The rise of crypto bailouts
The Future. With projects shuttering left and right as the crypto winter sets in, FTX CEO Sam Bankman-Fried is racing to put out fires the only way he can… by infusing cash and extending lifelines to floundering companies. But not everyone’s a fan of these crypto bailouts. As Bankman-Fried and others (with liquidity to spare) race to save companies in the short term, the efforts could end up hurting the industry down the road.
Operation “Rescue Web3” is underway.
- In June, FTX extended a $250 million line of credit to BlockFi, a crypto lending platform that’s gone from a $5 billion valuation to less than $500 million. Since then, it has moved to acquire BlockFi outright.
- That same week last month, Alameda Research (also a Bankman-Fried company) gave Voyager Digital a $500 million line of credit.
- Now, Bankman-Fried is on the hunt for more companies to bail out, telling Reuters that he still has “a few billion” to give out.
It’s not all sun and rainbows, though. Some critics think that the companies struggling to stay afloat in the current bear market shouldn’t receive a lifeline, considering many were operating with models that presumed a healthy bull market.
Putting it shortly, Daniel Roberts wrote for Decrypt: “I tend to think the current Crypto Winter will wash out the weak, fly-by-night players and that the strong companies and projects will survive; the wheat will separate from the chaff.”