Some crypto-exchanges are on the verge of bankruptcy. What is known about this?
Trading on most crypto exchanges with dubious reputations or low popularity is very risky. In the current environment, some of these exchanges may soon become completely insolvent or cease to operate altogether. This statement was made in a recent interview by Sam Bankman-Fried, CEO of crypto exchange FTX, although he did not name specific companies with possible problems. We tell you more about what’s going on.
Note that by current conditions, we are referring to the collapse that has been going on since November 2021. Today, BTC slipped again and dropped to the level of $19,000. Overall, the situation with coin rates looks like this.
At the same time, changes over the month look much more painful. In particular, Etherium almost halved in value during this period of time. BNB and Solana have lost a third of their prices.
Naturally, the number of those willing to trade in such conditions is also decreasing amid the market downturn. This means that exchanges get less commissions from trades – which has a direct impact on their financial health.
What is happening to cryptocurrency exchanges
The reason for such high-profile statements by FTX’s representative is obvious – the general decline of the crypto market, which is hitting hard the profits of so many companies related to the industry. As we have already noted, today Bitcoin’s price has once again collapsed below the $20,000 level, which only makes the situation worse.
And here’s one of Bankman-Fried’s quotes explaining his point of view. The billionaire and one of the most influential people in the digital asset industry quotes CryptoSlate.
There are companies that are essentially too far gone and it’s not viable to support them because of significant balance sheet holes, regulatory issues or other critical flaws.
In other words, some platforms are experiencing financial problems - and it's not just exchanges that are affected. Sources said the day before that certain mining companies are also at risk. The fact is that in the past they had taken out loans to buy equipment for mining digital assets. However, now mining brings in less money, so it becomes very difficult to make payments on time. And this is also where things can end up in bankruptcy.
The statement of support also has a context: the FTX chief had previously promised to support promising companies in the crypto-sphere, which are temporarily experiencing financial difficulties for the time being. However, the global bearish trend will play into the hands of the majority by “clearing” the market of those who cannot withstand the competition. This will make room for promising start-ups that stand out from the rest.
In total, there are now more than 600 different trading platforms for digital assets. Some of them are already teetering on the brink of bankruptcy and may soon officially announce it. Other platforms are also intensively preparing for such a procedure – among them the recently bankrupt Celsius and Three Arrows Capital fund.
Among hundreds of exchanges, so far only a few of the largest, including FTX itself, are operating without any problems. Sources have reported on the prior day that FTX management has allegedly been interested in a possible takeover of Robinhood and Voyager Digital as part of a plan to expand its presence in the market.
Read also: Tether spokesperson accuses funds of attacking USDT Stablecoin. What's going on with the coin?
MicroStrategy, on the other hand, continues to actively accumulate bitcoins despite all the market conditions and its own unrealised losses of $1.4 billion. According to Cointelegraph sources, yesterday it reported buying 480 BTC at an average price of $20,817. So a total of about $10 million was spent on coin purchases in this round.
MicroStrategy now has 129,699 BTC on its balance sheet, for which it shelled out $3.98 billion, and it is still the largest bitcoin holder among publicly traded companies. The coin purchase was also confirmed by MicroStrategy CEO Michael Saylor on his Twitter.
MicroStrategy has purchased an additional 480 bitcoins for ~$10.0 million at an average price of ~$20,817 per #bitcoin. As of 6/28/22 @MicroStrategy holds ~129,699 bitcoins acquired for ~$3.98 billion at an average price of ~$30,664 per bitcoin. $MSTRhttps://t.co/leQYTXn817
– Michael Saylor⚡️ (@saylor) June 29, 2022
By the way, Saylor himself maintains a positive attitude against all odds and believes in the growth of the crypto market. He has stated many times in the past that Bitcoin has a future with huge opportunities, which is why it is best to accumulate cryptocurrency now. Furthermore, Sailor is a clear Bitcoin-maximalist, as he is openly critical of other digital assets , i.e. altcoins.
Unfortunately, so far MicroStrategy has been incurring unrealised losses, although the company has the means to “stay afloat”. The new growth trend of Bitcoin and the coin market in general will change the situation significantly. Most likely, Sailor wants to “reach” that time by any means and already then benefit from its persistence.
We think that there is nothing strange in this situation with the exchanges: not all players had time to prepare for a coming bearish trend, which means that someone simply does not have enough money. Most likely, with this in mind, we will be waiting for news about the closure of certain platforms. However, given recent events, some of these companies may be able to get financial help.
What do you think about it? Share your opinion in our Millionaire Crypto Chat. There we discuss other actions of popular investor companies as well.