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CNN Interview: SBF discusses current state of the crypto market, FTX's institutional support purpose, denies acquisition of Coinbase

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CNN Interview: SBF discusses current state of the crypto market, FTX

FTX founder Sam Bankman-Fried recently sat down for an interview with CNN to discuss the current state of the crypto market and FTX's expansion plans. Host Julia Chatterley even jokingly asked SBF if he was planning to acquire Coinbase. What exactly did they talk about in this interview?

SBF was interviewed by "CNN: First Move" on Wednesday (7/7). "First Move" is a program that focuses on global business, economy, and finance. The topics discussed in this interview included the current state of the crypto market, market rumors about FTX acquisitions, why SBF is supporting these crypto institutions, and the upcoming expansion plans.

Clearing is Painful, but Healthy in the Long Run

Julia Chatterley started by asking about the current situation in the crypto market:

"I think although it's painful and challenging for the crypto industry right now, are we also seeing some level of 'healthiness'?"

SBF believes that the crypto market is moving towards a healthier state. Over the past two years, some institutions and capital have overexpanded, and now the market is liquidating these excessive leverages, eliminating companies with problematic capital adequacy.

At a certain point, you start to see even well-capitalized players having issues, and I think that's when the market is no longer healthy. The market is currently clearing out these excessive leverages, washing out players with asset-liability problems, which I think, to some extent, is healthy for the market.

In fact, SBF expressed a similar view in an interview with Reuters.

He pointed out that market clearance of excessive leverage can cause liquidity tightening, and the worst period of liquidity tightening has passed, as evidenced by the stabilizing market prices. However, this does not mean the bear market has ended, and the future trend still depends on the overall economic impact.

What are the Criteria for Supporting Crypto Companies?

Recently, lending platform BlockFi secured a $250 million revolving credit line from FTX, and SBF had previously stated willingness to lend money to other companies to set a stop-loss line for this liquidation crisis.

Julia Chatterley asked:

"I dare say, there are people knocking on your door every day shouting, 'Hey, do you want to invest in us?' So you have to sift out the companies that are of poor quality, unprofitable, or even insolvent, right?"

SBF unequivocally stated that lending to these companies is not charity, so a careful evaluation is necessary.

FTX's standard is to look for companies with "good business performance." These companies only temporarily face liquidity issues, so providing some loans can protect these companies' users and preemptively prevent a systemic crisis.

You hit the nail on the head; that's exactly what we are doing, which means lending to these companies is not just a rescue mission. Some of the companies we study are destined to go bankrupt, and declaring bankruptcy is the right move for them. The key to the companies we choose is their good business performance. Because these loans are just a way to provide liquidity to them in the short to medium term.

At the same time, SBF clarified some market rumors. He stated that besides having good company fundamentals, the most important thing is to protect the users of these good companies, so the mining industry is not a concern for FTX.

Rumors about FTX aiding miners have been circulating hotly, which is understandable as it is one of the main industries in the crypto field. But what I want to say is, we are not interested in the mining sector. This sector does not require protection for users because anyone can purchase mining machines to fill in the hash power gap, and there is no systemic risk in this area.

Will FTX Acquire Other Companies at a Low Point? Like Coinbase?

According to SEC official documents, SBF acquired 56 million shares of Robinhood in May, becoming the third-largest shareholder of the company. Although SBF denied any intention of acquisition by FTX, it still sparks speculation.

SBF clarified that this was simply an investment. He highly respects Robinhood's founder Vlad Tenev and the entire team, and there are no active discussions about acquisitions, but he does not deny that other opportunities may arise.

Julia Chatterley believes that acquiring shares at a low point is reasonable and asked:

"There seems to be a lot of interest in your investment in Robinhood. Are there other targets you would consider investing in? Maybe we can also discuss (investing in) Coinbase?"

SBF immediately laughed off the idea of acquiring Coinbase.

He pointed out that FTX is currently in good operational shape, so there is no need to rashly acquire either Robinhood or other companies, putting themselves in unfamiliar operational environments. However, he also mentioned being open to collaborations with different companies.

Answering this question carries the risk of sparking rumors, so I don't intend to delve into this topic. But I can say that we are open to collaborating with any company.

Is FTX Profitable this Quarter?

Coinbase released its Q1 financial report last month, showing a halving of revenue and increased expenses, resulting in a net loss of $430 million.

Julia Chatterley:

"During this turbulent market period, is FTX's trading business profitable? Because I think this time can also be used to differentiate between good, average, and bad companies based on profitability."

The answer is affirmative. SBF stated that FTX has been profitable for several quarters in a row, including the most recent ones. He believes the key is "steady expansion."

Yes, we have achieved that, including for several recent quarters, we have been profitable for a continuous period. I think the key to maintaining profitability is being able to grow steadily. Of course, I'm not saying expansion is wrong, especially when the timing and conditions are right, but expansion is undoubtedly a risky decision that can put you in a passive, weak position. So unless we find a very good opportunity and invest in a way we like, I won't easily expand.

SBF particularly mentioned the expansion of personnel. He previously stated that although expansion during a bull market makes sense, after research, he found that rapid company expansion makes coordination between departments difficult and lowers employment standards, resulting in poor communication among colleagues, which eventually leads to a breakdown in communication, even if there are incentive mechanisms.