Everyone had just calmed down a little after the collapse of Terra, when suddenly Celsius and hedge fund Three Arrows Capital (3AC) appeared on the horizon. Some experts believe that these companies are close to bankruptcy, which could affect the entire cryptocurrency market as they are big players.
Alameda Research also completes the picture, which, similarly to Celsius and 3AC, is actively selling the stETH token, which is already far from parity with the price of Ethereum. And all this is happening against the backdrop of a deep market correction, record low values of the fear index and massive layoffs in large cryptocurrency companies. Let’s look at the key theses and what is behind them
According to some experts, Celsius used high-risk investment strategies, investing user funds in “experimental” DeFi protocols.
According to Nansen’s Ape Board tracker, the firm holds 409,305 stETH worth about $447 million in a wallet. Huobi Research claims that only 27% of Celsius’ ETH is liquid. In addition to “staking ether”, a significant part of the portfolio (27% or $415 million) is accounted for by tokenized bitcoin WBTC. A combination of factors made the situation very precarious for the company.
3AC and Alameda Research
Three Arrows Capital and Alameda Research have put significant pressure on the stETH token, whose parity with Ethereum has faltered amid the collapse of Terra.
A few months before the collapse of Terra, the non-profit organization Luna Foundation Guard raised $ 1 billion. Among the major buyers of the LUNA token was the cryptocurrency hedge fund Three Arrows Capital (3AC), which led the token sale along with Jump Crypto.
In June, analysts at PeckShield drew attention to large swaps generated by wallets believed to be linked to Three Arrows Capital. In two transactions, over 56,000 stETH were exchanged for ETH. Speaking to CoinDesk, Nansen analyst Andrew Thurman noted that during May, the hedge fund withdrew ETH and stETH from Curve for a total of about $400 million.
Some community members have suggested that 3AC is in a similar situation to Celsius.
A further drop in the price of staking ether is fraught with liquidation cascades that could negatively affect the DeFi segment and the market as a whole.
The problems that have become urgent in connection with the current situation are still far from being resolved. They exposed the vulnerabilities of the DeFi ecosystem, which, as it turned out, can be influenced by large centralized platforms.
Many users of landing protocols use leveraged positions. This is fraught with massive liquidations that accelerate the decline in asset prices. In the short term, the situation remains precarious. However, it is possible that Bitcoin and Ethereum have already approached the “bottom”, and the long-awaited upgrade of The Merge will restore investors’ faith in the cryptocurrency market and serve as a driver for recovery.