Crypto winter

Sam Bankman-Fried (FTX): the worst of the crypto crisis is behind us

Bankman-Fried announces that his company still has enough cash, a few billion dollars, to assist crypto companies.

Image Source : CNBC

The FTX founder and crypto billionaire believes that the hardest phase of the liquidity crisis is over. The exchange is ready to use $2 billion in cash to bail out the crypto industry and stop the contagion.

FTX is still profitable despite the crypto winter

Sam Bankman-Fried is one of the richest people in crypto, thanks to his FTX exchange and Alameda Research trading firm.

The son of two Stanford law professors, he studied physics at MIT but was drawn to “effective altruism,” the utilitarian-inflected notion of doing the most good possible.

So he took a job trading ETFs at a quant firm, donating a chunk of his salary to charity, then jumped into crypto trading in late 2017, when he spied a lucrative arbitrage opportunity.

Bankman-Fried launched his own exchange, FTX, in 2019. Built “by traders, for traders,” it’s one of the leading exchanges for buying and selling crypto derivatives.

Investors valued FTX at $18 billion in 2021, helping make him one of the richest people under 30 in history. The exchange and its U.S. operations hit a combined $40 billion valuation in January 2022.

Most of his wealth, which he says he will eventually donate to charity based on a philosophy called “earning to give,” is tied up in ownership of about half of FTX and a share of its FTT tokens.

We’ve been profitable the whole time

Unlike many of its competitors, SBF noted that FTX has made “money every quarter, we have a few in a row, and that includes the most recent one. He continued,

We’ve been profitable the whole time and intend to stay profitable.

As for how FTX has been able to remain profitable, SBF said that looking at excessive spending on marketing is not the main issue. For him, the most critical area where others have failed is “headcount,” as he believes too many companies in the crypto industry have overstaffed their teams to facilitate strong growth.

Without elaborating, Bankman-Fried says he has used his money to support distressed companies on “one or two occasions”. The billionaire is now more optimistic.

I don’t think it’s an existential threat to the industry,” says SBF, although he acknowledges that “it’s a little more serious than I anticipated. The worst may now be behind us.

In the short term, FTX’s CEO believes that prices should stabilize after hitting or being near their lows. But beware, he warns, the industry will continue to be affected by broader economic factors.

How about risk of contagion in the crypto markets?

The fall of Terra, Three Arrows Capital, Voyager Digital have dented the confidence of investors and users. The fragility of players like Celsius and BlockFi has also contributed to this and highlighted a risk of contagion in the crypto markets.

It was in order to limit this contagion, but also to prevent a mass withdrawal of users, that Sam Bankman-Fried and FTX made the decision to intervene with the ecosystem.

$2 billion deal if necessary

FTX has “enough cash to make a $2 billion deal if necessary” to help support the crypto industry in its time of need, CEO Sam Bankman-Fried told Reuters.

SBF also told CNN that FTX has remained profitable throughout the bear market and is expected to continue doing so.

 Consumer confidence that things will work as advertised is incredibly important and if it is broken, it will be terribly difficult to get it back, argues SBF.

On several occasions the crypto exchange has therefore stepped in, such as with BlockFi and Voyager Digital. The latter, however, declared bankruptcy this week, filing for Chapter 11 protection under US law.

Bankman-Fried announces that his company still has enough cash, a few billion dollars, to assist crypto companies. “It’s getting more and more expensive every time,” the executive acknowledges.

Nevertheless, he adds that FTX’s capital allows it, if necessary, to carry out a $2 billion operation. The founder of the exchange also says that he can raise his own capital when the transaction is not justified for FTX and its shareholders.

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