Three Arrows Capital defeat: ETH’s first Holder is in a liquidity crisis

Where is the first big bear market after the institution’s high-profile and heavy positions?

The crypto market is in a panic, and the bad news is gradually being realized.

The crash of Luna, the insolvency of Celsius, the de-anchor of stETH… With a series of bad news, the market kept hitting new lows without rebounding.

Today, a tweet from Zhu Su, founder of Three Arrows Capital, made the encryption community fry the pot again, “We are communicating with relevant parties and are committed to solving the problem.”

Three Arrows Capital defeat: ETH's first Holder is in a liquidity crisis

This news has triggered various speculations and “revelations” about Three Arrows Capital.

In fact, in the past few days, the content of the continuous operation has been increasing and fermenting on Twitter about the insolvency of Three Arrows Capital and the liquidity crisis. Discussions focused on:

1. It buys BTC by adding leverage, and BTC continues to fall, which in turn triggers a Margin call (margin call);

2. It keeps selling stETH (in exchange for ETH) to pay off debt;

3. It previously participated in the investment in Luna (tens of billions of dollars have been evaporated).

Although Three Arrows Capital has not responded positively to the above statement, the data on the chain (the Three Arrows address was liquidated a large amount of ETH:, the profit and loss of the account disclosed by the exchange (Three Arrows account Huge losses: all point to one point – Three Arrows Capital is facing a dark moment, and may pull the trigger of “market spiral down”.

Prologue of Disaster

Why did Zhu Su post such a tweet with no beginning and no end? Let’s start with the comments from Danny, Head of Trading at 8BlocksCapital.

After Zhu Su’s tweet about “solving the problem”, Twitter user @Danny8BC stated that the $1 million in the Three Arrows Capital trading account was withdrawn, and asked Three Arrows Capital to return it as soon as possible.

Three Arrows Capital defeat: ETH's first Holder is in a liquidity crisis

As an investment institution that once managed tens of billions of dollars, transferring funds without the authorization of the partner will inevitably lead to speculation. Could it be that the liquidity of Three Arrows’ capital, which has always been “rich and powerful”, has dried up?

In fact, there have been rumors in the market before that Three Arrows Capital is suspected of having operational and repayment problems due to the plummeting market. Since the collapse of LUNA in May, Three Arrows Capital has been operating frequently. It has successively transferred a huge amount of ETH to FTX and Bitmex, and has transferred about 162,629 ETH so far.

At the same time, Three Arrows Capital is still selling stETH. When stETH “decoupled” to 0.94 ETH, Three Arrows pulled 127,000 stETH liquidity (worth $246 million at the time) from Curve.

Three Arrows Capital defeat: ETH's first Holder is in a liquidity crisis

Recently, the stETH de-anchoring event has intensified (see “Why stETH is not the next UST” for details of the event), and both circulating lending and liquidity shortages have made stETH/ETH continue to depreciate.

On-chain data shows that in addition to Celsius selling frantically, Three Arrows Capital is also selling stETH through its sub-accounts and seed round investment addresses.

On June 14, the address marked by Nansen as Three Arrows Capital exchanged 38,900 stETHs to 36,718.64 ETHs through Matcha (the exchange rate is about 0.94). After that, Three Arrows Capital also exchanged 17,780 stETHs for 16,625 ETHs, and then all of them were exchanged for nearly 20 million DAI.

Aave data shows that the Three Arrows Capital wallet has borrowed $198 million, with a pledge rate of about 85%. If ETH falls to $1,042, it will be liquidated. In order to avoid liquidation risks, it has been actively repaying the debt borrowed on the chain. (Odaily Planet Daily Note: Around 17:00, ETH fell to $1,028, and Paidun monitored that the suspected Three Arrows Capital address was liquidated with 3,346 ETH.)

Three Arrows Capital defeat: ETH's first Holder is in a liquidity crisis

In addition to stETH, Three Arrows Capital is also the largest holder of Grayscale Bitcoin Trust GBTC (at the end of 2020, holding 5.62% of the GBTC share). In the process of continuous market decline, this part of the position has also shrunk seriously due to decoupling, and Three Arrows Capital is facing Margin Call (margin call).

According to crypto trader degentrading, Three Arrows Capital has lending positions on multiple mainstream lending platforms such as BlockFi, Genesis, Nexo and Celsius. According to The Block, Three Arrows’ $400 million position has been liquidated. At 17:14 Beijing time, Three Arrows Capital was liquidated again with 2681 ETH. If the market continues to fall, further triggering large-scale serial liquidations, the spread will be very wide.

Three Arrows’ Famous Work and “Black History”

What is the existence of Three Arrows Capital in the crypto market?

Founded in 2012 by Zhu Su and Kyle Davies, Three Arrows Capital has been investing in the cryptocurrency field. Its investment portfolio includes BTC, ETH, AVAX, LUNA, SOL, NEAR, MINA and other top L1s. At its peak, it had more than 100 It is one of the most active investment institutions in the cryptocurrency field.

In addition, Sanjian is also the first investor to hold more than 5% of GBTC shares, with a maximum share of 6.26% at the beginning of 2021 (no latest data available).

The reason why the brand of Three Arrows Capital is famous in the market is because of the high-profile and radical speech style of founder Zhu Su . The first time many people heard of its name was the “Ethereum Controversy” last November.

At that time, Zhu Su angered Ethereum, saying that the high cost of Ethereum GAS is not suitable for new players; the developers of the Ethereum community have become rich and forget their original intentions, and they need a bear market to cool down, or establish new real support users elsewhere. , and made it clear that he was a supporter of Ethereum, but now decided to abandon the idea of ​​Ethereum.

As one of the biggest beneficiaries of the Ethereum ecological explosion, Three Arrows Capital’s open boycott of Ethereum was countered by members of the Ethereum community including Buterin Vitalik. In the end, Zhu Su issued a soft apology to announce the end of the matter.

In fact, Zhu Su’s failure to develop Ethereum is not without a purpose. There are two core reasons: First, Three Arrows Capital bet on Ethereum, and exchanged SOL for ETH before the outbreak of Solana ecology, and the income of the two was disparate; second, at that time Three Arrows Capital has invested heavily in the ecological projects of Avalanche, Solana and other public chains, and Zhu Su’s related tweets also support Avalanche, attracting Ethereum community builders and users to migrate to the new ecology, which is more in line with its own interests.

However, just half a month after the end of the debate, Sanjian once again “revolted”. At the beginning of December, the wallet address marked as Three Arrows Capital transferred more than 100,000 ETH (about 400 million US dollars) from multiple trading platform addresses for several days. In response to this, Zhu Su responded on Twitter that the 100,000 ETH he bought was “insignificant”, and he would buy more ETH in the future; he also said that he would not abandon Ethereum, and that he would continue to panic in the market in the future. buy. Zhu Su’s behavior of disgusting Ethereum with the front foot and increasing the position with the back foot was ridiculed by the group on social media.

In the following months, Three Arrows Capital has indeed fulfilled its commitment and continued to increase its ETH positions, as if it had “infinite bullets”, and gradually became one of the largest currency holders on Ethereum. At that time, the market was still very curious, where the money for the three arrows to increase the position came from. Now that I think about it, it is probably a revolving mortgage loan, which has put leverage on itself, which also paved the way for today’s rout.

The core reason that led to the collapse of Three Arrows Capital was that Zhu Su misjudged the market and was too optimistic about the trend of encrypted finance and Bitcoin, so that he made mistakes and continued to increase leverage. , was tragically liquidated.

In an interview with the UpOnly podcast last year, Zhu Su said that if the market value of bitcoin reaches the level of gold, the price of bitcoin could be as high as $2.5 million per coin. At the beginning of this year, Zhu Su tweeted, “I will only make one prediction for 2022, that is, at least 10 nation-states will make BTC legal tender.” In addition, Zhu Su also proposed the concept of “super cycle”, He believes that the crypto market will gradually rise in this market cycle, avoiding a sustained bear market.

However, this year, with central banks raising interest rates and curbing inflation, the global financial market has continued to decline in the past few months, and it is difficult for encrypted finance to survive alone. Bitcoin continues to fall, hitting a new 19-month low, and Zhu Su’s “super cycle” has also become made a joke. In a tweet in late May, Zhu Su wrote: “Sadly, the supercycle price theory is wrong, but cryptocurrencies will still thrive and change the world every day.”

Since June this year, Zhu Su, who has always been high-profile, has become “silent” and began to reduce comments on currencies other than Bitcoin; even when it comes to Bitcoin, he lists favorable data to recharge the market with belief. In a tweet, he wrote, “My team told me that the next 20,000 tweets are best just bitcoin.” In addition, he also deleted the words ETH, AVAX, LUNA, SOL, NEAR, MINA, etc. from his Twitter profile.

Three Arrows Capital defeat: ETH's first Holder is in a liquidity crisis

Of course, in addition to decision-making mistakes, Sanjian also seems to lack some “luck”, catching up with the biggest collapse in the history of encryption – Terra & UST Thunder. In February this year, Terraform Labs established LFG to support the UST link and successfully raised one billion US dollars, led by Jump Capital and Three Arrows Capital; with the UST thunderstorm and Terra plummeting, LFG’s loss rate exceeded 90%, and Three Arrows also lost heavy.

This thunderstorm has undoubtedly greatly weakened the anti-risk ability of Three Arrows Capital, and was completely exposed to the risk of the overall downward trend in the market.

The possibility of a death spiral

Coincidentally, when the crypto market was prosperous, the high-profile positions and high-pitched voices of institutions were undoubtedly the “reassurance” for all investors, but in today’s falling market, the former bull market promoters have become black swans lining up, each taking The number plate that will be liquidated. What is even more frightening is that in the transparent financial system on the chain, the numbers on these number plates are clearly seen by everyone.

In the face of various speculations in the market, Three Arrows Capital has not given an official reply so far. Under the panic of liquidation and debt, will Three Arrows face a death spiral? Will market conditions fall further? In the absence of accurate data and information support, some KOLs also gave some judgments.

degentrading considers Three Arrows Capital to be one of the largest borrowers/clients of global lenders. Celsius, BlockFi, Genesis, etc. are all associated with Three Arrows Capital, and their event will transfer economic risk to their lenders. For example, Sanjian holds a large number of loan positions through CeFi institutions such as Celsius. Once it encounters a complete liquidation, in addition to bringing greater selling pressure, it may also trigger a more terrible chain reaction, because its loan positions and mortgage assets. The loss gap between the two will be forced to be borne by these CeFi institutions, and the current situation of institutions such as Celsius is also difficult to guarantee…

And encrypted KOL Jiang Zhuoer believes that the three arrows will die, but the market has basically bottomed out, and the market panic will gradually rise.

Three Arrows Capital defeat: ETH's first Holder is in a liquidity crisis

No matter how the three arrows end, the market panic has become a fact. As of press time, ETH fell below 1100 USDT and is now at 1024.01 USDT, a 16% drop in 24 hours.

In today’s sluggish market sentiment, no one can accurately predict the next market trend of the market. This is the first big bear market after institutions have entered the market, but it is not the first time that Bitcoin, Ethereum and even the encrypted market have faced difficulties. crisis.

We are convinced that the market will always bottom out and rebound. This decline may not be worth mentioning in the long history of the future, but as an ordinary investor, don’t easily judge short-term and heavy positions. The crypto market never lacks opportunities, but we There is always a shortage of bullets in hand.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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