Insolvent crypto firms have sparked a wave of bailout euphoria, is this the right way for the sector?

SBF is rescuing insolvent crypto companies left and right. Now CZ and Justin Sun want to get involved. However, none of this is very healthy for the sector.

Rescue missions of insolvent crypto companies in full swing

FTX CEO Sam Bankman-Fried rushed to save failing crypto firms during the current crash so quickly that now his rivals are taking note and want to enter the race for the rescue.

Last month, FTX provided a $250 million loan to crypto lender BlockFi. A day later, Alameda Research, another SBF company, extended a $500 million loan to Voyager Digital. Two weeks later, FTX agreed to acquire BlockFi outright. And last week, SBF told Reuters that FTX still had several billion to bail out other companies.

It's hard to see this as a positive for the cryptocurrency sector.

The CEO of Binance CZ criticized Voyager's bailout, stating: “I would never do such a deal. I just wouldn't invest in that company, I'll keep my money.”

But CZ has now apparently succumbed to the bailout euphoria as well, as he stated: “We're looking at a large number of deals in the middle of the crypto-liquidity crisis, and some of them are really good deals. So I think we will also invest and save several projects.”

Also Tron CEO Justin Sun he said The Block, that he is ready to pay $5 billion to help failing crypto companies.

But these bailouts don't seem like a healthy way out of the current crypto market crisis.

Celsius, BlockFi, Voyager and other crypto lenders that promised high returns on user deposits always seemed too good to be true and they were. They had bad business models that assumed an "up only" market environment. Do they deserve to be saved?

To be fair, as CZ pointed out, it's better for users that companies that still hold their funds are bought rather than gone. "That means users won't lose money or hopefully lose less money," he said.

CZ published it recently, on June 23 blog post, in which he stated, “Don't keep bad company. Let them go bankrupt.” It creates a tendency to think that the current crypto winter will wipe out the weak players, and strong companies and projects will survive; the grain is separated from the chaff. But CZ has obviously changed its mind in this regard.

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All content in this article is for informational purposes only and does not in any way serve as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.