Sam Bankman-Fried says more crypto platforms will close
The CEO of the cryptocurrency exchange FTX, Sam Bankman-Fried, recently warned that some exchanges have been “secretly insolvent” and they might collapse.
Commenting on the infamous flop of Luna, a $40 billion digital asset associated with TerraUSD, a $16 billion stablecoin designed to keep balance with the U.S. dollar, Sam Bankman-Fried asserted that more failures will happen. “There are some third-tier exchanges that are already secretly insolvent,” he said.
“There are companies that are basically too far gone and it’s not practical to backstop them for reasons like a substantial hole in the balance sheet, regulatory issues, or that there is not much of a business left to be saved,” said SBF.
Last month, Singapore-based Three Arrows Capital (3AC), a highly levered digital trading firm which bought $200 million of locked Luna classic (LUNC) confirmed that it’s now worth $700.
Three Arrows’ had borrowed large sums from different crypto-related companies such as Voyager Digital and BlockFi. Bankman-Fried decided that, between FTX and his trading company Alameda, he provides the faltered companies with $750 million in credit lines.
However, he added that he’s aware there is no guarantee this investment will show profitable.
“You know, we're willing to do a somewhat bad deal here, if that's what it takes to sort of stabilize things and protect customers,” he said
Still, this cash injections are far from only being altruistic. Known as a “vulture capitalist”, SBF recently bought a 7.6% stake in cryptocurrency brokerage Robinhood and the people familiar with the situation say he’s into a total acquisition.
Along with this theory comes the latest rumors of Sam Bankman-Fries actually closing in on a deal to buy embattled crypto lender BlockFi for $25 million in a fire sale.
JPMorgan Says Crypto Deleveraging Cycle Won’t Last
Also, last year, he decided to slash leverage on FTX saying crypto derivatives are a "somewhat misunderstood area."
"Any position that you're putting on with that level of leverage can't be absolutely crucial for efficient markets, and this is not something I felt was particularly important or good for crypto market health," SBF commented after lowering the cap to 20 times.
This move proved to be good, at least according to the JPMorgan crypto views. The company’s strategist Nikolaos Panigirtzoglou recently explained “historic deleveraging of the cryptocurrency market could be coming to an end, which could signal the close of the worst of the bear market”.
Panigirtzoglou added that “the fact that crypto entities with the stronger balance sheets are currently stepping in to help contain contagion.”
Author: Teuta Franjkovic
A sincere writer with a strong will to share knowledge on all things blockchain, crypto, metaverse and DeFi. Starting out as a writer with Cosmopolitan, Teuta has risen through the ranks of business journalism, editing newspapers and websites within the fintech industry for over 15 years. She holds a double MA in Public Politics and Entrepreneurship.