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Pantera Capital Highlights Terra (LUNA), Celsius, and Three Arrows Capital’s Fiasco

Pantera Capital, a popular crypto investment firm, has recently highlighted what initiated the troubles that subsequently brought financial calamity upon Terra (LUNA) ecosystem, crypto lending platform Celsius, and Singapore-based crypto hedge fund Three Arrows Capital (3AC).

In the blockchain newsletter for the month of June 2022, Pantera Capital explained what triggered the fiascos mentioned above.

For Terra ecosystem, the firm said the crypto industry’s detractors will certainly term the incident as a big deal of failure, but it cannot overshadow blockchain’s utility and promises.

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Explaining further, the firm stated that the Terra ecosystem’s collapse is similar to the dot.com era when some experiments worked, while others failed. This led to the failure of Pets.com but didn’t mean the internet has no viable utility. It only means that one business model wasn’t right for the time.

So, the newsletter says LUNA’s failure only means that one type of algorithmic stablecoin failed to work as planned, which does not imply that blockchain technology has failed.

Read Also: Three Arrows Capital (3AC) Files Chapter 15 Bankruptcy, Seeking to Defend its US Assets

Pantera Capital noted:

“There’s a ton of stress about whether Tether is fully backed by collateral.  In 2019 they admitted it wasn’t.  It serves its purpose – shadow banking system.  However, most stablecoins, like Coinbase and Circle’s USDC are fully backed with treasury bills, very transparent, and audited. 

“You have to work through some of these experiments. Ultimately, that vast majority of the stablecoin market will look just like USDC and FedCoin.”

For Celsius, the company wrote:

“Celsius is a centralized crypto lending business.  Their business model is:  you deposit USDC, ETH, some sort of cryptocurrency, and they promise a yield on it.“

“What ended up happening is they put a bunch of those assets into either very risky projects or into things that have a long liquidity horizon.  Classic leveraged lending model – borrow short-term, lend long and risky. 

“The liquidity mismatch where you have customers who expect to be able to withdraw their funds within 24 hours, but you have assets that may be locked up for months.  Celsius ended up freezing withdrawals and were forced to sell a huge amount of crypto over the last week, which is part of what caused a cascade in prices.”

Read Also: $559.6 Million Used By Three Arrows Capital (3AC) to Acquire Locked LUNA Now Worth $670

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Regarding the current issue faced by Three Arrows Capital (3AC), Pantera Capital said:

“Similar situation with Three Arrows Capital, known as 3AC.  Very leveraged with liquidity mismatches. They weren’t able to meet their margin calls.  They ended up being a forced seller in a time where there wasn’t that much liquidity in the markets.

“The markets are very efficient.  With a 70-90% downdraft we probably have worked through most of the problems.  We think these events have mostly washed through the crypto space.”


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Solomon Odunayo
Solomon Odunayo
Solomon is a trader, crypto enthusiast, and analyst with over four years of experience in the industry. He strongly believes that crypto assets and the blockchain will continue to gain prominence. At TimesTabloid.com, he focuses on news, articles with deep analysis of blockchain projects, and technical analysis of crypto trading pairs.
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