The bankruptcy of FTX is expected to trigger more failures among cryptocurrency companies but whether those failures spill into the general economy is still undetermined.
FTX Trading may pull several other firms into bankruptcy. The Wall Street Journal reported Tuesday thatThe firm paused withdrawals, stating it could no longer operate its business as usual due its "significant exposure" to FTX.
Additional crypto bankruptcies would not be a surprise. Several firms, including crypto hedge fund Three Arrows Capital and crypto lenders Celsius Network and Voyager Digital previously went under. Lipson noted, for example, with the 2008 bankruptcy of investment bank Lehman Brothers, the Federal Reserve and other regulators were able to map transactional relationships to have a general sense of the financial fallout. Employees of Christie's auction house manoeuvre the Lehman Brothers corporate logo i London, Sept. 24, 2010.
Lipson notes Lehman was very important to the financial economy and the financial economy, in turn, was very important to the real economy. It’s unknown whether crypto plays similar role, as its influence has not been tested until now. "We just don’t know enough about the FTX transactions to know whether there will be analogous ripple effects."while FTX is in the billions. The firm’s bankruptcy petition lists estimated assets of $10 to $50 billion, with liabilities of the same amount.
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