Three Arrows Capital needs a lender’s assistance or asset sale

According to the co-founder of Three Arrows CAPITAL (3AC), Kyle Davies, the crypto hedge fund is looking at several options. Including being acquired by another company or asset sales.

Following the end of the flash crash, some of the largest crypto exchanges liquidated the company’s leveraged positions.

The Three Arrows CAPITAL team is currently in talks with different firms, according to Davies. He said that the options they are exploring include getting taken over by another firm or selling some of their assets.

Davies did not name any potential buyers. It is also unclear what Three Arrows CAPITAL’s assets are worth.

The Three Arrows CAPITAL team is also looking at other options, according to Davies. These include launching a new hedge fund with different investors or setting up a family office.

Three Arrows CAPITAL was founded in 2018 by Davies, Su Zhu, and Dalton Caldwell. The firm has offices in San Francisco and Singapore.

Over the previous few years, Three Arrows Capital has developed into one of the most significant crypto-focused hedge funds. Unfortunately, recent market turmoil and the Terra (LUNA) collapse a month ago has been a testing period for the firm.

Liquidation of 3AC positions

Three Arrows Capital’s liquidated leveraged positions have been sold on Bitmex, Deribit, and FTX digital currency trading platforms.

During an interview with the Wall Street Journal (WSJ), Davies revealed the dire situation that Three Arrows was in. While his partners remained silent on the fate of the hedge fund.

Davies says that Three Arrows was down 85% from its January highs and was facing a potential liquidation of its positions.

The situation at Three Arrows Capital is a reminder of the risks associated with leverage in the cryptocurrency markets.

While leverage can help amplify gains during periods of market growth. It can also lead to catastrophic losses during market downturns.

For Three Arrows, the market downturn has been exacerbated by the fact that the firm was highly leveraged. According to Davies, Three Arrows had borrowed $600 million to trade cryptocurrencies and other digital assets.

With the value of those assets now down 85%, Three Arrows is facing a margin call from its lenders.

Davies admits that the company had lost money because of the crash of two digital currencies, TerraUSD (UST) and Terra (LUNA). LUNA Classic is the present version of Luna.

Three Arrow Capital and others invested $1 billion in a token sale by the Luna Foundation Guard. Three Arrow Capital puts in $200 million.

Davies says:

“The Terra-Luna situation caught us very much off guard.”

Aside from the Terra (LUNA) fiasco, the plummeting cryptocurrency values are jeopardizing 3AC’s long crypto bets. Three Arrows is down 40% this year.

Davies announces that Three Arrows is looking for a lender or an asset sale to raise funds and meet its obligations. The company has already started talks with potential partners. Three Arrows is also seeking to restructure its business.

Addressing the situation, Davies says:

“This has pushed 3AC into looking for desperate options, including asset sale and a rescue by another firm.”

He also mentioned, however, that they are not the first business to be harmed by this issue, adding that many other firms have been similarly impacted.

He remains confident that Three Arrows will be able to weather the storm and come out stronger on the other side.

“In times like these, you see who your friends are,” Davies says. “We’re grateful for the support of our community and hope to continue serving them for many years to come.”

The Three Arrows story highlights the risks associated with investing in digital currencies. While the potential rewards are high, so are the risks. Investors should always be aware of the risks involved before making any investment.