Samson Mow recently stated that the crash of crypto lending platforms is good for Bitcoin and the crypto ecosystem. Samson Mow defended this stance on Twitter three days ago. The Jan3 CEO believes that Bitcoin investors will learn a big lesson from the recent fall of lending and investment platforms.
Samson Mow tagged the investment of these companies as investments made in “shitcoins.” He further believes investors who want to take higher risks should take the risks directly rather than putting their assets in the hands of these companies.
Mow went on to criticize the earning framework of lending and investment companies. The institutions accept Bitcoin, Ether, and USDT from investors. The funds collected are then used to invest in more volatile assets. In the end, if the investment goes well, the protocol gives investors a portion of the profits made. However, if the market turns sour, investors usually lose all or part of their funds.
Crypto Lending Platforms Keep Crashing
Yesterday, Vauld, a platform for crypto lending and borrowing announced that it will pause withdrawals. According to the company, there has been an imbalance in the withdrawal rate relative to the deposit rate. The company now faces liquidity issues due to the pale condition of the crypto market.
A few days back, BlockFi faced its own kind of woe. The company resorted to being acquired by FTX, a much larger crypto company due to the huge losses it had and an inability to keep up with the unfavorable market conditions.
For other institutions like the Celsius network and Three Arrows Capital, the distress has been greater. Both companies have lost millions to liquidation already. The Celsius network paused withdrawals last month while Three Arrows Capital has defaulted on its huge debt.
Perhaps this series of events will be an eye-opener to crypto investors. Investors will now exercise caution when investing with crypto lending platforms.
