So, what happened to BlockFi? 🥲

The crypto streets were buzzing late last week after news got out that BlockFi would be bought by FTX at an extremely low valuation. To put it into perspective, the company was worth $4.8 billion this time last year. If the rumors of FTX buying BlockFi are true, the company would be worth $25 million. I know when this news dropped we were headed into Fourth of July weekend where sales are happening left and right, but whew! A 99% discount is wild and definitely caught people way off guard.

On June 30th CNBC tweeted this:

However, just a few hours later, BlockFi CEO, Zac Prince, tweeted that this is not true. It’s giving drama!

After doing a little more research, it came out that “the terms agreed give the company a variable price of up to $240 million based on performance," according to Yahoo Finance. Regardless, it’s important to be in the know. As someone who has a BlockFi account, I needed all the deets. Expeditiously.

Now, let’s break this down.

What is FTX?

According to their website, “FTX is an easy to use crypto exchange where you can buy, sell, and store Bitcoin, Ethereum and other cryptocurrencies and digital assets such as NFTs.” Think of it like a Coinbase or Binance.

What is BlockFi?

According to fool.com, “BlockFi offers a cryptocurrency exchange, interest-bearing accounts, and low-interest-rate loans worldwide.” I have used BlockFi to generate interest on my crypto investments. It felt easy to use and came highly recommend.

In terms of the company, you could say there were some early signs that BlockFi was going through it, but it seemed in line with most crypto companies. According to CNBC, “Crypto lender BlockFi is cutting around 20% of its staff. CEO Zac Prince said in a tweet on Monday that,” BlockFi has been hurt by the “dramatic shift in macroeconomic conditions,” which have had a “negative impact” on growth. The company grew from 150 employees at the end of 2020 to more than 850 prior to the cuts.”

Why did FTX enter a deal with BlockFi?

According to CNBC, “The fire sale comes a week after FTX provided a $250 million emergency line of credit to BlockFi. FTX CEO Sam Bankman-Fried said at the time that the financing would help BlockFi “navigate the market from a position of strength….Billionaire Bankman-Fried has been seen as a lender of last resort in the space.” 

The bear market is not playing with y’all! While yes it’s tumultuous, it’s also extremely normal to exist within this cycle. What this tells me is that BlockFi may have just been extremely overvalued and the corrections are getting them back in line. The injection of cash we were seeing a year ago has left investors counting their losses. Really hate to see it. (LOL at me feeling bad for these rich investors 🥴)

Overall, I’m interested to see how this plays out. We’ll likely get an update this week, and hopefully this post gives you context to understand what’s happening!

See you next time!

Kendall