Crypto carnage brings Celsius and Three Arrows Capital closer to insolvency, June 9-16


The 2022 release of crypto winter is unlike anything we’ve seen before. As I warned last month, the collapse of the Terra ecosystem did not end with Luna Classic (LUC) reaching zero. The biggest threat was contagion. As the dust started to settle, we finally got a glimpse of who was holding the bag. Crypto lender Celsius and Singapore-based venture capital firm Three Arrows Capital suffered heavy losses during the debacle. These companies, once a vital part of the nascent crypto industry, are now at risk of disappearing after weeks of market sell-offs.

Celsius reportedly sought advice from lawyers on restructuring

Alex Mashinsky’s Celsius dominated the headlines this week after the popular cryptocurrency lender suspended withdrawals due to “extreme market conditions”. During the freeze, the company withdrew approximately $247 million in wrapped bitcoin (wBTC) from Aave and sent it to derivatives exchange FTX, along with $74.5 million in Ether (ETH). It didn’t take long for rumors of Celsius’ insolvency to escalate. In response, Celsius reportedly hired lawyers to advise them on a restructuring plan. Digital asset lender Nexo has submitted a takeover proposal to Mashinsky’s team, which has until June 20 to respond.

Su Zhu’s cryptic statement as rumors swirl about 3AC liquidations and insolvency

From debacle to debacle, crypto investors have spent the past few days obsessing over Three Arrows Capital (3AC), one of the most prolific venture capital funds in the industry. Like Celsius, 3AC would also face insolvency after incurring approximately $400 million in liquidations related to the ongoing Ether price crash. The company was also a major investor in Terra and held large positions in other tanking altcoins such as Solana (SOL) and Avalanche (AVAX). 3AC co-founder Su Zhu posted a cryptic tweet on Tuesday saying the company is “fully committed to solving this problem.” He also removed all mentions of altcoins from his Twitter bio.

Crypto exchange Coinbase cuts staff by 18% in bear market

One of the most obvious signs of crypto winter is massive layoffs at major corporations. This week, cryptocurrency exchange Coinbase announced that it was reducing its staff by around 18%. Apparently Coinbase grew “too quickly”, according to CEO Brian Armstrong. In addition to cutting jobs, the San Francisco-based company has also rescinded job postings even after candidates informed their existing employer that they were leaving. Some of the stories are heartbreaking, to say the least.

Tether aims to zero out USDT’s commercial paper backing

Stablecoin issuer Tether has a plan to crush any remaining FUD, or fear, uncertainty, and doubt, regarding its Tether (USDT) backing. This week, the company announced that it would eventually reduce its commercial paper exposure to zero, currently at $8.4 billion. Tether has also flatly rejected any claim that 85% of its commercial paper portfolio is backed by Chinese or Asian assets. So what’s the deal with commercial paper? These are essentially unsecured, fixed-maturity notes issued by corporations. The concern of some observers is that Tether is struggling to find a financial institution willing to take its money on deposit.

Before you leave! Don’t let the bear market distract you from the Metaverse

With the fall of crypto-assets, it’s hard to think of anything else these days. In this week Market report, I discussed the crypto carnage alongside fellow analysts Jordan Finneseth, Marcel Pechman, and Benton Yuan before changing course to the metaverse. It’s hard to be optimistic right now, but the metaverse economy will create tremendous value this decade. Click below to watch a full replay of the show.

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