The recent slump in the cryptocurrency market has triggered a wave of liquidations, and Celsius, Babel Finance, BlockFi, and Three Arrows Capital have fallen into a liquidity crisis. In order to curb the spread of the troubled situation of the cryptocurrency industry, the digital asset exchange FTX has taken the lead in launching the “currency circle rescue operation”, which has been praised. In this regard, Binance CEO Changpeng Zhao (CZ) believes that while large players have a responsibility to assist other players, some projects may not be worth saving.
Changpeng Zhao revealed that many overleveraged fund companies have turned to Binance in an attempt to seek bailout financing to avoid liquidation. He also pointed out that Binance is not the “main trading venue” of Three Arrows Capital, nor does it provide Three Arrows Capital credits.
Shortly after, Changpeng Zhao published an article on the official blog detailing his personal views on bailouts. He pointed out that as a member of the cryptocurrency industry, it is a responsibility to help other players survive, even if it does not benefit Binance in any way, or even loses money.
Changpeng Zhao said that the projects currently in need of assistance can be roughly divided into three categories: bad projects, projects that have made small mistakes, and projects that are dying but have great potential. He went on to point out that poorly designed, poorly managed, and poorly managed projects belong to the former category, and should not continue to exist. Of course, there is no point in extending a helping hand to them.
Zhao Changpeng mentioned that some bad projects have huge user groups, but this is usually because the project party will attract the masses by exaggerating the incentive mechanism, very “creative” marketing or pure Ponzi scheme. He says,
In any industry, there are always more failed projects than successful ones. Bailouts here (referring to bad projects) are pointless. Don’t continue your life for a poor company. They should be allowed to perish and be naturally eliminated in the market. Let other better projects take their place.
However, Changpeng Zhao also realized that there are still some good companies in crisis in this bear market, but they are just too aggressive in spending, lack of reserves or have some small problems that can be solved. Changpeng Zhao believes that these projects are excellent in nature. Their products can meet market demand, can generate income under normal circumstances, and have a good business model, so they should be aided and supported.
At present, there are still some potential projects in the cryptocurrency market that are on the verge of death. They do not have enough budget to grow healthily and can only wait for capital injection or mergers and acquisitions. From the perspective of a potential investor or acquirer, Changpeng Zhao believes it makes sense to lend a hand to these projects.
He said Binance began receiving requests from companies a few weeks ago to talk more about investing and let Binance help them through the storm, but he said that Binance would scrutinize each project before making a decision.
Changpeng Zhao also mentioned that compared with the bear market in 2018, the leverage of the cryptocurrency market is much higher now. There are currently two types of leverage, “fast” leverage and “slow” leverage. The former refers to exchanges The fast financing service provided allows investors to trade with dozens of times the leverage. The latter is a DeFi financing service. Users use collateral to borrow for transactions, and the latter’s liquidation speed will be much slower than the former, so He doesn’t think the wave of liquidations is over.
However, he also emphasized that the cryptocurrency market is currently showing unprecedented resilience. In other words, three years ago, “Bitcoin $20,000” was a sky-high price, but now it is a bear market price. Market education will do better.