Ethan Lou: Lender meltdown is making everything about the crash worse. Read on.
It might be time to do something about these lenders, which are at best a source of major risk and at worst just a broken model.
The fund 3AC, it turns out, was also simultaneously an investor in BlockFi, which seems to complicate things. To get by, BlockFi had to get a bailout, a credit facility of up to US$400 million from a more successful crypto firm, the Bahamas-based FTX. There’s been a byzantine web of lending, borrowing and investing in the crypto world. The result is a lot of interdependency and, therefore, a lot of risk across the system.
Sometimes, it’s hard to remember exactly who is lending how much to whom or investing in what. It’s just one big calamitous wreck. One bright spot, though, are the bailouts coming from the likes of FTX — it is not the only successful company trying to shore up the sector. While scooping up cheap assets and consolidation can create issues in their own right, they do show that stability and crypto are not mutually exclusive.
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