Multiple news outlets have reported that Three Arrows Capital is under intense pressure to meet a Monday deadline and return more than $670 million in loans or face default.
The likelihood of the crypto-focused hedge fund missing the deadline set by Voyager Digital for repaying a loan of 15,250 Bitcoin and $350 million in USDC could have massive repercussions for the whole digital asset market.
As of Monday’s exchange rate, the total loan amount exceeds $675 million. Voyager granted Three Arrows until the 24th of June to pay back $25 million in USDC and the remaining loan balance by June 27.
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Voyager Shares Down After 3AC Exposure Revealed
This year, shares of the Toronto Stock Exchange-listed company Voyager have dropped by 94%. The share price of Voyager plummeted more than 60% last week after the company acknowledged it had exposure to 3AC.
According to reports, Voyager wants to pursue a recovery from Three Arrows and is currently involved in discussions with its counsel regarding the various legal alternatives available to it.
Stephen Ehrlich, the chief executive officer of Voyager Digital in Toronto, stated:
“We are working diligently … to strengthen our balance sheet and pursuing options so we can continue to meet customer liquidity demands.”
Three Arrows is renowned for its highly leveraged crypto wagers and is one of the most prominent crypto hedge funds. The ostensibly insolvent crypto hedge fund, also known as 3AC, continues to execute client orders and process withdrawals while operating normally.
Alameda Ventures awarded Three Arrows a $500 million credit facility, of which the company has already utilized $75 million. Additionally, 3AC may continue to utilize the Alameda “to facilitate customer orders and withdrawals, as needed.”
Crypto total market cap at $921 billion on the daily chart | Source: TradingView.com
Three Arrows Might Sell Its Assets
The Wall Street Journal reported last week that Three Arrows Capital, based in Singapore, is considering options including the sale of assets and a bailout by another company as a result of a market decline in digital assets.
3AC’s default on the $660 million loan reveals the hedge fund’s stressed liquidity. A significant decline in the value of Lido staked Ethereum (stETH), which 3AC had heavily used as collateral, exposed the company to repeated margin calls, causing it to exhaust its financial resources.
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Three Arrows’ issues looked to have begun earlier this month when Zhu Su, Co-founder and CEO of Three Arrows Capital, tweeted a somewhat strange message stating that the firm is in the process of “communicating with all relevant stakeholders” and dedicated to finding a solution.
Featured image from Corporate Finance Institute, chart from TradingView.com