Market routing was needed to tame euphoria, says FTX CEO

FTX CEO Sam Bankman-Fried (SBF) believes the worst of the crypto winter is over as long as no macro shocks follow.

If the Nasdaq falls 25%, interest rates continue to rise and a two-and-a-half-year recession hits, a bitcoin price of $10K to $15K is a reality, SBF warned. If that happens, SBF says, there could be even more devastation.

SBF’s FTX has endured most of a somewhat cold winter, leaving some businesses out in the cold and exposed. Voyager Digital, Celsius, Babel Finance and Three Arrows Capital have all suffered a shock freeze that has left some investors desperate for deposited funds.

Market disruption not over, says SBF

Bankman-Fried believes that a small portion of the cryptocurrency market decline has yet to occur and it will be manageable. The defeat began after the collapse of the algorithmically backed TerraUSD stablecoin, a type of cryptocurrency pegged to a fiat currency using reserves or algorithmic resources.

The founder of Frax, a stablecoin that is partly collateral-backed and partly algorithmic, believes the collapse of another stablecoin is unlikely in the current crypto winter. Holding exogenous assets as collateral makes this “literally impossible,” Sam Kazemian told Be.[In]Crypto in an exclusive interview.

SBF said winter was needed to filter out those who invest in crypto without deliberately considering an asset’s true value. He says that kind of “baseless” thinking only works during periods of euphoria in the market.

SBF has put money into ailing cryptocurrency businesses in what it believes is an effort to protect client assets and prevent the ill effects of interconnected loans from spreading. In addition, he said, FTX considered making deals that were not catastrophic, but also not optimal. This deluge of spending by FTX drew comparisons to the roles played by banks like JPMorgan Chase, which served as banks’ last resort during the 2008 financial crisis.

One of the deals that FTX and SBF viewed as beneficial was BlockFi, to which it extended a $400 million line of credit as the lender struggled to meet liquidity requirements. It has an option to buy the company for $240 million.

In May, SBF bought a 7.6% stake in Robinhood Markets as the brokerage’s stock price took a dent in the spring. In addition, he loaned cryptocurrency lender Voyager Digital $200 million and 15,000 bitcoins. The company used $75 million and filed for bankruptcy in May 2022.

He saID card that the lack of trust between collaborating companies makes any business between them precious, which he wished he knew more about before going out on his own.

Bitcoin going to $100K pushes it

Speaking of Ethereum, SBF shied away from making price predictions in connection with the impending merger. Vitalik Buterin said he does not expect proof-of-work forks to disrupt the merger, turning Ethereum’s consensus layer into proof-of-stake. He added that he hopes people don’t lose money.

On bitcoin, SBF sentiments are cautiously optimistic. He believes the environment of greater regulatory transparency, accompanied by a recovery in price, will help bitcoin’s rise to greater heights. But $100k might be a bridge too far.

At the time of writing, bitcoin was $23,172.

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