Hi Fren,
Plenty of crypto gist for you. Let’s recap what’s been happening in the crypto market lately.
El Salvador’s President Nayib Bukele acquires 80 additional bitcoins at $19,000.
SBF plays J.P Morgan's role in 1907
If you are familiar with the global financial market, J.P Morgan's name should not be new to you. A bit of background about J.P. Morgan is that he was an American financier and investment banker who held controlling interests in numerous American businesses.
The financial panic of 1907 which was caused by public distrust in the banking system and led to the withdrawal of money from the banks would have been the end of banking in the US. However, most notably, J.P. Morgan and other wealthy Wall Street bankers lent their own funds to save the country from a severe financial crisis. This led to J.P. Morgan taking over six financial institutions and gaining ultimate control over banking in America.
Crypto-entrepreneur and billionaire, Sam Bankman-Fried (SBF), and the Founder/CEO of FTX have started walking in the shoes of J.P. Morgan as he has been saving the struggling crypto industry from chaos and protecting the digital asset ecosystem. Recently, the crypto industry has been experiencing chaos as we witnessed the LUNA/UST crash, the liquidation of 3AC, Coinbase laying off over 1000 employees, and the fact that the overall crypto market has lost over $2.1 trillion in less than eight months. If this spiral continues, numerous crypto companies could face insolvency, especially smaller crypto exchanges.
Rescue of BlockFi
BlockFi is a global crypto financial services company. Founded in 2017 by Zac Prince and Flori Marquez, BlockFi is building a bridge between cryptocurrencies and traditional financial and wealth management products to advance the overall digital asset ecosystem for individual and institutional investors.
SBF, through FTX, agreed to provide BlockFi with a $250 million revolving credit facility to help BlockFi “navigate the market from a position of strength.” The proceeds of the credit facility are intended to be contractually subordinate to all client balances across all account types (such as BlockFi Interest Account*, BlockFi Personalized Yield, and BlockFi Loan collateral) at BlockFi and will be used as needed to further bolster BlockFi’s balance sheet, underscoring long-term stability for the company.
The interest rate, the conditions of BlockFi’s balance sheet, and the terms and conditions of the contract were not disclosed in the tweet. Market rumours are also saying that FTX is on a deal to buy BlockFi for $25million, 99.9% below its last valuation.
Financing Voyager Digital
Voyager Digital, a crypto broker, has secured a loan of over $500million from Alameda Research (a company founded by SBF) to help see it through the current market backlash. The $500million financing is split in two; a $200 million facility of cash and USDC, and 15,000 BTCs worth around $309million. The loan has an annual interest rate of 5% payable on the maturity date and it expires on Dec. 31, 2024.
Summary
In relation to J.P. Morgan’s wealth in 1907, SBF is one of the wealthiest people in crypto with an estimated worth of $ 20 billion, according to Forbes. The current crypto market crash is similar to the financial panic of 1907, with Sam Bankman-Fried in the role of J.P. Morgan. Even in the extreme fear condition in the crypto market, SBF has chosen to be greedy and recently announced the acquisition of Canadian crypto exchange Bitvo to enter into the Canadian market, alongside the loan facilities of $250million and circa $500million to BlockFi and Voyager Digital respectively.
Custodial Vs Non-Custodial Wallets
If you hold a cryptocurrency, you have probably interacted with a crypto wallet before. The question now is “can you tell the type of wallet you use?”. The major difference between a custodial and non-custodial wallet is the party with access to, and who manages, the private keys.
Custodial Wallet
The word “Custodial” means that a third party is responsible for taking care of something. In this regard, a Custodial Wallet is a crypto wallet that is managed by a third party - which is usually a central exchange. Examples of custodial wallets include Binance, Blockchain.com, etc.
The major advantages of using a custodial wallet are its simplicity and guarantee of access to the password as you are entrusting your private keys to a third party. Although custodial wallets are simple to use and the password can be reset, this could also act as a disadvantage as custodial wallets are vulnerable to hackers.
Non-Custodial Wallet
A Non-Custodial wallet grants full control to the holder who possesses and controls the private keys. Non-custodial wallets grants holders the opportunity to trade crypto directly from their wallets, since there are no intermediaries. Examples of non-custodial wallets include Metamask, Coinbase wallet, Trust wallet, etc.
The major advantages of using a non-custodial wallet are that it offers full control over your keys and funds and that it is cheaper than the custodial wallet since you don’t have to pay custodial fees. Holders of non-custodial wallets need to be extra careful with their private keys because once it is lost, the crypto assets are lost forever. In addition, private keys should be kept from third parties who can steal crypto assets.
Conclusion
The type of wallet you decide to use depends on your personal goal. Do you want to have access to your private keys and be your own bank? Do you want a third party to take care of your storage needs while you trade? The most important factor is to apply safety practices for any wallet you decide to use.
Writer: Adesegun Sunmola