Crypto lending isn't dead — but it will have to evolve, nic__carter writes.
CoinDesk columnist Nic Carter is partner at Castle Island Ventures, a public blockchain-focused venture fund based in Cambridge, Mass. He is also the co-founder of Coin Metrics, a blockchain analytics startup.
New financial instruments are created. Trading firms start trading these instruments on margin. A massive firm blows up with a series of leveraged trades, causing losses to its creditors. The main partners at the firm flee the country. Panic follows, kicking off a liquidity crisis and a wave of bank runs. Major lending institutions go bankrupt and credit contracts rapidly.
Colonial planters needed credit, and British merchants wanted commodities to sell to more markets. A credit boom resulted, as did a speculative fervor among traders in London and Europe. Shares in the British East India Company rallied sharply in 1772 as traders heaped on margin to trade with.
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