<p>The future of crypto hedge fund Three Arrows Capital hangs in the balance as the firm faces potential insolvency after being liquidated by its lenders.</p> <p>According to well-placed sources, the investment firm — which counts the likes of options exchange Deribit and financial services firm BlockFi among its venture bets — is in the process of figuring out how to repay lenders and other counter-parties after it was liquidated by top tier lending firms in the space. </p> <p>Sources declined to share the names of those firms on the record for fear of reprisal, but three people said the liquidation totaled at least $400 million. <span style="font-size: 16px;">They added that the firm has maintained limited contact with its counter-parties since being liquidated. </span></p> <p>The liquidation event is just one of several setbacks by the firm, which has backed projects like Avalanche, Polkadot, and Ether which are all down 57%, 38.8%, and 47% over the last 30 days respectively. </p> <p>The fund sustained significant losses during the collapse of the Terra ecosystem last month, after investing heavily in its native token LUNA. </p> <p>The firm, which reportedly managed approximately $10 billion at market peak by some <a href="https://www.bloomberg.com/news/articles/2022-04-07/three-arrows-capital-s-su-zhu-remains-bullish-on-crypto-investments">estimates</a>, is led by former classmates Su Zhu and Kyle Davies. </p> <p>Zhu, co-founder and CEO of Three Arrows Capital, <a href="https://www.theblock.co/linked/152087/three-arrows-capital-boss-breaks-silence-amid-insolvency-rumors">addressed rumors</a> regarding the crypto investment firm’s operations and solvency in a tweet Tuesday evening. </p> <p>"We are in the process of communicating with relevant parties and fully committed to working this out," he said. </p> <p>Representatives from Three Arrows did not respond to messages seeking comment. </p> <p>Zhu — who up until a few weeks ago was a vocal crypto bull — recently took to Twitter to admit that his 'supercycle' bull case on the crypto market was "regrettably wrong."</p> <p>"<span class="css-901oao css-16my406 r-poiln3 r-bcqeeo r-qvutc0">Supercycle price thesis was regrettably wrong, but crypto will still thrive and change the world every day</span>," he said at the end of May.</p> <p>The supercycle was an idea pushed by Zhu that suggested the crypto market would gradually rise during this market cycle, avoiding a sustained bear market.</p> <p>In an interview on the UpOnly podcast in February 2021, Zhu suggested that bitcoin's price could go as high as $2.5 million per coin if bitcoin were to capture the same market value as gold.</p> <p><em>The headline of this report has been updated for clarity.</em></p>