Scimitar Capital confirms "strategic" decision to liquidate crypto holdings of over $2 billion.
MATIC, SOL, SUI and all altcoins suffer minimum -20% drawdown
APG Capital offers to purchase remaining assets and infrastructure of Scimitar Capital
The entire crypto market was rocked when prices of altcoins suddenly dropped by a whooping 30% in a matter of minutes, while BTC and ETH only dropped by ∼2%. What really happened? Here is the real truth!
Scimitar Capital confirmed in a tweet On June 10 2023 at around 7am UTC that they have liquidated all of their crypto holdings, and will be returning capital to their esteemed LPs. This came after rumors was flying around that the venture fund went bankrupt and the liquidation of remaining crypto assets in their possession was responsible for the market drawdown.
At 6:30 am UTC on June 10 2023, Thiccy tweeted a breaking news of a fund that liquidated $2B of altcoins. About an hour later, Scimitar Capital confirmed the rumor as seen in the screenshot below.
This makes Scimitar Capital, a Singapore based venture fund, the latest high-profile victim in the credit crisis sweeping through crypto since the Terra Luna collapse in 2022. They were not the only one to suffer though, as some prestigious market makers were taken out as well.
Cephalopod tweeted an announcement that his market making firm, Octopus Capital, took altcoins from Scimitar Capital at 10% discount.
Announcement.
At approximately 9pm ET on Friday my market making firm, Octopus Capital, agreed to take on a substantial block of altcoins from Scimitar Capital in the OTC market at approximately a 10% discount.
— Cephalopod (@cephalopod) June 10, 2023
Rather than keep these coins, they sold them all, leading to them loosing several millions of dollars. As they got liquidated, prices went further down.
Goblin Capital, a market maker and venture fund, also tweeted that they lost some money as well, as they got hit on their bids.
But today that wasn’t so easy. Thank you for understanding, we are doing our best in what are increasingly difficult market conditions.
— Goblin Capital (@GoblinCap_) June 10, 2023
Moments later, APG Capital tweeted that they are exploring the possibility of purchasing the remaining assets of Scimitar Capital. We don't know if this deal pulled through or not. There were also suggestions if APG would be interested in buying the assets of Ligma Ventures, another venture fund who lost money.
The big question many asked is: What firm is this Scimitar Capital? They had less than 1,000 followers on Twitter before they made their announcement. How could such unknown fund have over $2bn in altcoins in such an illiquid market?
It turns out that Scimitar Capital is a bankrupt venture fund. Defi^2 was appointed as restructuring Administration to oversee disbursement of remaining assets. All affected by the liquidation were asked to reach out.
Apparently, they have been bankrupt for a while, and only had customer assets in their portfolio, of which they sold off some in massive loss, and the remainder got liquidated. Over $12 million have been incurred in restructuring advisory. See image below.
So, was it just VC funds and market makers that got liquidated, or retail capitulation? A good explanation was given by Skew Δ on Twitter.
Yeah, pretty sure margin call event
Bad debt -> creditors call back $ due to SEC -> nuke portfolio
Depreciation -> loss of capital
— Skew Δ (@52kskew) June 10, 2023
It was an unfortunate situation, and several retail investors either lost money or got liquidated. But Scimitar Capital along with other market makes and some VC funds were the biggest losers, and the main reason why prices of altcoins dropped so hard.
Apparently, there was too much leverage in the system, leverage longs even in the face of uncertainty birthed by the SEC's lawsuits against crypto giants Binance and Coinbase. When longs gets liquidated, it becomes a sell on the market. Too many longs getting liquidated = large sell order, especially at a time when liquidity and volume is low. This event couldn't have happened at a worse time.
At the end of the day, each person is responsible for their financial decision, and proper risk management should be applied. For example, a stop loss could have saved a lot of people. Stay safe out there.
Will market bounce from here? Or is it the beginning of the end for altcoins? Share your thoughts below.