Unchained The Chopping Block: Here’s What Was So Bad About Three Arrows Capital - Ep. 368
Jun 30, 2022
Taylor Monahan, a pioneer in crypto UX and security, shares insights on the fallout from Three Arrows Capital’s risky strategies. She discusses the chaotic lending landscape where firms used customer funds unsafely and reflects on the parallels between current crypto turmoil, the 2008 crisis, and previous collapses like Mt. Gox. Monahan emphasizes the crucial need for user-centric design in crypto and how DeFi may offer solutions to the systemic issues plaguing traditional finance, advocating for resilience and responsible governance in the shifting market.
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Three Arrows Capital Downfall
- Three Arrows Capital, a successful crypto trading firm, suffered significant losses after the Terra Luna collapse.
- They attempted to recoup losses through GBTC and Lido STETH trades, but both failed.
Impact of 3AC's Leverage
- Three Arrows Capital borrowed heavily, creating systemic risk for crypto lenders.
- Their negative equity triggered margin calls and a market meltdown.
3AC's Long Crypto Bet
- Three Arrows Capital's main trade was being levered long on various L1 crypto assets.
- This high-conviction bet backfired during the market downturn.