Crypto Unrest Intensifies As Major Fund Defaults

The turmoil in the cryptocurrency market intensified with news on Monday that major crypto hedge fund, Three Arrows Capital, defaulted on loans worth a total of $670 million.

The money is owed to digital asset brokerage Voyager Capital, which issued a notice that Three Arrows failed to repay a $350 million loan in the USDC stablecoin as well as approximately $323 million in bitcoin dollars.

An advertisement for the Bitcoin cryptocurrency is displayed on a street in Hong Kong, Thursday, February 17, 2022. [AP Photo/Kin Cheung]

Three Arrows’ problems stem from the crypto market crisis that erupted last month when so-called stablecoins TerraUSD and its sister stablecoin Luna crashed, resulting in losses of billions of dollars.

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Stablecoins were touted as bringing stability to the crypto market, as they were supposed to be pegged to the US dollar and functioned analogously to tokens in a gambling casino that could be cashed in at full value. In May, however, they fell below dollar parity.

Three Arrows had invested heavily in Luna which fell to virtually zero.

As warnings about Three Arrows’ impending default have spread over the past week, attention has turned to Voyager Capital, whose shares fell more than 60% last Wednesday.

Following confirmation of the default, Voyager issued a statement aimed at trying to contain fears of contagion across the broader crypto market. The overall market capitalization fell from $3 trillion last November to around $900 billion, a loss of nearly 70%.

Voyager CEO Stephen Ehrlich said the company was “working diligently and quickly to strengthen our balance sheet and pursuing options so we can meet customer demands for liquidity.”

The fear of contagion stems from widespread borrowing by Three Arrows, one of the largest crypto asset hedge funds, from a range of companies to fund its investments in a number of digital assets. There are concerns that Voyager is not the only company to face heavy losses.

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Crypto Unrest Intensifies As Major Fund Defaults


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