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Crypto contagion spreads as more lenders face trouble

GB Market Commentary 04/07/2022

by Marcus Sotiriou


Bitcoin remains below the 2017 all-time-high which is concerning for bulls. The LUNA and UST crash has led to a tragic contagion amongst other crypto firms, as we have seen liquidity withdrawn from the crypto market at an extraordinary rate.


Archery Target

Three Arrows Capital has reportedly filed for bankruptcy, after they were reprimanded by the Monetary Authority of Singapore (MAS) and faced liquidation from a court order stemming from the British Virgin Islands (BVI).


Financial regulators issued a stern rebuke of the firm last week. A press release has revealed, “The Monetary Authority of Singapore today reprimanded Three Arrows Capital Pte. Ltd. (3AC) for providing false information to MAS and exceeding the assets under management (AUM) threshold allowed for a registered fund management company (RFMC).”


In addition, it has been claimed by a local report in Singapore that Three Arrows Capital’s homes and property located in the country are at risk of being liquidated. The report showed that from 2019 to 2021, the hedge fund’s founder Su Zhu purchased 3 properties in Singapore costing around $83.55 million.


The collapse of Three Arrows Capital has triggered the downfall of many other companies across the crypto space, particularly lenders who the hedge fund borrowed from in enormous sums.

Crypto brokerage Voyager Digital paused withdrawals, trading, deposits, and loyalty rewards last week. Voyager’s debit card was also impacted, and Voyager customers are unable to use the cards issued by the company.


Vauld, a crypto trading and lending platform backed by Coinbase Ventures is the latest crypto firm to halt customer withdrawals, as it announced today in a blog post.


Zac Prince, co-founder of BlockFi

Fortunately, Zac Prince, the co-founder of BlockFi, has confirmed that rumours around BlockFi being bought by FTX for $25 mill are false, and that his company has come to a very different agreement with FTX. The deal, still subject to shareholder approval, aims to “protect client funds”. The agreement involves a “$400 [million] revolving credit facility which is subordinate to all client funds.” Furthermore, the BlockFi CEO added that FTX has “an option to acquire BlockFi at a variable price of up to $240M based on performance triggers.”


All of this fear and uncertainty has led to Bitcoin becoming extremely cheap according to many on-chain indicators. However, until we see a slowdown with inflation and/or crypto companies improving their own financial stability, we can expect the downtrend to continue.

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