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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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.
Crypto Lender Degen Behavior
- Crypto lenders engaged in risky practices to offer high yields, similar to Three Arrows Capital's GBTC trade.
- This created a dangerous arms race focused on yield rather than safety.
SBF as Lender of Last Resort
- SBF backstopped failing crypto lenders to prevent a collapse and protect retail investors.
- This mirrors Warren Buffett's refusal to bail out banks in 2008, ultimately requiring the Fed's intervention.