FTX CEO Sam Bankman-Fried (SBF) believes that as long as there is no macro shock, the worst of the crypto winter is over.
SBF warned that if the Nasdaq fell 25%, interest rates continued to rise, and a two-and-a-half-year recession occurred, Bitcoin prices of $10,000 to $15,000 would become a reality. If this happens, further damage could be caused, SBF said.
SBF’s FTX weathered much of the cold winter, which left some companies cold and exposed. Voyager Digital, Celsius, Babel Finance and Three Arrows Capital have all experienced shock freezes, leaving some investors desperate to get their deposited funds back.
Market slump not over yet, SBF says
Bankman-Fried believes that a small part of the plunge in the cryptocurrency market has yet to happen and is manageable. The rout began with the collapse of the algorithmically-backed TerraUSD stablecoin, a cryptocurrency pegged to fiat using a reserve or algorithmic means.
Frax is a partly collateral-backed and partly algorithmic stablecoin whose founders believe another stablecoin is unlikely to crash during the current crypto winter. By holding exogenous assets as collateral, this is “practically impossible,” Sam Kazemian told Be[In]Crypto in an exclusive interview.
SBF said it was necessary in the winter to screen out those investing in cryptocurrencies without considering the actual value of the assets. Such “baseless” thinking, he said, only works when the market is booming.
The SBF has put money into troubled cryptocurrency companies, which he says is to protect client assets and prevent the adverse effects of interlinked loans from spreading. Furthermore, he said, the transactions that FTX considers to be done are not catastrophic, but neither are they optimal. This spending boom for FTX has been compared to the role played by banks such as JPMorgan, which acted as lender of last resort during the 2008 financial crisis.
One of the deals that FTX and SBF see as favorable is BlockFi, which extended a $400 million line of credit to lenders as they struggled to meet liquidity needs. It has the option to buy the company for $240 million.
In May, SBF bought a 7.6% stake in Robinhood Markets as the brokerage’s shares took a hit in the spring. In addition, he borrowed $200 million and 15,000 bitcoins from cryptocurrency lender Voyager Digital. The company used $75 million before filing for bankruptcy in May 2022.
Bitcoin’s rise to $100,000 is driving it
Speaking of Ethereum, SBF shied away from making any price predictions related to the upcoming merger. Vitalik Buterin said he doesn’t expect any proof-of-work forks that would disrupt the merger of Ethereum’s consensus layer change to proof-of-stake. He added that he hoped people would not lose money.
Regarding Bitcoin, SBF sentiment is cautiously optimistic. He believes that greater regulatory transparency and an environment for price recovery will help Bitcoin rise to greater heights. However, $100,000 might be an excessive bridge.
Bitcoin is at $23,172 at press time.
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