Crypto: Liquidity crisis spreads to large stock exchanges
The list of collateral victims of the liquidity crisis that is currently affecting crypto borrowers is far from fully known.
If we actually already have two dominoes that have fallen, it will take time to know the names of the various companies that are exposed to this debacle that has renewed a great deal of mistrust in the crypto industry.
It all started with the dramatic collapse of sister sister Luna and UST in May, which led to the disappearance of at least $ 55 billion. Since then, we have learned that the hedge fund Three Arrows Capital, also known as 3AC, had invested large sums of money in Luna.
The episode revealed other interconnections that reveal a sector dominated by debt and with very few risk management mechanisms. In fact, Three Arrows Capital has apparently borrowed money from several crypto companies that use the same Bitcoins as collateral. The more Bitcoin prices fell, the less the hedge fund could repay its creditors.
It is therefore no surprise that 3AC defaulted on a $ 667 million loan provided by Voyager Digital. The other platforms that have lent to 3AC are BlockFi and Babel Finance. In a panic, the customers of these companies hurried to withdraw their money, but unfortunately the lenders did not have enough cash in hand to meet these requirements. As a result, a large number of cryptocurrencies 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 into liquidation by a court in British Virgin Island. Voyager filed for bankruptcy.
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The crisis initially gave the impression of mainly affecting crypto borrowers, but we now learn that other players, and especially 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, Coindesk understands. However, the trading platform believes that this will not affect liquidity.
“Smith also stressed that Blockchain.com ‘remains liquid, solvent and our customers will not be affected’, in the letter dated June 24,” 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 Blockchain.com revelation, TheStreet contacted other major cryptocurrency exchanges to inquire about their exposure to 3AC.
“Coinbase does not,” a spokesman for TheStreet said in an email. Coin base (COIN) – Get Coinbase Global Inc Report is the most popular cryptocurrency trading platform in the United States told TheStreet in an email.
Binance, the largest crypto exchange by volume, did not respond at the time of writing.
