What happened to Three Arrows Capital? (summary of rumors)

In every round of bull-bear transition, some well-known institutions, capital, and projects will disappear from sight. When the market size is getting bigger and bigger, the replacement will become more and more violent. We have seen that the top five LUNAs in market capitalization have returned to zero overnight, and we have seen Celsius, the largest lending platform in the United States, had to suspend withdrawals. Since yesterday, there have been rumors in the market that Three Arrows Capital, which is quite active in the primary and secondary markets, has also experienced a liquidity crisis. Su Zhu, the founder of Three Arrows, seemed to confirm the rumors on social media this morning. Su Zhu said, "We are communicating with relevant parties and are committed to solving the problem."

Regarding what happened to Sanjian Capital, we still have to wait for the official confirmation, but we can get a general outline of the situation of Sanjian through the analysis and information of some KOLs. Based on the information of several KOLs, this crisis is mainly divided into three parts: GBTC, stETH and Luna, in addition to the asset decline caused by various copycats and the trading losses on some platforms.

GBTC

According to public information, as of the end of 2020, Three Arrows Capital was the largest holder of Grayscale GBTC, holding 5.6168% of GBTC shares, and its market value at that time was approximately US$1.24 billion.

As we all know, GBTC cannot be redeemed and can only be sold in the secondary market. If Sanjian wants to make up the Margin call, it can only sell GBTC in the secondary market.

Worse than Bitcoin’s drop, Three Arrows appears to be using leverage to buy Bitcoin. According to the disclosure of crypto trader degentrading on his social networking site, Three Arrows Capital has lending positions with multiple mainstream lending platforms (such as BlockFi, Genesis, Nexo, Celsius, etc.). Therefore, if Sanjian Capital is liquidated, the impact will be extremely extensive.

stETH

The recent problems of stETH mainly come from the revolving loan. Sanjian Capital seems to be leveraging on the revolving loan, and the market decline also forced Sanjian to sell.

According to the summary of trader MoonOverload on the social networking site, people think that Celsius is the biggest dumper of stETH, but this is not the case: the biggest sell-off comes from Three Arrows Capital. The selling timing of the two institutions is different. Most of Celsius's selling was a week ago, while Three Arrows' selling was in the past two days. On-chain data shows that Three Arrows is selling stETH through every account and seed round investment address it owns.

MoonOverload believes that most of these sell-offs look like they are paying down their debts and borrowings.

Luna

Many people believe that the collapse of LUNA is an important reason for the problems encountered by Sanjian. FatMan, a member of the Terra Research Forum, said that Sanjian Capital once purchased 10.9 million LUNAs at a price of US$559.6 million, which is now worth US$670.45.

All the above information seems to indicate that Sanjian Capital is experiencing Margin Call, and it is using all available assets. According to crypto trader degentrading on his social networking site, Three Arrows Capital is pledging the equity shares previously obtained in the primary market in exchange for more liquidity.

I hope that Three Arrows Capital can tide over this difficulty.