A Retrospective on the Crypto Runs of 2022

Radhika Patel and Jonathan Rose
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Radhika Patel: https://www.chicagofed.org/people/p/patel-radhika

Chicago Fed Letter, 2023, vol. no 479, 7

Abstract: In this article, we describe the spectacular collapse of several crypto-asset platforms in 2022 following investment losses and widespread customer withdrawals. These platforms offered and marketed to customers a number of products and services related to crypto-assets, including high-yield investments, trading, and custody services. The platforms were subject to run risk: They allowed customers to withdraw funds on demand while using those funds to make illiquid and risky investments, in part to generate the high rates of returns promised to customers on investment products. In one of the most severe episodes, customers withdrew a quarter of their investments from the platform FTX in just one day, according to our analysis of data from its bankruptcy filing. These episodes together formed a classic financial crisis in a novel setting that has raised urgent policy concerns.

Keywords: financial; economics (search for similar items in EconPapers)
JEL-codes: G01 G23 (search for similar items in EconPapers)
Date: 2023
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https://doi.org/10.21033/cfl-2023-479

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