BlockFi And Voyager Get Bailed Out By FTX

The listed below is an excerpt from a current edition of Bitcoin Magazine Pro, Bitcoin Magazines premium markets newsletter. To be among the very first to receive these insights and other on-chain bitcoin market analysis directly to your inbox, subscribe now.Read last weeks problems here: The Sam Bankman-Fried (SBF) FTX and Alameda Research rescue trip is well in progress in the wider cryptocurrency space, with both BlockFi and Voyager taking $250 million and $200 million loans respectively from SBF company bailouts. “I do seem like we have an obligation to seriously think about actioning in, even if it is at a loss to ourselves, to stem contagion” – SBF on the state of the exchange/lendor environment. Currently, extremely few of the bitcoin and “crypto” yield-generating counterparties seem solvent or safe– whether thats reinforcing messaging to customers, total shutdowns in efforts or services to raise money to cover deposit liabilities. As price draws down, threats are exposed and the liquidity tide returns out, were discovering which institutions will endure this new environment and which ones took on too much danger. Today, FTX announced a $250 million revolving line of credit, or injection, to BlockFi in an effort to assist them “browse the marketplace from a position of strength.” This bailout comes at a time when BlockFi has been in the procedure of closing an extra financing round at more than an 80% discount rate compared to their previous $5 billion-plus valuation just last year. They have likewise decreased their personnel by 20% this month. In BlockFis case, the loan will be utilized to enhance the balance sheet with some unclear, legal language on how that supports customer deposits.The Voyager offer is $200 million credit and 15,000 BTC with 5% interest through 2024. Now, theres absolutely nothing naturally incorrect with business going out to the market and raising extra capital in an effort to make it through the unfolding bearishness, but it does raise warnings about the health of each business, the security of customer deposits and the deleveraging contagion risks of the entire industry.Injecting more liquidity into big, struggling players as an effort to stop additional bank runs and instill market confidence is in FTXs finest interest. Another institutional blowup indicates yet another major selloff and death-spiral event for bitcoin and more comprehensive cryptocurrency possessions. This comes at a time when all three institutions are attempting to grow their retail client base so a healthy, sustainable market (in addition to greater costs) is good for business. Final NoteGiven the nature of the last two weeks specifically, we highly recommend that users get their funds into their own custody..

Other Questions People Ask

What financial assistance did BlockFi and Voyager receive from FTX?

BlockFi received a $250 million revolving line of credit from FTX, while Voyager was granted a $200 million credit facility along with 15,000 BTC at a 5% interest rate through 2024. These bailouts are aimed at helping both companies navigate the current challenging market conditions. The financial support comes as both firms are facing significant liquidity issues and are attempting to stabilize their operations amidst a bearish trend in the cryptocurrency market.

How does the bailout from FTX impact the stability of BlockFi and Voyager?

The bailout from FTX is intended to enhance the balance sheets of BlockFi and Voyager, which may help restore some level of confidence among their customers. However, it raises concerns about the overall health of these companies, as they are resorting to external funding to survive. The situation highlights the precarious nature of the cryptocurrency market, where many firms are struggling to maintain solvency and protect customer deposits.

What are the implications of FTX's intervention for the cryptocurrency market?

FTX's intervention by providing financial support to BlockFi and Voyager could potentially prevent further bank runs and instill some confidence in the cryptocurrency market. However, it also underscores the risks associated with liquidity issues among major players in the industry. If these bailouts do not stabilize the companies, it could lead to a broader selloff and further destabilization of cryptocurrency assets.

What should customers of BlockFi and Voyager consider following the bailouts?

Customers of BlockFi and Voyager should carefully evaluate their options in light of the recent bailouts and the ongoing market volatility. It is advisable for users to consider moving their funds into their own custody to mitigate risks associated with potential insolvency. Given the uncertain environment, maintaining control over their assets may provide a greater sense of security during this turbulent period.

What does SBF's statement about taking action to stem contagion imply for BlockFi and Voyager?

SBF's statement about feeling an obligation to act, even at a loss, indicates a recognition of the systemic risks facing BlockFi and Voyager. This suggests that FTX is willing to absorb some losses to prevent further contagion within the cryptocurrency market. Such actions may be seen as necessary to stabilize not only these companies but also to protect the broader ecosystem from additional failures that could exacerbate market downturns.