The so-called crypto winter isn’t over yet — and a number of cryptocurrency exchanges have already run out of cash, billionaire and founder of crypto exchange FTX Sam Bankman-Fried said on Tuesday.
There are “some third-tier exchanges that are already secretly insolvent,” Bankman-Fried told Forbes. The 30-year-old’s own fortune has taken a significant cut this year as crypto has crashed, but still sits at $8.1 billion, according to Bloomberg.
Bitcoin, the largest cryptocurrency by market value, lost 58% of its value in the second quarter of the year, putting it on pace for its worst quarterly performance since 2011. It fell below $19,000 on Thursday, a long way from its all-time high of nearly $69,000. Bitcoin led the slide of the overall cryptocurrency market, whose market valuation now sits below $1 trillion, down from its November 2021 peak of more than $3 trillion.
Bankman-Fried’s FTX has been seen as a lender of last resort in the crypto space — meaning that it has given loans to exchanges near collapse — and on Thursday CNBC reported that it is close to a deal to buy crypto lender BlockFi for roughly $25 million. Still, Bankman-Fried said there are more crypto firms that will likely go under.
“There are companies that are basically too far gone and it’s not practical to backstop them for reasons like a substantial hole in the balance sheet, regulatory issues or that there is not much of a business left to be saved,” he said Tuesday, without naming any specific companies.
Fellow billionaire and Dallas Mavericks owner Mark Cuban previously described the current crypto slide as echoing the early 2000s dotcom bubble, when speculative investing inflated the valuations of internet-based companies over a 5-year span before a steep crash in 2001 and 2002.
“Crypto is going through the lull that the early internet went through,” Cuban said. The space is currently stuck in an “imitation phase” where there are too many companies with too little new utility. Like Bankman-Fried, he predicted that more companies will fail.
“The chains that copy what everyone else has, will fail,” Cuban tweeted.
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