Three crypto firms are down bad this week, and things may get worse

Illustration by Alex Castro / The Verge

The average investor has learned a lot from this week's developments. There are two firms that have frozen withdrawals. It is not known how much damage has been done to Celsius Network, Babel Finance, and Three Arrow Capital.

The Celsius Network announced on Sunday night that it would be pausing withdrawals and transfers. The value of cryptocurrencies plunged even further after that, and the news hasn't improved since.

Three firms manage other people's money. Retail investors were wooed by the network. Babel Finance raised $80 million in a funding round a month ago. According to Fortune, 3AC managed $10 billion in assets last month. The ripple effects from the firms' troubles are likely to affect the rest of the cripto

The FAQ of Celsius doesn't tell investors when or if they will get access to their funds, one week after it was frozen. Alex Mashinsky thanked unnamed people for their patience and support but did not comment on reports the company has hired restructuring attorneys.

Assets under management were $12 billion as of May. Celsius could be an equivalent to securities lending. After the BadgerDAO hack, Celsius lost millions of dollars due to a mistake that resulted in Stakehound's private keys being lost and Celsius's token becoming worthless. Customers weren't told of the loss. Financial markets were spooked by the collapse of Celsius.

A shift in strategy was shown by the research by the firm. The report states that if Celsius has to sell its stake to pay investors, there could be problems because of the data linking it to Staked ether.

Babel Finance has announced a freeze on withdrawals and redemptions in Hong Kong. The company was valued at $2 billion as recently as May 25th. Babel is accused of misuse of client funds. Genesis Capital is one of its better known clients.

According to The Wall Street Journal, Three Arrows Capital has suffered a lot of losses. The failed Luna protocol was an investment that zeroed out after Terra crashed. 3AC is working with legal and financial advisers. It is possible that the firm will be sold off and that another firm will bail it out.

The head of trading at 8Blocks Capital said that 3AC ghosted everyone after margin calls. Other companies had to sell off their assets.

According to a report by The Block, 3AC closed its positions with the Bitfinex exchange, but FTX, Deribit, and BitMEX did not. While it surveys its damage from 3AC, the company has limited withdrawals to 1,500 a month.

It can take a long time to see the effects of a bad loss on an investment. It wasn't until this week that the extent of Luna's damage was known. The connections between 3AC, Celsius Network, Babel Finance, and the rest of the market seem to indicate that it isn't over.