Cryptocurrency Carnage Brings Celsius, Three Arrows Capital Closer to Insolvency, June 9-16

Crypto Winter’s 2022 release was unlike anything we’ve seen before. As I warned you last month, the collapse of the Terra ecosystem did not end with Luna Classic (LUNC) reaching zero. The biggest threat was contagion. As the dust began to settle, we finally got a glimpse of whoever was holding the bag. Cryptocurrency lender Celsius and Singapore-based venture firm Three Arrows Capital both suffered heavy losses during the disaster. These companies, which were once a staple in the cryptocurrency industry, are now in danger of dying after weeks of massive market sales.

Celsius reportedly seeks advice from lawyers on restructuring

Alex Mashinsky’s Celsius dominated headlines this week after the popular cryptocurrency lender halted withdrawals due to “extreme market conditions”. During the freeze, the company withdrew around $247 million worth of packaged Bitcoin (wBTC) from Aave and sent it to the FTX derivatives exchange, along with $74.5 million worth of Ether (ETH). It didn’t take long for rumors of Celsius’s insolvency to proliferate. In response, Celsius reportedly hired lawyers to advise on a restructuring plan. Digital asset lender Nexo has submitted a purchase proposal to Mashinsky’s team, which has until June 20 to respond.

Su Zhu’s cryptic statement as rumors swirl of 3AC liquidations and insolvency

From one disaster to another, cryptocurrency investors have spent the last few days fixated on Three Arrows Capital (3AC), one of the most prolific venture funds in the industry. Like Celsius, 3AC is also facing insolvency after incurring around $400 million in liquidations linked to the continued collapse of the Ether price. The company was also a significant investor in Earth and had sizable positions in other tank altcoins such as Solana (SOL) and Avalanche (AVAX). 3AC co-founder Su Zhu posted a cryptic tweet on Tuesday that the company is “fully committed to resolving this.” He also removed all mentions of altcoins from his Twitter bio.

Cryptocurrency exchange Coinbase cuts staff by 18% amid bear market

One of the most obvious signs of the crypto winter is mass layoffs at large companies. This week, cryptocurrency exchange Coinbase announced that it was reducing its staff by around 18%. Apparently, Coinbase is growing “very fast,” according to CEO Brian Armstrong. In addition to cutting jobs, the San Francisco-based company also rescinded job offers even after candidates notified their existing employer that they were leaving. Some of the stories are heartbreaking, to say the least.

Tether aims to lower USDT commercial paper backing to zero

Stablecoin issuer Tether has a plan to squash any remaining FUD, or fear, uncertainty and doubt, about its Tether (USDT) support. This week, the company announced that it would eventually reduce its exposure to commercial paper, currently at $8.4 billion, to zero. Tether also categorically rejected any claim that 85% of its commercial paper portfolio is backed by Chinese or Asian assets. So what’s the problem with commercial paper? They are basically unsecured notes with a fixed maturity issued by companies. The concern of some observers is that Tether is struggling to find a financial institution willing to take its money as a deposit.

Before you go! Don’t let the bear market distract you from the Metaverse

With crypto assets plummeting, it’s hard to think of anything else these days. In this week’s Market Report, I discussed cryptographic carnage alongside fellow analysts Jordan Finneseth, Marcel Pechman, and Benton Yuan before shifting course to the Metaverse. It’s hard to be optimistic now, but metaverse economics will create enormous value this decade. Click below to watch a full replay of the show.

Crypto Biz is your weekly pulse of the business behind blockchain and cryptography delivered straight to your inbox every Thursday.