Three Arrows Capital insolvency rumors draw questions over soundness of DeFi

The firm is widely regarded as a major player in the cryptocurrency world. Its most recent investment activities were a $20 million capital raise in the DEX platform Orderly Network on June 9 and a $2.5 million capital injection in data analytics firm Laevitas as its lead investor.

The rumors began as on-chain analysis showed 3AC had withdrawn on-deposit stETH from DeFi protocol Aave on Tuesday. According to Defiant, it sold the funds across several transactions totaling around $40 million. stETH, or Staked Ether, represents Ethereum locked into the Beacon Chain staking contract (which cannot be withdrawn until the mainnet Merge rolls out). stETH acts as collateral to borrow more ETH on DeFi platforms. In other words, it’s a “workaround” that frees value from tokens locked in the Beacon Chain staking contract.


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