FTX chief executive Sam Bankman-Fried has acted as a lifeline for the struggling $900bn crypto industry by providing the much-needed second bailout this week. He has done this twice in the past few weeks.
FTX, a crypto trading platform in which Bankman-Fried is the chief, has extended a $250 million loan to BlockFi. The company was also able to pull back Voyager Digital from the brink with a loan that amounted to $485 million.
Cryptocurrency investors got a breath of fresh air as the rescue steps to show confidence in the crypto market. Even industry giants have fallen into distress in this period. It’s important for cryptocurrencies to be independent of the central bank. However, Bankman-Fried is becoming more like the 2008 crisis authorities that bailed out banks.
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“It has been reported that Sam has become a lender of last resort”, according to Nickel Digital Asset Management.
Samuel Bankman-Fried, the chairman of FTX, spends time preparing for these potential emergencies when they happen. For example, he says that if there are many crises at the same time, a crypto “winter” can last for a very long time.
Crypto World is Struggling to Survive
Bitcoin, the world’s most valuable digital asset, has dropped 70% since December. Many companies operating in the crypto world are struggling to survive amidst the cryptocurrency bear market. The cryptocurrency TerraUSD and its sister token, Luna, have collapsed in the past month.
The loan by the Market Asset-backed Token to BlockFi and Voyager marks a change in the scale of support that has been growing and shows the prominence of these groups. The BlockFi lending platform cut about one-fifth of its employees to compensate for the “dramatic shift in macroeconomic conditions” which came into effect about a week ago.
Last week, Crypto Capital liquidated some of their holdings due to BlockFi not giving them enough money because they lost more than they could make.
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BlockFi has Been Bailed Out by Crypto Exchange FTX
BlockFi secured a $250 million revolving credit facility from FTX but did not disclose the cost of repayment or interest. All client balances will be paid before FTX claims if BlockFi were to go bankrupt.
Bankman-Fried claims that BlockFi is debt-free, aside from the Celsius and Three Arrows debt.
“BlockFi did well by removing troublesome individuals and adding cash as soon as they needed it,” Bankman-Fried wrote on Twitter.
He added: “All operations are normal and assets are safe.”
FTX’s managing director, Michael Bankman-Fried, wrote that he welcomes struggling market participants to reach out and ask for help. He explained that a fully functional marketplace is what is best for the entire market.
Voyager, in collaboration with a loan support entity, agreed to a credit facility of $200 million, with money and USDC, which is also popular in the crypto industry. They also got a loan for 15,000 bitcoins for $285 million and will be paying 5% interest annually which expires in 2024.
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Zac Prince, the chief executive of BlockFi said that this deal would provide them with access to capital and help them bolster their balance sheet. He further added that his team has weathered many storms in their years of experience. This has made them more resilient in the market.
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Source: https://insidebitcoins.com/news/ftx-chief-executive-bails-out-blockfi