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What would it mean for the industry if Celsius and Three Arrows collapsed?

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If 3AC (Three Arrows Capital) collapses, the impact is enormous.

What would it mean for the industry if Celsius and Three Arrows Capital Collapse?

原文作者：Degentrading

原文编译：TechFlow intern

First of all,If 3AC (Three Arrows Capital) collapses, the impact is huge because they have borrowed from every well-known, well-funded lender.Think BlockFi, Genesis, Nexo, Celsius. Every lender is expected to take a hit from 3AC.

I strongly suspect their true net worth at the time was much lower. There are rumors that although they have made disposals on the assets, they still have a pledge in Deribit.

But let's do $18 billion, and let's say $9 of that is the fair value of the VC portfolio, and $9 of that is liquidity.

Assuming all of these assets are the safest BTC (yes, I know they have fake coins, but they die a horrible death)From November 21 to now, their liquidity will be reduced by nearly 70 percent.

Their liquidity is worth $2.7 billion at best, but if you add the risk of fake coins, in reality their liquidity is down to $1 billion or less. This is consistent with rumoured reports that they could not meet their margin requirements.

Failure to meet margin calls is the death knell for any hedge fund. Whether it's cryptocurrency or traditional funds, there are reports that they tried to use Starkware equity as collateral.

3AC is one of the world's biggest customers of loans, and their failure would transfer economic risk to their lenders. Lenders will bear the difference between what they owe and the liquidated collateral.

These lenders are poorly prepared. They operate balance sheets of $10 billion-20 billion and have an equity buffer of around 5%, meaning that a default would lead to significant equity erosion.

Not all lenders are created equal. Celsius is the worst, it has crashed. Nexo I don't know, BlockFi sucks, Genesis is probably the best of them all.

And that means,Lenders will protect themselves by withdrawing credit from the system.All lenders may have about $50 billion (estimated) in loans...... I expect $30 to $40 billion of credit to be destroyed, that is, loans to be withdrawn, credit to be curtailed.

When credit leaves the system, there's less money overall, the same amount of assets, less money, the price of the assets goes down.

Furthermore, when credit is cancelled, each participant's overall balance sheet shrinks as risky assets are marked down and market makers are less able to provide liquidity.

The gap between bid and ask prices widened,For funds -- as volatility increases, they need to deleverage their risky assets to maintain the same value at risk.Besides, would LP be scared by UST and now Celsius? It's best to prepare for redemption by selling ahead of time.

In essence,The collapse of the primary fund and the primary lender would shrink overall credit in the system and lead to continued deleveraging.So far we have had an orderly liquidation, but there are still more people who need to deleverage.

What price is reasonable, to be honest, I don't know. We may need the casino owners to step in. After all, if your clients are dead, you need to wait for more clients to arrive before your business picks up.

However, if no one intervenes. We could see bitcoin go below 10,000. After all, we've had a rally (QUANTITATIVE easing, etc.) and now we have a perfect storm of major deleveraging of all financial assets (rate hikes, QT, inflation).