In a blog on Thursday, CZ said, “As you all know, the current market conditions are tough. With our position as one of the largest industry players with healthy cash reservesIt is our duty to protect users. It is also our responsibility to help the industry players survive and hopefully thrive. This is the case even if we have no direct benefit or we experience negative ROI.”
According to Zhao, the word “bailout” can have different meanings to different people. And as with most things in the real world, it is not a binary situation.
In the first category, Zhao points out, “not all bailouts are created equal”. He explains different types of “bailouts” for different situations. First, some companies/projects/products are poorly designed (no product-market fit); poor management; bad operation.
Simply put, these are just ‘bad’ projects, and in Zhao’s view “should not be saved.”
However, the dilemma begins when some of these ‘bad’ projects have large numbers of users, which according to Zhao are often achieved through increased incentives, “creative” marketing, or pure Ponzi schemes.
In addition, according to Binance CEOs, in any industry, always have more unsuccessful projects than successful ones.
He hopes that the failures are small, and the successes are big. In his opinion, there is no point in bailing out here.
Zhao said, “Don’t keep the bad companies. Let them fail. Let other better projects take their place, and they will.”
For users falling prey to bad projects, Zhao guides, saying, “Education is the best protection.”
Zhao said, “We (industry players, schools and governments) need to educate people on financial literacy, risk management, diversification, and most importantly, how to evaluate the fundamentals (users, revenue, etc.) need to.”
In the second category, there are some problems that can be fixed. These are projects with little mistakes. In their opinion, they are either too aggressive on spending, have insufficient reserves, or have other trivial problems fixable.
“These projects usually have some good qualities: product-to-market fit, generating revenue in normal market conditions, good business models, decent teams, etc.,” Zhao said.
According to him, projects whose problems can be fixed can be bailed out and later ensure changes can be made to fix the problems that led them to this situation in the first place.
In the third category, he talks about projects that have barely survived but have great potential. “They are cash strapped. They don’t have enough budget for healthy growth now. They can either wait for it, get cash injection, or explore M&A possibilities,” he said. Obviously, all of this makes sense from a potential investor’s or acquirer’s point of view.”
The Binance founder also revealed that his deals team kicked into high gear a few weeks ago. He said, “Many projects have come to us who want to get involved and talk. Again, in real life, these categories are not clear labels. All projects see themselves as a third category, and we have to consider each project as a third category. There is a need to look in detail to make a decision. There is some subjectivity in it.”
Speaking of leverage, according to the biggest cryptocurrency billionaire, there are two types of leverage – fast and slow.
Speaking of rapid leverage, Zhao said you’ll find it on centralized exchanges, often with futures products.
To explain the rapid leverage, Zhao gave an example of a cascading liquidation on BitMEX on March 12, 2020, which caused the price of bitcoin to drop from $8000 to $3000 in a single day. “Very fast,” he said, adding, “However, the position was over within 24 hours. The next day, the markets started to recover, and they never looked back. Exchanges are efficient that way.”
Meanwhile, slow leverage, Zhao said, is “when funds lend to other funds or the DeFi protocol for investment. When one of these is liquidated, affected lenders usually feel the pain or accept it.” It takes a few days or even weeks to do so. These can also have a widespread effect, but the rate of spread is very slow.” He continued, “I believe we have not yet seen the end of these. Fortunately, the more these widespread events occur, the smaller the number becomes and the more spread.”
So far, Zhao believes that the blockchain industry has shown tremendous resilience.
If two years ago, on March 12, 2020, you told me that bitcoin would be worth $20,000 in June 2022, he would have said, “I would be very happy.”
“So, why not zoom out for a more balanced perspective? With that in mind, let’s take the situation as an opportunity to reiterate proper risk management and educate the public,” Zhao explained.
Binance crypto exchange is the largest exchange in the world in terms of volume. On average, the daily volume on Binance is around 2 billion, while there are over 1.4 million transactions per second. Overall, the 24-hour trading volume on the Binance exchange is approximately $76 billion, with a registered user base of 90 million. There are over 600 cryptocurrencies listed on Binance and it has the lowest transaction fees of less than 0.10%.
BNB known as Binance was launched in 2017 and has emerged as the largest cryptocurrency exchange globally based on daily trading volume. With its unique ecosystem of decentralized, blockchain-based networks, BNB is an integral part of the successful functioning of many Binance sub-projects.