Zhu Su's ignored warnings: when risk management meets reality

The story of Three Arrows Capital and its co-founder Zhu Su remains one of the most instructive in the cryptocurrency sector. In February 2021, during a podcast interview, Zhu Su articulated a clear warning about the pitfalls of prolonged bull markets. He explicitly advised investors to beware of the risk of being “expelled” during an euphemistic market movement, especially during a supercycle.

Ambitious Predictions and Abandoned Principles

At that time, Zhu Su envisioned a bright future for Bitcoin, projecting that the largest cryptocurrency could see its market capitalization reach $50 trillion to $100 trillion—an extrapolation that would imply a price of $2.5 million per unit. Meanwhile, he preached caution against attempts to synchronize markets, a stance reflecting a solid theoretical understanding of risk management principles.

Today, with Bitcoin fluctuating around $91,960 according to current data, these spectacular projections seem distant, but the more relevant question remains: why did a figure warning against poor risk management succumb to the very same traps?

The Irony of a Spectacular Fall

Shortly after this prophetic statement, Three Arrows Capital found itself at the center of a spectacular collapse. The company fell under the weight of a monstrous liability of $3.5 billion, revealing poor risk control despite public recommendations from its leader. The contrast between cautious discourse and operational reality raises thorny questions about the actual application of the principles outlined.

Lessons Learned from the Collapse

Zhu Su’s subsequent imprisonment marked a symbolic turning point, transforming this episode into a case study on the tangible consequences of inadequate risk management. This trajectory reminds us of a fundamental truth: in the cryptocurrency sector, knowing the risks and effectively managing them are two distinct challenges. The fall of Three Arrows Capital continues to enlighten contemporary investors on the importance not only of understanding risk management theory but especially of rigorously applying it in practice.