Cryptocurrency Market

Earlier this week, the apparent insolvency of Three Arrows Capital (or '3AC' for short) caught many in the crypto world by surprise, including Wintermute CEO Evgeny Gaevoy who commented:

“Everyone kind of assumed those guys just made billions over the years… but now it seems like we were just all horribly wrong.”

In this episode of The Scoop, Evgeny Gaevoy joins The Block’s Frank Chaparro and guest co-host Larry Cermak to analyze the fallout from the 3AC situation, and to explain the wide-scale deleveraging that is occurring in the crypto markets.

According to Cermak, not only was 3AC liquidated by top-tier exchanges, but the firm has outstanding debts with multiple counterparties,

“The impact isn't completely clear when it comes to size… the number I've heard is roughly around $1.5 to $2.5 billion in terms of actual debt that 3AC has — and in terms of the firms affected, it’s almost everyone.”

While the extent of 3AC’s obligations is unclear, Voyager Digital has publicly announced its intent to pursue legal action against 3AC, if the firm defaults on a loan worth over $650 million. 

Given the widespread uncertainty regarding balance sheets in the wake of 3AC’s insolvency, crypto lenders have begun recalling loans to large counterparties, including Gaevoy’s Wintermute.

“[Wintermute] basically got recalled pretty much on all open loans that we had with all the lenders,” Gaevoy said, “our balance sheet decreased more than half basically.”

As Gaevoy explains, recalling loans allows crypto lenders to check counterparties for solvency:

“The reason is everyone just wants to see who is solvent in this market. That’s basically the best way to check it, because once you recall all the loans and you give all the firms like one or two weeks… you probably will see some of them fail and collapse and that's it.”

Episode 57 of Season 4 of The Scoop was recorded remotely with The Block’s Frank Chaparro and Larry Cermak, and Evgeny Gaevoy, CEO of Wintermute.

Listen below, and subscribe to The Scoop on Apple, Spotify, Google Podcasts, Stitcher or wherever you listen to podcasts. Email feedback and revision requests to podcast@theblockcrypto.com.

This episode is brought to you by our sponsors Fireblocks, Coinbase Prime & Cross River

Fireblocks is an enterprise-grade platform delivering a secure infrastructure for moving, storing, and issuing digital assets. Fireblocks enables exchanges, lending desks, custodians, banks, trading desks, and hedge funds to securely scale digital asset operations through the Fireblocks Network and MPC-based Wallet Infrastructure. Fireblocks serves over 725 financial institutions, has secured the transfer of over $1.5 trillion in digital assets, and has a unique insurance policy that covers assets in storage & transit. For more information, please visit www.fireblocks.com.

About Coinbase Prime

Coinbase Prime is an integrated solution that provides institutional investors with an advanced trading platform, secure custody, and prime services to manage all their crypto assets in one place. Coinbase Prime fully integrates crypto trading and custody on a single platform, and gives clients the best all-in pricing in their network using their proprietary Smart Order Router and algorithmic execution. For more information, visit www.coinbase.com/prime.

About Cross River

Cross River is powering today’s most innovative crypto companies, with banking and payments solutions you can rely on, including fiat on/off ramp solutions. Whether you are a crypto exchange, NFT marketplace, or wallet, Cross River’s API-based, all-in-one platform enables banking as a service, ACH & wire transfers, push-to-card disbursements, real-time payments, and virtual accounts and subledgers. Request your fiat on/off ramp solution now at crossriver.com/crypto.