It reminds me of the saying that nobody know who is swimming without clothes until the water pull backs at the beach. However, I feel that more people know than what they let on and as people are caught leaning too much, they are put front and center to fail. I still recall the GameStop shorting saga during the pandemic that made some large hedge funds get hit fairly hard. This was an example of a crunch that was somewhat of a surprise as it seemed it was from retail investors; although I was never convinced.
Another I recall was MF Global who happened to leverage too much on European debt and went bankrupt in a weekend despite the bonds never actually defaulting. That was also a surprise as it was an institution led by a former Goldman Sachs executive who was part of a special club they say. However, it feels as if once someone or a Company is caught over-leverage, the sharks attack as they smell the blood. Most never have a chance to rebound.
This year we have seen the same in Crypto which I have to admit has been an embarrassment as the underlying premise of Crypto is to not to need trust and let the protocol do its job. However, we saw the likes of LUNA start a domino effect which has now led to the collapse of FTX and SBF. This has impacted many projects but I do believe it has also strengthened the future of Blockchain as the technology itself has not failed and could only learn and build from here. There is no sustainability for thousands of projects so the failures should continue for some time.
The question is now what other crunches can occur as there must be others vulnerable. It is only a matter of time for those in FTX come out with failures. However, I do not think there will be the last as I think a certain well known billionaire (the richest at one point) has plenty of stock pledge for a large acquisition made recently. Will he be the next to suffer a crunch despite having a viable business? I think we will know fairly soon.
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