Three Arrows Capital Internal Collapse and the Lessons It Has Taught Crypto

Three Arrows Capital (3AC) collapsed just a month after Terra collapsed. The collapse of the two crypto giants in such a short period of time has put the market in one of its most volatile positions to date. The collapse of Luna caused repercussions in the market, and 3AC was also greatly affected by it.

Three Arrows Capital Internal Collapse and the Lessons It Has Taught Crypto

3AC’s collapse

The Luna debacle initially seemed isolated, with institutional investors losing billions. However, the weeks after the crash will show that its effects are more widespread than initially expected . One of the troubles is 3AC.

The crypto fund was a direct target of the Luna debacle, with exposure of more than $200 million and speculation as high as $450 million. At first, the company appeared to bounce back from Luna’s collapse, but it soon became apparent that 3AC was in a more dangerous position than investors thought.

Founder and CIO Su Zhu has been outspoken in his belief that the supercycle won’t really collapse, it will soon be proven wrong by the market, and the company will take the hit with him. As Luna collapsed, losses suffered by 3AC put pressure on the crypto company. With the market failing to recover properly, 3AC could soon find itself liquidated on its undercollateralized loan by a large undisclosed lender.

Three Arrows Capital Internal Collapse and the Lessons It Has Taught Crypto

As cryptocurrency exchanges such as Bitmex and FTX liquidate the cryptocurrency company, other liquidations will follow. BlockFi and Genesis also revealed that they are liquidating and mitigating losses, with Genesis saying the losses will be deducted from its balance sheet. After the liquidation, Genesis was apparently still owed $6 million by 3AC.

Lessons learned from the crash

The collapse of 3AC brings to the fore a number of important investment precautions that should be taken. In a bull market, since everything is “pumping” repeatedly, a lot of caution is left behind, so everyone is making money.

However, risk management, prudent planning and caution cannot be overemphasized when dealing with volatile markets such as the cryptocurrency market. They help small and large investors make more informed decisions rather than giving up based on belief and confidence in the project .

Three Arrows Capital Internal Collapse and the Lessons It Has Taught Crypto

The crash left parties involved in 3AC with varying degrees of debt. Ultimately, these debts will have to be borne by these parties as losses, but it remains to be seen how they deal with them. But with two market giants collapsing in such a short period of time, the impact is expected to be huge and quite negative.

Investors are better off taking a defensive stance in their portfolios as events continue to unfold. Once the impact of the 3AC collapse is felt in the market, an already stressed market is expected to succumb further to the bears.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/three-arrows-capital-internal-collapse-and-the-lessons-it-has-taught-crypto/
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.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-06-23 10:36
Next 2022-06-23 10:37

Related articles