A couple of months ago, Su Zhu, the co-founder of the crypto hedge fund Three Arrows Capital, was considered an icon in the crypto community. He gave market insights and lessons full of optimism to crypto consumers all around the globe. Moreover, Three Arrows Capital was the largest crypto hedge fund in the world with billions of dollars under management. Thus, the company had a huge name in the digital asset industry.
Three Arrows Capital was an investor in renowned crypto startups. Its co-founders, Su Zhu and Kyle Davies were also crypto influencers with hundreds of thousands of Twitter followers. Zhu was also popular for his predictions in the crypto market. However, things took a drastic turn for Three Arrows Capital and its founders.
The hedge fund company remained adamant about a rebound of Bitcoin. However, the coin kept on falling after touching new all-time highs in November last year. Bitcoin is now trading below $20,000, and the hedge fund lost all its bets in anticipation of a rebound. Lastly, Three Arrows missed the margin calls from its funders and was forced into bankruptcy on July 1.
The Fall of Three Arrows Capital
As the bankruptcy filing moved forward, the liquidating advisers said that Zhu and Davies are not cooperating, and they are nowhere to be found as well. However, Zhao tweeted that an effort to work in collaboration was met with baiting. But Zhu, Davies, or any of their lawyers did not further comment on the matter.
Three Arrows Capital acted like banks while offering double-digit yields and borrowing from traders. The firm grew majorly when the crypto market was going up. However, as soon as the market retraced, the fortunes of Three Arrows Capital also fell. Many firms linked with Three Arrows Capital, like Voyager Digital also defaulted. Investors and customers of these firms are unsure of getting their funds back.
The problem with Three Arrows was that it largely focused on borrowing funds from large crypto lenders over reputation. However, the firm did not disclose much information about its finances. Plus, Zhu and Davies had influential online personalities. They shamed stock traders but they themselves gambled the assets of investors.
With the fall of the crypto market, many crypto startups, lenders, and hedge funds have suffered losses. Many platforms have defaulted while many were forced to make large-scale changes. Thus, such events carry an adverse impact on the expansion and adoption of crypto in the global arena.