Summary: Binance CEO Changpeng Zhao (CZ) criticized bailouts for “bad” crypto projects and provided a series of classifications for different types of bailouts in a note issued on Thursday on the crypto exchange’s website.  He also took to Twitter to publicize his post.  This summary provided by Zhao comes as rival crypto exchange FTX has bailed ...

Binance CEO Changpeng Zhao (CZ) criticized bailouts for “bad” crypto projects and provided a series of classifications for different types of bailouts in a note issued on Thursday on the crypto exchange’s website. 

He also took to Twitter to publicize his post. 

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This summary provided by Zhao comes as rival crypto exchange FTX has bailed out several large crypto companies including providing BlockFi with a $250 million revolving line of credit. 

The CEO of the largest cryptocurrency exchange in terms of daily volume categorized bailouts into three separate categories. The first category  Zhao gave was poorly designed, poorly managed and poorly operated companies and emphasized these companies should not be bailed out. However, he sympathized with users who were attracted to those projects. 

“In short, they are just “bad” projects,” Zhao said. “These should not be saved. Sadly, some of these “bad” projects have a large number of users, often acquired through inflated incentives, “creative” marketing, or pure Ponzi schemes.” 

The second category for Zhao was companies with small fixable problems with a good overall outlook and situation. 

“These can be bailed out and subsequently ensure changes are made to fix the problems that led them to this situation in the first place,” the Binance chief said. 

The last category was barely surviving projects with great potential. He described these projects as companies low on cash with huge potential, but at a crossroad deciding whether or not to wait it out or seek a cash injection from investors. The problem with this third and final category is that the vast majority of small companies believe they fit into this category. Most of them claim they have huge potential, but need more cash in order to see their company realize their full potential. 

The CEO noted that deciphering which companies actually fit into this category is subjective as these companies seek investments without a clear label saying they are in CZ’s category three of bailouts. 

CZ concluded his post by offering some perspective for investors and enthusiasts amid extremely tumultuous crypto times.

“If two years ago, on March 12, 2020, you told me bitcoin’s price would be $20,000 in June 2022, I would be pretty happy,” Zhao said. “So, why not zoom out for a more balanced perspective? With this in mind, let’s take the situation as a chance to reiterate proper risk management and educate the masses.” 

Author: Tyler Irvin