Cryptocurrency has a shiny future, the digital asset lender BlockFi implied on Monday. The issue was that the corporate stated so in a submitting with a US chapter court docket.
BlockFi was one of many crypto companies most uncovered to Sam Bankman-Fried’s FTX. It shortly halted withdrawals from its platform after FTX went underneath this month. In its personal chapter submitting on Monday, BlockFi valiantly tried to distance its transfer to hunt safety from collectors from the identical transfer at FTX.
BlockFi argued that it may merely reorganise within the following weeks and are available out the opposite facet revitalised.
The corporate might not have been spectacularly mismanaged as FTX was. However the sheer interconnectedness of the crypto trade suggests the ecosystem is now inherently unstable for all contributors.
In keeping with court docket papers, BlockFi has as much as $10bn in liabilities which embody buyer accounts and settlement funds it owes the US Securities and Change Fee. Its difficult relationship with FTX, nevertheless, is essentially the most attention-grabbing element.
FTX rescued BlockFi in the course of the first wave of crypto misery within the spring when the terra-luna stablecoin collapsed. BlockFi secured an emergency credit score line of $400mn which additionally gave FTX an inexpensive choice to purchase BlockFi outright.
On the similar time, the buying and selling arm of FTX, Alameda Analysis, itself had borrowed almost $700mn from BlockFi. BlockFi cryptocurrency can be at present caught on the FTX platform. The Monetary Occasions reported on Monday that BlockFi was suing Bankman-Fried to grab his shares of web stockbroker Robinhood. BlockFi alleged he had pledged them to safe borrowings made by his FTX empire.
BlockFi’s sunny outlook appears unrealistic for 2 causes. First, it requires that the FTX case, with which it’s intertwined, be resolved shortly. Given the messiness of the case, that’s unlikely. Second, it’s not apparent that the cryptocurrency sector is secure and wholesome sufficient for a reorganisation to succeed. BlockFi solely survived the spring when the then mighty FTX arrived with a bailout.
A tough few months in crypto have felled the likes of Three Arrows Capital, Voyager Digital, Celsius Community, FTX and now BlockFi, with others probably teetering. There are tactical causes for BlockFi and its attorneys to placed on a courageous face. However there’s little motive to think about that the crypto ecosystem can turn into secure or sustainable in its present kind.
