From Warning to Collapse: Risk Management Lessons from Zhu Su and Three Arrows Capital

In 2021, when the crypto market was at the peak of the (bull cycle), Zhu Su - one of the prominent figures of Three Arrows Capital - issued a warning to the investment community about a critically important matter: the importance of risk management during periods of market exuberance.

Pioneering Warnings

In a February 2021 podcast, Zhu Su not only shared an optimistic outlook on Bitcoin but also issued specific warnings. He predicted that Bitcoin could reach a valuation between 50 to 100 trillion dollars, corresponding to a price of $2.5 million per coin. However, Zhu Su’s most notable statement was: do not attempt to “catch” the market top, as doing so could cause investors to be “blown away” during this super cycle.

Glory and Collapse

It seems that Three Arrows Capital did not follow the very advice Zhu Su had given. Not long after these predictions, the large investment fund continued to accumulate risk through substantial debts and overly concentrated positions. As a result, Three Arrows Capital faced an inevitable collapse, leaving a massive debt gap of up to $3.5 billion in the market.

Lessons in Risk Management

The collapse of Three Arrows Capital and Zhu Su’s subsequent detention have become clear evidence of the dangers of ignoring risk management principles. This story serves as a reminder that, regardless of how long-term the crypto outlook may be, without disciplined risk management, any organization or investor can face unforeseen consequences.