Binance might hop on to Crypto Bailout Race, follow FTX’s footsteps
- In a recent interview, Binance’s CZ contrasting his earlier thoughts on bailouts, stated that they are looking at a number of good deals/projects that might require Binance’s help.
- CZ in an apparent dig at SBF’s FTX saving battered crypto companies, had earlier stated, “Don’t perpetuate bad companies. Let them fail”.
- FTX has extended a $250 million line of credit to troubled crypto lender BlockFi.
- Earlier this month, SBF noted that FTX still has a “few billion” on hand to save struggling crypto firms.
Currently, the crypto market is going through a tough run. With increasing liquidations taking down some of the business’s biggest names like 3AC, several crypto lenders/exchanges are in dire need of bailouts. Bailouts can potentially save firms from going bankrupt.
Although crypto bailouts are widely believed to be necessary to instill hope into the battered DeFi market, Binance CEO CZ believes some crypto firms should not be saved. On 23rd June around the time FTX announced its offering to blockfi with a $250 million credit line, Binance co-founder CZ shared a blog titled “My views on bailout and leverage, as in the current market.’
In his words” Don’t perpetuate bad companies. Let them fail”. This was an apparent dig at SBF’s FTX jumped in to bail out battered crypto firms. CZ stated that some projects are “bad” and should not be saved. According to him, some of the “bad” has a large number of users, often acquired through inflated incentives, “creative” marketing, or pure Ponzi schemes”. He might have been hinting at how the now-bankrupt companies have earlier lured customers with their concerningly high yield promise marketing.
In July, Alameda Research-SBF company provided struggling and now bankrupt crypto lender Voyager Digital with a credit line of $500 million. In Voyager’s case, it turns out Alameda already owed Voyager $377 million. When asked to share his thoughts on the bailout, Binance’s CEO said he was surprised about the deal’s details. He further added ” ‘I will invest in your company, and then you loan me some money. I would just not invest in that company, I’ll keep my money.”
However, in a recent media interview, CZ contradicted his anti-bailout stance by stating that Binance is looking at a high number of deals. “Some of them are actually good deals. So I think you will see that we will be investing, bailing out, saving multiple projects”, he said. According to him, Binance only invests based on data such as the company’s revenue and the number of users.
FTX’s approach to Crypto Bailout
Sam Bankman-Fried, CEO of FTX, one of the world’s largest crypto exchanges, is quite in a rush to save ailing crypto firms amid an increasingly volatile crypto market. Last month, FTX extended a $250 million line of credit to troubled crypto lender BlockFi.
According to him, FTX chose to financially aid BlockFi because it “has careful risk management and great leadership” and that “sometimes leadership means acting decisively, and that’s what BlockFi did”.
In June, the battered and now liquidated Voyager Digital, has entered into an agreement with Alameda Ventures, Bankman-Fried’s quantitative research firm and received $200m in cash and USDC. Alameda also injected 15,000 BTC worth $300m (£244m) into Voyager.
Earlier this month, SBF stated that FTX might still have a “few billion” on hand to save struggling firms that could further destabilize the digital asset industry. Bankman-Fried believes that the firm I has a responsibility to step in “even if it is at a loss to ourselves, to stem contagion.” “Even if we weren’t the ones who caused it or weren’t involved in it,” he said.
CZ has stated that Binance wouldn’t bail out “bad project,” but he also has acknowledged that some good crypto projects might need Binance’s help. So it is yet to be seen if Binance will step in offering lifelines or will hold on to the anti-crypto bailout stance.