Pantera Capital on What Went Wrong With Terra, Celsius, and Three Arrows Capital

Recently, Crypto investment firm Pantera Capital took a closer look at what caused the the recent troubles of the Teraa ecosystem, crypto lender Celsius, and Singapore-based crypto hedge fund Three Arrows Capital (3AC).

In the June 2022 issue of his firm’s monthly newsletter (“Pantera Blockchain Letter”), Pantera Capital gave their explanation for the the above-mentioned debacles in the crypto space:

Below are some highlights from their comments about Terra, Celsius, and Three Arrows Capital:


  • LUNA’s failure only means that that one type of algorithmic stablecoin didn’t work.
  • … most stablecoins, like Coinbase and Circle’s USDC are fully backed with treasury bills, very transparent, and audited.


  • Celsius is a centralized crypto lending business.  Their business model is:  you deposit USDC, ETH, some sort of cryptocurrency, and they promise a yield on it.
  • What ended up happening is they put a bunch of those assets into either very risky projects or into things that have a long liquidity horizon.  Classic leveraged lending model – borrow short-term, lend long and risky.  The liquidity mismatch where you have customers who expect to be able to withdraw their funds within 24 hours, but you have assets that may be locked up for months.  Celsius ended up freezing withdrawals and were forced to sell a huge amount of crypto over the last week, which is part of what caused a cascade in prices.

Three Arrows Capital

  • Similar situation with Three Arrows Capital, known as 3AC.  Very leveraged with liquidity mismatches. They weren’t able to meet their margin calls.  They ended up being a forced seller in a time where there wasn’t that much liquidity in the markets.

Pantera Capital also had something to say about the Grayscale Bitcoin Trust (GBTC):

  • For years, when people pitched the Grayscale “arbitrage” I always thought – nothing is risk-free, this could go super-negative, no interest. Well, it has. Bitcoin is down -72%, ETH -77%, SOL -90%.  That kills anybody with leverage.  However, if you’re long via GBTC you’ve lost way more than that.
  • Three Arrows is thought to have owned 6% of the entire GBTC Trust – leveraged.  They are being liquidated.  BlockFi is rumored to have had a large exposure to this trade as well.  There probably are similar firms all being liquidated now.
  • “Investors paid a massive premium to get in – $6 billion at the peak in January 2021.  They now face an $8bn discount to get out.  That’s on top of the movement in the price of bitcoin.  That’s a lot of value destroyed.

On March 25, Pantera Capital CEO and Co-CIO Dan Morehead was interviewed by Yahoo Finance’s Brian Chung. During that interview, Morehead was asked for his prediction of where Bitcoin’s price would be a year or two from now.

He replied:

We’ve been doing this a long time, and Bitcoin has gone up 2.5X on average for 11 years, and sometimes it gets ahead of itself, and has a bubble, and sometimes it’s in a bear market, like it is now. And right now, I see 60% below that 11-year trend regression. So, our normal forecast is that a year from now, we’re going to be 2.5X higher. That puts you at about a $100,000 per Bitcoin. And although that number sounds crazy. I think it’s pretty likely to happen.

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