Now Loading



The crypto industry is now facing a debt crisis and a crisis of trust is not the same as the one that plagued Wall Street in 1907. Today, 29-year-old businessman and billionaire Sam Bankman-Fried, also known as the SBF, has begun to step in. in a bankruptcy collection or borrowing from troubled businesses. Presenting his inner Morgan with the Warren Buffett brand, Bankman-Fried is greedy while others fear - with the added benefit of boosting confidence in volatile investors. Last Tuesday, his firm FTX signed a $ 200 billion term sheet with crypto BlockFi lender, a day after announcing the acquisition of the Canadian crypto exchange Bitvo. A few days earlier, he redeemed another crypto lender, Voyager, with his hedge fund, Alameda Research, doubled a few days later with a $ 250 million facility from FTX.

John Pierpont "J.P." Morgan, Sr, Portrait, Washington DC, USA, circa 1912

Now FTX is rumored to be Robinhood's broker-dealer for problems, which became famous (and no doubt infamous) for its role in the meme-stock boom. On the day the rumors began to fly, Robinhood's stock had to stop as it reached “the limit” as stocks rose, suggesting that markets take any Bankman-Fried engagement seriously. The company's denials did not dampen the rumors, which spread over speculation about what the SBF company would bid for next.

Notably, a few weeks ago, Bankman-Fried was rumored to be a white Terra Luna expert and stablecoin UST, who at the time had removed the U.S. dollar. Probably in the same way J. Pierpont Morgan concluded that the Knickerbocker Trust was more than a reserve, the SBF refused when offered the opportunity to provide rescue funds in Luna or UST. Soon UST and Terra Luna fell. Lord, really.

The fact that markets are investing heavily based on individual interests reveals how newborn crypto is still. Wall Street has long been accustomed to expecting relief when things get worse. This shows the great role of government and the big banks in our economy. In traditional finance, even large commercial banks, corporations, and very wealthy citizens are small compared to the power and influence of the Federal Reserve and the U.S. government. They are the ultimate lenders and the source of the economic crisis: When the Financial Crisis came to a screeching halt and when COVID crippled the economy, the Fed and Congress were there to rescue markets. Even if banks have worked together in modern times to stabilize markets using their resources, it is often the Fed's invisible trading agreement, as in the case of the hedge fund Long-Term Capital Management in 1998. .

Crypto, on the other hand, alone, paves the way for a bold new world in which financials are fragile, digital, and peer-to-peer, while releasing some of the pain of the past.

The bank by any other name smells like iffy

The most troubled companies in the crypto industry are intermediate mediators who have found themselves struggling to meet their debts. In contrast, many DeFi (decentralized finance) contracts, which automatically connect market participants who are willing to use smart contracts, are not affected by performance, even though they have seen their assets (known as total lock or TVL) and user activity declining. very quickly.

Therefore, the problem is not so much crypto fragmentation but too much focus between corporate mediators, their internal strategies and financial health is hidden from the public. The difference with DeFi, where information and code are obvious for testing and verification, is obvious. For example, we know that DAI, the popular stablecoin, is overcollateralized because all of its code base and wallet standards are in the public domain, "chains" as it were. DeFi will survive this crisis, but medium-sized crypto banks and other shadow lenders may not be.

What now?

The government does not seem to care about the financial health of any single crypto company, and at the moment regulators are not concerned with any kind of spillover from crypto to financial markets. To be clear, the crypto industry has gone through tough times and will survive this, and we expect it to come out stronger than ever. But in the meantime, there may be some damage to the catch.

Shareholders, debtors, and many employees of these troubled companies will lose out if their situation does not improve. Bankman-Fried and other people and companies with strong interest have deep pockets but face the same challenges that many in the economy face — high inflation, inflation, and more. Prepare for a few difficult months.

Source: yahoo

How do you feel about this blog?


Leave a Reply