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crypto lenders

Crypto Lending Platforms Under Immense Stress As Court Orders 3AC Liquidation

Best Owie
by Best Owie
3 years ago
·
Posted in Crypto News, DeFi
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

Multiple events in the last two months have seen various crypto lending platforms come under fire from both a liquidity and investor confidence angle. The first which had been the LUNA collapse had been the trigger for the rest such as the Celsius insolvency and the subsequent liquidation of Three Arrows Capital (3AC), the largest crypto fund. Now, the spillover effects of these events are beginning to rear their heads as crypto lending platforms face the ultimate test.

Which Crypto Lender Will Survive?

Different platforms have suffered through the three events mentioned above, each one worse than the last. 3AC’s liquidation is especially prominent given the fact that the firm had its tentacles in other large lenders in the space. One of these is Voyager which is currently facing some issues in the wake of the 3AC collapse.

Related Reading | Bitcoin Mining Facility Shut Down Following Sharp Decline In Miner Profitability

Voyager had published a notice regarding 3AC that showed that the firm was in default of a loan of 15,250 BTC and $350 million USDC. These loans were for the client withdrawals, and as such, Voyager has had to look to other places to fulfill these withdrawals. One of these ways has been the 15,000 BTC and $200 million USDC revolver from crypto exchange FTX. Alameda also made a $75 million line of credit available for the lender.

crypto lenders suffer

Nexo withdrawals ramp up | Source: Arcane Research

Data from the crypto lender also shows that withdrawals have ramped up on the platform following the 3AC issues. However, it is not the only lending platform that is seeing a rise in withdrawals over the last couple of weeks.

Nexo is also a big player in the space and possesses significantly more liquidity but this has not shielded the platform from the fear that has struck investors. Data from Arcane Research shows that more than 50,400 BTC has been withdrawn from Nexo in the last two weeks which was triggered by a tweet that forecasted that Nexo would likely go the way of Celsius and hit a liquidity crisis. 

Crypto total market cap chart from TradingView.com

Total market cap drops below $850 billion | Source: Crypto Total Market Cap on TradingView.com

Another platform feeling the heat is BlockFi. Although this platform’s issues have not been most prominent due to the bail-outs being offered, it remains in a precarious position, especially with prices not recovering in the market. BlockFi had received a $250 million line of credit from FTX and Alameda, and Morgan Creek plans to raise $250 million in equity capital for the platform. What this would do though is allow FTX to acquire BlockFi at ridiculously low prices.

Related Reading | ProShares Short ETF Becomes Second-Largest Bitcoin Fund In Record Time

A prominent problem with all of these lenders has been their lack of transparency. This is why it has been difficult for those in the space to know the impact that events such as the LUNA collapse, Celsius’ insolvency, and 3AC’s liquidation has had on the market. Nevertheless, it is only a matter of time before the impacts begin to unravel and the market is able to see the full extent of the damage.

Featured image from Coin Guru, charts from Arcane Research and TradingView.com

Follow Best Owie on Twitter for market insights, updates, and the occasional funny tweet…

Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Best Owie

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Best Owie is a Managing Editor at Bitcoinist with extensive experience and a proficient expert known for crafting captivating and insightful content. Best boasts over six years in the crypto sector, and has supervised the conception and publication of thousands of articles. Best is also a content and marketing strategist with the ability to make sure your content reaches the right audience and beyond. In every aspect, Best stands out as a consummate professional, always striving for unparalleled excellence both within and outside the workplace.

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