The list of collateral casualties of the liquidity crisis currently affecting crypto lenders is far from complete.
If, in fact, we already have two dominoes that have fallen, it will take time to know the names of the various firms facing this debacle that has renewed a great deal of distrust towards the crypto industry.
It all started with the dramatic collapse of sister tokens Luna and UST in May, leading to the disappearance of at least $55 billion. We’ve since learned that hedge fund Three Arrows Capital, also known as 3AC, has invested heavily in Luna.
The episode revealed other connections, revealing a debt-dominated sector with very few risk management mechanisms. In fact, Three Arrows Capital appears to have borrowed money from multiple crypto firms using the same bitcoins as collateral. The more Bitcoin prices fell, the less the hedge fund was able to repay its creditors.
It’s no surprise, then, that 3AC has defaulted on a $667 million loan from Voyager Digital. The other platforms that have lent to 3AC are BlockFi and Babel Finance. In a panic, the customers of these companies rushed to withdraw their money, but unfortunately the lenders did not have enough cash on hand to meet these demands. As a result, a large number of crypto lenders have suspended withdrawals and other transactions. These include Celsius Network, CoinLoan, CoinFlex and of course Voyager and Babel Finance.
Coinbase says it has no exposure to Three Arrows Capital
3AC was forced into liquidation by a British Virgin Island court. Voyager filed for bankruptcy.
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The crisis initially appeared to be hitting mostly crypto lenders, but we are now learning that other players, and particularly large cryptocurrency exchanges, are also victims. Such is the case of Blockchain.com, which has a $270 million exposure to 3AC, according to Coindesk.
CEO Peter Smith made the announcement in a letter to shareholders, the news site wrote. Blockchain.com, founded in 2011, expects to lose the money loaned to 3AC, according to Coindesk. However, the trading platform believes that this will not affect its liquidity.
“Smith also emphasized in the June 24 letter that Blockchain.com will ‘remain liquid and solvent and our customers will not be impacted,'” Coindesk reported.
Blockchain.com, which became one of the sponsors of the Dallas Cowboys NFL team this year, did not immediately respond to a request for comment.
Following Blockchain.com’s disclosure, TheStreet reached out to other major cryptocurrency exchanges to ask if they were exposed to 3AC.
“Not Coinbase,” a spokesperson told TheStreet in an emailed statement. coin base (COIN) – Get the Coinbase Global Inc report is the most popular cryptocurrency trading platform in the US, TheStreet said in an emailed statement.
Binance, the largest crypto exchange by volume, has not responded at the time of writing.