Better known as 3AC, 3 Arrows Capital was one of the leading crypto investment funds until recently. But in recent days, reports of financial health have fueled fears of bankruptcy.
After the collapse of the Terra blockchain projects and the freezing of recordings on the platform of turn of Celsius, it’s 3 Arrows Capital’s turn to experience a very bad patch, according to several observers. But since mid-June, more and more analysts have reported 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 company’s ill health.
3 Arrows Capital, abbreviated 3AC, is not just any platform. It is one of the leading investment and speculation funds in the cryptocurrency sector, managing capital of more than $3 billion. Due to this large fund, 3AC has positions in many crypto companies and has invested in major blockchains. And if the platform ever goes bankrupt, the consequences could be disastrous for a whole part of the ecosystem.
What’s going on with 3 Arrows Capital?
To keep it simple, A3C is a hedge fund. It is more or less the same as a mutual fund, except that these hedge funds (also called hedge funds) take stocks in riskier sectors to get better returns and use loans to guarantee them. They are therefore considered risky investments.
The situation A3C is in today is quite complicated and has been linked to the depreciation of several tokens, including stETH. But it had also invested $200 million in Luna, the Terra project whose value collapsed in a matter of days — and is now worth nothing. Between the Luna debacle and the fall in crypto prices, some specialists believe that 3AC would no longer have adequate guarantees for the loans it subscribed to. If so, the company may default.
The analysts came to these conclusions by seeing the transactions performed on wallets allegedly belonging to 3AC. For a few days, the company and its founders were walled off in silence. But in an interview with the Wall Street Journal on June 17, they finally confirmed 3AC’s dire situation.
The company is ” explore all options “to avoid payment default”, 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 reach a solution†
If the company were to default, the consequences for 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 fund these investments.
If the platform defaults and does not repay its loans, the knock-on effect would be felt across the crypto world. The first company to suffer from the fall of 3AC would be the strike platform Celsius, which granted it a loan, and which itself is experiencing significant liquidity problems. Other lenders would also be concerned, as would the projects in which 3AC has invested.
Pending confirmation of the situation by Zhu Su or by the company, it is therefore everyone in crypto who is holding their breath – hoping to escape the worst.