Over the past few years, a number of companies have attempted to act as the cryptocurrency equivalent of a bank, promising lucrative returns to customers who deposited their bitcoin or other digital assets.
In a span of less than 12 months, nearly all of the biggest of those companies have failed spectacularly. Last week, Genesis filed Chapter 11, joining Voyager Digital, Celsius and BlockFi on the list of companies that have either filed for bankruptcy protection or gone out of business.
The collapse is reminiscent of the 2008 financial crisis, but on a much smaller scale. There are no worries that the collapse of these crypto firms will impact the broader economy. Demand for crypto deposits was so high, firms were willing to pay a yield of 10% of more on depositors’ crypto holdings. BlockFi, another crypto lender, turned to then-crypto giant FTX and its founder Sam Bankman-Fried for a rescue. Bankman-Fried gave BlockFi a financial lifeline, one of several moves that earned Bankman-Fried plaudits as a savior or financial backstop for the crypto industry.
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