Translation: BitMEX co-founder Arthur Hayes analyzes the rise and fall of 3AC, and the lessons learned from the demise of centralized lending companies.

This article is a translation of the article "Number Three" released by BitMEX co-founder Arthur Hayes on July 1st, which can be found here. In the article, Hayes discusses the rise and fall of 3AC from Three Arrows Capital, describing the capital arbitrage methods in the crypto market, the relationship between leveraged trading and centralized lending companies, and explains why, in this 3AC storm, only one side, whether it is CeFi or DeFi players who are lenders, is spared from suffering.

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Any views expressed are solely those of the author and should not be taken as a basis for investment decisions, nor should they be construed as recommendations or advice for engaging in investment transactions.

The current nuclear disaster-grade crypto bear market marks my third encounter with a widespread market slaughter. While at times it may feel like a replay, each episode brings new lessons. Everyone always has their own views on what those lessons are— but if you’re listening to the mainstream financial media, I can confidently tell you, you’re drawing the wrong conclusions. They serve the devil of traditional finance and will take every opportunity to ridicule our economic/social experiment— gleefully proclaiming, “We warned you, cryptocurrencies are worthless!” In the name of Satoshi Nakamoto, I will attempt to correct the slurs oozing from these malicious harpies.

In this article, I will use the adventure of 3AC from Three Arrows Capital as the perspective, through which we can better understand the real insights to be gained from the current bear market. Please note that while I personally know Su Zhu and Kyle Davies, the heads of 3AC, I don’t know what happened beyond publicly reported circumstances. I intend to dissect the story of their collapse through my knowledge of cryptocurrencies and financial services, as well as common sense, starting from the implosion of TerraUSD and Luna