Three Arrows Capital Faces Liquidation
Major news shuttered crypto markets late Tuesday night, as alleged rumors of insolvency at Three Arrows Capital, a giant in the crypto fund space, look to be confirmed to be true. This is following the Celsius debacle, which we have documented in the latest two issues of Bitcoin Magazine Pro.
With the price of bitcoin plunging close to its 2017 all-time high of $20,000, a cascade of liquidations looked increasingly feasible, and traders in the bitcoin options and derivatives market scrambled for protection.
1-week implied volatility in the options market briefly touched an astounding 216% as the market hovered above the liquidation of many risk models that had assumed a retouch of previous cycles highs was not likely (given its lack of occurrence throughout the history of bitcoin).
In particular, put options garnered a massive premium, given the increasing likelihood of a market wide liquidation event below $20,000 BTC and $1,000 ETH.