Changpeng “CZ” Zhao still sees possibilities amidst the ruins.
The founder and CEO of Binance, the world’s largest cryptocurrency exchange by volume, shared his thoughts on the current state of the industry in a published statement on Twitter on June 23.
“Incredible resilience”
“So far, I think the blockchain industry has shown tremendous resilience,” Zhao said. “If two years ago, on March 12, 2020, you told me that the price of bitcoin would be $20,000 in June 2022, I would be pretty happy. So why not zoom out for more perspective balanced?”
“With that in mind, let’s take the situation as a chance to reiterate good risk management and educate the masses,” Zhao said.
Bitcoin’s closing price on March 12, 2020 was $4,858.38.
As Zhao made his comments, bitcoin was down nearly 1% as the world’s most popular cryptocurrency struggled to stay above the critical $20,000 level.
“As you all know, current market conditions are challenging. With our position as one of the biggest players in the industry with healthy cash reserves, we have a duty to protect users,” said writes Zhao. “We also have a responsibility to help industry players survive and hopefully thrive. This is the case even if there are no direct benefits for us or if we know negative returns on investment.
Online crypto trading firms were hit hard on Wednesday after BinanceUS, the company’s US subsidiary, scrapped its spot trading fees for bitcoins.
He noted that not all bailouts are the same, citing some companies, products or projects that are “badly designed, badly managed and badly operated.”
“In short, these are just ‘bad’ projects,” Zhao said. “These should not be saved. Unfortunately, some of these ‘bad’ projects have large numbers of users, often acquired through inflated incentives, ‘creative’ marketing or pure Ponzi schemes.”
“Let Them Fail”
Bailouts don’t make sense for these companies, he added, because in any industry there are always more failed projects than successful ones.
“Don’t perpetuate bad businesses,” he said. “Let them fail. Let other better projects take their place, and they will.” Industry players. schools and governments “need to educate people about financial literacy, risk management, diversification, and most importantly, how to assess the fundamentals,” Zhao said.
Other companies have good qualities but have made mistakes, he said, and “these can be bailed out and then make sure changes are made to address the issues that got them there. in the first place”.
“The third category contains projects that will survive, but barely,” Zhao said. “They’re strapped for cash. They don’t have enough budget anymore to grow healthily. They could either wait, get a cash injection, or explore M&A opportunities. Obviously, that all makes sense for a investor or potential purchaser. point of view.”
Zhao noted that he thinks a key difference between the current situation “and the bear market of 2018 is that there is now more leverage in our industry.”
“You’ll find quick leverage on centralized exchanges, often with futures products,” he said. “These work, as you might guess, very ‘fast’.”
Zhao said slow leverage occurs when funds lend to other DeFi funds or protocols to invest.
‘Survival of the Fittest’
“When one is liquidated, it usually takes the affected lenders a few days or weeks to realize or admit the pain,” he said. “These can also have a cascading effect, but the speed of spread is much slower. I think we haven’t seen the end of that yet.”
“Fortunately,” he added, “the more these cascading events occur, the more the number shrinks and spreads out.”
His comments were generally well received on social media.
“Okay, survival of the fittest like everything in today’s world,” one person tweeted.
“Well said”, another person said. “So many people hear about bailouts and automatically think of the negative implications. But as a community, anyone who is able to provide assistance to strong projects to help sustain their development through the bear market has a responsibility to help .”
Earlier this month, Binance temporarily suspended bitcoin withdrawals “due to a blocked on-chain transaction”.
The company has also had to deal with reports that it handled $2.35 billion in transactions stemming from investment fraud, hacks and illegal drug sales.
Zhao is the 80th richest person in the world, according to the Bloomberg Billionaire Index, which puts his net worth at $18.5 billion.
Trading2 weeks ago
Investment5 days ago
Blockchain1 month ago
Forex1 week ago
