Fortunately, there are no "real" banks in this crisis!

Looking at the bankruptcy filing documents of encryption platforms FTX, Celsius, VoyagerDigital and hedge fund ThreeArrows, people will not see any large banks from their biggest creditors. Although the information provided by bankruptcy documents is not comprehensive, these documents show that many of the largest creditors are only customers of these platforms or other money companies.

In other words, the cryptocurrency industry actually runs in a closed loop from beginning to end-it is deeply related in this closed loop, but it has never established a clear connection with traditional finance. This explains why an asset class once worth about $3 trillion lost 72% of its value, and famous intermediaries in the industry went bankrupt one after another, but there was no obvious spillover effect on the whole financial system.

GaryGorton, an economist at Yale University, and JefferyZhang, a law professor at the University of Michigan, wrote in a forthcoming paper, "Encrypted space is basically an internal cycle. Once cryptobanks get deposits from investors, these companies will borrow money and even trade with themselves. They have little interaction with companies related to the real economy. "

Without the "Lehman crisis" in these currency circles this year, in view of the increasing pressure on regulators and bankers to accept cryptocurrencies, the situation may be different in a few years.

Fortunately, the rapid collapse of the encryption industry in the past few months can effectively prevent this. On the contrary, like every cloud has a silver lining, it nipped a wider crisis in the bud.

How is the "implosion" of the currency circle interlocking?

For a long time, cryptocurrency has been packaged as an unregulated, anonymous and well-circulated asset, which can easily replace traditional banks and currencies in the future. However, its fast-growing ecosystem actually looks like a banking system-accepting deposits and issuing loans.

Gordon and Zhang wrote, "Encrypted lending platform is actually equivalent to reengineering banking business. If an entity is engaged in lending business, it is economically equivalent to a bank, even if it is not labeled as a bank. "

Just like the banking system, the encryption industry is leveraged and interrelated, and is easily affected by bank runs and panic contagion.

This year's currency crisis actually began in May, when the so-called stable currency Terrausd (a cryptocurrency aimed at maintaining a constant value against the US dollar) collapsed, because investors lost confidence in the assets it supported, and this currency was called Luna. Rumors about the loss of Celsius on Terra and Luna led to its rapid operation. In July, Celsius filed for bankruptcy protection.

Sanjian Capital, an encrypted hedge fund that once invested in Luna, also had to be liquidated. The loan loss of Sanjian Capital and the panic contagion of Celsius forced Voyager, an encryption platform, to declare bankruptcy.

At the same time, FTX affiliates AlamedaResearch and Voyager lent money to each other, and Alameda and Celsius also exposed each other. In the end, it was the connection between FTX and Alameda that caused FTX, one of the five largest encryption platforms in the world, to "crash" overnight.

Like many platforms, FTX has issued its own cryptocurrency FTT. After being found to be Alameda's main asset, Qian 'an, another major encryption platform, said it would throw out its own FTT, which in turn became the beginning of a series of mine explosions in FTX.

At present, the "Lehman crisis" in this currency circle is still spreading in the encryption industry. GenesisGlobalCapital, another cryptocurrency lending institution, has exposure to Sanjian Capital and Alameda. After the collapse of FTX, the company has suspended withdrawals and said it will seek external cash.

In addition, according to media reports, BlockFi, an encrypted lending institution with business ties with FTX and Alameda, is also preparing to file for bankruptcy.

In a report of June+10, 5438, the Financial Stability Regulatory Commission of the United States explained the interrelation of the "cryptocurrency universe" with a chart.

It's a good thing that the coin circle bursts early, right?

Many currency investors-from immature retail investors to large venture capital and pension funds-suffered losses in this year's currency crisis, and some even completely changed their lives.

However, these losses are fundamentally different from crisis events that threaten the solvency of major lending institutions and the stability of the broader financial system.

Although the banking system may not be unscathed in this round of currency crisis-it does not rule out that some banks also face some loan or investment losses. Some banks also provide custody and payment services for cryptocurrency companies and hold their cash, such as supported stable coins. Some small banks serving cryptocurrency companies have been hit by the outflow of large amounts of deposits.

However, in any case, the traditional financial sector has not established too many close ties with the encryption industry, because unlike national debt, mortgage or commercial loans or even derivatives, cryptocurrency has almost no effect in the real economy.

Bitcoin is still not regarded as a reliable and convenient means of payment to a large extent. The much-hyped encryption innovations, such as the stable currency DeFi, mostly only promote encryption speculation, rather than beneficial economic activities.

The notoriety of the currency circle has long deterred mainstream financiers such as Buffett and JamieDimon, CEO of JPMorgan Chase, and made regulators deeply uneasy about banks' participation in cryptocurrencies.

Perhaps, without this year's thunder drama, this situation will change sooner or later-not because cryptocurrency is becoming more and more useful, but because it has created so many profits for speculators and the ecosystems they support, which is bound to make "greedy" Wall Street capital addicted to it.

But now, influenced by bankruptcy and scandal, it is obvious that cryptocurrency industry needs to wait longer-perhaps forever-before it can be fully accepted by traditional banks.

From this perspective, the explosion of the currency circle may be a blessing for the long-term fate of the global economy and financial system!