The list of collateral victims of the liquidity crisis currently affecting crypto lenders is far from well known.
If indeed we already have two pieces of dominoes that have fallen, it will take time to know the names of the different firms exposed to this debacle that has renewed a great distrust towards the cryptographic industry.
It all started with the dramatic collapse of sister tokens Luna and UST in May, which resulted in the disappearance of at least $ 55 billion. Since then, we learned that the Three Arrows Capital hedge fund, also known as 3AC, had invested large sums of money in Luna.
The episode revealed other interconnections that are exposing a debt-dominated sector with very few risk management mechanisms. In fact, apparently, Three Arrows Capital has borrowed money from several crypto companies using the same Bitcoins as collateral. The lower the prices of Bitcoin, the less you could pay the hedge fund to your creditors.
It is therefore not surprising that 3AC has defaulted on a $ 667 million loan granted to it by Voyager Digital. The other platforms they have lent to 3AC are BlockFi and Babel Finance. In a panic, customers of these companies rushed to withdraw their money, but unfortunately the lenders did not have enough cash on hand to meet these demands. As a result, a large number of cryptographic lenders have suspended withdrawals and other transactions. Among them, Celsius Network, CoinLoan, CoinFlex and, of course, Voyager and Babel Finance.
Coinbase says it has no exposure to Three Arrows Capital
3AC was forced to liquidate by a court in the British Virgin Islands. Voyager filed for bankruptcy.
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The crisis initially gave the impression of mainly affecting cryptocurrency lenders, but we now learn that other players, and in particular large cryptocurrency exchanges, are also victims. This is the case with Blockchain.com which has a $ 270 million exposure to 3AC, according to Coindesk.
CEO Peter Smith revealed this in a letter to shareholders, the news site wrote. Blockchain.com, founded in 2011, expects to lose the money lent to 3AC, according to Coindesk. However, the trading platform believes that this will not affect its liquidity.
“Smith also stressed that Blockchain.com” is liquid, solvent and our customers will not be affected, “in the June 24 letter,” Coindesk reported.
Blockchain.com, which this year became one of the sponsors of the Dallas Cowboys NFL team, did not immediately respond to a request for comment.
Following the revelation of Blockchain.com, TheStreet contacted other major cryptocurrency exchanges to ask if they were exposed to 3AC.
“Coinbase does not,” a spokesman told TheStreet in an emailed statement. Coinbase (COIN) – Get the report Coinbase Global Inc. is the most popular cryptocurrency trading platform in the US told TheStreet in an emailed statement.
Binance, the largest cryptographic exchange by volume, did not respond at the time of writing this article.