Source: Jarretera / Shutterstock.com
Grabbing a discounted investment is great. Grab one for pennies on the dollar…or less…even better. This is the case of today’s news which FTX reportedly struck a deal to buy a crypto lender BlockFi for $25 million. The kicker: BlockFi’s last private valuation was $4.8 billion, which means Sam Bankman-Fried and the FTX team are picking up BlockFi for about 0.5% of its previous valuation.
This kind of bargain price doesn’t happen very often. In fact, in the crypto sector, a world where valuations have only risen in the past year, such a headline would seem unfathomable just a few months ago.
There are several reasons for this dramatic reduction. With so many coins and tokens down more than 50% from their recent highs, intense selling pressure has led to liquidations and the discovery of which lenders have gone too far.
Here is more information on what investors may want to know about this combination.
What to know about the FTX, BlockFi deal
FTX CEO Sam Bankman-Fried now appears to be the “lender of last resort” in the crypto world. Its recent $250 million line of credit to BlockFi, as well as support for other crypto companies, is noteworthy. If there is any part of the crypto market in trouble, investors can be sure Mr. Bankman-Fried is taking a look.
Given the recent fallout from the crypto lender Celsius and hedge funds Capital of the Three Arrows, there is a huge concern in this space. Such an environment can provide opportunities for those who really have a long-term view of this sector. As FTX seeks to increase its influence, it seems to be buying season.
Reportedly, many BlockFi stock investors are now writing their stake in the company. It’s unclear where that $25 million will go and what assets FTX may acquire. In addition, other offers are said to be on the table. However, FTX seems to be the company that comes out on top.
This deal is expected to take months to complete. It’s an intriguing story that those in the crypto world may want to keep up to date. The entire centralized financial realm of crypto is about to be rocked.
As of the date of publication, Chris MacDonald had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.