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Muyao Shen
Speculation about the financial health of cryptocurrency hedge fund Three Arrows Capital intensified on Wednesday after a tweet from co-founder Zhu Su hinted at potential stress amid a deep selloff in digital assets.
“We are in the process of communicating with relevant parties and fully committed to working this out,” the former Credit Suisse Group AG trader tweeted from his verified account, without providing further details. Zhu and Three Arrows co-founder Kyle Davies didn’t respond to requests for comment.
Read more: Ex-Credit Suisse Traders Amass Billions of Dollars of Crypto
While information on the fund’s size and trading strategies is sparse, blockchain analytics firm Nansen estimated in early March that Three Arrows managed about $10 billion. It owned more than 5% of the Grayscale Bitcoin Trust as of December 2020, according to the latest available regulatory filings, though it’s unclear whether Three Arrows has maintained that position. The trust has a market value of about $10 billion.
We are in the process of communicating with relevant parties and fully committed to working this out
— Zhu Su (@zhusu) June 15, 2022
Recent attention on Three Arrows has centered around its exposure to a cryptocurrency called staked Ether, or stETH.
The fund started withdrawing stETH from decentralized platforms last month, according to Nansen. As recently as Tuesday morning, it withdrew more than 80,000 stETH from decentralized lending project Aave in four transactions and then swapped 38,900 of the stETH for 36,700 Ether.
The trade may have resulted in a “big haircut,” said Andrew Thurman, content lead at Nansen. The stETH token is supposed to be redeemable for one Ether coin, after a planned upgrade to the Ethereum network takes effect.
The price of stETH has tumbled 35% in the past seven days to $1,137.38, while Ether has declined 34% to $1,193.98, according to CoinGecko.
The total market value of cryptocurrencies tracked by CoinGecko has plunged to $984 billion from $3 trillion in November. Losses accelerated in recent weeks amid concerns about Federal Reserve rate increases, the collapse of the Terra blockchain and a at crypto lender Celsius Network Ltd.
