3AC Missing The Mark May The Liquidations Continue

Dum dum dum, another one bites the dust. We often joke about the bitcoin cycle since this is the 4th one and we should all know how it works, the previous three were predominantly retail-driven while this one was heavily influenced by institutional capital which has been humbled just like your average retail investor.

In a bull market, everyone thinks they're a genius, they think it will go on forever and people pile into more risk as they didn't get burned, but once risk is at its maximum and most overleveraged is when the market finally reverts.

We've seen Terra Labs, Celsius shit the bed, Coinbase is firing 10% of its staff, and now news that big mouth fund 3AC is facing liquidation.

Big mouths get bitch slapped

During the bull market you may have come across firm’s founders, Su Zhu and Kyle Davies, were two of the most vocal participants in the crypto markets in the past few years. Since they were riding the tails of bitcoin's run and making bets on non-fungible tokens (NFT), decentralized finance (Defi) applications, layer 1 blockchain tokens and cryptocurrency companies.

Now the last 2 years was pretty easy to make money in the space, even a ham sandwich could do put on a risk on trade and make paper gains. But taking profits is a different story.

According to 3AC site, their investments include ether (ETH), Solana (SOL), and luna (LUNA). Prices of these are down 77%, 90% and 99.7%, respectively, since lifetime highs, as per CoinGecko data.

Luna and stETh were big bets

Now Luna blowing up sure would rip a hole in anyone's balance sheet and be tough to recover from, while Solana has had several shut downs and a massive hack in the form of wormhole which really hit the ecosystem hard

Now that's enough to cripple a lot of funds but if the other major bet is locking your ETH into the beacon chain then a large portion of your funds are illiquid.

You've tied your fund to the successful move to POS for ETH, a move that has been delayed for years. The crunch has hit the firm hard and threatens to face possible insolvency after incurring at least $400 million in liquidations, according to The Block

Three Arrows Capital sold at least $40M worth of Lido’s staked Ether early Tuesday. The largest seller of the token in the past week, as they cover their immediate redemptions and obligations.

Depending on how long it takes to offload positions and the liquidity of the market we could see them depress shitcoin and bitcoin prices even further as they try to stay in business.

Alternatively, this could end up being another victim and with a fund of this size liquidating you can be sure that prices will take a pounding :)

Which is good news for humble stackers like myself, keep shitting the bed shitcoiners!

Sources:

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