3AC Contagion

After getting rekt on LUNA, stETH, GBTC and hundreds of millions of dollars in liquidations, the recklessness of Three Arrows Capital is still being felt across the industry.

The last 10 days have made it clear that Su and Davies were even more degenerate than the rest of us.

Their extreme investing activities built a time bomb for themselves, and their creditors, who they have allegedly been ghosting.

With hindsight, their tweets take on a different meaning:

”Those who do not manage their risk will have the market manage it for them” - Zhu Su

“Couple more liquidations then up only” - Kyle Davies

The wake-up call for 3AC came with the collapse of LUNA, which Su shilled to the last moment before admitting his supercycle thesis was “regrettably wrong” and posting a grotesquely tone-deaf response to the crash:

“All w/ zero need for govt bailouts”

Now, 3AC are the ones in need of a bailout.

Their creditors are desperately looking for a lifeline.

And Alameda is there to pick up the pieces.

In a thread published the same day that rumours began to circulate about 3AC, Voyager stated that “transparency is a core part of our ethos”, describing the company’s “straightforward, low-risk approach to asset management”, whilst claiming that they “have the experience to back our decisions and weather any bear market.

Strange then, that on Wednesday Voyager announced an agreement with Alameda for $200M and 15k BTC (>$300M) to help “meet customer liquidity needs”.

There was no better partner for Voyager, seeing as Alameda had bought up 15M Voyager shares the week before, making themselves the largest shareholder.

The statement “concurrently announced” outstanding loans of $350M and 15.25k BTC, with a value of approximately $1.1B at the time and interest rates ranging from 1% to 9%.

It would be very interesting to know how 3AC used the funds, but perhaps we will never know.

3AC have until Monday to repay the >$650M before being considered in default but, given Su and Davies are reportedly looking for a bailout, Voyager shouldn’t hold their breath.

Investors certainly aren’t; Voyager stock is down over 50% since yesterday’s announcement.

More than half a billion dollars in outstanding uncollateralised loans doesn’t sound like a very “low-risk approach”...

Two days before the Voyager statement, BlockFi CEO Zac Prince announced a $250M credit line from FTX to back up the platform’s balance sheet. This comes after last week’s news that a “large client” had been liquidated (again, no prizes for guesses) after failing to meet a margin call.

With Voyager dropping daily withdrawal limits yesterday from $25k to $10k, and BlockFi’s apparently worrying financial outlook, are these bailouts realistically hoping to save the platforms?

Or are Alameda and FTX simply waiting for them to get even weaker?

And who’s next?

How many DeFi projects had 3AC running their treasuries?

While these moves may be presented as “rescues” by the mainstream press, the CeFi casualties are not being kept alive out of effective altruism.

As SBF picks the bones of the dead and dying, power is being consolidated.

Seeds sown at the bottom could become extremely fruitful during the next cycle.

With much of the competition facing difficulties following aggressive hiring, ostentatious marketing and internal conflicts, will we see a version of DeFi's decentralised monopoly play out in CeFi?

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