FTX’s bankruptcy is causing the financing plumbing of the crypto industry to seize up, and the fallout is quickly spreading to other high-profile companies, including Genesis and Gemini.
At the center of the meltdown is a business known as crypto lending, where firms lure customer deposits of crypto by offering high yields and lend money out to big traders looking to make highly leveraged bets.
When times were good, this system helped supercharge crypto markets. And lenders thought they were safe because in theory they could quickly seize crypto assets borrowers used as collateral. But with the implosion of FTX, a major borrower from these lenders via its Alameda Research trading arm, faith in the system is quickly unraveling.
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