The crypto industry is in big trouble. Not only has Sam Bankman-Fried’s empire collapsed along with several other crypto projects, the contagion has spread to Genesis Global Capital, which suspended withdrawals last month. Now Tether, the largest stablecoin, and Binance, the largest crypto exchange, are facing questions about their stability. The Wall Street Journal reports that Tether (whose internal details are largely a mystery) has been lending its coins to customers, increasing the risk on its balance sheet. It also reported that despite recent disclosures, Binance “has a long way to go before it discloses enough meaningful information to give investors confidence in its future, accounting and financial specialists say.”
In this video, Prospect managing editor Ryan Cooper explains how crypto has recapitulated all the financial problems that caused the crash of 2008—risky speculation, excessive leverage, and systemic vulnerability to a crisis of confidence. Watch the video:
