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In another sign of distress at Three Arrows Capital, an affiliated fund that had scooped up dozens of high-priced NFTs has moved much of its multimillion dollar collection into a single wallet, prompting speculation of an upcoming fire sale.
That fund, Starry Night Capital, launched last summer with backing from Three Arrows. Famed NFT collector Vincent Van Dough was brought on as a partner and curator of the collection. As of Wednesday, its entire collection on NFT marketplace SuperRare had been moved into a new wallet and was no longer listed on the site.
The moves prompted speculation Starry Night was planning on selling its collection to cover massive losses incurred by Three Arrows during this bear market.
The collection includes, among other things, pieces from the famed Fidenza and Ringers series from the Art Blocks collection, worth hundreds of thousands of dollars apiece. “A slight lack of symmetry can cause so much pain,” by Dimitri Cherniak, was purchased last October for 800 ETH, worth more than $2M at the time.
“Our thesis is simple, we believe the best way to gain exposure to the cultural paradigm shift being ushered in by NFTs is owning the top pieces from the most desired sets,” the collector tweeted when introducing the fund.
Coinmetrics researcher Kyle Waters estimated the firm had spent $21M to amass its collection. In fact, the fund has accounted for one out of every ten dollars spent on SuperRare, the researcher said. That’s a drop in the bucket, however, compared with the billions Three Arrows Capital was estimated to manage.
“You’re talking about potentially, like, single digit millions – that really isn’t really that much compared to some of the estimates out there around their assets under management – in the billions,” Waters said.
Neither Vincent Van Dough nor Three Arrows responded to a request for comment.
Although the moves were odd, Waters said in an interview that he couldn’t prove a sale was imminent.
“We can’t tell how the two entities are linked, Three Arrows Capital and Starry Night, so they probably have different liquidity providers or different investors in the fund,” he said. Such an arrangement, though unconfirmed, would make it difficult to use proceeds from selling Starry Night assets to pay back Three Arrows investors – something others on Twitter were quick to point out.
“But it struck me as highly unlikely to just be a coincidence this would happen right when 3ac was going through this in the market,” Waters added.
If the collection were sold, Starry Night would likely incur heavy losses, Waters pointed out. Most of the pieces were acquired last summer and fall, during crypto’s bull run. Prices have cratered since, meaning the fund would likely sell its art for a fraction of what it took to acquire.
“I suppose if they set the fund up correctly, 3AC could collapse and Starry Night remain unaffected as a solvent fund,” tweeted Kaprekar_Punk. “But them moving pieces now doesn’t look promising.”
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