The “bloodbath” in the cryptocurrency sector may claim another victim, with the co-founder of billionaire hedge fund Three Arrows Capital taking to Twitter in an attempt to combat rumors that the company is insolvent following the market crash.
With a net asset value of $18bn (£14.9bn) at its last public statement, the Singapore-based hedge fund was known for taking large and highly leveraged stakes in crypto and cryptocurrency deals outright. He has positions in cryptocurrencies, including bitcoin, Ethereum, and Solana, as well as equity investments in companies such as the BlockFi exchange and the Deribit options trading platform.
The turmoil in the crypto markets has substantially reduced the value of those holdings and wiped out some other holdings the fund, known as 3AC, has taken, including in the doomed “algorithmic stablecoin” project Terra and the “play to win” game Axie. Infinity, which was the victim of a $700 million hack late last year, attributed to North Korean state-sponsored hackers.
Zhu Su, the Dubai-based investor behind the crypto-focused trading house, tweeted on Wednesday morning that “We are in the process of reaching out to the relevant parties and fully committed to resolving this.”
With traders already nursing their wounds after a 25% drop in the price of bitcoin in a single day, triggered by crypto banking surrogate Celsius’s announcement that it would suspend withdrawals, Zhu’s statement kicked off another day of turmoil in the crypto sector. The CEO of crypto exchange Binance, Changpeng Zhao, described the situation as a “bloodbath”.
Bitcoin’s value continued to fall on Wednesday, to just over $20,000, down 70% from its all-time high of $69,000 in November.
Tether, the centralized stablecoin that is of systemic importance to the broader cryptocurrency sector, released a statement denying any loss of 3AC or Celsius.
“The Celsius position has been liquidated with no loss to Tether,” the company said. “Tether’s lending activity with Celsius (as with any other borrower) has always been overcollateralized. Tether currently has zero exposure to Celsius apart from a small investment made with Tether’s capital in the company.”
The company had previously told the Financial Times that its loans to Celsius were overcollateralized by 30%, meaning it had taken $1.30 worth of bitcoin for every $1 it lent.
Celsius added: “Tether is aware of other rumors that are being spread which suggest that it has credit exposure to Three Arrows Capital. – again, this is categorically false.”
The company also dismissed claims that its large holdings of commercial paper — short-term loans to companies — were held in disproportionately risky investments. It also said it intended to replace those holdings with US Treasuries, although it did not offer a date when that change was intended to occur.
On Wednesday, the Tron DAO reserve project, which backs the USDD algorithmic stablecoin, announced that it would withdraw over $100 million worth of crypto from Binance to support its stablecoin’s dollar peg, which had dropped to $0.97 in cryptocurrency exchanges. That sparked fears that the stablecoin could follow in the footsteps of its similarly structured UST peer, whose collapse precipitated the latest crisis.
Teunis Brosens, chief digital finance economist at Dutch bank ING, said that while the cryptocurrency rally could be partly explained by broader market conditions, the recent collapse of stablecoin project Terra had sparked deeper concern. on the general viability of some of the lesser-known digital assets. “Cryptocurrency investors have become very critical, especially regarding more complex products, and they want out. There may still be trust in bitcoin and Ethereum, which are the simpler currencies, but as people struggle to get out of the complex products, entities like Celsius have to liquidate their conventional currencies like bitcoin and Ethereum, which only reduces even more plus its price. ”
On Tuesday night, Bill Gates warned that the cryptocurrency industry was a bubble economy, “100% based on the biggest fool theory,” the idea that profits come from finding someone dumber than you who sell your asset. “I’m used to asset classes … like a farm where they have production, or like a company where they make products,” Gates said.