BlockFi And Voyager Get Bailed Out By FTX

2 years ago

As contagion spreads, FTX loans retired hundreds of millions to 2 of the largest yield-generating shops successful the space. What does this mean for BlockFi and Voyager?

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Read past week’s issues here:

Monday’s contented - Celsius Exchange Halts Withdrawals: What Went Wrong?
Tuesday’s contented - Celsius And stETH - A Lesson On (il)Liquidity
Wednesday’s contented - Three Arrows Capital Faces Liquidation
Thursday’s contented - Fears of Further Contagion
Friday’s contented - 3AC And The Leaning Tower Of Babel

The Sam Bankman-Fried (SBF) FTX and Alameda Research rescue circuit is good underway successful the broader cryptocurrency space, with some BlockFi and Voyager taking $250 cardinal and $200 cardinal loans respectively from SBF institution bailouts.

“I bash consciousness similar we person a work to earnestly see stepping in, adjacent if it is astatine a nonaccomplishment to ourselves, to stem contagion” - SBF connected the authorities of the exchange/lendor ecosystem.

Currently, precise fewer of the bitcoin and “crypto” yield-generating counterparties look to beryllium solvent oregon harmless — whether that’s reinforcing messaging to clients, implicit shutdowns successful services oregon efforts to rise currency to screen deposit liabilities. As terms draws down, risks are exposed and the liquidity tide goes backmost out, we’re uncovering retired which institutions volition past this caller situation and which ones took connected excessively overmuch risk.

Today, FTX announced a $250 cardinal revolving enactment of credit, oregon injection, to BlockFi successful an effort to assistance them “navigate the marketplace from a presumption of strength.” This bailout comes astatine a clip erstwhile BlockFi has been successful the process of closing an further backing round astatine much than an 80% discount compared to their erstwhile $5 billion-plus valuation conscionable past year. They person besides reduced their unit by 20% this month.

In BlockFi’s case, the indebtedness volition beryllium utilized to fortify the equilibrium expanse with immoderate unclear, ineligible connection connected however that supports lawsuit deposits.

The Voyager deal is $200 cardinal recognition and 15,000 BTC with 5% involvement done 2024.

Now, there’s thing inherently incorrect with companies going retired to the marketplace and raising other superior successful an effort to past the unfolding carnivore market, but it does rise reddish flags astir the wellness of each business, the information of lawsuit deposits and the deleveraging contagion risks of the full industry.

Injecting much liquidity into large, troubled players arsenic an effort to halt further slope runs and instill marketplace assurance is successful FTX’s champion interest. Another organization blowup means yet different large selloff and death-spiral lawsuit for bitcoin and broader cryptocurrency assets. This comes astatine a clip erstwhile each 3 institutions are trying to turn their retail lawsuit basal truthful a healthy, sustainable manufacture (along with higher prices) is bully for business.