With world economies falling and dragging down the crypto sector, some crypto projects such as Three Arrows Capital, Celsius, and others, are already in the public eye as failing. According to Sam Bankman-Fried, some crypto exchanges are about to follow.
With the crypto sector very much on the edge, speculators and investors are waiting to see whether the industry will take the generally expected fall. $2 trillion has now been wiped off the entire crypto market cap, and there could be a lot more pain to come.
For two of the crypto lenders, Sam Bankman-Fried has been instrumental in keeping them solvent. BlockFi, and Voyager Digital have been very much affected by the fall-out from Three Arrows Capital, and therefore a much needed injection of liquidity from the CEO of FTX and Alameda Research has plugged a hole, at least for the time being.
Through his two companies, Bankman-Fried has agreed to provide credit lines to the tune of $750 million. The billionaire entrepreneur, now the richest man in crypto, said that he is not expecting a guaranteed return, but that some degree of stability will result, which will be good for the companies and for their investors.
According to an article on Forbes, it may not all be about altruistic intent on the part of Bankman-Fried. As well as propping up a crypto market that he depends on for the future of his own companies, he is also potentially looking at acquiring a part of some of these crypto companies, which would put him in an excellent position, if and when the bull market continues.
Robinhood is another company he has an interest in, and he has managed to build a 7.6% stake in the trading app platform. A full-out acquisition is rumoured to be on the cards.
However, Bankman-Fried is not bullish on the chances of some of the exchanges outside of the big leaders, such as Binance, Coinbase and Kraken, believing that some are ready to fail.
“There are some third-tier exchanges that are already secretly insolvent,”
His view is that these exchanges are desperately trying to attract customers, and are doing so by offering high yields, but given the current downturn this doesn’t look sustainable and so some are likely to fail.
On the other side of the coin, FTX remains profitable, which is more than can be said for its biggest rival Coinbase. The exchange posted losses of $432 million for Q1 of 2022, and its stock is down nearly 90% from the high.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.