How Three Arrows Capital Blew Up and Set Off a Crypto Contagion
Su Zhu and Kyle Davies turned 3AC into the most important hedge fund in crypto, but they bet everything on prices only going up.
Illustration: Inkee Wang for Bloomberg Businessweek
Days before Bitcoin fell decisively below $40,000, and two months before his hedge fund went bankrupt, Su Zhu sat down for an interview in the Bahamas, one shoeless foot tucked under his leg. An investor as legendary as they come in the decade-old cryptocurrency industry, he had a message that matched his relaxed demeanor. “When there’s a lot of despair, you can start buying,” he said deadpan at a podcast recording for the FTX exchange. “You don’t have to follow the despair.”
That kind of steely optimism isn’t hard to find in a crowd that turned the typo “HODL” into a full-blown mantra for never selling. But Zhu wasn’t just any laser-eyed crypto trader. With his schoolmate Kyle Davies, he ran Three Arrows Capital, one of the largest crypto hedge funds in the world. With a few billion dollars under management, it was far from massive by Wall Street standards. But in digital assets, it was a heavyweight.