BlockFi received a $250 million line of credit from FTX.
Massive leverage is the root of many problems afflicting the crypto community.
The current bear market and the aftermath of Terra LUNA and UST last month have significantly impacted the crypto industry. The demise of Terra set off a chain reaction that resulted in substantial losses for a large number of liable companies.
Massive leverage is the root of many problems afflicting the crypto community, with much of the contagious impact connected to lending and borrowing money. Celsius halted withdrawals almost two weeks ago, and those acquainted with the subject have said that Celsius is experiencing significant financial difficulties.
The Terra Catastrophe Still Haunting
Three Arrows Capital (3AC), a Singapore-based crypto hedge firm, purportedly acquired $200 million worth of locked LUNA classic (LUNC) that is currently worth $700 due to critical liquidations. Terra, Celsius, and 3AC’s problems have spread to other cryptocurrency companies.
Alameda Research, Bankman’s quantitative cryptocurrency trading business, provided Voyager Digital with a $500 million line of credit to assist the company deal with 3AC risk. BlockFi received a $250 million line of credit from his cryptocurrency exchange FTX on June 21.
3AC’s financial difficulties “couldn’t have happened with an on-chain protocol that was transparent,” Bankman-Fried tweeted in June. FTX CEO Bankman-Fried spoke with Forbes author Steven Ehrlich about crypto exchanges that are “secretly insolvent” on June 28, 2022.
According to the CEO of FTX, a growing number of platforms may go down due to financial difficulties in the near future. Bankman-Fried said, “There are some third-tier exchanges that are already secretly insolvent.”
Because of the size of the hole in the balance sheet, regulatory concerns, or the fact that there is not much of a company remaining to be salvaged, backstopping these businesses would be impractical, he said.