The last 7 days have seen a slight rebound of the crypto market with Bitcoin and Ethereum up 12% in the last week. Furthermore, FTX CEO Sam Bankman-Fried has made a statement earlier in the week stating that the worst of the crypto winter has passed indicating the bottom has been reached. The seven day Bitcoin chart shows that the market has reacted positively to Sam’s encouraging statement.
It’s early to tell whether Sam had simply incredible foresight when calling it, or whether him saying this triggered a lot of people to buy. After Bailing out BlockFi and Voyager, SBF announced that FTX still has a few billion remaining for further bailouts.
This leaves FTX with a $750 million exposure to organisations that are in a dire financial situation, after the bear market has exposed threats in their value offering or cashflow strategy that were previously left unaddressed during the last bull run. The money that was paid to both ($500m to Voyager and $250m to BlockFi) is used to keep those organisation float, and nothing more. In the case of Voyager and BlockFi — they don’t have a reserve anymore, and are forced to operate with everything on the line, inclusive of FTX loan. With a $750 million U.S. dollar exposure to organisation that have taken the bear market rather badly so far, the last thing you would want is for the bear market to continue. It’s likely that if it goes on, these companies would need additional bailouts in order to keep them away from bankruptcy.
Therefore, FTX and SBF have quite a bit to lose if those organisations do go under. In spite of SBF’s earlier statement, here is why, in fact, we have not yet bottomed out:
The last Bear Market lasted over 2 years
The previous bear market lasted between January 2018 and April 2020 — or 2 years and 4 months. During the previous bull run, the last ATH recorded by Bitcoin took place on the 8th of November 2021 — which also marks the start of the current Bear market. That would mean that we’ve transition from bull to bear and back to bull in less than 8 months, but based on previous scenarios it usually take a lot longer in order for this to happen.