According to the CEO and founder of FTX, Sam Bankman Fried, some small cryptocurrency exchanges are already insolvent. He also claims that many other cryptocurrency exchanges will soon fail. Bankman-Fried made his views known during a recent interview with Forbes. The FTX CEO explained that many of these crypto firms were recklessly investing during the cryptocurrency bull run of the past two years.
Therefore, the current price drop has caused these companies to lose almost all of their investments. Sam Bankman Fried He added that these crypto companies are insolvent because they were offering double-digit returns during the crypto bull season. Therefore, they were unable to maintain their performance offerings when prices began to plummet. The CEO of FTX predicts that many other small cryptocurrency exchanges will fail soon as they were also offering unsustainable returns.
“Some companies have gone too far and there is no way to back them up.”
The FTX CEO’s comments came after offering $750 million in credit lines to BlockFi and Voyager Digital. The two digital asset platform was affected after Three Arrows Capital will not pay their loans. However, it is unclear why Bankman-Fried did not extend similar lines of credit to the Crypto lender, Celsius.
Perhaps Celsius is one of those companies that Bankman-Fried classified as too advanced and impracticable to support. Popular trading platform, Three Arrows Capital, could soon file for bankruptcy following the failure of its recent high-risk trades.
There are three causes of the current storm of insolvency blowing against crypto companies. The first is uncertainty about inflation and interest rates. The others were the Terra network collapse last month and the decoupling of Lido Staked Ethereum.
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In his opinion, Bankman-Fried admits that his company may not benefit from its recent bailouts as the market downturn worsens by the day. However, he said the consolation is that the bailouts helped maintain stability and protect customers.
It is worth noting that cash injections from Sam Bankman Fried They are not altruistic gestures. He is considered by industry analysts to be a savvy capitalist in today’s crypto market. He is fully aware that a healthy recovery and growth of the cryptocurrency market determines his fortune as well.
Thus, there are unconfirmed reports that FTX is preparing to convert its Voyager and BlockFi credit lines into equity. FTX could also buy other smaller players. Most of them are headed for insolvency anyway. In his interview with Forbes, Bankman-Fried reiterated that FTX is profitable compared to its competitors like Coinbase, which have reported heavy losses this year.
“Tether fears are unfounded”
Bankman-Fried also stated that stablecoin Tether (USDT) is an asset that could survive the current crypto winter. Despite remaining largely stable in recent months, many market participants are unsure whether Tether has enough reserves for USDT to hold its peg.
Related: Tether to Launch USDT on the Tezos Blockchain
However, the CEO of FTX said that those biased views of USDT are wrong as there is no proof. Tether CTO Paolo Ardoino has publicly assured investors that USDT has enough reserves to hold its peg regardless of market conditions. However, there is still more misery awaiting the cryptocurrency market. There is still no solution to the cause of the current market downturn.