Fabio Panetta: Crypto dominos - the bursting crypto bubbles and the destiny of digital finance
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It is a true pleasure to be back at the London Business School. I did my PhD here many years ago. As soon as I arrived, I found myself immersed in an environment where pioneering academic research and economic analysis were carried out in a friendly atmosphere. In those years I learned not only to be rigorous in doing research, but also the importance of doing one's job with enthusiasm.
I still have vivid memories of stimulating and motivating discussions with my fellow students and the faculty. I am particularly grateful to my PhD supervisor and dear friend, Professor Richard Brealey.
Moving from the past to the future, today I will discuss crypto-assets and the destiny of digital finance.
When I last spoke about crypto finance at Columbia University last April, I likened it to the Wild West and warned about the risks stemming from irrational exuberance among investors, negative externalities and the lack of regulation.
Crypto markets have since witnessed a number of painful bankruptcies. The crypto dominos are falling, sending shockwaves through the entire crypto universe, including stablecoins and decentralised finance (DeFi).
The crash of TerraUSD, then the world's third-largest stablecoin, and the recent bankruptcy of the leading crypto exchange FTX and 130 affiliated companies each took only a few days to unfold. This is not just a bubble that is bursting. It is like froth: multiple bubbles are bursting one after another.
Investors' fear of missing out seems to have morphed into a fear of not getting out.
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