Skybridge Capital founder Anthony Scaramucci appears to believe that the bear market has reached the bottom following the signing of a bail-out deal, providing BlockFi Inc. with a $250 million credit line by Sam Bankman-Fried, co-founder of FTX US.
Sam Bankman's attempt to help the floundering crypto industry this month by declaring a number of bailouts to pull floundering companies back from the brink of failure.
In a recent interview with CNBC, Scaramucci revealed that the market is suffering as a result of Voyager Digital's suspension of all customer trading, deposits, withdrawals, and loyalty rewards.
Skybridge’s founder also compares the current state of cryptocurrency to the "Long Term Capital Management", a highly leveraged hedge fund that failed in 1998 and 2008. If the previous events repeat themselves, the results will be disastrous.
“We saw this in 1998 with the Long-Term Capital Management crisis. We saw it in 2008 and listen, there’s a lot of people that were over-leveraged in the system. They were overzealous. There was double collateralization going on. It was almost like Bernie Madoff got married to Long-Term Capital Management and they created Celsius and so some of this stuff is terrible, frankly.” Scaramucci predicted.
Long-Term Capital Management was a hedge fund that collapsed rapidly in the early 1990s, sending shockwaves through the financial sector as a result of Wall Street investment banks' exposure to the fund. It was bailed out by the Federal Reserve.
Reaching the market’s bottom is part of the phase
Despite the fact that the crypto space is reportedly dealing with the fallout from a market condition in which non-commercial interests set the price, Scaramucci remains optimistic about the long-term prospects of digital assets and dismissed the idea that cryptocurrencies have no intrinsic worth.
Furthermore, given the ongoing increase in cryptocurrency transactions, Sam Bankman Fried's willingness to take a risk to save crypto-asset broker Voyager Digital and now agree to bail out crypto lender BlockFi may imply that there is significant potential in the industry.
“The use cases [of crypto} are proliferating and there’s billions of dollars moving into the space, and of course, we haven’t got to Sam Bankman-Fried, who’s been willing to backstop the space and put up capital, so lots of smart money there…” Scaramucci continued to argue.
The highs and lows of the state market are part of a larger trend whose effects have been observed over time, so we shouldn't get too worked up about it. And we haven't even begun to face the following year's incoming phase.
"This is just part and parcel of a long-term trend in cycle and of course we have the halving coming in February-March of 2024,” the Skybridge founder said.
Fried's decision to provide BlockFi with a $250 million credit line was reported in the Wall Street Journal last month. Following competitors Celsius Networks and Babel Finance freezing withdrawals and transfers, BlockFi is attempting to instill trust during a period of increasing stress.
The crypto lender is also still processing withdrawal requests and handling rising demands from corporate borrowers, it has reduced its workers by roughly 20%.
Scaramucci responds to the BlockFi and Sam Bankman deal, stating that Sam meant to safeguard depositors while also seeking new customers.
“A big shout out to the BlockFi people who focus on depositors first. They took a deal from Sam. It may not have protected the equity there, but it’s certainly protecting the depositors and I think in Sam’s case, he’s looking for customer acquisition, and I think he sees this as a broad opportunity to get those customers through BlockFi…” Scaramucci concluded.