreviated 3AC, is not just any platform. It is one of the most important investment and speculation funds in the crypto-currency sector: the company manages a capital of more than 3 billion dollars. This large fund means that 3AC has positions in many crypto companies and has invested in the main blockchains. And if ever the platform declares bankruptcy, the consequences could be disastrous for a whole part of the ecosystem.
What’s going on with 3 Arrows Capital?
To simplify, A3C is a hedge fund. It is more or less the same thing as an investment fund, except that these hedge funds (also called hedge funds) take shares in riskier sectors in order to have a better return and use loans to guarantee them. They are therefore considered risky investments.
The situation in which A3C finds itself today is quite complicated, and it is linked to the fall in value of several tokens, including stETH. But it had also invested $200 million in Luna, the Terra project whose value collapsed in a few days — and which is now worth nothing. Between the Luna debacle and the fall in the price of cryptos, some specialists believe that 3AC would no longer have enough guarantees for the loans to which it subscribed. If so, the company could default.
The analysts reached these conclusions by seeing the transactions carried out on wallets supposedly belonging to 3AC. For a few days, the company and its founders were walled in silence. But, in an interview with the Wall Street Journal on June 17, they finally confirmed 3AC’s bad situation.
The company is ” exploring all options “in order to avoid non-payment, ” including the sale of their assets and buyout by another company “, explains the WSJ. ” The fund hopes to reach an agreement with its creditors, in order to have more time to find a solution.”
What consequences?
If the company were to default, the repercussions on the crypto world would be catastrophic. In addition to managing the funds of many companies and individuals who could lose some of their money, 3AC has also borrowed large sums to finance these investments.
If the platform defaults and fails to repay its loans, the domino effect would be felt throughout the crypto world. The first company to suffer from the fall of 3AC would be the staking platform Celsius, which granted it a loan, andwhich is itself experiencing significant liquidity problems. Other lenders would also be worried, as would the projects in which 3AC has invested.
While waiting for confirmation of the situation by Zhu Su or by the company, it is therefore everyone in crypto who holds their breath – and hopes to escape the worst.