Know 3AC
1- Three Arrows Capitals (3AC) is a Venture Capital established in 2012 with investments in money and capital markets, but since 2018, 3AC has been focused on investing in cryptocurrencies. Its main Cryptocurrency portfolio includes GBTC, Grayscale’s Bitcoin Fund, Blockchain Layer 1, CeFi, More Than 50 Crypto Platforms and Blockchain Games.
2- At the beginning of 2021, 3AC was a huge success, with the top four performers being AXS, SOL, PERP and DOT.
- GameFi Coins AXS Axie Infinity Makes 300% Profit
- Blockchain Solana Coin SOL Profit 15,000%
- PERP Coin of Perpetual Protocol Platform 2000% Profit
- DOT Coin of Blockchain Polkadot Profit 1,100%
And many other coins, making the investment portfolio of 3AC grow more than 100 times in 2021!!
3- The reason why 3AC is so profitable, besides the management skills, 3AC has a strategy of choosing to invest in the Seed Round, Follow-on Round, Series A and Series B, which will be the first round of the project. to raise money for development resulting in a large discount (In other words, investing at a price that is cheaper than the price on the trading board), but it has to be traded with a very high risk and vesting period as well.
4- Vesting Period is where the project will gradually release coins to investors to prevent selling as soon as the coins become available for trading in the secondary market. Periods include gradual distribution of equal amounts over 3 years or more, including Cliff, which means that the first 6 months will not distribute, but accumulate the number of coins to distribute at once after 6 months, etc.
This makes even the overall profit of 3AC looks very good. But it could be a temporary profit.
The portfolio looks good, but it’s just a temporary profit.
5- Digging into the coins that 3AC has invested in, the Governance Tokens of various DeFi projects are being invested in large coins like UNI, AAVE, SNX, COMP and YFI, and smaller coins like FST, KNC, NRV, DHT, MTA, ROOK and DODO as well. The problem with these coins is that there will always be a sell-off from increasing liquidity all the time, known as Toxic Liquidity.
6- The reason why these coins are sold is because the benefits of these coins are low and the supply of coins that will be distributed continuously. Consequently, 3AC coins are constantly being added. But having a period to release coins makes it when it’s real time. The selling price may not be as good as the first or even a loss.
7- There is also an investment in GBTC where besides BTC is negative more than 68% from its peak, GBTC is 34% cheaper than real BTC at the time of writing. The cause is due to unclear license issues. The launch of a legal Canadian Bitcoin ETF and the liquidity of the secondary market Finra can not support a huge sell-off. These reasons are the pressure on 3AC’s losses even more.
Entering the bear market, the VC port will not survive.
8- The reason why the coin price has dropped during this period caused by inflation that has skyrocketed in decades the US Federal Reserve Therefore, there is no choice but to raise interest rates and reduce the size of the Balance Sheet, resulting in huge capital outflows from the market. The unrest between Ukraine and Russia has led to higher oil prices and people withdrawing investments to mitigate risks. These things are like triggering other problems to follow.
9- Avalanche (AVAX) is another 3AC favorite coin. Su Zhu and Kyle Davies, the owners of 3AC, brought the red triangle symbol of AVAX into their Twitter name, and in late 2021 Su Zhu announced an attack on Ethereum ( ETH) that fees are high and slow (But it is reported that 3AC secretly bought ETH after the price drop) and jointly invested $260 million in Avalanche with popular Polychain VC and another $200 million with Blizzard in development. NFT and Gaming are on top as well, with AVAX currently down 87% from its peak, making 3AC a huge hit as well.
Terra, the cataclysmic trigger
10- The collapse of Terra is predicted to be planned as it takes a bear market and UST is on the cusp of turning liquidity increases on the Curve, the largest stablecoin exchange, attacking UST below $1. And finally, the price was unable to keep up, causing both UST and Luna, their pair of coins, to drop 99.2% and 100% thereafter.
11- 3AC suffered huge losses from this incident as it invested more than $200 million in the Luna Foundation Guard funding. It was then noticed that 3AC had LUNA of 10.9 million LUNA, worth $560 million at the time, and it’s now only $660. Call it a loss of almost 100%
The Merge upgrade uncertainty makes the 3AC even more painful.
In addition to the Terra event, the Ethereum Upgrade event also affects 3AC.
12- In early June, Alameda, the FTX Exchange Fund, sold 50,615 stETH worth about $91 million to convert to ETH. This huge amount caused the stETH and ETH exchange rate imbalance to the extent that stETH had. The price is 6% lower than ETH, the reason for that is still uncertain, but some speculate that Alameda was insiders about the postponement of The Merge, a huge upgrade to Ethereum, so it sold first. not go back
13- stETH is a Liquid Staking Derivative, ETH Depositing Agent Contract on the Lido Platform. Lido deposits ETH in the Beacon Chain to earn Staking Rewards, and stETH acts as a deposit contract. It can be redeemed at a rate of 1:1 when entering the Shard Chain phase. If anyone is in a hurry, they can go to the secondary market like Curve, where the price is based on all market mechanisms. Currently, stETH is selling heavily.
14- 3AC has also invested in stETH. According to investigative history of 3AC, it has sold $40 million in stETH previously.
Recovered must be used back
15- 3AC has borrowed $264 million worth of stablecoin in Aave and $35 million in conpound. A look at 3AC’s wallet address shows that the debt is now closed. which is still not very confident because it may be borrowed from other places to close the debt here as well
16- The bad news is not over yet. Around the same time, BitMEX Exchange announced that 3AC’s $6 million loan was cleared as 3AC was unable to raise funds to maintain its leverage. In addition, FTX and Deribit cleared 3AC’s borrowing status on the platform. Norm as well, adding that it’s not a very large position, so there shouldn’t be any problems.
17- But the worst news is that 3AC borrowed at least $400 million from BlockFi, which if 3AC doesn’t raise money to add collateral it could be forced to sell assets and run the risk of bankruptcy. Over the next few days, it was reported that BlockFi had been forced to sell.
Conclusion
18- Right now 3AC is financially in a critical condition. We’ve seen too much reliance on risk management and risk diversification enough to make this happen. Recently, the Wall Street Journal announced that 3AC is coordinating with legal and financial advisors to help raise funds from investors and companies.
This has to be closely monitored as 3AC will declare bankruptcy and this ends up being just a legend. Or is there someone who believes in both of them and then gives money to help continue to invest?
Anyway, I ask everyone to keep this crisis as a lesson that anything can happen. Don’t be All in or love any coin too much.
WAGMI 💪💪
Article written by Khun Ok Prit Boonluen, Senior Analyst at Cryptomind Advisory
Compiled by Bitcoin Addic Thailand Team
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