The question of the solvency of this $10 billion fund added to the uncertainty on the Celsius lending platform is raising fears of a devastating domino effect on the cryptocurrency ecosystem.
Winter in cryptocurrency is difficult for many players. Within a few months, the volume of capital rose by $2 billion, and the price of Bitcoin or Ether struggled to stabilize. All eyes are now on the hedge fund Three Arrow Capital. This funding giant with $10 billion is a good part of the crypto ecosystem. He has invested in many companies in this sector, but he has also invested a lot instablecoinTerra which collapsed last May. According to the specialized media The Block, the fund is dangerously close to bankruptcy. He allegedly liquidated $400 million of Ether to avoid bankruptcy. Few shares were sold.
Percentage lending platform also has a serious problem. This week it suspended the ability of 1.7 million customers to withdraw or transfer their cryptocurrency, after they found themselves extremely vulnerable to a drop in crypto assets.
Over the past two years, many companies as well as governments have listed crypto assets in their vaults. Tokens are often acquired at a price higher than the current price. bitcointreasuries.net lists dozens like Tesla, Square, Fidelity, El Salvador…all of them incurring capital losses.
At the end of April, Elon Musk’s company, Tesla, clarified in a financial document that it held all 43,000 bitcoins purchased a year earlier for $1.5 billion. They are only 940 million, or 560 million.”lossesAbility. The company has not yet commented on this situation.
In its last quarterly report, the company already showed a loss of $100 million. In the company’s accounts, cryptocurrencies are considered “Intangible assets with an indefinite useful life in accordance with the applicable accounting rulesTesla says.Therefore, any decline in its fair value from its book value at any time after the acquisition would require us to record an impairment charge, while we would not be able to make any upward revisions to any increase in the market price even on saleThe issue of managing these cryptocurrencies will be brought up to them during their upcoming quarterly results.
Small strategy, billion losses
For Tesla, the fall of Bitcoin is alarming but neglectful. Cryptocurrency is only a small part of his portfolio. In return, the software publisher Microstrategy bet everything with this coin. It contains 129,218 tokens purchased in various amounts, totaling $3.9 billion. At the current rate, it is only worth 2.8 billion, which is more than a billion.”lossesAbility. In March, the company borrowed $205 million from crypto bank Silvergate. This money was used to buy more bitcoins, with additional holdings…more bitcoins.
In May, the company’s chief financial officer indicated that if the bitcoin price fell below $21,000 – as it did on June 15 – it would have to start a margin call. This is the situation where the company must demand more funds to avoid running out of cash. CEO Michael Saylor told CNBC he won’t have to borrow new money.
“MicroStrategy is a very special case. They repeated several times that they would not sell. For its CEO, it’s a matter of convictionAlexander Stachenko, Blockchain and Cryptocurrency Analyst at KPMG explains. For Michael Saylor, it is already unbelievable to liquidate his bitcoins. He regularly showed his love for this symbol. On his Twitter account, he regularly preaches messages like “Bitcoin is the solution to chaos“or,”We trust Bitcoin“, Referring to”We trust in GodThe national emblem of the United States.
No one knows how far down the prices can go. Changpeng Zhao, co-founder and CEO of exchange platform Binance, expects a prolonged price drop. If he sees this new crypto winter as an opportunity for his company to make new acquisitions at attractive prices, as he explained in an interview with Fortune, his personal wealth will likely melt by 90% between January and June 2022., according to Bloomberg Billionaires Index.