Matt Levine, Columnist

FTX Creates Crypto Contagion

Genesis, the FTX balance sheet, futures clearing, and performance coaching.

November 16, 2022 at 7:17 PM UTC

Matt Levine is a Bloomberg Opinion columnist. A former investment banker at Goldman Sachs, he was a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals for the 3rd Circuit; and an editor of Dealbreaker.

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I asked yesterday if there has ever been a liquidity crisis at a crypto firm. I didn’t really get any answers.1 But you could imagine how it might go:

In this scenario, the lender is perfectly solvent — the money is safe and will be paid back in full, reasonably soon, leaving more than enough to repay depositors — but illiquid. It is a classic normal bank run.