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At 29, with a net worth of $16.2 billion, Sam Bankman-Fried (“SBF”)– CEO and founder of the cryptocurrency exchange FTX – has been hailed as the richest person in terms of crypto. Leveraging the increasing demand for derivatives in the cryptocurrency has helped him amass such a figure and continues to reap the rewards. He recently expressed his opinions about it stating that these are just misunderstood assets.
Blaming crypto derivatives
The cryptocurrency community is well-acquainted with the fact that these crypto derivatives (i.e. futures and options) are unregulated and some are being presented with leverage enabling investors to significantly pump up the usual size of their positions well above their actual holdings. Hence, this risky nature of derivatives has been deemed to have caused massive price dips within the crypto space.
Sam Bankman-Fried pushes back at critics
With that in mind, Bankman-Fried pushed back against such criticisms towards crypto derivatives saying that statement is short-sighted. The FTX CEO sat down with Forbes as he talked about derivatives in cryptocurrency saying that it has grown to become more responsible, maturing, and essential within the crypto market. Additionally, he highlighted those large leverage in crypto critics stating that they seem to forget that such has been present within the traditional market for years now.
When asked about the role of derivatives in the market including what he considers healthy trading volume ratios between different types of markets, Bankman-Fried responded that it (crypto derivatives) is a somewhat misunderstood area. He explains that people are seeing something happening and assume that such an event happened for the first time in history. He went on to say that people will note that derivatives trade more volume in crypto than spot, which according to him is true, though he pointed out that it’s true to every asset class in the world.
Made markets more efficient
The CEO also stated that derivatives are making markets even more efficient by adding liquidity for traders who preferred crypto price exposure, but who don’t need actual token delivery. Nonetheless, he acknowledged the fact that derivatives like crypto futures do sometimes encounter speed bumps along the way. An example he mentioned is when leveraged positions may sometimes lead to forced liquidations.
A similar thing happened back in early March when the market correction eventually led to excessive leverage, and ultimately pushed a whopping $500 million worth of long liquidations in just over an hour. In response, Bankman-Fried took to Twitter and announced the reduction in the leverage available to traders on his FTX platform. From 101X, it took a nosedive to just 20X. He said that this move was to promote responsible trading.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
