Why Possible Insolvencies by Celsius and 3AC Could Spell Disaster for Crypto - Ep. 364

Unchained

Mika Honkasalo, independent crypto researcher, discusses what is happening with Celsius and Three Arrows Capital, the importance of having proper risk management, and the contagion effects on the industry.

Show highlights:

• why is it so significant that Celsius paused withdrawals
• what is stETH and why is it important to understand the Celsius situation
• how the Luna/UST debacle started a contagion effect in the crypto space
• why Celsius’s investors won’t bail the company out
• what will happen to Celsius’s retail customers
• what Three Arrows Capital (3AC) is and whether they have a solvency problem
• how 3AC was levered long and whether they had poor risk management
• who will be hurt if 3AC goes under
• what would be the effect of 3AC and Celsius collapsing
• which types of funds that Mika will be eyeing to see if they also end up in a similar situation to 3AC and Celsius
• why Mika would counsel anyone who keeps their money with centralized crypto lenders to scrutinize their practices

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EPISODE LINKS

Mika Honkasalo

• Twitter: https://twitter.com/mhonkasalo
• Substack: https://mhonkasalo.substack.com/
• Mika’s writings on The Block: https://www.theblockcrypto.com/author/mika-honkasalo

Mika’s blog post on the stETH-ETH peg: https://mhonkasalo.substack.com/p/stetheth-peg-not-a-peg-presents-a?s=r

Celsius announcement that they would be withholding assets: https://twitter.com/CelsiusNetwork/status/1536169010877739009?s=20&t=hL-ZsBSKZOLF-whTwNmjgw

Nexo’s offer to buy Celsius assets:

https://twitter.com/Nexo/status/1536256598993211393?s=20&t=vKmJCZGNToaOqZU-TEjcDg

Celsisus’s investors unlikely to bail out company:

https://www.wsj.com/articles/celsius-networks-investors-unlikely-to-provide-more-funds-to-bail-out-crypto-lender-11655395113

Celsius hires restructuring lawyers:

https://www.wsj.com/articles/crypto-lender-celsius-hires-restructuring-lawyers-after-account-freeze-11655250575?tpl=br

Why staked ETH is part of Celsius’s and 3AC’s woes:

https://www.coindesk.com/markets/2022/06/14/staked-ether-becomes-focus-of-crypto-stress-from-celsius-to-three-arrows/

Conor Ryder on the stETH liquidity problem

https://twitter.com/ConorRyder/status/1537130483007508480?s=20&t=pZGZf17ed_DyOS18CHExmQ

The DeFi Edge on the 3AC situation: https://twitter.com/thedefiedge/status/1537465349976694786?s=20&t=Q29mo3EKSASasTenHVEm4Q

Who else has exposure to 3AC:

https://fortune.com/2022/06/16/crypto-crash-hedge-fund-three-arrows-capital-insolvency-rumors-novogratz/

3AC withholding $1M in assets from 8 Blocks Capital:

https://twitter.com/Danny8BC/status/1537224378554806272?s=20&t=Q29mo3EKSASasTenHVEm4Q

Meltem Demirors explains the problem from the balance sheet perspective:

https://twitter.com/Melt_Dem/status/1537155214897201153?s=20&t=Q29mo3EKSASasTenHVEm4Q

Adam Levitin on Celsius bankruptcy

https://twitter.com/AdamLevitin/status/1536932912674836481?s=20&t=Q29mo3EKSASasTenHVEm4Q

degentrading on Why Celsius and 3AC going under should cause you to worry

https://twitter.com/hodlKRYPTONITE/status/1536902115540742144?s=20&t=Q29mo3EKSASasTenHVEm4Q

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