Multi-billion-dollar crypto hedge fund, Three Arrows Capital (3AC) is the latest victim of the crypto bear-market and the Staked Ether (stETH) spiral. On-chain data has triggered speculation that the Singapore-based company is facing at least a USD$400 million liquidation from its lenders.
A closer look into the company came after its CEO, Zhu Su, posted a cryptic tweet earlier this week:
We are in the process of communicating with relevant parties and fully committed to working this out
Due to the transparent nature of the blockchain network, 3AC's market operations have been easily accessible, including a report which indicates 3AC converted 30,000 stETH to ETH, raising concerns about the status of the company.
stETH is supposed to represent one ETH token that is locked up on Ethereum's new 'proof-of-stake' version of the Ethereum blockchain. In the wake of the Terra collapse, a 2-3% disparity between stETH and ETH opened up during market volatility and the gap has further widened amid market degradation and the financial troubles of companies like Celsius Networks.
As such, major holders of stETH used the Curve platform to dump their stETH holding for locked up ETH as the disparity between stETH and ETH climbed to a high of 8%. As a result, the Curve pool, on which 98.5% of these transactions occurred, does not have enough ETH to swap into stETH.
While the wider market fall has implicated 3AC's ability to source enough capital to pay out investors, the stETH collapse has clearly contributed to the looming risk of insolvency for 3AC.