Bitcoin has no lender of last resort for those who take undue risks. Bitcoin’s recent leverage cleansing is par for the course for a truly scarce asset.
The below is a direct excerpt of Marty’s Bent Issue #1228: “Deleveraging bitcoin before the world de-levers.” Sign up for the newsletter here.
The bitcoin market is in the process of going through a great deleveraging event. The process started last month when the Luna-Terra ponzi blew up spectacularly and was forced to liquidate approximately 80,000 bitcoin. The process accelerated last week when Celsius, Three Arrows Capital, and Babel Finance proved to be overextended in exotic high-yield token projects that crashed hard and, in the case of Babel, lending to those overextending in these projects.