Sam Bankman-Fried, CEO of FTX, alleges that the Feds are driving the crypto downturn. The last few weeks have seen cryptos collapsing. The wealthy merchant told the media that the Fed is raising interest rates to combat excessive inflation.
The billionaire noted that the central bank is “stuck between a rock and a hard place.” Thus, he understands the difficulty of its mission. Yet, he stated that the Fed’s decisions in the following months would significantly impact his business perspective.
The Fed raised interest rates for the first time since 1994 earlier this week. Financial markets have been increasingly anxious, and cryptocurrencies have been in meltdown mode. Bankman-Fried stated, “markets are afraid.” “It even terrifies the wealthy.”
FTX is a firm that helps investors trade digital currencies through its app and websites.
Last week, Bitcoin, the most well-known crypto, fell by almost 20%. Furthermore, it continued to decline over the weekend. It is now less than half as valuable as it was at the start of the year. Other digital currencies have fallen much worse – Ether has lost more than 70% of its value in the same time frame.
Bankman-Fried worries about the downturn’s effect
There are worries about how the downturn will affect the new investors. Lately, the crypto sector has made an all-out campaign to attract amateur investors. Besides, they aimed to improve brand recognition. The campaign saw the entire value of cryptocurrency surge to $3 trillion by 2021.
Most new investors joined the crypto business due to its incredible attention. According to a December survey, a quarter of investors own BTC, and more than half (55%) started investing in the past year.
Some people have even put their money into cryptocurrency lenders. Yet, some lenders stopped their customers from getting their money back in the last week. The disarray has fueled worries of a financial system-wide meltdown.
Crypto lender Babel Finance briefly halted bitcoin redemptions and withdrawals on Friday. Another lender, Celsius Network, had already halted withdrawals and transfers. The firm’s CEO said the crypto sector is experiencing tough times. He said that they had to take action to stabilize liquidity and operations. In addition, they needed to protect and maintain their assets. However, Celcius’ move has attracted interest from several regulators.
Crypto-regulation might stem from the downturn
Another crisis is engulfing a crypto-focused hedge fund called Three Arrows Capital. It made significant investments in TerraUSD and Luna, which both recently failed. And according to reports, the fund failed to meet lender margin calls this week, leaving it unable to pay its creditors.
The impact, according to Bankman-Fried, could influence crypto legislation. He believes that The government will closely monitor leverage in the crypto business. In the meantime, cryptocurrency businesses are seeking a way to protect themselves.
Investors like Bankman-Fried and larger corporations like FTX, recently valued at $32 billion, have helped limit losses when there have been confidence problems.
I believe we have a responsibility to consider stepping in to stop the contagion from spreading. Even if we were not the ones who started it or were not directly involved, that, I believe, is what is good for the environment. I want to do everything I can to assist it to grow and flourish.Bankman-Fried
BlockFi, Crypto.com, and Gemini have all announced layoffs in recent days. Also, the CEO of Coinbase, one of FTX’s significant rivals, revealed in a note to employees that it is cutting its headcount by about a fifth. FTX’S CEO has not announced any layoffs, although he did say in a Twitter thread that hiring had halted. Bankman-Fried is now situated in the Bahamas. FTX has recently begun construction on a new worldwide headquarters there.
Bankman-Fried was in Washington this week to converse with lawmakers and regulators. There is a lot of concern about the risk to investors. Besides, lawmakers are keen on the broader financial system due to the crypto catastrophe.