The bitcoin price has plummeted 20% since this time last month, dragging down the wider crypto market and taking the total value erased from the combined crypto market to around $2.2 trillion (though Tesla billionaire Elon Musk has issued a surprise 2023 price prediction).
Now, Binance chief executive Changpeng “CZ” Zhao has pledged $2 billion to a crypto rescue fund—just months after the Luna Foundation Guard burnt through almost $3 billion trying to prop up its terra stablecoin ecosystem and FTX’s disgraced founder Sam Bankman-Fried (SBF) reportedly dipped into FTX user funds to support his trading company, Alameda Research, and the wider market.
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Binance’s so-called industry recovery initiative will support cryptocurrency companies and “projects” that are struggling during the bitter crypto winter that risks becoming an ice age thanks to the sudden collapse of FTX.
“The mandate of this new effort is to support the most promising and highest quality companies and projects built by the best technologists and entrepreneurs that, through no fault of their own, are facing significant, short-term, financial difficulties,” a Binance blog post read, adding the fund will accept donations from other crypto companies and has already received interest from a handful of high-profile investors.
After first pledging $1 billion to the fund, saying Binance would “ramp up that amount to $2 billion in the near future if the need arises,” CZ upped the commitment to $2 billion just hours later.
“Binance allocated another $1 billion [in Binance’s dollar-pegged stablecoin] to the industry recover initiative,” CZ posted to Twitter. “It’s not the end of crypto. Far from it. It’s the beginning of a new chapter.”
The industry recovery initiative is an attempt to inspire or restore confidence in the crypto market in the manner of a central bank following the implosion of FTX and SBF, who was earlier this year branded crypto’s “lender of last resort” before his devastating downfall.
However, the fund has failed to immediately allay fears the contagion of FTX won’t spread to other companies and will continue to drag on the bitcoin price and other cryptocurrencies.
“It’s hard to imagine a scenario where this particular fund does much to stop the inevitable collapse,” crypto market commentator Liron Shapira said via Twitter DM.
“The idea of an insurance fund against a structural, cascading collapse never works. At best it can keep delaying by another day which is the whole way the Ponzi works in the first place—the more money they burn through, the longer they can keep it going.”
The fund has also raised questions of centralization in the crypto market, with Binance both the world’s largest exchange and the industry’s de facto lender of last resort.
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“Obviously, a CZ-led recovery fund won’t be any better than an SBF-led effort to ‘save crypto,'” Cory Klippsten, an outspoken critic of non-bitcoin cryptocurrencies and the chief executive of bitcoin-buying app Swan Bitcoin, said via Telegram.
“All it means is more money pumped into the casino to fuel more greater-fool gambling on inherently worthless non-bitcoin crypto tokens. If CZ succeeds in further centralizing the non-bitcoin crypto industry it will only make it more prone to collapse or regulatory capture.”