The cryptocurrency lender crisis continues to rage, with cryptocurrency lender BlockFi announcing that it will no longer accept shares of Grayscale (GBTC) as collateral, which has heavy exposure to the Three Arrows Capital Fund.
Following the news, GBTC shares plunged 5% on Tuesday to $12.21. Amid the bitcoin rection, GBTC shares have been in free fall this year and have corrected nearly 65%.
The recent BlockFi decision highlights the fragility of the crypto lending sector and its exposure to insolvent companies. Grayscale had exposure to Three Arrows Capital, which held more than 5% of GBTC shares at one point.
Due to its bad debt to Three Arrows, BlockFi is already suffering $80 million worth of losses. BlockFi CEO Zac Prince spoke about exposing him to 3AC, adding that they will be part of the embattled hedge fund’s ongoing bankruptcy case.
According to late information, BlockFi has already undone its entire position in GBTC. Last month, BlockFi agreed with FTX US to get out of its liquidity problems. Under the deal, FTX US would extend a 4400 million revolving credit facility along with an option for the exchange to acquire BlockFi for $240 million.