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Collapse of a Crypto
Hedge Fund
By: www.ProfitableInvestingTips.com
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
There have been a lot of losses in the world
of cryptocurrency over the years. One of
the most spectacular has been the
collapse of a crypto hedge fund that
was based on the concept that crypto only
goes up.
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
Not only did Three Arrows Capital blow up
but it caused a whole sequence of losses
as noted by Bloomberg. When a business
fails it is useful to look at the mechanics of
what happened and both the thinking of
those who ran the business and their
actions at critical moments.
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
Trusting That Crypto Always Goes Up
After a Fall
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
As we noted in an article about bear markets
as a key to future wealth, fortunes have
been made by smart investors who purchased
stocks in depressed markets. In regard to
Three Arrows Capital, one of the founders, Su
Zhu, sounded a bit like Warren Buffett as
Bitcoin fell from its November 2021 high of
$67,000 to $40,000 in that he said in a
podcast, “When there’s a lot of despair, you
can start buying. You don’t have to follow the
despair.”
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
On one hand this statement is like Buffett’s
that you should be “fearful when others
are greedy, and greedy when others are
fearful.” However, Buffett steps in to buy
in distressed markets based on a clear
idea of what a company does to make
money and an intrinsic stock value
assessment indicating years of profits in
the future.
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
There is ample evidence that dividend stocks
like Coca Cola keep making money with their
huge product lines, world famous brand
names, and deep pockets. They make things
in the real world and have reliably made
money in good years and bad for the markets
for more than a century. By comparison the
cryptocurrency world is 13 years old and does
not currently have a sound basis for
calculating intrinsic value in the worlds of
decentralized finance, non-fungible tokens, or
the Metaverse.
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
An Integral Piece of the Crypto
Framework
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
Three Arrows Capital was worth about $3
billion which makes it small compared to
the top companies in the S&P 500 but in
the world of crypto it was a mover and
shaker. They provided venture capital
investments in crypto startups and even
managed the capital of some firms. They
profited by lending and borrowing in this
arena and partnered with funds that were
just getting started.
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
They made their name in the crypto world
when they stated in 2018 that the world
had seen the last crypto winter after
Bitcoin fell by 80% before starting up
again. Because they believed that the
arrow only pointed upwards for crypto,
they borrowed against future gains and it
worked for a while until it did not work
anymore. They declared bankruptcy when
Bitcoin fell below $20,000 and the two
owners went into hiding.
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
Much Ado About Nothing?
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
As Bitcoin and the rest went from dollars to
tens, hundreds, thousands, and tens of
thousands of dollars one could almost do
no wrong. Thus, companies were set up
with smart contracts and algorithmic ways
to contain risk but the basic premise was
that crypto would always go up, be a
hedge against inflation, provide a safe
haven in times of economic stress, and be
a virtually guaranteed way to accumulate
wealth.
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
The temptation for folks like at 3AC was to
leverage their capital and multiply their
profits with fingers in multiple pies in the
crypto world. When a business goes bust
it is a reminder of the perils of capitalism.
When those who trusted that business
lose their money it is a shame and
sometimes a crime.
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
How The Owners Explain the Collapse
of Three Arrows Capital
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
Bloomberg interviewed the owners of
Three Arrows Capital who were at an
undisclosed location. The bottom line is
their admission that their speculation in
crypto caused sequential margin calls and
the loans on which these happened were
poorly chosen and should not have been
made.
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
Their business was to accept money,
generate income on crypto gains, pay
back the money with gains, and pocket
profits. When crypto kept falling this
business model ceased to work. They also
note that they have had death threats and
will most likely land in the EAE which is a
crypto hot spot.
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
Meanwhile creditors have filed for more
than $2.8 billion in debts and that amount
is likely to go up substantially. The take-
home lesson seems to be that building a
business model on wishful thinking and
group hysteria is not such a good idea.
https://profitableinvestingtips.com/pr
ofitable-investing-tips/collapse-of-
crypto-hedge-fund
For more insights and useful information
about investments and investing, visit
www.ProfitableInvestingTips.com.

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Collapse of a Crypto Hedge Fund