Cryptomillionaire Sam Bankman-Fried says the Fed is driving the current downturn: NPR
Sam Bankman-Fried, Co-Founder and CEO of FTX, Hong Kong, China, Tuesday, May 11, 2021.
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Sam Bankman-Fried, Co-Founder and CEO of FTX, Hong Kong, China, Tuesday, May 11, 2021.
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Cryptocurrencies are going through a spectacular crash and the head of one of the largest crypto exchanges says that the Federal Reserve is responsible for this downturn.
“The core driver of this has been the Fed,” said Sam Bankman-Fried, CEO of FTX, whose app and websites are used by investors to buy and sell digital currencies.
The Fed is raising interest rates aggressively to combat high inflation, and this has led to a “recalibration” of risk expectations, Bankman-Fried told NPR.
The billionaire said he appreciates the difficulty of what the central bank is trying to do, noting that it is “trapped between a rock and a hard place.” But Bankman-Fried said much of his own outlook for his business now depends on decisions the Fed will make in the coming months.
This week, the Fed announced the largest rate hike since 1994. With cheap money quickly becoming history, financial markets have already been extremely nervous and cryptocurrencies have been in meltdown mode.
“The markets are literally scared,” Bankman-Fried said. “People with money are scared.”
The most well-known cryptocurrency, Bitcoin, fell around 20% last week and continued to sell out over the weekend. It is now worth less than half of what it was at the beginning of the year. Other digital currencies have fallen even more dramatically – Ether is down more than 70% in the same period.
A bitcoin logo will be seen during the Bitcoin 2022 conference at the Miami Beach Convention Center on April 8, 2022 in Miami, Florida.
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A bitcoin logo will be seen during the Bitcoin 2022 conference at the Miami Beach Convention Center on April 8, 2022 in Miami, Florida.
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The biggest concern is what effect this will have on the vast universe of amateur investors who have been uploading cryptocurrencies in just the last couple of years. In 2021, the total value of cryptocurrency swelled to $ 3 trillion, as the crypto industry made an all-out push to attract amateur investors and increase brand recognition.
FTX bought naming rights to an arena in Miami, and made a Super Bowl ad with comedian Larry David.
All this attention brought in many beginners. A December survey found that a quarter of investors own Bitcoin and more than half, or 55%, of them started investing in the last 12 months.
Some even parked their money with crypto borrowers. Over the past week, a couple of lenders stopped their customers from getting their money back, and the ensuing chaos fueled the fear of infection. to the broader financial system.
On Friday, cryptocurrency lender Babel Finance temporarily suspended redemptions and withdrawals of cryptocurrencies because it “faces unusual liquidity pressure”.
This was followed by another lender, Celsius Network, which had already frozen withdrawals and transfers. The CEO called this “a difficult moment“Celsius said it made the decision” to stabilize liquidity and operations while taking steps to preserve and protect assets. “A handful of state regulators are now examining the company’s practices.
A crypto-focused hedge fund called Three Arrows Capital is at the center of another crisis unfolding. It invested heavily in two digital currencies, TerraUSD and Luna, both of which recently collapsed. And this week, the fund reportedly missed out on lending margin calls, which means it could not come up with what it owed its lenders.
Bankman-Fried suggested that the fallout could shape cryptoregulation, which is hotly debated in Washington. He said it is likely that there will be increased scrutiny of how influence is used in the crypto industry, and how transparent companies are about potential dangers.
A smartphone screen that displays the logo of FTX, the crypto exchange platform, with a screen that displays the FTX website in the background.
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A smartphone screen that displays the logo of FTX, the crypto exchange platform, with a screen that displays the FTX website in the background.
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Meanwhile, crypto companies are looking for coverage.
When there have been confidence crises in the past, investors like Bankman-Fried, and larger companies like FTX, which was recently valued at $ 32 billion, have helped limit losses.
“I feel we have a responsibility to seriously consider going in, even if it is at a loss to ourselves, to stop the infection,” he said. “Even if we were not the ones who caused it, or were not involved in it. I think that’s what’s healthy for the ecosystem, and I want to do what can help it grow and thrive.”
Bankman-Fried noted that this has happened “a number of times before”, and he specifically mentioned an incident. Last year, hackers attacked the Japanese cryptocurrency exchange Liquid and stole nearly $ 100 million worth of cryptocurrency.
FTX provided Liquid with $ 120 million in financing. Shortly afterwards, FTX announced plans to buy Liquid for an undisclosed sum.
“We, I think about 24 hours later, went in and gave them a pretty broad line of credit to be able to cover all their requirements, to ensure that customers were done whole, while we thought about the long-term solution.”
In recent days, some of the largest players in the crypto industry BlockFi, Crypto.com and Gemini have announced layoffs, and in a note to employees, the CEO of Coinbase, one of FTX’s biggest rivals, said that the company is reducing the number of employees. by almost one-fifth.
“We grew too fast,” Brian Armstrong wrote. “Downmarkets are challenging to navigate and require a different mindset.”
Bankman-Peace’s company has not announced any cuts, however in a Twitter threadhe said that the company has slowed down employment.
These days, Bankman-Fried is based in the Bahamas, where FTX recently broke ground on a global headquarters.
FTX CEO Sam Bankman-Fried testified during a hearing before the House Financial Services Committee on December 8, 2021.
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FTX CEO Sam Bankman-Fried testified during a hearing before the House Financial Services Committee on December 8, 2021.
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A bit this past week, Bankman-Fried was in Washington in a meeting with lawmakers and regulators, many of whom look at the unfolding cryptocurrency, and are concerned about the risk to investors, the crypto industry and the broader financial system.
But he said he sees signs of progress, especially on Capitol Hill, where Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) just debuted the broadest legislation on cryptocurrency to date, which defines many cryptocurrencies, among other things. as commodities, not securities. This means that regulation will fall under the Commodity Futures Trading Commission, not the Securities and Exchange Commission.
