The Fallout of Margin Calls

Three Arrows Capital, a prominent venture firm, appears to be teetering on the edge of insolvency. Following an unexpected market downturn in the crypto space, they failed to meet margin calls, leading to significant liquidations of their positions. Might want to consider a new hobby—like knitting—because this is a classic case of “you shouldn’t put all your eggs in one blockchain.”

liquidations and the Ripple Effect

Among the casualties of this liquidity crisis is BlockFi, a crypto lender that opted to liquidate some of 3AC’s positions in response to their inability to comply with margin calls. The Financial Times disclosed that 3AC had borrowed Bitcoin (BTC) from BlockFi, which sounded great until the market turned sour and they couldn’t pay up. The specter of insolvency looms larger than a cat meme on the internet.

A Ripple Through the Crypto Community

The fallout didn’t stop there. Hong Kong-based platform Finblox, designed for eager investors seeking yield on their digital assets, felt the heat too. In response to the panic swirling around 3AC, Finblox reduced its withdrawal limits on Thursday. It’s like the crypto version of a restaurant running out of avocado for their toast—total chaos.

The Numbers Game

Estimations vary, but it appears that 3AC has racked up $400 million worth of liquidations across several positions. That’s not pocket change! The firm had hefty investments in cryptos such as Terra (now sporting the awkward nickname LUNC), Solana (SOL), and Avalanche (AVAX)—all of which need to check their texts from 3AC right now.

Caught in the Downward Spiral

The recent market collapse of Ether (ETH) has not been kind, with prices nearing $1,000—yikes! As if that weren’t enough, whispers surfaced that 3AC’s troubles may stem from their involvement with synthetic assets like the Grayscale Bitcoin Trust (GBTC) and Lido’s Staked ETH (stETH). It’s a tough week when your portfolio is more like a horror movie than a success story.

Whispers of Resolution

In the wake of all this hullabaloo, Su Zhu, the co-founder of 3AC, has taken to Twitter to assure the public that they are in talks with “relevant parties” to resolve their issues. A cryptic tweet perhaps, but in a sea of financial despair, any glimmer of hope is a welcome sight. But let’s be real, it’s pretty clear that saying they are “working on it” is just business speak for “please don’t freak out.”