The past few months have been tumultuous months even for hardcore market participants. The crypto market has lost a lot of value and some players have been wiped out. But this time, big names like Singapore-based cryptocurrency hedge fund Three Arrows Capital (3AC) are also on board. So, "what is 3AC crypto?" and "what happened?".
What is 3AC Crypto?
3AC was founded in 2012 by Kyle Davies and Su Zhu. Over the years, 3AC has grown to be one of the top players in the industry and has been involved in numerous projects such as LUNA, Aave, Avalanche, BlockFi, Deribit, and Solana .
As it grew, the company began making riskier bets on the market, and when LUNA collapsed in May, it set off a chain reaction of events that ultimately led to its collapse. Despite rumors circulating on Twitter beforehand, the Financial Times reported on June 16 that 3AC failed to respond to calls on the margin. A few days later, The Wall Street Journal reported that 3AC may not be able to repay the total $665 million it owed from crypto broker Voyager Digital.
Voyager Digital then had to file for bankruptcy, with CEO Ehrlich revealing that 3AC's failure to repay was the main reason. 3AC's failure to meet its margin call led to further industry repercussions.
As it turned out later, 27 companies were affected and suffered losses of more than US$3 billion.
The History of The Downfall
At its peak, 3AC managed approximately $18 billion in crypto assets, making it one of the top firms in the industry. Early investments in successful projects like Ethereum (ETH) and Avalanche allowed for the massive sum (AVAX).
What then, with such assets, could drive such a company into bankruptcy? To put it briefly, it is a combination of bad risk management, carelessness when dealing with business partners, and a huge amount of greed.
LUNA: UST crash was the origin point
The collapse of LUNA and its algorithmic stablecoin UST marked the beginning of 3AC's troubles. 3AC maintained a sizeable holding in the two assets, valued at about $560 million at its peak and about $600 when the price fell sharply to nearly nothing in a couple of days .
3AC built the above position using high leverage via counterparty funds. 3AC put the funds in Anchor Protocol without the knowledge of the counterparties.
From rumor to fact
It all started to come to light when Zhu Su deleted his presence on social media and vanished from the public eye. This, among other things like 3AC selling 60,000 stETH, led to the first rumors of a 3AC margin call on June 14. Few people could have predicted that 3AC would now also be affected by bankruptcy after the Luna disaster.
The following day, press reports made it public that 3AC had deposited $245 million in ETH on the lending platform Aave, which they used as collateral to borrow $189 million in USDC and USDT. The loan-to-value ratio was therefore only 77%. 3AC could neither repay the loan nor increase the collateral.
Now I believe that you have a clue about "what is 3AC crypto?" , and "what happened to it?".
