Episode 67 of Season 4 of The Scoop was recorded remotely with The Block's Frank Chaparro and Bill Barhydt, CEO of Abra.
As head of a retail crypto platform with lending exposure to Three Arrows Capital (‘3AC’), Abra CEO Bill Barhydt has personal insight into what led similar platforms to go bust in the wake of 3AC defaulting on $3.5 billion in loans across 27 different counterparties.
In this episode of The Scoop, Barhydt reveals how Abra has been able to remain operational despite 3AC exposure, and where other lenders who incurred severe losses from 3AC went wrong.
Adequately accounting for ‘concentration risk’ for example, which Barhydt describes simply as not putting “all your eggs in one basket,” has been key to Abra’s survival. This meant Abra was able to write-off a relatively small loss resulting from the collapse of 3AC without it having an impact on their broader operations.
Yet, while Barhydt believes concentration risk is “by far the easiest thing to manage for in lending,” firms like Voyager have been forced into bankruptcy from over-exposure to 3AC, with court documents suggesting Voyager has claims of over $650 million against 3AC compared to the $1.3 billion in crypto assets the broker currently has on its platform.
When lenders take a hit from failing to adequately account for concentration risk, Barhydt believes it is usually out of complacency:
“Usually it’s a function of laziness because: hey, the rates are good, nobody’s asking any questions, markets going up and to the right… It is pure laziness. And unfortunately, there were a couple of firms that were in that situation for different reasons.”
During this episode, Chaparro and Barhydt also discuss:
- The extent to which leverage still exists in the crypto market
- The potential synergy between CeFi and DeFi
- Abra's plans to become a licensed bank
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