The cryptocurrency industry is barely more than a decade old, but we've already lived through multiple cycles of booms and busts. And, it seems each cycle outdoes the previous one in terms of intensity and magnitude.

Currently, we are in another major bear market for cryptocurrencies with major coins like bitcoin and Ethereum down more than 60%, while smaller and more speculative coins are down even more. Overall, the total value of the cryptocurrency industry has sagged from over $3 trillion at its peak to under $1 trillion at the June lows.

There are also some parallels to the previous cycle in terms of initial coin offerings (ICO) which contributed to the speculative hype and drove inflows into the market. The initial batch was so profitable that these returns attracted more inflows, and these gains were recycled into new projects, leading to even more upward pressure.

A similar thing played out with Defi protocols and gaming tokens during this cycle. There was a combination of constant inflows from retail and institutional investors, and the profits and gains from previous transactions were recycled back into newer projects. And, this was abetted by 'staking' which meant that customers could borrow against their coins.

Another element is that the greed and hype led to tremendous amounts of leverage and fraud in an interconnected manner. Crypto lenders advertised high rates of returns for depositors. They invested in riskier projects in order to earn these returns. But, the merry go round ended when these projects went bust which meant that depositors' money vanished, and many of those 'staking' their coins were liquidated.

3AC

As a result, we've had multiple blowups with the likes of Terra, Celsius, and BlockFi. Now, we also have the bankruptcy and upcoming liquidation of 3 Arrows Capital which was actually considered to be the 'smart money' in the crypto space.

This was more of a VC firm that managed $3 billion in assets and was an early investor in ethereum and avalanche. Like Long-Term Capital Management which also blew up in the 90s despite having multiple Nobel Prize winners on staff and an elite Wall Street pedigree, 3AC simply took on too much risk with their deposits at lending platforms that went bust.

The story has drawn wider interest as it seems the firm is essentially 'ghosting' as it simply stopped talking with lenders about their margin obligations. The firm's founders are also apparently on the lam and have gone from heroes in the crypto community to subjects of mockery.