Crypto billionaire Sam Bankman-Fried predicts more exchanges will fail

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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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