Crypto Biz: Crypto carnage pushes Celsius, Three Arrows Capital closer to insolvency, June 9-16

The 2022 version of crypto winter has been unlike anything we’ve seen before. As I warned last month, the meltdown of the Terra ecosystem didn’t end with Luna Classic (LUNC) hitting zero. The biggest threat was contagion. As the dust began to settle, we finally got a glimpse of who was left holding the bag. Crypto lender Celsius and Singapore-based venture firm Three Arrows Capital suffered heavy losses during the debacle. These firms, once a staple of the budding crypto industry, now risk demise following weeks of massive selloffs in the market. 

Celsius reportedly seeks advice from lawyers on restructuring

Alex Mashinsky’s Celsius dominated headlines this week after the popular crypto lender paused withdrawals due to “extreme market conditions.” During the freeze, the firm unstaked roughly $247 million in wrapped Bitcoin (wBTC) from Aave and sent it to the FTX derivatives exchange, along with $74.5 million worth of Ether (ETH). It didn’t take long for rumors of Celsius’ insolvency to proliferate. In response, Celsius has reportedly onboarded attorneys to advise on a restructuring plan. Digital asset lender Nexo has tabled a buy-out proposal to Mashinsky’s team, which has until June 20 to respond.

Su Zhu’s cryptic statement as rumors swirl of 3AC liquidations and insolvency

From one debacle to another, crypto investors have spent the past few days fixated on Three Arrows Capital (3AC), one of the industry’s most prolific venture funds. Like Celsius, 3AC is also reportedly facing insolvency after incurring roughly $400 million in liquidations tied to the ongoing collapse of Ether’s price. The company was also a significant investor in Terra and had sizable positions in other tanking altcoins such as Solana (SOL) and Avalanche (AVAX). 3AC’s co-founder Su Zhu issued a cryptic tweet on Tuesday that the company is “fully committed to working this out.” He also removed all mentions of altcoins from his Twitter bio.

This wallet (tagged as 3AC on Nansen) has been aggressively paying back AAVE debt against its 223k ETH / $264mm position to avoid liquidation. With $198mm in borrowings against it, @ a 85% liq threshold, a -11% move in ETH to $1,042 liqudates ithttps://t.co/y7yJJ0NlMc pic.twitter.com/2S55Rzl9Xc

— Onchain Wizard (@OnChainWizard) June 15, 2022

Crypto exchange Coinbase slashes staff by 18% amid bear market

One of the most obvious signs of crypto winter is mass layoffs at major firms. This week, cryptocurrency exchange Coinbase announced that it was reducing its staff by about 18%. Apparently, Coinbase has been growing “too quickly,” according to CEO Brian Armstrong. In addition to cutting jobs, the San Francisco-based firm has also been rescinding job offers even after candidates gave notice to their existing employer that they were leaving. Some of the stories are heartbreaking, to say the least.

Tether aims to decrease commercial paper backing of USDT to zero

Stablecoin issuer Tether has a plan to squash any remaining FUD, or fear, uncertainty and doubt, about its Tether (USDT) backing. This week, the company announced that it would eventually unwind its exposure to commercial paper, currently at $8.4 billion, to zero. Tether also categorically rejected any claim that 85% of its commercial paper portfolio is backed by Chinese or Asian assets. So, what’s the big deal with commercial paper? These are basically unsecured notes with a fixed maturity issued by corporations. The concern for some observers is that Tether is struggling to find a financial institution willing to take its cash as a deposit.

Before you go! Don’t let the bear market distract you from the Metaverse

With crypto-assets plunging, it’s hard to think about anything else these days. In this week’s Market Report, I discussed the crypto carnage alongside fellow analysts Jordan Finneseth, Marcel Pechman and Benton Yuan before shifting course to the Metaverse. It’s hard to be bullish right now, but the metaverse economy will create enormous value this decade. Click below to watch a full replay of the show.

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