While soaring inflation is hurting U.S. consumers and may have already dragged the economy into a technical recession (which this week’s ISM data might hint at), one of the strengths of the U.S. economy remains the labor market. Indeed, the strength of the labor market (with the unemployment rate hovering at pre-pandemic levels) is one of the main reasons the Fed is so confident it can raise interest rates so aggressive.
In this sense, the good labor market data on Friday could be negative for risk appetite, if it reinforces the Fed’s tightening bets. This could weigh on crypto, which tends to prefer an environment of more accommodative financial conditions (even if this is due to weaker growth prospects, such as in the first year and a half of the pandemic).
FTX could buy BlockFi for up to $240 million
In a Twitter thread last Friday, BlockFi CEO Zac Prince announced that the crypto lending platform had signed a new deal with leading global crypto exchange FTX. BlockFi secured a new $400 million revolving credit facility with FTX, which also gave FTX the option to purchase BlockFi at a “variable price of up to $240 million based on performance triggers.”
Prince said BlockFi signed the deal to “strengthen liquidity and protect customer funds” following significant volatility in the crypto market. The transaction is still subject to shareholder approval.
Elsewhere in related news, FTX CEO Sam Bankman-Fried told Bloomberg in an interview last Friday that he was open to possible takeovers from struggling crypto miners. “There could be a really interesting opportunity for us – I certainly don’t want to rule that out,” he said.
Bankman-Fried added that such buyouts could also help stem further contagion of financial stress in the crypto space. “When you think of the mining industry, it plays a small role in the possible spread of contagion, as there are miners who were securing loans with their mining rigs,” he said. .
Crypto Winter: Voyager Digital, Vauld Halt Withdrawals, Celsius cuts 23% of staff
Leading cryptocurrency broker Voyager Digital announced last Friday that it will temporarily freeze trades, new deposits, withdrawals and loyalty rewards, joining a growing group of peers for doing so. The firm blamed the move on the failure of embattled crypto hedge fund Three Arrows Capital (3AC) to repay a substantial loan.
The company’s CEO said on Twitter that the move would give Voyager time to strengthen its balance sheet to protect assets and safeguard the future of the platform. Voyager had issued a notice of default to 3AC on Wednesday.
Elsewhere, crypto lending platform Celsius Network is set to cut 150 jobs, or about 23% of its workforce, as part of a corporate restructuring. The platform halted customer withdrawals on June 12 citing “extreme market conditions”.
Many crypto analysts/commentators believe that Celsius could face insolvency. The company said in a recent announcement that it was exploring options to “protect and preserve” its assets. Goldman Sachs has reportedly led a $2 billion fundraising round to buy troubled Celsius assets, while rival crypto lending platform Nexo has also offered to buy Celsius outright.
Meanwhile, fellow crypto lending platform Vauld just became the latest major platform to halt trading and withdrawals on Monday. The company said in a blog post that it was also exploring restructuring options, after laying off 30% of its staff last month.
Crypto analysts suspect that more exchanges/lending platforms will be forced to halt withdrawals and more crypto firms will be forced to cut staff numbers if the crypto price bear market continues to escalate. worsen, pushing the industry into a deepening recession.
KuCoin Denies Rumors of Impending Withdrawal Halt
On the subject of withdrawal stops, the world’s leading crypto exchange KuCoin faced a Twitter storm over the weekend, with various well-known pseudo-anonymous accounts warning their followers to withdraw funds from the exchange as soon as possible by due to an impending freeze on withdrawals.
KuCoin CEO Johnny Lyu quickly took to Twitter to denounce “FUD” (fear, uncertainty and doubt). According to Lyu, KuCoin has no exposure to LUNA, 3AC or Babel Finance and has not (as rumored) faced “tremendous suffering” from a “coin meltdown”. Also, KuCoin has no plans to stop withdrawals, Lyu added, and everything on the exchange is working fine.
Facebook’s parent company, Meta Platforms, announced last Friday that it would shut down its digital wallet payment pilot Novi, ending its efforts to establish its own stablecoin called “Diem” (formerly known as libra). Facebook unveiled ambitious plans to roll out its own crypto-based stablecoin payment system in 2019, but amid heavy regulatory pushback, it never gained noticeable traction.