The previous two crypto bubbles, in 2013 and 2017, both quietly deflated without much fuss. The 2021–2022 bubble is collapsing with lots of noise and explosions!
Fear spreads by contagion. There have never been enough dollars to cash out the paper wealth in crypto. So the whales — the largest crypto holders — are swinging their weight around to try to cash out before you can.
On Monday, Amy wrote about Solend. A Solana SOL whale deposited “$170 million” (face value) of illiquid SOL into Solend as collateral on a loan of $108 million in the USDC and USDT (tether) stablecoins, and disappeared. It wasn’t a loan — it was an exit.
The whale exited at least twelve days before Solend realized there was a problem — when SOL dropped in price and the interest on the loan came due. Now the depositors can’t get their USDC out of Solend. And Solend can’t sell off the SOL without crashing the price.
Solend quickly created a DAO, and passed two proposals to just take the SOL the whale had left behind. They just passed a third DAO proposal, to limit the size of loans to $50 million in future. This doesn’t stop someone from taking out multiple loans.