The Crash of Three Arrows Capital's Starry Night Portfolio Shows NFTs' Lack of Staying Power

In early 2018, a new asset class began to take shape. Non-fungible tokens, or NFTs, were digital assets that were "unique and irreplaceable." Unlike fungible tokens, which are interchangeable and can be divided into smaller units, NFTs are meant to be one-of-a-kind. They are the digital equivalent of collectibles or works of art.

NFTs gained popularity in the early days of the ICO craze. Investors were enticed by the possibility of buying low and selling high. They were also excited by the fact that NFTs could be easily traded on decentralized exchanges. However, as the market matured, it became clear that NFTs were not a good investment. In June 2017, the value of Bitcoin peaked at $3,000. By February 2018, it had fallen to $6,000. During this time, the price of Ethereum fell from $1,400 to $300. As a result, many investors lost a significant amount of money.

However, this did not stop Three Arrows Capital from launching its Starry Night portfolio in December 2017. The portfolio was made up of NFTs from different projects, including CryptoKitties and Decentraland. Unfortunately for Three Arrows Capital, the value of the portfolio soon began to crash. By January 2018, the value of the portfolio had fallen by 50%. By February 2018, it had fallen by 70%. And by March 2018, it had fallen by 90%. Finally, in April 2018, Three Arrows Capital announced that it was liquidating the portfolio. The loss was estimated to be about $5 million.

The crash of Three Arrows Capital's Starry Night portfolio is a cautionary tale for anyone considering investing in NFTs. While NFTs may be unique and irreplaceable assets, they are not a good investment. Their lack of liquidity and volatility make them a risky investment that is not worth the risk.