Crypto crisis: FTX chief Bankman-Fried calls on industry to take relief action

Jun 22, 2022

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Crypto crisis: FTX chief Bankman-Fried calls on industry to take relief action

Originally posted here.
By: guido

Overview

The crypto market is currently being pushed into a negative trend by projects in trouble and bankruptcies. The head of the crypto exchange FTX, Sam […]

The Post

The crypto market is currently being pushed into a negative trend by projects in trouble and bankruptcies. The head of the crypto exchange FTX, Sam Bankman-Fried, sees the industry in the responsibility to respond with relief actions.

Fear is spreading among investors in Bitcoin (BTC) and Co.: at the latest since the collapse of the Terra ecosystem in the second week of May, bad news such as from the DeFi platform Celsius or the hedge fund Three Arrows Capital (3AC), which seem to be on the verge of insolvency, are piling up. The price curves of Bitcoin, Ethereum (ETH) and other major altcoins have fallen back to levels seen at the turn of 2020/21. In this situation, Sam Bankman-Fried, CEO of crypto exchange FTX, is making the case for financially propping up struggling projects. He feels a responsibility to think about how crypto industry intervention could “contain contagion,” Bankman-Fried said in an interview with US Radio .

Complementing that, the 30-year-old billionaire said his plans are not even about whether people themselves were involved or responsible for recent bankruptcies and failures. He argues pro bailouts to bring the crypto markets as a whole back to a “healthy” path. Bankman-Fried professes “Effective Altruism” and wants to see societal improvements elsewhere through effective giving.

BlockFi gets $250 million loan from FTX.

Following the interview with NPR, it was announced that its crypto exchange FTX is coming to the aid of the struggling platform BlockFi with a $250 million line of credit. BlockFi CEO Zar Prince’s relief at the emergency financial assistance was evident on Twitter . Bankman-Fried, in turn, expressed confidence via tweet  that BlockFi could now steer through the difficult market from a strong position. Just over a week ago, BlockFi had already announced that it would cut 20 percent of its workforce in response to the market environment.

Bankman-Fried has become principled on other issues these days as well. He sees the U.S. Federal Reserve as one of the triggers for the price drops in cryptocurrencies. The Fed had recently increased the U.S. key interest rate by 0.75 percent, the largest increase since 1994. When fiscal policy tightens the reins, Bankman-Fried said, investors sell the assets, which are associated with greater risks. On the 3AC hedge fund drama, Bankman-Fried said he would like to see regulation and/or transparent DeFi in the future as a measure to prevent a repeat in the Twitter discussion . FTX is among the top five crypto exchanges in the world, and Bankman-Fried has previously come to attention as opinionated.

Bottom line: crypto industry in self-dealing mode?

Prominent voices like Bankman-Fried are generally conflicted internally: on the one hand, they want government influence and regulation on the crypto industry with a sense of proportion, but on the other hand, they are by no means operating in a separate space from the global economy and politics anymore. The call for self-responsibility could point the way to a new balance. We should also remember the $600 million hack of Axie Infinity (AXS) and the sidechain Ronin, where a consortium around the world’s largest crypto exchange Binance provided millions in April to fully compensate victims. Here, too, contagion risks for connected projects had been identified and, in a best-case scenario, aid money used will be profitable for Binance in the medium term. For now, it remains to be seen whether Bankman-Fried’s call will find support in the crypto industry and enable concerted action. However, even the profitable crypto exchanges would not have been able to compensate for a $40 billion crash like Terra (LUNA) and UST.

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