Singapore-based crypto hedge fund's cryptic tweet fuels speculation over losses

NEW YORK (Bloomberg): Speculation about the financial health of cryptocurrency hedge fund Three Arrows Capital intensified on Wednesday (June 15) after a tweet from co-founder Zhu Su hinted at potential stress amid a deep selloff in digital assets.

"We are in the process of communicating with relevant parties and fully committed to working this out,” the former Credit Suisse Group AG trader tweeted from his verified account, without providing further details. Zhu and Three Arrows co-founder Kyle Davies didn’t respond to requests for comment.

While information on the fund’s size and trading strategies is sparse, blockchain analytics firm Nansen estimated in early March that Three Arrows managed about US$10 billion. It owned more than 5% of the Grayscale Bitcoin Trust as of December 2020, according to the latest available regulatory filings, though it’s unclear whether Three Arrows has maintained that position. The trust has a market value of about $10 billion.

Recent attention on Three Arrows has centred around its exposure to a cryptocurrency called staked Ether, or stETH.

The fund started withdrawing stETH from decentralised platforms last month, according to Nansen. As recently as Tuesday morning, it withdrew more than 80,000 stETH from decentralised lending project Aave in four transactions and then swapped 38,900 of the stETH for 36,700 Ether.

The trade may have resulted in a "big haircut,” said Andrew Thurman, content lead at Nansen. The stETH token is supposed to be redeemable for one Ether coin, after a planned upgrade to the Ethereum network takes effect.

The price of stETH has tumbled 35% in the past seven days to $1,137.38, while Ether has declined 34% to $1,193.98, according to CoinGecko.

The total market value of cryptocurrencies tracked by CoinGecko has plunged to $984 billion from $3 trillion in November. Losses accelerated in recent weeks amid concerns about Federal Reserve rate increases, the collapse of the Terra blockchain and a crisis at crypto lender Celsius Network Ltd.