FTX CEO, Sam Bankman-Fried, issued a dire warning that some crypto assets have real crash potential. In a conversation with CNN, SBF warned that a substantial fraction of cryptocurrencies is empty products.
SBF also highlighted that such empty currencies represent a very small portion of crypto assets by market cap or volume. However, when considering by the number of assets, they represent a substantial fraction.
SBF’s Thoughts On Ponzi In Crypto
SBF believes that empty crypto assets form a pattern. According to him, they usually exist as a long tail of assets that are primarily speculative with no use case. The core, however, consists of assets with real usage.
SBF’s beliefs can be supported by evidence. There are currently over 20,000 crypto assets listed on CoinMarketCap. Despite this, Bitcoin and Ethereum contribute the majority of value.
Bankman-Fried also pointed out in a recent Bloomberg interview that he believes many crypto projects are just Ponzi schemes, whose value is derived only from people putting in money.
SBF’s comments on crypto assets are significant, given the current market conditions. Crypto platforms like Celsius, Three Arrow Capital, BlockFi, and Voyager either suspended all activities on their platforms or declared bankruptcy. Recently, Celsius was sued by a former asset manager for allegedly being a Ponzi scheme.
Similarly, CoinFlex’s new rvUSD token was labeled as a Ponzi scheme by many experts.
The Role Of Exchanges
SBF believes that exchanges have a role to play in combating Ponzi schemes. He highlighted that there needs to be an effort to distinguish and offer tokens that are healthy for the ecosystem. He did however point out that it is not often easy to recognize Ponzi schemes and that no exchange can be perfect at that.
SBF has already made efforts to protect certain crypto platforms from the bear market. FTX ventures gave a $250 million revolving credit line to BlockFi. Meanwhile, other exchanges like Binance followed suit and announced that they would bailout a few crypto platforms. Justin Sun, the founder of Tron, also announced that he will help crypto platforms to the tune of $5 billion.