Crypto Biz: Crypto carnage pushes Celsius, Three Arrows Capital closer to insolvency, June 9-16

Published at: June 17, 2022

The 2022 version of crypto winter has been unlike anything we’ve seen before. As I warned last month, the meltdown of the Terra ecosystem didn’t end with Luna Classic (LUNC) hitting zero. The biggest threat was contagion. As the dust began to settle, we finally got a glimpse of who was left holding the bag. Crypto lender Celsius and Singapore-based venture firm Three Arrows Capital suffered heavy losses during the debacle. These firms, once a staple of the budding crypto industry, now risk demise following weeks of massive selloffs in the market. 

Celsius reportedly seeks advice from lawyers on restructuring

Alex Mashinsky’s Celsius dominated headlines this week after the popular crypto lender paused withdrawals due to “extreme market conditions.” During the freeze, the firm unstaked roughly $247 million in wrapped Bitcoin (wBTC) from Aave and sent it to the FTX derivatives exchange, along with $74.5 million worth of Ether (ETH). It didn’t take long for rumors of Celsius’ insolvency to proliferate. In response, Celsius has reportedly onboarded attorneys to advise on a restructuring plan. Digital asset lender Nexo has tabled a buy-out proposal to Mashinsky’s team, which has until June 20 to respond.

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

From one debacle to another, crypto investors have spent the past few days fixated on Three Arrows Capital (3AC), one of the industry’s most prolific venture funds. Like Celsius, 3AC is also reportedly facing insolvency after incurring roughly $400 million in liquidations tied to the ongoing collapse of Ether’s price. The company was also a significant investor in Terra and had sizable positions in other tanking altcoins such as Solana (SOL) and Avalanche (AVAX). 3AC’s co-founder Su Zhu issued a cryptic tweet on Tuesday that the company is “fully committed to working this out.” He also removed all mentions of altcoins from his Twitter bio.

This wallet (tagged as 3AC on Nansen) has been aggressively paying back AAVE debt against its 223k ETH / $264mm position to avoid liquidation. With $198mm in borrowings against it, @ a 85% liq threshold, a -11% move in ETH to $1,042 liqudates ithttps://t.co/y7yJJ0NlMc pic.twitter.com/2S55Rzl9Xc

— Onchain Wizard (@OnChainWizard) June 15, 2022

Crypto exchange Coinbase slashes staff by 18% amid bear market

One of the most obvious signs of crypto winter is mass layoffs at major firms. This week, cryptocurrency exchange Coinbase announced that it was reducing its staff by about 18%. Apparently, Coinbase has been growing “too quickly,” according to CEO Brian Armstrong. In addition to cutting jobs, the San Francisco-based firm has also been rescinding job offers even after candidates gave notice to their existing employer that they were leaving. Some of the stories are heartbreaking, to say the least.

Tether aims to decrease commercial paper backing of USDT to zero

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

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

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

Crypto Biz is your weekly pulse of the business behind blockchain and crypto delivered directly to your inbox every Thursday.

Tags
Related Posts
Coinbase Unveils USDT Custody, Then Deletes Announcement
Coinbase Custody, an international institutional cryptocurrency holdings arm of well-known U.S. exchange Coinbase, announced compatibility for stablecoin Tether (USDT), only to delete traces of the announcement shortly thereafter. Coinbase Custody, as well as Tether CTO Paolo Ardoino, unveiled a USDT listing on the Coinbase platform in May 30 tweets, according to CoinDesk reporting on June 10. The tweets have since been deleted at some point between their posting and the June 10 report. We will update as further details come in.
Business / June 10, 2020
Major Brazilian crypto asset manager secures $26M in funding
Hashdex, the Rio de Janeiro-based crypto asset manager with over 4 billion Brazilian real ($765 million) in assets under management, has raised $26 million in a new funding round from investors. According to Bloomberg on Wednesday, venture capital firm Valor Capital Group led the funding round with participation from Coinbase Ventures — the VC arm of American exchange giant Coinbase — and SoftBank. The $26-million capital influx comes as Hashdex is set to pursue its expansion outside Brazil. Indeed, the company is reportedly planning to open as many as 75 new locations across the world before the end of the …
Business / May 12, 2021
Coinbase junk bonds tank amid market rout and creditors’ fears
The price of Coinbase’s junk bonds are tanking amid an underwhelming performance in Q1 and fears over what could happen in the event of a bankruptcy. According to bond trading data from Trace Bonds, both of Coinbase’s junk bond offerings have dropped roughly 17% and 5.2% since its Q1 report on Tuesday to sit at $63 and $62.31 at the time of writing. Overall, they are down 20% and 19% apiece since the start of this month. 10y coinbase bonds trading at 63 cents on the dollar pic.twitter.com/fqmKmiXk5E — state (@statelayer) May 12, 2022 Junk bonds are a form of …
Business / May 13, 2022
FTX funds on the move: bankruptcy proceedings, insider threat or a hack?
The recent tensions between the two major crypto exchanges FTX and Binance, which was accompanied by a massive selloff of FTX Token (FTT), resulted in the collapse of roughly 130 companies linked to FTX Group — including FTX Trading, FTX US, West Realm Shires Services, and Alameda Research. Following the resignation of FTX CEO Sam Bankman-Fried and the revelation of the company’s intent to file for Chapter 11 bankruptcy, on-chain data hinted at the commencement of bankruptcy proceedings as multiple FTX wallets were found transferring funds over to a common Ethereum (ETH) wallet address. The wallet address in question received …
Regulation / Nov. 12, 2022
Coinbase takes a shot at Tether, encourages users to switch to USDC
United States-based cryptocurrency exchange Coinbase has asked its customers to convert their Tether-issued USDT (USDT) stablecoin to USD Coin (USDC), a USD-pegged stablecoin issued by Circle and co-founded by Coinbase in 2018. The cryptocurrency exchange suggested that USDC is a much more secure alternative in the wake of the FTX collapse saga and has also exempted any fee on the conversion of USDT to USDC on its platform. The firm said: “We believe that USD Coin (USDC) is a trusted and reputable stablecoin, so we’re making it more frictionless to switch: starting today, we’re waiving fees for global retail customers …
Regulation / Dec. 9, 2022