The $46 Billion Loss and Its Impact on 4.3 Million Crypto Investors

Blenda Rosen
Blenda Rosen Crypto Currency
3 Min Read

Five major cryptocurrency firms that collapsed last year – FTX, Celsius, Voyager, BlockFi, and Genesis – failed because they offered customers instant withdrawals while their assets were locked up in risky and illiquid investments in an attempt to generate unsustainable returns.

Moreover, because of the ability for customers to withdraw their funds instantly, often available in the palm of their hand via an app, the speed of withdrawals was historic, according to a study by Radhika Patel and Jonathan Rose of the Federal Reserve Bank of Chicago.

The Fed Report

The report presents the collapses in graphic form, giving readers a better idea of the scale and speed with which $46.5 billion disappeared – much of which was never seen again.

According to the report, “it’s not as if customers had lined up in person.”

Or, indeed, like the collapse of Northern Rock in the UK in 2008, when customers also queued in the streets to withdraw their money.

They were attracted by interest yields typically of 7.4% to 9%, but sometimes as high as 17% – all unrealistic in a low interest rate environment.

the 46 billion loss and its impact on 4.3 million crypto investors

Rise and Fall: The Journey of Celsius and Voyager

Celsius and Voyager survived early runs only to succumb later. Both companies were hit by two bank runs. The second runs were smaller, but at that point their balance sheets were so fragile that they collapsed.

Detail that the $7.8 billion run on FTX overshadowed all the others.

But in each case, the percentage of exits were less than 40%

Voyager and Celsius succumbed to the collapse of the stablecoin TerraUSD and the implosion of hedge fund Three Arrows Capital (3AC). They had lent money to 3AC but had not guaranteed the loans, the Chicago Fed said, while BlockFi and Genesis were brought down by FTX.

Small investors were hurt the most. The Chicago Fed says large institutional investors were the quickest to withdraw their money from the failed exchanges, leaving the smaller players holding the pump.

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Blenda Rosen
By Blenda Rosen Financial Writer
Hi there! My name is Blenda, and I'm a Personal Finance and Markets Reporter at California/USA Today. I graduated from San Jose State University with degrees in Business Administration and International Business, and I'm a Certified Public Accountant (CPA) in California. My passion is creating personal finance content that resonates with my readers. I know from experience how daunting managing personal finances can be, and I aim to provide actionable advice that people can use to improve their financial situations. Whether it's budgeting, saving, investing, or retirement planning, I'm here to help my readers make informed decisions about their money. As a financial journalist, I'm always seeking to expand my knowledge and skills in the field. I'm particularly interested in areas like venture capital, startups, fintech, payment methods, and international banking. I believe that staying up-to-date on the latest developments in the industry is crucial to providing valuable insights to my readers.
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