After 3AC's collapse, centralized lenders with exposure to 3AC had failed, while their decentralized counterparts liquidated collateral and continued operating
Good morning! An IT head, data scientist, and AI product manager walk into a bar. PYMNTS.com : Today in Crypto: Three Arrows Capital Files for Bankruptcy; Celsius Hits Three Week Mark of Closed Withdrawals Godfrey Benjamin / Blockchain News : Three Arrows Capital Files for Chapter 15 Bankruptcy in the US The Daily Hodl : Crypto Exchange Voyager Halts Trading, Deposits and Withdrawals, Citing Debt Failure From Three Arrows Capital Sam Reynolds / CoinDesk : Three Arrows Paper Trail Leads to Trading Desk Obscured Via Offshore Entities Emma Roth / The Verge : Crypto hedge fund Three Arrows files for bankruptcy Zach Horn / Vault : Lessons from the Last Cycle — Welcome to another edition of Vault. Jamie Redman / Bitcoin News : Report: Embattled Crypto Hedge Fund Three Arrows Capital Files for Chapter 15 Bankruptcy Shalini Nagarajan / Blockworks : 3AC Files for Bankruptcy as Co-Founders' Location Unknown Tim Hakki / Decrypt : This Week in Coins: Bitcoin and Ethereum Erase Gains, 3AC Files for Bankruptcy Ali Raza / Inside Bitcoins : 3AC files for bankruptcy amid financial troubles Ogwu Osaemezu Emmanuel / crypto.news : Bitcoin Bloodbath: Three Arrows Capital Officially Files for Bankruptcy Michael McSweeney / The Block : Voyager Digital suspends trading, deposits, withdrawals, and rewards citing market conditions, after issuing a default notice to 3AC in June over a ~$650M loan John P. Njui / Ethereum World News : Three Arrows Capital Files for Bankruptcy in the US to Protect its Assets from Liquidators. Jeremy Hill / Bloomberg : Three Arrows Capital files for Chapter 15 bankruptcy, protecting its US assets from creditors while a British Virgin Islands court carries out a liquidation Isaiah McCall / Yard Couch : Now That Bitcoin is Dead, What's the Next Big Thing? The Economic Times : Top crypto hedge fund Three Arrows Capital files for bankruptcy Brady Dale / Axios : Compound's founder is unworried about DeFi defaults Martin Young / CryptoPotato : 3AC Files for Bankruptcy as Voyager Digital Suspends Withdrawals Tweets: Alex B. / @bergealex4 : Why DeFi “succeeded”: It's over collateralized. The idea that it's a shoe in replacement for a financial system is laughable. The market for over collateralized lending has a glass ceiling. Degenerate or not, this capital inefficiency simply cannot scale to all use cases. https://twitter.com/... David Dorr / @daviddorr : 3AC didn't just blow up from degen gambling. They were duping investors and clients. Investigators are going to find a trail of crime. Seems like some of it may still be ongoing. https://twitter.com/... Cassandra Schadenfreude / @frances_coppola : If Voyager's app is still accepting deposits, then the announcement on July 1st was wrong. It said they were suspending deposits. Of course, this might just be a non-functioning screen on the app. https://www.investvoyager.com/ ... https://twitter.com/... https://twitter.com/... @permissionlesol : 4/ Arthur Hayes Some conclusions of 3AC implosion, how they started, how this happened. Also, conclusion that centralized lenders failed en masse, while their decentralized counterparts liquidated collateral and operated with no hiccups. https://entrepreneurshandbook.co/ ... Shaquille O'Atmeal / @crypt0e : Congratulations everyone, our very own Lehman Bros moment! We're growing up so fast! https://twitter.com/... https://twitter.com/... @djohnson_cpa : Can Satoshi's wallets sell some coins to really kick things up a notch? https://twitter.com/... https://twitter.com/... Maya Zehavi / @mayazi : Read!! How 2AC blew a whale shark-sized hole in crypto markets with reputation based leverage across centralized lending platforms https://entrepreneurshandbook.co/ ... Arthur Hayes / @cryptohayes : “Number Three” is a sad but predictable story of #cryptocurrency centralised trading and lending businesses blowing up due to too much leverage. Long Live #DeFi. SOFYL https://cryptohayes.medium.com/ ... https://twitter.com/... @kadhim : Voyager has halted withdrawals, joining Celsius in freezing customer deposits. Also reveals that almost 60% of the its outstanding crypto loans are to Three Arrows Capital, which is in liquidation https://www.prnewswire.com/... Alan Austin / @alangaustin : This is crazy. Lenders like Voyager concentrating this much of their loan portfolio with just 1-2 parties. What could possibly go wrong 🙄 https://www.prnewswire.com/... https://twitter.com/... Joe Weisenthal / @thestalwart : Big win for DeFi this cycle. While CeFi lenders are seeing their equity getting totally wiped out, the big DeFi protocols are only down around 90% https://twitter.com/... Ernesto Contreras / @ernestocontrer : “When you remove trust from the equation and rely purely on transparent lending standards executed by impartial computer code, you get a better outcome. This is the lesson to be learned” -@CryptoHayes's essay on 3AC & ecosystem is my best read this week! https://entrepreneurshandbook.co/ ... Jackson Palmer / @ummjackson : So these guys have just gone MIA while their guy in the Virgin Islands handles the bankruptcy? https://twitter.com/... https://twitter.com/... @zachweinberg : It's only web3 if it comes from the Defi region of France. Otherwise it's just sparkling finance. https://twitter.com/... @coindesk : EXCLUSIVE: A tangle of offshore entities connected to the embattled crypto hedge fund Three Arrows includes a trading unit, TPS Capital, that's said to remain quite active - @thesamreynolds reports https://www.coindesk.com/... Stacy Elliott / @stacyannj : Latest from @CryptoHayes is excellent: “Very few money managers stopped to engage the critical thinking part of their brain and ponder how the fuggity fuck Anchor generated these yields.” https://entrepreneurshandbook.co/ ... @lukeyoungblood : Another excellent blog by @CryptoHayes - despite the market carnage, it has been encouraging to see how well DeFi protocols fared. I hope that regulators and the public see how DeFi can lead to better outcomes for lenders, borrowers, and investors. https://entrepreneurshandbook.co/ ... https://twitter.com/... Boris Wertz / @bwertz : “Both centralised & decentralised lending companies/ platforms had exposure to 3AC - & only the players in one of these two markets went belly up.” Great analysis of the Three Arrows Capital (3AC) blowup and how decentralized platforms faired much better. https://cryptohayes.medium.com/ ... @mdudas : “Both centralised and decentralised lending companies / platforms had exposure to 3AC — and only the players in one of these two markets went belly up. The centralised lenders failed en masse, while their decentralised counterparts...” ~ @CryptoHayes https://entrepreneurshandbook.co/ ... Matt Huang / @matthuang : Clear (and humorous) recap from @CryptoHayes on: - 3AC and its collapse - The subsequent fallout on CeFi companies - “The [DeFi] protocols... did not have to halt any withdrawals... continued to issue loans... did not suffer any downtime.” https://entrepreneurshandbook.co/ ... @scottmelker : Three Arrows Capital fucked up so bad that they skipped 14 levels of bankruptcy and went straight to chapter 15. https://www.theblock.co/... Moon Lambo / @moonlamboio : Voyager has suspended all trading, deposits, and withdrawals indefinitely. In a nutshell: They ran out of money. 💸 They acknowledge a part of the problem is the insolvency of Three Arrows Capital. This is a domino effect spreading throughout crypto. https://www.investvoyager.com/ ... Garry Tan / @garrytan : The crypto carnage was driven by centralized lenders with weak risk controls and minimal collateral requirements Defi lending protocols operated as designed, and just notched another proof point through a catastrophic risk contagion 👇 https://twitter.com/... Parker / @pt : This was a good read on how crypto broke, but I'm still left wondering why people are so excited about lending that requires 150%+ collateral. Is the TAM huge for this? Does crypto expand the market or materially lower costs? DeFi survived, so what? https://entrepreneurshandbook.co/ ... https://twitter.com/... Wu Blockchain / @wublockchain : An excellent article by BitMEX founder Arthur Hayes reviewing the character and behavior patterns of the founders of 3AC: The only way to juice the performance of your hedge fund is to become a directional trader, and/or use borrowed funds. 3AC did both . https://cryptohayes.medium.com/ ...
Context & Ripple Effects
The immediate story is a split in how crypto credit intermediaries handled Three Arrows Capital’s failure: centralized lenders with exposure were failing, while decentralized protocols enforced collateral liquidations and remained available. Voyager’s suspension of trading, deposits, and withdrawals made the customer-facing consequence of that divide explicit.
The episode became part of the wider 2022 crypto-winter contagion narrative, where leverage and the TerraUSD collapse compounded 3AC-linked stress. Later coverage also examined the broader crypto credit crisis through the chain from 3AC to subsequent failures.
First-order effects
- Centralized lenders exposed to Three Arrows Capital lose operating continuity, with Voyager halting trading, deposits, and withdrawals as its debt failure surfaces.
- Decentralized lending protocols keep operating by liquidating posted collateral rather than pausing withdrawals, shifting losses to collateralized positions under their rules.
Second-order effects
- Voyager’s halt leaves its customers without normal access to trading and funds, while functioning decentralized protocols retain the capacity to serve borrowers and lenders during the same disruption.
- The contrast makes collateral enforcement a competitive dividing line in crypto lending: centralized firms’ counterparty exposure can disable the intermediary, while protocols’ liquidation mechanisms preserve service.
Third-order effects
- If this pattern persists, crypto credit will be organized more sharply around whether risk is managed through discretionary centralized balance sheets or automated collateral rules.
- The 3AC episode strengthens the industry’s legitimacy challenge by making operational resilience during stress—not promised yield—the test for lending venues.
The trend: Crypto lending is moving toward a sharper divide between centralized credit chains vulnerable to counterparty contagion and protocols built around programmable collateral liquidation.