FTX CEO: Some Crypto Exchanges Are On The Edge Of Bankruptcy

  • June 30, 2022
  • 45 Views

A series of insolvency may be at hand in the crypto exchange market.

In an interview with Forbes, Sam Bankman-Fried, CEO of FTX, also seen as a hero for struggling companies lately, said that more crypto companies are close to default. “There are some third-tier exchanges that are already secretly insolvent,” he commented.

The downtrend in prices is causing heavy damage to crypto markets.

Companies have made layoffs. Users’ trust and confidence in projects is lower than they did in the early days.

Indicators measuring market capitalization and industry criteria show that global growth is slowing down significantly.

This is Bigger Than Crypto

According to the CEO, FTX is protecting its customers, even if it means they’re getting bad deals. If you’re late to the party, a quick recap may help.

Earlier this week, major digital currency hedge fund Three Arrows Capital (3AC) officially defaulted after failing to repay a loan worth more than $670 million.

Voyager Digital, one of 3AC’s lenders, announced the insolvency of 3AC on a loan of $350 million in stablecoin USDC and 15,250 Bitcoin worth about $323 million at the press time.

The insolvency of 3AC comes after weeks of strong volatility in the cryptocurrency market, causing hundreds of billions of dollars in capitalization to be blown away.

Both strongest currencies Bitcoin and Ether have significantly declined and are far below all-time record levels.

Meanwhile, the total capitalization of the virtual currency market is currently $950 billion, down significantly from the peak of about $3 trillion in November 2021.

The Party is On Hold

Big players in the industry have suffered from financial crises.

The FED’s interest rate move up made it even worse for both borrowers and lenders. 3AC, Celsius, Voyager, Babel Finance, and BlockFi are struggling; and the CEO said it was just the beginning of a domino effect as others will soon follow suit.

Sam has bailed out some of them. FTX and its investment fund, Alameda Research, made a rescue offer for BlockFi with a loan of $ 250 million and guaranteed Voyager Digital through a loan package of $ 485 million.

Rumors spread around that FTX is in talks to acquire BlockFi.

It is a Hot Market for Anyone With Cash

Many controversies are swirling around the bold moves of the richest guy in the crypto industry, especially when his competitor, Coinbase, just cut 18% of its workforce earlier this month.

A “white knight,” isn’t he?

The CEO of FTX previously splashed a lot of money to acquire US derivatives exchange LedgerX, and Japanese crypto exchange Liquid or game developer Good Luck Games.

Another rumor recently has it that FTX is eying on acquiring Robinhood; this time, Sam denied it. Binance CEO Changpeng Zhao, on the other hand, is more selective when it comes to rescues.

CZ stated that he has received numerous bailout offers from struggling crypto companies, but that not everyone deserves to be saved because the project’s operating model has failed behind the emergence of the market.

Sam Bankman-Fried stressed that wrong calculation in yield was the biggest factor causing abnormal liquidity pressure in almost all the struggling lending platforms.

The yield rate is a dream in the uptrend, but when the downturn hits, it hits like a nightmare.

The CEO asserts that FTX is still profitable and has been running for the previous ten quarters, despite the global market crash.

Huge Losses are Mounting

Coinbase, FTX’s main competitor, lost $432 million in the first quarter of 2022, its share has plunged nearly 90% from its all-time high, and it was forced to lay off 1,100 staff.

The collapse of Terra (LUNA) puts the whole market in doubt for every stablecoin-related project. The biggest stablecoin Tether is currently surrounded by bad news and negative speculation.

However, the CEO said there’s nothing to be concerned about with Tether, “I think that the really bearish views on Tether are wrong…I don’t think there is any evidence to support them.”

We shall see.

The post FTX CEO: Some Crypto Exchanges Are On The Edge Of Bankruptcy appeared first on Blockonomi.

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