When Hodl Failed

Three Arrows Capital, the most important hedge fund in crypto, set off a digital-asset contagion

- By Pat Regnier

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 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 mantra for never selling. But Zhu wasn't just any laser-eyed crypto trader. With his schoolmate Kyle Davies, he ran the hedge fund Three Arrows Capital. With a few billion dollars under management, it was far from massive by Wall Street standards. But in digital assets, it was a heavyweight.

More than that, Zhu and Davies were an integral part of the crypto market's densely woven web. Their fund was a venture investor in crypto startups and, in some cases, manager of their corporate treasuries. It was both an aggressive borrower from large lenders and a shareholder in some of those lenders. It was a corporate parent for other fledgling funds. The duo were social media influencers as well as brokers of deals and introductions.