Three Arrows capital in the beginning of the liquidity crisis

Three Arrows Capital(3AC), one of the world’s largest borrowers, has recently come under fire. Recently on three arrows capital insolvency, liquidity crisis and other rumors continue to ferment.

“We are in communication with relevant parties and are committed to resolving the issue” Zhu Su, founder of Three Arrows Capital, tweeted yesterday. This piece of news, once again triggered encryption community to Three Arrows Capital speculation and revelations.

Then Danny, head of trading at 8 Blocks Capital, tweeted that Three Arrows Capital had misappropriated about $1 million from the firm for margin calls. On June 13, 8 Blocks Capital offered to withdraw a larger amount of Capital from Three Arrows Capital, but was not responded to.

According to foreign media reports, Three Arrows Capital has a total liquidation quota of us $400 million on Deribit, BlockFi and other lending platforms. In fact, since LUNA crash, Three Arrows Capital has been frequent operation, causing widespread concern in the encryption community. The market discussion on Three Arrows Capital mainly focuses on:

1. StETH decoupling, which continuously sells stETH in exchange for ETH to repay debts;
2. It bought BTC with increased leverage, and BTC continued to fall, thus triggering Margin calls;
3. Three Arrows Capital, which invested nearly $600 million in lock-up Luna, is losing tens of billions of dollars.

3AC asset dynamics on chain

Sorted out the chain dynamics of 3AC in the past two days, mainly including the following tracks:

agency address:
“0 x4862733b5fddfd35f35ea8ccf08f5045e57388b3”
“0 x3ba21b6477f48273f41d241aa3722ffb9e07e247”

1 A large amount of ETH is transferred from FTX. According to the data on Tokenview , on June 14, 3AC withdrew 14,900 ETH from FTX in total.
10,140 ETH are then transferred to the address starting with 0x3BA associated with the three arrows. The final address is AAVE (beginning with 0xCC9).

2 3AC began to sell stETH. On June 14, the address of 3AC (beginning with 0x3BA) converted 38,900 stETH into 36,718.64 ETH via Matcha (exchange rate approximately 0.94).

After that, 3AC(beginning with 0x486) transferred 17,780 stETH to the address beginning with 0x549 . In the end, 17,780 stETH were exchanged for 16,625 ETH, and all were exchanged for nearly 200 million DAI.

3 On June 15, 3AC transferred 4,100,000 FTT (worth $90 million) to Kucoin from addresses beginning with 0x139. Larry Cermak, vp of research at The Block, tweeted, “I don’t know why Three Arrows would send a $90 million FTT on KuCoin and not FTX.”

4 In addition, on June 15, suspected to be related to the address of 3AC
:0 x716034c25d9fb4b38c837afe417b7f2b9af3e9ae was largely liquidated ETH.

5 On June 16, 3AC (address beginning with 0x3BA) exchanged 5500 stETH for over 6 million USDT through Matcha.

At the end

SuZhu, one of the founders of 3AC, has long been active on the social media platform Twitter. It has often drawn attention from the crypto community because of its high-profile and aggressive speech style.

Some articles pointed out that the core reason for the collapse of 3AC was Zhu Su’s misjudgment of the market and excessive optimism about the trend of crypto finance and BTC, which led to his wrong decision and continued to increase leverage. When the market went down, he had to continue to fill positions, but still could not resist the downward trend and was liquidated.
Luna’s purchase of nearly $600 million triggered the crisis of 3AC. 3AC ranked second on Bitfinex’s monthly loss list in May, with a total loss of $31.37 million, according to Bitfinex.

As one of the world’s largest lenders, Sanjian 3AC takes loans from well-known lenders such as BlockFi, Genesis, Nexo and Celsius. If 3AC imploded, there would be no doubt that the impact would be extremely bad. It would transfer economic risk to its lender, who would bear the difference between what it owed and the liquidated collateral. Each lender is expected to take a big hit from Three Arrows capital.