By
Mayowa Adebajo
April 11th, 2024
Three Arrows Capital is just one of several venture capital firms that are reeling from the pangs of the current crypto winter.
The fate of Three Arrows Capital (3AC), one of the biggest venture capital firms in the digital currency ecosystem is hanging in the balance amidst the encompassing turmoil in the crypto industry. As reported by The Block citing sources close to the situation, Three Arrows Capital is facing worrisome liquidations from its lenders.
While the sources provided no names of the lenders, more than one of them confirmed that the liquidations summed up to a total of $400 million, and Three Arrows Capital has not maintained contact with its counterparties since this liquidations event. It has been a very tough time for everyone, including major stakeholders in the cryptocurrency ecosystem.
At the time of writing, the slump in the digital currency ecosystem had regained its momentum, with the combined crypto market cap dropping to $868 billion, a level that had not been seen in more than 18 months. The decline in the market has caused a lot of negative and unprecedented business situations.
With a number of legacy companies including Coinbase Global Inc (NASDAQ: COIN) and Gemini laying off 18% and 10% of their entire workforce respectively, many more companies are facing a massive economic downturn across the board. In the negative twists, crypto lender Celsius paused its withdrawals earlier this week with its counterpart from Switzerland, Nexo offering a bailout to buy its collateralized loans.
With a full-blown crypto winter underway, Three Arrows Capital has also been bearing the brunt and besides the hinted liquidations, the company is also not thriving well on other fronts including the performances of its portfolio companies.
Three Arrows Capital in Crypto Winter
Three Arrows Capital is just one of several venture capital firms that are reeling from the pangs of the current crypto winter. The company has a robust portfolio of firms it is backing and the worst bet in recent times can be said to be Terra’s Luna Classic (LUNC) which lost over 99% of its value in less than a week last month.
The company is also amongst the early backers of Ethereum (ETH), Polkadot (DOT), and Avalanche (AVAX), all of which have continued to shed off their gains at a worrisome rate. While Ethereum is down 15.03% in the past 24 hours and atop 42.55% over the past week to $1,037.44, DOT and AVAX are not faring any better.
The reality is that 3AC has been placed in a very tight situation where only a swift market recovery can help it regain its posture in the ecosystem and amongst the VCs operating in the space. While Co-Founder and CEO, Su Zhu said the firm is “in the process of communicating with relevant parties and fully committed to working” out its survival model post liquidation, Zhu has admitted he was wrong on some of his projections for the market.
“Supercycle price thesis was regrettably wrong, but crypto will still thrive and change the world every day,” he said at the end of May.
Time will reveal how Three Arrows Capital will navigate this crypto market and general economic downturn.