Is FTX saving the cryptocurrency industry or taking control of it? The derivatives-focused digital currency exchange has been on the sidelines, watching everything around them collapse, and eventually decided to take action. That or, as the rumor reveal, FTX created this whole situation in their labs and is now buying assets on the cheap. There’s only circumstantial evidence of that, though. The bailout, on the other hand, is completely real.
The proceeds of the credit facility are intended to be contractually subordinate to all client balances across all account types (BIA, BPY & loan collateral) and will be used as needed.
— zac prince (@BlockFiZac) June 21, 2022
Earlier, BlockFi CEO Zac Prince tweeted, “today BlockFi signed a term sheet with FTX to secure a $250M revolving credit facility providing us with access to financial resources that further bolsters our balance sheet and platform strength.” For his part, FTX CEO Sam Bankman-Fried replied “today we’re injecting $250m into BlockFi and partnering with them so they can navigate the market from a position of strength.”
Sources tell me that it is common knowledge within the #Crypto industry right now that Alameda (FTX) & SBF are 100 percent trying to push the #Bitcoin price down right now to liquidate a number of market participants including, but not limited to #Celsius.
— N (@NickNew41532832) June 21, 2022
Over the last few weeks, the cryptocurrency market has been trending down. The contagion effect of the Terra/ Luna extinction event rocked every company out there, most of all those who offered yield on digital currency deposits like BlockFi and celsius and hedge funds like Three arrows Capital (3AC). These companies’ complications and possible liquidation of assets, in turn, sent the cryptocurrency market into even more turmoil.
What Is FTX ‘s Endgame?
We wouldn’t know, but the exchange put itself in a position of power with all of these movements. As reported by Bankman-Fried, BlockFi “successfully removed at- danger counterparties preemptively,” and the company acted decisively by “removing troublesome counterparties before they become a complication, and adding cash before it was necessary.” And yes, by “troublesome counterparties” he means Celsius and 3AC.
3) Sometimes leadership means acting decisively and that’s what BlockFi did: removing troublesome counterparties _before_ they become a complication, and adding cash _before_ it was necessary.
— SBF (@SBF_FTX) June 21, 2022
For his part, Zac Prince frames it as a victory all around. “Throughout the volatility of the market of the last a few weeks, I’m incredibly proud of how our team, platform and management of danger protocols have performed. Today’s landmark notice reinforces BlockFi’s commitment to serving its clients and ensuring their funds are safeguarded”. Nonetheless, are $250M enough for a company this size? Let’s hope it is, for the sake of its clients.
In any case, both corporations seem excited to collaborate. Prince stated, “this agreement likewise unlocks future collaboration and innovation in the middle of BlockFi & FTX as we work to accelerate prosperity worldwide through cryptocurrency financial services.” On the same subject, Bankman-Fried claims FTX is “excited to partner with BlockFi to offer industry leading products.”
So, everything’s peachy on the cryptocurrency front at present, right? Nonetheless, what goes on if BlockFi keeps losing money? Does FTX get an opportunity to buy the whole company for peanuts?
Solana (SOL) price chart on FTX | Source: SOL/USD on TradingView.com
BlockFi ‘s Previous Problems
In an post about the subject at hand, Zerohedge reminds us of a recent episode in BlockFi’s history:
“As a reminder, BlockFi was fined $100 Million in February this year for its high-yield interest accounts, which were deemed as security products by the United States Securities and Exchange Commission.”
And, who could forget when they gave out Bitcoin instead of stablecoins to some lucky users?
“ 1 Reddit-user shared a screengrab of their bonus payment showing that they received 701.4 Bitcoin, which equates to greater than $24 Million United States dollars at the time of writing. They stated they believe they were owed around $700 USD and that the Bitcoin (BTC) transaction had been reversed.”
To that, Zac Prince responded, “Our team is battle tested and has weathered several storms over the years, which only makes us stronger and more resilient as we navigate today’s market environment.” That’s a way of putting it. Nonetheless, what could he say about the rumor that the company lost greater than $285M during the bull market?
@BlockFi income statement is real bad
It’s a mess of negative numbers, let’s dig into it togetherhttps://t.co/Kr9lhiH8AS
— otteroooo (@otteroooo) June 19, 2022
If the speculation are true, does that guarantee that their business model failed and they will not able to survive the bear market? No, it doesn’t. It suggests it, though.
Featured Image by Cytonn Photography on Unsplash | Charts by TradingView
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