Crypto Three Things (11/28)

Monday, Nov 28th 2022

Commentary

“How did we go bankrupt? Slowly, and then all of a sudden.” -Ernest Hemingway


1) BlockFi Files for Bankruptcy: The once high-flying crypto lender BlockFi crumbled under mounting pressures, filing for Chapter 11 bankruptcy protection. It’s the latest casualty of the shockwaves from FTX’s spectacular blowup. BlockFi’s brewing troubles began this summer when a liquidity crisis from a bad loan forced the lender to seek a bailout, thus inviting FTX to swoop in with a $400M credit line. Initial bankruptcy filings show that the firm had assets and liabilities of $1B to $10B, with more than 100,000 creditors.

Titan’s Takeaway: BlockFi, last valued at $4.8B, may be seen as going under twice – it barely survived its first major knockdown when rival lender Celsius folded in July. The knockout punch was unexpectedly delivered by its supposed savior FTX, which had its own demons.

2) Binance Pledges $1B to Recovery: Leading crypto exchange Binance has committed $1B from its own assets, and is seeking another one, to help promising but financially distressed crypto companies get back on their feet. This comes as fears sweep across the industry in the wake of FTX’s implosion. Projects that Binance and backers are interested in are those with “laser focus” on risk management, a viable business model, and those that are under pressure through “no fault of their own.”

Titan’s Takeaway: It’s not hard to spot distressed crypto assets. What is difficult is determining which companies deserve a lifeline and which should be left to drown. With just $1B in a capital-starved industry, deep due diligence and strong judgment is necessary.

3) Matrixport Seeks $100M Funding: One of Asia’s largest crypto lenders, Singapore-based Matrixport, is reaching out to investors globally to secure a $100M funding round that will give the startup a $1.5B valuation - a markup from $1B prior to the FTX collapse. Existing venture capital backers who ponied up more than $100M last summer include DST Global and Tiger Global.

Titan’s Takeaway: FTX developments have shattered valuations. Matrixport’s $1.5B funding value might be a hard pill to swallow for investors who are moving a lot more cautiously after the recent scandal.

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