Alameda is ready to save Celsius and Three Arrows Capital cryptocurrency funds

The cryptocurrency market has been in a downtrend since the beginning of May. Cryptocurrency funds like Celsius and Three Arrows Capital have run into problems and are on the verge of bankruptcy. However, Alameda Founder Research and FTX cryptocurrency exchange Sam Bankman-Fried said he was ready to support them.

Alameda’s view of the declining digital asset market

The founder of Alameda and the FTX cryptocurrency exchange, Sam Bankman-Fried, sees the Fed’s policy as the main reason for a market decline. As part of the fight against high inflation, the Federal Reserve began to raise the critical rate aggressively and announced the start of the sale of its balance of Treasury bonds and mortgages. As a result, it decreased liquidity in the financial system and a flight from risky assets.

Bankman-Fried understands that the Fed is solving a difficult task and is between a rock and a hard place since any decision by the Fed in this situation will entail risks for the economy. But, at the same time, Sam says that now he is forced to make decisions in his business with an eye on Fed policy.

Last week, the US regulator raised the rate immediately by 0.75%. Such a solid one-time rate hike has not been seen since 1994. As the rate rises, money becomes more expensive, which leads to the sale of assets from risky sectors.

“The market participants are scared,” says the founder of Alameda. “People who own capital are worried”.

Concerns about the cryptocurrency market

Bitcoin has lost about 20% of its value over the past week. The main drop occurred over the weekend. Since its peak in November 2021, Bitcoin has lost over ⅔ of its value. Many altcoins have lost 80-90% or more during this time.

The most vulnerable category of cryptocurrency investors in this situation were those who came to this market in the last few years. In the wake of growing interest in the digital asset industry in 2021, the total capitalization of cryptocurrencies has exceeded $3 trillion. Currently, capitalization has fallen to $800 billion.

The growing market for digital assets has attracted many newcomers to the industry. According to various studies, more than half of Bitcoin buyers have entered the market within the last year.

Some of these new players have invested in cryptocurrency funds. However, last week it became known about the problems of some of these funds – they suspended the withdrawal of funds from clients. As a result, it caused panic among cryptocurrency buyers and led to their sales.

On Friday 17.06.2022, it became known that crypto lending company Babel Finance has introduced restrictions on withdrawing funds because it faced a lack of liquidity.

Before Babel’s Trouble Finance, similar actions to suspend the issuance of investors’ investments were taken by another crypto-currency fund – Celsius Network, whose leader admitted that the fund was going through difficult times. Celsius representatives said they had taken steps to freeze client assets to stabilize liquidity. Regulators have already become interested in these actions.

Crypto hedge fund Three Arrows Capital also failed to cope with the challenges of the market. It became known that this fund invested in the collapsed digital currencies UST and LUNA. Last week Three Arrows Capital failed to make another payment to its creditors.

Alameda Founder Research Bankman-Fried believes that all these situations will tighten regulation of the cryptocurrency market by supervisory authorities. Regulators became interested in the methods of using leverage (unsecured transactions) and the transparency of reports of cryptocurrency funds.

Alameda and FTX have already saved the cryptocurrency market players

In the past, Bankman-Fried and his companies Alameda and FTX, valued at $32 billion, have come to the rescue of companies hit by market volatility.

“I think we should help distressed funds, even if it doesn’t work for us, to prevent more market turmoil,” says Bankman-Fried. “While we were not involved in creating these problems, it is in our interest to calm the markets and help them recover”.

Bankman-Fried noted that they have already helped players in this market several times in the past.

For example, in 2021, the Japanese cryptocurrency exchange Liquid was attacked by hackers who stole more than $100 million. FTX helped Liquid by providing $120 million in funding. Shortly after, FTX announced plans to acquire Liquid for an undisclosed amount.

“Within a day after the incident, we decided to assist Liquid so that the clients of this exchange would not suffer as a result of the theft of a large amount”.

Alameda and FTX actions in the current environment

Over the past weeks, many major players in the cryptocurrency market have announced staff cuts. Such companies include BlockFi, Crypto.com and Gemini. In addition, Coinbase, one of FTX’s main competitors, has announced cutting nearly 20% of its workforce.

The head of Coinbase wrote that the company was growing too fast, and difficult decisions had to be made in a falling market.

Bankman-Fried’s companies Alameda and FTX have not announced job cuts but have said they will slow down recruiting. Bankman-Fried runs his companies from the Bahamas, where FTX recently opened its headquarters.

Last week, Bankman-Fried travelled to Washington, where he met with lawmakers and regulators concerned about declining markets and risks for investors.

According to Sam, legislators have made progress in enacting a law regulating cryptocurrencies. Senators Cynthia Lummis (R-Washington) and Kirsten Gillibrand (D-NY) are pushing for legislation that defines cryptocurrencies as commodities, not securities. It means that regulation will fall under the purview of the Commodity Futures Trading Commission, not the Securities and Exchange Commission.

Recall that many accuse Alameda of cheating and pushing market players to create problems for its competitors. In the wake of emerging difficulties, Alameda will probably try to take its competitors’ assets at underpriced prices.

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