Given the current macroeconomic climate industries across the board are reeling from the disappearance of "cheap money" and increase in interest rates. Crypto has been hit especially hard ever since LUNA crashed followed by Celsius and Three Arrows. These failures have further driven down the investor sentiment and thus the price of practically every digital asset there is.
Yesterday word came out about two crypto companies stepping up and helping out other companies on the brink of collapse. FTX and Alameda both run/owned by Sam Bankman-Fried deserve immense praise for what they have done to help prevent further collapses in the industry. It is no chump change that is being provided by these two companies with FTX opening a $250 million revolving credit facility with BlockFi and Alameda committing $500 million in financing to Voyager Digital.
While many are familiar with FTX and Bankman-Fried's role in it his other company Alameda is not as well known. Many are familiar with FTX as they have been pouring money into advertising and increasing its product offerings Alameda on the other hand was something I had not previously heard about. Alameda, a quantitative trading firm, interestingly enough is helping out Voyager Digital which as a crypto brokerage does compete with FTX.
The way that these deals are structured is really important to understand as well as it is not cash that BlockFi and Voyager are receiving rather it is a mix of cash, USDC stablecoin, and Bitcoin. A deal structured like this is something easy to overlook however is a stark difference from traditional finance and thus is helping solidify a foundation for future deals like this to occur. Looking back during previous economic and industry upheavals it was pretty common to see companies within the industry buy each other out or provide funding to prevent collapse.
The reasons for this expand beyond centralizing power it allows for the industries to not melt down and suffer for years as they try to rebuild what was lost. While people might be concerned about someone like Bankman-Fried becoming too powerful we must remember that the industry is extremely fragmented and so the industry must consolidate some so that money invested goes to the best products and is not just wasted. As the world settles down some I fully expect to see crypto settle down along with everything else. How long will this take though is a whole other question due to the amount of uncertainty that is encompassing really everything.
Please know I am not a financial advisor and make sure you do your own research! If you enjoyed this article and would like to further support me below are a few referral links that if you used when signing up I would appreciate it! Also, follow me on Twitter @Cje95_
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