In a recent interview, FTX CEO Sam Bankman-Fried cautioned people that some tiny crypto exchanges have become “secretly bankrupt,” and more are on the verge of failing.
While in conversation with Forbes, Bankman-Fried cautioned that aggressive investment at the time of the crypto rise in the last two years has brought about a series of disasters following a price slump.
It’s just not this; the other reason may also be due to several modest firms providing double-digit payouts that won’t sustain after crypto prices start seeing a downfall.
It goes without saying that small exchanges, that provide returns above what their financial position permits them to, are likely to fail.
Bankman-Fried’s remarks pop up as the founder offers credit facilities to two troubled companies, Voyager Digital and BlockFi. Celsius, on the other hand, seems to have skipped this credit line and is now bankrupt.
Trading firms like Three Arrows Capital are already suffering bankruptcy due to high-risk investments that collapsed owing to the current crisis.
Factors Fueling The Market’s Ongoing Decline
The market’s prolonged bankruptcy risks result from three major factors:
- The Terra fall in May
- The de-pegging of Lido Staked Ethereum
- Fears about increasing inflationary pressures
However, given the intensity with which the markets have collapsed, Bankman-Fried admitted that his latest bailouts via FTX and Alameda could be a “terrible offer.” Still, it could be sufficient to preserve stability and safeguard clients.
Yet, charity isn’t the primary motivation for the FTX CEO. According to sources, FTX is looking into buying equity holdings in Voyager and BlockFi in exchange for credit lines.
As several other smaller players will probably go bankrupt, FTX may pick them up too. Although its competitors, like Coinbase, have reported significant losses in 2022, Bankman-Fried told Forbes that his exchange platform remains profitable.
Tether (USD) To Survive The Bearish Market
Tether (USDT), the stablecoin, is one investment that the FTX CEO believes will survive the approaching crypto winter. However, despite the stablecoin remaining relatively stable, speculation over USDT’s holdings has recently dominated the market.
Pessimistic opinions on the USDT, according to Bankman-Fried, are “incorrect” and lack proof. Furthermore, Tether CTO Paolo Ardoino has stated that the stablecoin is well-positioned to withstand further market volatility.
However, the larger crypto space is due for further suffering, as the issues contributing to its current decline remain unsettled.