FTX Closing In On Deal To Acquire BlockFi For $25M• July 1, 2022 3:45 pm • Comments
As the recent crypto bear market takes its toll on crypto companies, it seems larger crypto companies are taking advantage of it to acquire them at bargain prices.
It is revealed that FTX may soon be acquiring BlockFi for a low price of $25M after it had provided it a $250M line of credit to help bailout the company from financial trouble.
The $25M price tag is apparently only around 1% of the company’s recent valuation as it was previously valued at around $4.8 billion.
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Analysts are expecting this trend to continue within the crypto industry where the bear market will “deleverage” the industry so that only those that truly provide utility will survive after this crypto winter.
In a sense, this could be good news for larger blockchain projects like Ripple and Stellar to stand out from the competition.
An FTX spokesperson said the company “would not be commenting on the matter.” A BlockFi spokesperson said the company “does not comment on market rumors.” BlockFi CEO Zac Prince pushed back on the $25 million figure in a tweet calling the figure “market rumors.”
The fire sale comes a week after FTX provided a $250 million emergency line of credit to BlockFi. FTX CEO Sam Bankman-Fried said at the time that the financing would help BlockFi “navigate the market from a position of strength.”
It’s the latest fallout for crypto lending companies amid plunging crypto asset prices. Funds have struggled with liquidity issues as counterparties fail to meet margin calls.
Celsius and CoinFlex paused customer withdrawals citing “extreme market conditions.” Major cryptocurrency hedge fund Three Arrows Capital has fallen into liquidation, CNBC reported earlier, marking one of the biggest casualties of crypto’s bear market.
There is also a lot of discussion within the regulatory space as well as the crypto community on whether or not the industry should be receiving bailouts from the government.
So far, SEC Commissioner Hester Pierce is against it as the lack of bailouts will only serve to strengthen the industry in the long term and will set it up for future growth.
With that being said, it seems that some bigger players in the industry like FTX are doing its own bailout.
Other firms like Ripple have also previously announced that they are actively looking at potential acquisitions in the future which was a bullish indication given that many firms are in the middle of layoffs.
“Their stepping in to buy up distressed crypto companies – while clearly doing so for business reasons – is also partly motivated in shoring up the industry during this downturn,” he said, adding that, however, “the one thing to keep in mind with this current news about acquiring BlockFi is that decentralization must remain the foremost goal in crypto.”
“Decentralized and transparent financial protocols are the end game here, and fostering user growth in this aspect of the market should always be the focus.
Looking forward, it’s important to double down on the DeFi industry, as it has remained robust despite the turbulence of the crypto market these past few months,” he said.
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