Crypto giants are ready to save the day and prey on the weak

When internet stocks crashed in the dot-com bubble, it took many years for investors to touch internet stocks again — if at all. Crypto is going through a similar experience, and crypto giants are here to save the day.

Crypto saviors or opportunists?

Sam Bankman-Fried (SBF) is the founder of FTX Exchange, an industry leader and is now the savior of several crypto platforms. Through his crypto trading firm Alameda Research, SBF provided crypto platform BlockFi with a $250M loan and Voyager Digital a $500M loan.

Crypto platform Nexo ($NEXO) also wants to lend a helping hand to struggling crypto companies. After Celsius paused withdrawals, Nexo offered to buy its assets and take on its debt and customers — which Celsius rejected.

• Nexo released a post saying, “the crypto space is about to enter a phase of mass consolidation.”
• Nexo brought on Citibank for acquisition advisory and has reached out to several companies to help “alleviate financial pressure.”

Whether seen as saviors or opportunists, those in a strong financial position can take advantage of a weak market.

The world’s two largest crypto trading platforms, Binance ($BNB) and FTX ($FTT) are cash-rich, ready to expand and eager to take out their competition.

The crypto exchange wars heat up…

Stock market fees took decades to reach zero, but crypto fees are taking a shorter path. This week, Binance.US, the American affiliate of Binance, began offering zero-fee Bitcoin trading with plans to expand into other tokens.

Coinbase (NASDAQ:COIN) controls the majority of the U.S. crypto trading market but is a tiny player globally, with a 4.8% market share in May, down from 7.8% last November.

• A race to zero fees will hurt Coinbase — which makes ~90% of its sales from trading fees.
• According to Kaiko, fees on FTX can be as low as 0.07%, while Coinbase can charge upwards of 4%. That’s a long way to drop.

And FTX isn’t stopping with Coinbase. FTX is launching stock trading in the U.S. and is reportedly eyeing acquisitions in the space. Robinhood, watch out.

Investors: The big get bigger

The pattern has been seen throughout history in emerging sectors (i.e., railroads, automakers, internet). A boom leads to many competitors and eventually a bust that consolidates the industry into a few winners.

The Bank of England Deputy Governor Jon Cunliffe compared the current crypto crash to the dot-com bubble.

• In the dot-com bubble, the tech sector went through one of its biggest crashes and the companies that survived “turned out to be dominant players.”
• Like then, today’s survivors could become tomorrow’s “Amazons and eBays.”