Crypto crash: What contagious risks could Celsius, Three Arrows pose? Here’s what to watch

The latest crisis started Sunday with Celsius, one of the biggest crypto lending platforms, pausing all withdrawals, swaps and transfers between accounts. The company reportedly has hired restructuring attorneys to advise on possible solutions for its mounting financial problems, according to a Tuesday report by the Wall Street Journal. 

Meanwhile, rumors swirled over potential stress at the influential hedge fund Three Arrows Capital, following a vague tweet late Tuesday from its founder Zhu Su, who wrote that “we are in the process of communicating with relevant parties and fully committed to working this out.”

On Wednesday, the Block reported that Three Arrows is “in the process of figuring out how to repay lenders and other counterparties after it was liquidated by top tier lending firms in the space.” 

As a major player and one of the most high-profile hedge funds in the crypto space, Three Arrows was estimated in March to be managing around $10 billion in assets, according to Bloomberg, citing data from Nansen. The firm also held more than 6% of the Grayscale Bitcoin Trust
the world’s largest bitcoin fund, as of December 2020, according to a regulatory filing.

Read: As crypto crash deepens, here are 4 signs the worst could be yet to come

The unease has added to the pressure on bitcoin, the most popular cryptocurrency, which is trading almost 70% lower than its all-time high in November, though it saw a slight rebound Wednesday after the Fed said it would raise its benchmark interest rate in its largest rate hike since 1994. Bitcoin
was recently trading at around $22,487, up 1.2% over the past 24 hours. 

And all this is happening a month after the collapse of blockchain Terra, which shook some investors’ confidence in the nascent crypto industry. 

Some market participants are now worried about the contagious risks Celsius and Three Arrows Capital may pose to the whole crypto market, if, in a worst-case scenario, the firms were to become insolvent. 

Su and representatives at Celsius did not reply to…



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