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Nexo co-founder and Managing Partner Antoni Trenchev believes the crypto sector is not on the verge of a collapse similar to that witnessed in 2008 with the then financial services giant Lehman Brothers.
Trenchev made the comment during an interview with Bloomberg on Thursday. He told “Bloomberg Surveillance Early Edition” that despite the current price crash across the cryptocurrency market, the industry wasn’t experiencing a ‘Lehman moment.’
He noted that this is unlikely even with the sad reality that has hit Terra (LUNA) and the stablecoin TerraUSD (UST). His views also come amid a ‘rescue plan’ for the algorithmic stablecoin, with negative sentiment from the stablecoin’s de-pegging having seen Bitcoin (BTC) plunged to lows of $26,500.
What happened with the Lehman Brothers?
In September 2008, the financial services giant Lehman Brothers filed for bankruptcy, deep in the middle of a financial crisis that had engulfed the housing market, and within days, was off the map in what remains the largest corporate bankruptcy in the US.
And here is why some would look at that ‘moment’ as a reference point.
As the housing market crash deepened, toxic subprime mortgages and years of failed regulatory oversight pushed Lehman into seeking equity financing to stay afloat. But that failed, credit defaults mounted, and takeover bids too hit a snag. The only avenue out for Lehman was to file for bankruptcy, with its stock plummeting more than 93% as the wreck became unsalvageable.
Elsewhere, spooked investors withdrew hundreds of billions of dollars from money markets, sending the global financial system to near collapse and forcing bailout plans.
Bitcoin was born right out of this crisis.
Why this is not a Lehman moment
The crypto crash has wiped billions of dollars off the total market capitalisation of the crypto sector, with many of the industry’s billionaires’ net worth plummeting overnight.
For instance, Bloomberg data shows Binance CEO Changpeng Zhao, Galaxy Digital Holdings CEO and founder Mike Novogratz and FTX founder Sam Bankman-Fried have all seen their net worth fall by billions of dollars in the past week.
Asked if such a crash is an indication that the crypto market was seeing a crash similar to the 2008 financial markets episode, Trenchev said he doesn’t think it is.
I don’t think it is a Lehman moment. You know, [this is] obviously not the prettiest of episodes, but we get one to two of those per year.”
He then mentioned the 2021 price crash after China’s crackdown on Bitcoin and the 50% drawdown recorded in 2020 as a result of the COVID pandemic.
He also noted that this year, despite the massive sell-off pressure, there has been a “limited number of sellers” compared to 2020 and 2021. This, he explained, is observable on the Nexo platform whose close to four million retail users and significantly large institutional clientele, have not sold Bitcoin as was recorded in the previous sell-offs.
BTC pressure down to Terra ‘unwinding’
On what is adding to the downside pressure, the Nexo chief noted:
I think the pressure that Bitcoin is seeing right now is the unwinding of the huge BTC reserves that the Terra Foundation had accumulated. And this is what is putting pressure on the market.”
So, what does he think will happen next for Bitcoin?
According to Trenchev, Bitcoin’s dip below $30k means the next main support level could be around $25k. If this doesn’t hold, a revisit to the 2017-2018 bull market high of $20k is possible.
Trenchev also talked about the “rescue plan” for UST, noting that his firm was not part of the mission. However, the platform was open to joining up with others in subsequent plans should the firm’s board approve of it.
The post Crypto is not having a ‘Lehman moment’, says Nexo’s Trenchev appeared first on Invezz.
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