June 15, 2022

🥛 The Next Phase of the Crypto Crash


GM. This is the Milk Road. Your favorite bear market newsletter. We serve you crypto news, with a large side of jokes.

The crash continues to unfold. ETH is down 9% and BTC is down 5%.

Right now it’s a game of “liquidation dominoes”

The first domino: Luna

The second domino: Celsius (we talked about this yesterday)

Today’s domino: 3 Arrows Capital (a multi-billion dollar hedge fund)

Yep. Every day there’s a new main character in crypto…but the trick is that you do NOT want to be the main character.

I call it dominoes because one causes the next.

Pretend there are 4 players in a game:

Player A – takes HUGE risks

Player B – takes big risks

Player C – takes small risks

Player D – takes no risk

In this case, the risk is ‘leverage’. Or, borrowing money, to juice your returns.

What we are seeing is Player A (in this example, Do Kwon, founder of Terra/Luna). Took massive risks, and went busto.

That drove prices down.

Now Player B (Celsius) is at risk. Because they are borrowing money against crypto collateral. And when crypto prices fall, the collateral value goes down…creating a margin call or liquidation.

So Player B panics. Sells what they can, and tries to avoid getting liquidated. The general market, seeing prices slide, start to sell too. This creates an avalanche of selling.

Now Player C, who wasn’t even taking much risk…is suddenly in trouble. Prices have dropped so much due to the greed of Player A and Player B.

This is how the dominoes fall in crypto. (Similar to how we saw Bear Stearns, Lehman Brothers, etc.. all collapse on Wall Street back in 2008)

The latest domino is 3 Arrows Capital (3AC) a multi-billion dollar hedge fund. They're a big investor in various tokens, and a huge brand in the community (not many hedge funds have 500k+ Twitter followers).

Rumors started swirling yesterday that they may be going broke and now it looks like they're next on the Crypto Hitlist.

Why do we care about this?

1/ If it’s true 3AC is insolvent, this could cause prices to go down even further. 3AC is one of the biggest borrowers/clients in the world. Their collapse would transfer that economic risk to their lenders. Causing a bigger sell-off.

2/ Three Arrows Capital has been a pioneer in crypto so far. Seeing a crypto OG go down is like seeing a fellow soldier take a fall. Never a good sight.

How did this happen?

They’ve taken massive losses recently.

Their portfolio held many of the same tokens that we held. They invested $560M in Luna, which is worth a Costco-size bag of Doritos right now (if we’re lucky)

They also bought ~$500M ETH at the top of the market ($4.3k ETH) and have a large staked eth position (that is not very liquid) amongst other things.

Celsius Update

Speaking of Celsius, let’s take a look at how they’re doing. Yesterday we talked about how they’re facing their own troubles. They’re in danger of getting liquidated too.

Today? The situation is looking better.

They added collateral to lower their liquidation risk. They will be in trouble if Bitcoin goes to ~$14,000. On one hand, that means they have some buffer. On the other hand, you never want the market to have a target number where they know you are forced to sell.

They’ve also hired a “restructuring specialist” law firm to help him get their ducks back in a row. I don’t know who they hired, but I hope it’s the WOLF from Pulp Fiction.

The Milk Road’s Take: High possibility there are still more dominos to fall.


You gotta check this out. The Winklevoss Twins have a new band called Mars Junction. And they’re currently on tour.

Do they sound good? No.

Are we going to buy tickets? Hell yes.

Tbh – everyone is making fun of this, but I love it. This is the most likable thing the Winklevoss twins have ever done.


Yesterday Coinbase announced they will cut 18% of their current workforce.

They aren’t alone. Gemini, BlockFi, and Crypto.com all announced cuts to their teams recently too.

Now Coinbase is joining the club. Brian Armstrong (CEO of Coinbase) sent out a message to the company explaining the reasons why. Here they are:

  • Economic conditions are changing quickly

  • Managing costs during down markets is critical

  • Hired too fast (4xd the size of the team in the last 18 months)

But not everyone is doing layoffs… Here’s who’s zigging while others zagging.

1/ FTX

SBF recently wrote a great thread on why FTX is gonna keep growing while others downsize.

His secret? A nice, steady growth. SBF isn’t falling into the trap of hiring everyone and their friend that wants to work at a startup.

FTXs workforce is about 10% the size of others but SBF says he’d take his team over any of them any day.

2/ Binance

A lot of crypto companies have been spending money on Super Bowl Ads, renaming stadiums, and hiring athletes as ambassadors. Not Binance.

They've been careful with their money and now they're ready to hire more than 2,000 roles from engineers, product, and marketing to business development.

CZ (the CEO) says the bear is a great time to find top talent.

"The crypto space is still in its early stages, and bull markets tend to care more about price while bear markets have more value-conscious teams that continue to build the industry. We see this as a great time to bring on top talent."


Is it time that we go buy mydatewiththepresidentsdaughter.eth?


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We might just need to start a Milk Road community petition to get Mickey D’s to bring back the McRib.

That's all for today folks, see ya tomorrow!

Shaan aka “Elon’s chocolate milk” & Ben "2% Milk" Levy

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.