Many Small Crypto Exchanges Are Insolvent – Sam Bankman-FriedJune 29, 2022
FTX CEO Sam Bankman-Fried has claimed that most small exchanges are already battling insolvency. He added that more of them would soon have the Same challenge. The FTX CEO shared his opinions following a new interview with Forbes.
Actions And Consequences
Bankman-Fried opined that the cause of their insolvency was their reckless investment during the last crypto bull run. Thus, now that the crypto market prices are declining, many are facing the consequences of their reckless investment. He also said that many of them were offering unsustainable double-digit yields.
These companies could get away with such yields during a bull season. However, they would struggle with such yields during a bear season. Bankman-Fried predicts many others would suffer a similar fate since they also offered those unreal high yields. The FTX CEO said cash infusion into some crypto firms could no longer solve their insolvency issues.
Bankman-Fried’s comments come amidst its credit lines extension towards BlockFi and voyager digital. The two digital assets platform had to seek Bankman-Fried’s help after three arrows capital defaulted in its loan repayment to them.
However, FTX CEO couldn’t extend his credit lines to crypto lender, Celsius. Bankman-Fried may have considered Celsius one of those companies where cash injections can no longer solve their insolvency issues. The insolvency issues of three arrows capital might soon force it to declare bankruptcy.
Earning Returns From Bailouts?
Rising inflation rates and interest concerns are among the causes of crypto firms’ insolvency issues. The other cause includes the crash of the Terra network last month. Bankman-Fried also admitted that his bailouts for these crypto firms might not come with any returns.
According to him, there is no end to the crypto market slump. However, the good news is that the bailouts will help maintain market stability and provide customer protection. Market participants claim that Bankman-Fried cash infusion into these distressed arent signs of his benevolence.
Rather, he is making strategic investments in distressed crypto firms. He knows that the value of his wealth is strongly tied to a healthy rebound and growth of the crypto market.
Thus, there are rumors that Bankman-Fried may offer to own equity stakes in BlockFi and Voyager in exchange for the credits he offered. Many industry analysts also claim that the FTX CEO may already be eyeing other distressed crypto exchanges to buy them at bargain prices.
During the interview, the FTX CEO also clarified that his crypto firm is in profit, unlike Coinbase and its other competitors declaring losses. Bankman-Fried also spoke about the fud surrounding tether’s USDT. According to him, there are no truths in the rumors. He said he is confident that the USDT has enough reserves to thrive beyond this crypto winter.