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As one of the leading players in the industry, Binance has a “duty” to protect users and help the rest of the industry survive. However, there are “bad projects” that should not be saved, said the head of the exchange, Changpeng Zhao.
“As you know, current market conditions are challenging. As one of the largest players in the industry with healthy cash reserves, we have a responsibility to protect users. We also have a responsibility to help industry players survive and thrive. This is true even if there is no direct benefit to us and we face negative ROI“, he wrote.
On June 19, a similar opinion was expressed by the head of the FTX cryptocurrency exchange, Sam Bankman-Fried. Speaking on National Public Radio, he said his company “must intervene, even if it is at a loss” to stop the “contagion” of the industry.
Zhao noted that some companies and products are poorly designed, managed illiterately, and operated with errors. According to him, these projects will be replaced by more successful ones, and therefore there is no need to save them.
“In short, these are just ‘bad’ projects. They should not be rescued. Unfortunately, some of them have a large number of users, partially acquired through inflated incentives of ‘creative’ marketing or pure Ponzi schemes,” he added.
Earlier, the Commissioner of the US Securities and Exchange Commission Hester Pierce said that participants in the cryptocurrency industry should not support projects that have found themselves in a difficult situation due to negative phenomena in the market. She explained that it only hurts the industry.
According to Zhao, the best protection for users is education. He believes that industry participants and government organizations need to launch initiatives aimed at improving the financial literacy of the population.
The head of Binance stressed that there are many problematic projects in the industry, but the shortcomings of some of them can be corrected. According to him, such players “can be taken on bail.”
He added that the same goes for products that “barely survive but have potential.”
Zhao also touched upon the topic of leverage in the cryptocurrency industry. He noted that due to the impact of the latter, the crisis of the industry has not yet been exhausted.
“I believe that the key difference between the current bear market and the events of 2018 is that there is a lot of leverage in our industry right now,” the head of Binance explained.
According to him, leverage can be divided into two categories – fast and slow. The first includes margin positions on centralized exchanges, which are quickly eliminated in the event of market shocks.
To the second, Zhao ranked the credit positions of large industry participants such as funds and DeFi protocols.
“When one of them is liquidated, it usually takes several days or weeks for affected creditors to realize and accept the pain. It also has a cascading effect, but the speed of its propagation is much slower. I believe that we have not yet seen the end of these problems,” he wrote.
Recall that in June 2022, Zhao stated that the crypto winter is a suitable time to hire new employees and further develop the business through various acquisitions.
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