DeFi’s existential problem: It only lends money to itself

Remember how the banking system self-destructs every few decades? Now imagine that banks only borrowed money to fund other banks, and you might get a sense of the house of cards that is “decentralized finance” or DeFi.

Cryptocurrencies continue to plunge, with bitcoin hovering around $20,000 for the first time since 2020. The chaos has spread to DeFi: Celsius, a leading cryptocurrency lender with assets of approximately $20 billion, was recently forced to freeze deposit withdrawals. Last week, crypto exchange FTX said it bailed out one of Celsius’ troubled rivals, BlockFi, with a $250 million loan, not long after bailing out crypto broker Voyager Digital

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