The fallout from the downfall of the 3AC crypto hedge fund continues to swallow up the industry.
CoinFLEX, which bills itself as "the home of cypto yield" is suspending withdrawals temporarily.
"Due to extreme market conditions last week & continued uncertainty involving a counterparty, today we are announcing that we are pausing all withdrawals. We fully expect to resume withdrawals in a better position as soon as possible. We will fully communicate with you as we find out more," the company said in a blog post.
A picture is beginning to emerge of 3AC that suggests it tapped loans far in excess of capital to make a leveraged bet on bitcoin. As the bet began to go back, it sought to borrow even more and may have crossed some red lines in doing so.
The problem now is that users everywhere are counseling each other to pull out of crypto investments and that is sapping liquidity.
🧵 Su Zhu is now back in Singapore working with a law firm specializing in white collar crime. He really doesn't want to go to prison, and creditors are after him. But how did he get to this point? Where did 3AC go wrong, and what should you do next?— FatMan (@FatManTerra) June 23, 2022
This kind of thing can become a self-fulfilling spiral. Last week, it was reported that Sam Bankman-Fried tried to take steps to shore up the whole industry but it's one man trying to hold back a flood.
Bitcoin continues to find bids above $20,000 but every headline like this is a headwind. I have to imagine that the yield farming business is dead as well and that presents a long-term impairment to crypto.
On the other hand, there's a line of thinking that if all the crypto scams are cleaned up, more money will be available flow into 'safe' bitcoin.