Crypto lending and borrowing firm Three Arrows Capital (3AC) had positions liquidated by crypto exchanges Deribit, BitMEX and FTX.
What Happened: Across the past week, 3AC has experienced liquidations in Bitcoin derivative positions. As disclosed by The Block, 3AC currently owes $6 million to BitMEX. It was further revealed the positions liquidated by FTX and Deribit were comparatively smaller than the liquidation by BitMEX.
As a result of uncertain market conditions and the major loss incurred on its position in Terra (CRYPTO: LUNA), 3AC has experienced an extreme liquidity crisis. As crypto prices continued to plummet, the firm was unable to meet its margin calls.
“BitMEX's legal department is in touch with 3AC on the next steps,” a BitMEX representative told The Block.
FTX’s spokesperson denied making any public comment on the liquidation unless it is legally required. Deribit also maintained silence, only divulging, “We can confirm that Three Arrows Capital is a shareholder of our parent company since February 2020. Due to market developments, Deribit has a small number of accounts that have a net debt to us that we consider as potentially distressed.”
Why It's Important: As the market conditions continue to worsen, numerous crypto firms are experiencing liquidation risks. 3AC missing its margin calls and further facing major-scale liquidations serves as alarming news to investors globally given the threat to their funds.
3AC must continue to protect investor funds, via ensuring collateralized asset reserves and work to prevent margin calls. Experiencing more than a total of $400 million in liquidations, the firm must work to secure against absolute insolvency ensuring loan repayment and limiting asset sales.
