Early in November, after the sudden collapse of the cryptocurrency exchange FTX, Jeremy Allaire, the founder and chief executive of Circle, called this crypto’s “Lehman Brothers moment.” Within the closed world of crypto, that’s hardly an exaggeration; every day seems to bring news of fresh disaster. Yet this has been rather tame compared with the cascade of market meltdowns that followed the collapse of Lehman Brothers.
As credit dried up back then, someone in the corporate bond markets told me he had “stared into the abyss” when his trader threw corporate bonds with a face value of $1 million onto the market, and “didn’t get a single bid back (not even a penny).” Stunned, he staggered back to his office and contemplated the evaporation of everything he’d thought he’d understood.
“I realized my previous assumptions about life, society, the markets, government, etc. took way too much for granted,” he told me.
When I asked that same financier how the crypto meltdown was affecting his business today, he said “zero” — except, he added dryly, the amount of time people were wasting trading jokes about now-disgraced FTX founder Sam Bankman-Fried.
[It may be a more closed loop than people realized. However, the collapse certainly did matter to people inside the loop, and eventually that evaporated paper wealth will matter more broadly. — Ed]
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