Sam Bankman-Fried is taking a lesson from JP Morgan and the 1907 Financial Crisis by offering liquidity to distressed exchanges. In investing, there i

Sam Bankman-Fried and the 1907 Knickerbocker Crisis

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2022-07-01 19:30:11

Sam Bankman-Fried is taking a lesson from JP Morgan and the 1907 Financial Crisis by offering liquidity to distressed exchanges.

In investing, there is an urge to look to the past and find previous events that look similar to what is going on now as a framework to predict the future. This works well with typical equities because they have hundreds of years of robust market dynamics, so there is a comp for just about everything. In crypto, the comparisons are usually pretty weak, mostly because they don’t capture the same market dynamics. Things have just gotten so fast and complex with advancements like high frequency trading, synthetic assets (gBTC and stETH), complex leveraged financial tools (think crypto native perps, which are open ended options).

All of that being said, I think there is a really good comp between the crypto market right now and the 1907 Knickerbocker Crisis. You’re right, that’s not the only name. Many people call it the 1907 Financial Crisis, the 1907 Banking Crisis, etc. We’ll be exclusively referring to it as the Knickerbocker Crisis, because it’s way funnier. Okay, first a quick history lesson on the Knickerbocker Crisis.