You need to squint hard to see a silver lining in the crypto crash.
Nearly $2 trillion, or two-thirds of the sector’s value, has disappeared. Layoffs and hiring freezes are hitting young companies. And a deadly cocktail of too much leverage and too little liquidity continues to punish companies and funds that wrongly assumed the worst could not happen.
Yet where there’s crisis, there’s opportunity.
Billionaire crypto boss Sam Bankman-Fried has emerged as the man of the moment, using his companies to backstop other players with hundreds of millions in credit. Other executives also rightly see ripe opportunities to consolidate power and gain ground on competitors.
But Bankman-Fried’s exceptional actions have sparked a debate: Is he a white knight? A robber baron? Or something in between?
The crypto world is repeating decades of financial mistakes all at once, creating a field day for financial history buffs who have drawn comparisons to Lehman Brothers and the dot-com crash.
Bankman-Fried’s bailouts have forced amateur historians to look further back, all the way to 1907, when J.P. Morgan used his wealth and clout to help backstop a collapsing banking system.
The irony is that the 1907 debacle helped give rise to the modern, regulated financial system—with insured deposits, a central bank and other protections to stem the kind of panic that threatens decentralized finance today. Bankman-Fried’s bailouts have also provided fodder for critics who say that crypto banks…
