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By Geoffrey Smith
Investing.com — FTX is on a roll.
The cash-rich Sam Bankman-Fried-owned cryptocurrency exchange featured prominently in two more trades on Tuesday, promoting consolidation in a cryptocurrency space that has been battered by the sudden drop in asset values. digital.
FTX extends a $250 million lifeline to cryptocurrency lending platform BlockFi, just a week after its CEO, Zac Prince, was forced to deny rumors that it had been driven to the brink. insolvency by the explosion of the Hong Kong-based hedge fund 3 Arrows Capital.
Prince denied those rumors, but acknowledged that BlockFi was forced to liquidate the position of a large anonymous client after failing to meet a margin call. BlockFi had nevertheless continued to operate as normal, unlike a number of other exposed lenders which were forced to suspend or limit withdrawals.
Prince said on Tuesday that his exchange had signed an agreement for a $250 million revolving credit facility with FTX. This facility is designed to be legally subordinate to client funds, which means that if BlockFi ever gets into trouble, clients would have to get their money back before FTX.
Separately, The Block reported that FTX has agreed to buy stock broker Embed Financial, in a deal that will help it expand beyond its core crypto business; FTX is expected to begin offering exchange trading in the United States later this summer. Terms of the transaction were not disclosed.
If confirmed, this transaction would be the second for FTX in less than a week. Last Friday, FTX agreed to buy Canadian-based digital asset platform Bitvo for an undisclosed amount.
FTX is in a better position than most companies to weather the volatility that has hit many cryptocurrency platforms hard in recent weeks, having raised $400 million in fresh capital in January at a valuation of around $32 billion. .
On the other hand, the last few weeks have been difficult for platforms with weaker balance sheets. Celsius Network said on Monday it still needed time before lifting its freeze on customer withdrawals, while Hoo Exchange, Finblox, Global and Babel Finance all imposed more or less severe restrictions on customer deposits. .
At least five US states are said to be investigating the incidents that led to the Celsius freezing.
Babel, which suspended withdrawals on Friday and is now grappling with fake accounts on Twitter trying to impersonate it, said on Monday it had reached “preliminary agreements” with stakeholders, including customers, to reschedule some of its debts, thereby easing the pressure on the company’s short-term liquidity.
However, withdrawals from Babel remain impossible for the time being.
Crypto-asset volatility has been largely a function of central banks around the world – notably the US Federal Reserve – tightening monetary policy to bring down inflation. This sent the price of as low as $17,800 over the weekend, before it recovered to settle at $21,542 as of 4:30 p.m. Tuesday. It is still down more than two-thirds from last year’s peak. Other altcoins lost even more, revealing inadequate risk management at a number of major players.