An overview of the current situation of Celsius and 3AC funds, the two villains in the crypto market

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2022-06-21 23:15:41

There are a lot of rumors swirling around Three Arrows Capital (3AC) and Celsius right now, but it’s still unverified. This makes the psychology of investors in these two projects become more insecure. When the main issues are concerned are the fear of insolvency and unmet transparency.

Celsius and 3AC are the main factors causing market turmoil these days

Three Arrow Capital

The founder of the intelligence company Messari and Twitter Space executive Ryan Selkis gave an assessment of the severity of the 3AC crisis:

“3AC is facing a net debt of $1.5 billion, but fundamentally or at least on the surface, the fund is doing business as usual.”

Selkis went on to further elaborate on the crisis, saying that it appears 3AC is facing too many FUDs “falling from the sky”. Many funds, projects and lending platforms quickly shied away from Celsius and 3AC in the last week. Some have also confirmed the complete liquidation of positions by third parties. Tether announced that it is no longer exposed to Celsius as the fund has been “liquidated without loss”. As reported by The Block:

“Cryptocurrency exchanges FTX, Deribit and BitMEX have liquidated almost all of the Three Arrows Capital positions in the past week alone.”

BlockFi and Genesis also hinted that they had liquidated a third-party position (not detailed) during the week. However, by not naming 3AC, these positions could come from another major crypto company that is also struggling with liquidity and collateralized loans. Previously, 3AC listed BlockFi on their website as a large and promising investment partner.

In theory, if the total exposure for 3AC were $1.5 billion, the direct impact of this incident on the market could be rather small. That level of debt would represent just over 1% of the total market capitalization of the crypto industry, and less than the value of the amount of Bitcoin Terraform Labs sold during the LUNA crisis. However, in reality, the decline in the price of Bitcoin and the entire crypto industry is mainly due to the fear and uncertainty of investors in the market when Celsius, Terra and 3AC all experienced crises within just a short period of time. one month. In addition, the cash flow in the world economy is facing difficulties when macro issues have many bad fluctuations.

BlockFi CEO Zac Prince stated that, given the current state of crypto lending, “the path of self-regulation is not a viable option.” Earlier in a public conversation, he also confirmed that he agreed with the view that “more regulation will be needed after the current crisis”.

Frank Chapparo, editor of the popular blockchain industry newspaper, The Block, also stated that: 3AC has “affected all the trading desks, token projects… making it impossible for anyone to make a profit. from arbitrage trading GBTC…”. He also confirmed that 3AC has contacted projects to “offer to hold funds, and conduct fund management for projects… They have convinced many people to deposit hundreds of millions of dollars into 3AC’s coffers.” .

According to Chapparo, “the terms of some of these deals were really bad,” suggesting that any company that accepts 3AC’s offer to hold funds could face heavy losses. Selkis also mentioned that it is difficult for these projects to accept offers of help as this could cause their token prices to plummet and be entangled in possible future lawsuits, against 3AC. According to reports, this investment fund has offered an 8% return for investors holding the project’s asset fund.

Defi Edge claims that projects have reported that the project cannot contact 3AC, some of the protocols that 3AC has invested in are in danger of collapse… as their coffers evaporate without a trace. In this case, the consequences can be huge.

3AC borrowed money from many funds and partners, put it into Anchor to generate profits without informing them. The project held 9 figures of UST before Terra lost its peg. The collapse of this ecosystem has dragged the investment fund 3 Arrow into a “fund of 3 incense sticks”.

Interestingly, in order to access the 3AC website, the user must confirm the terms and conditions containing the disclaimer:

“Because of the risks involved, investing in the Three Arrows Capital fund is only suitable for connoisseurs of investors who can afford to lose a substantial part or even all of the money invested in the Fund without affecting their investment. affect their standard of living”.

The language in this clause is a bit unusual as it refers to “standard of living” as an important indicator. This phrase is likely to become the main focus of future litigation. The entire current situation is very vague and not much information has been clarified. This is unacceptable in an industry accustomed to transparent on-chain transactions.

Celsius Recovery Plan

Founder of web3 investment firm Bnk to the Future, Simon Dixon, who led the first round of investment for Celsius has announced a recovery plan for the struggling platform. The recovery is geared towards “both the Celsius community and the investor community (Bnk to the Future) due to the recent withdrawal halt.”

Current price chart of Celsius . token

Dixon compared the current situation to 2011 and the collapse of Mt. Gox before saying, “I believe he will find the right solution when financial innovation goes wrong.” Bnk to the Future also supported Bitfinex in 2016 after it was hacked and “executed security, debt, equity token recovery and provided investors with a high return relative to the risk that they would otherwise incur.” they accepted”.

The Bnk to the Future founder also confirmed that “a small portion” of his total assets are invested in Celsius, so he himself is at risk of potential default:

“The issue was only resolved using a financial innovation solution like Bitfinex, when the problem was resolved within 9 months and worked great for the depositors.”

No further information will be released until Celsius is “ready”, so investors may still be waiting for a while. However, the content of the notice shows that the situation in Celsius is very serious. If a recovery plan is put forward by Bnk to the Future, Dixon expects it to be resolved within “9 months.” Speaking about the announcement, Rob Wolff of Digital Asset News stated:

“If Simon Dixon is involved, things look a little brighter.”

The rest of the community doesn’t seem to be optimistic about the same recovery plan as Bitfinex, complaining that “this is not a recovery plan” and that “users received worthless tokens”.

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