Enigmatic crypto investor Sam Bankman-Fried, founder of crypto exchange FTX, acquired a 30% stake in Anthony Scaramucci’s SkyBridge Capital, an alternative investment firm.
I believe this deal highlights the desperation the crypto industry currently faces.
I also don’t see the value in it.
Bankman-Fried is essentially the only prominent investor liquid enough to bank mediocre crypto infrastructure mostly because he has skin in the game and would potentially get shellacked with monstrous losses if crypto as an industry goes under.
Doing his best to prop up the mess is in his interests, otherwise, his brainchild FTX would suffer too.
As harrowing as this sounds, I don’t think crypto as an industry will go under, but the wounds get rawer by the day.
The deal was inked through SBF's venture-capital firm FTX Ventures and will support growth initiatives for SkyBridge.
SkyBridge will deploy the capital from FTX to buy $40 million in cryptocurrencies, which it will hold on its balance sheet.
SkyBridge investors are demanding redemptions from the fund ever since the price of Bitcoin has tanked causing anyone involved with the crypto industry a world of pain.
Many are anointing Bankman-Fried as the savior of crypto, but I would argue that this shows the inferiority of crypto as an industry.
It’s signaling that no other big names are coming to save crypto. No Marc Andreesen or anyone of that magnitude.
Crypto has shown it’s only viable when liquidity is in the process of loosening, and currently, the opposite is happening.
In fact, it appears as if liquidity will get even tighter heading into year-end.
And if that wasn’t bad enough, the integrity of the crypto industry has been under attack from all directions for quite some time.
Yet another explosive headline came out saying that a founder of a cryptocurrency investment research firm was accused by the SEC of promoting an initial coin offering without disclosing that he had been given incentives to do so.
Ian Balina, 33, promoted the SPRK token on social media platforms including YouTube and Telegram without revealing that he had been compensated by the company that offered it, the Securities and Exchange Commission said in a suit filed Monday in federal court in Austin, Texas.
It’s certainly a bad look that crypto is attracting such bad actors and the brand name downgrade just keeps getting clearer.
I believe crypto will weather this crypto winter but for the 10s of thousands of other crypto products, let’s call them collateral damage.
The next question is at what point does Bankman-Fried stop whipping his savior capital around and at what point does the crypto infrastructure get so bad there’s no way back?
Considering Bankman-Fried has wealth of around $24 billion, a $50-$70 million investment in some marginal crypto hedge fund is just a drop in the bucket for him.
SkyBridge doesn’t do that much, it just sells a crypto ETF, takes in fees for it, and markets it as a safer pair of hands to handle crypto for the investor. Investors can just go and buy crypto on Bankman-Fried’s FTX for a more direct way to invest in the same thing.
I do believe it’s worth it for Bankman-Fried to save these small companies now, to later unload them for a profit when Bitcoin recovers. He can afford the carry costs as he can pay in cash and avoid the high interest debt markets.
However, I do believe he will abstain from billion dollar purchases.
Even with him, there’s a limit.
As for the crypto infrastructure, just save one coin and that’s Bitcoin and the rest can go to hell. If this scenario takes place, crypto will survive and strengthen after the crypto winter ends.
Until then, it’s about survival for just about everyone in the crypto industry until the next crypto bull market initiates.
