Three Arrows Capital, a well-known cryptocurrency hedge fund, has defaulted on a loan worth more than $670 million. Digital asset brokerage Voyager Digital issued a notice of default Monday morning, saying Three Arrows failed to meet its obligations to repay the loan with $350 million in USDC and 15,250 bitcoins, which are currently valued at about $323 million.
In the past few weeks, the cryptocurrency market has been in turmoil, and the market value of hundreds of billions of dollars has evaporated. The overall cryptocurrency market value is about 950 billion U.S. dollars, far below the peak of about 3 trillion U.S. dollars in November last year. Now there is another three arrows capital default event.
Voyager said it intends to seek compensation from Three Arrows Capital. During this period, Voyager emphasized that the platform will continue to operate and fulfill customer orders and withdraw funds . This assurance may attempt to curb the spread of panic through the wider crypto ecosystem. Voyager CEO Stephen Ehrlich said:
We are working hard and rapidly to strengthen our balance sheet and pursue options so that we can continue to meet our clients’ liquidity needs.
As of June 24, Voyager said the company had about $137 million in its own crypto assets and said it had access to $200 million in cash and USDC revolving credits, as well as 15,000 bitcoin revolving credits from Alameda Ventures (worth 3 .18 billion) .
Alameda, the quantitative trading firm owned by cryptocurrency exchange FTX founder Sam Bankman-Fried, last week pledged $500 million in financing to cryptocurrency broker Voyager Digital. Voyager has drawn down $75 million from the line of credit.
” Three Arrows’ default will not result in a default of the agreement with Alameda, ” Voyager’s statement said .
Three Arrows Capital was founded in 2012 by Zhu Su and Kyle Davies. Zhu Su, a “super bull” in bitcoin, said last year that bitcoin could be worth $2.5 million. However, as the cryptocurrency market collapsed, Zhu Su tweeted in May that his “supercycle price claims are unfortunately false.”
Currently, the so-called “crypto winter” is hitting the cryptocurrency market and companies in related industries hard.
The Three Arrows issue appeared to have surfaced earlier this month, when Zhu Su posted a cryptic tweet saying the firm was “communicating with all parties involved and fully committed to addressing it.” There was no further text on the issue after that.
However, British financial media has since reported that US cryptocurrency lending platforms BlockFi and Genesis liquidated the positions of Three Arrows Capital. Three Arrows Capital had borrowed money from BlockFi, but was unable to meet margin call requirements.
Then, the algorithmic stable currency UST and its sister currency LUNA collapsed, and the LUNA exposure position owned by Three Arrows Capital suffered losses. Kyle Davies also revealed that this situation is very unexpected.
Three Arrows is still facing a credit crunch as cryptocurrency prices continue to come under pressure. Bitcoin is holding the $20,000 mark on the 28th, but has fallen more than 50% this year. In addition, the Federal Reserve signaled further interest rate hikes to curb inflation, also putting pressure on riskier assets.
Three Arrows Capital is one of the large crypto-focused hedge funds, borrowing large sums from various companies and investing in different digital assets. As a result, the latest default has sparked fears that it could have ripple effects across the industry.