One of the reasons for the creation of the Federal Reserve was the Panic of 1907 when the U.S. economy was on the brink of a collapse due to a banking crisis. In fact, much of US history was marked by spectacular booms followed by devastating busts with bank closures a routine occurrence where depositors couldn't access their money.

Often, panic would fuel fear which made the collapse of a bank inevitable as any bank would fail if depositors pulled their money all at once. However, these events led to the creation of institutions like the Fed and FDIC to create more confidence in the banking system. And, these measures have certainly been effective in this goal.

In 1907, these institutions weren't present just like the crypto markets today, Back then, JPMorgan (JPM  ) (the original) stepped up by pledging some of his own fortune to shore up the banking system. He also convinced his fellow financiers to do the same. This restored confidence and ended the crisis.

It also created the roadmap for what the Fed does during crises which are injecting tons of liquidity into the system to ensure that the banking system can keep functioning. Most of the money remains as reserves rather than actual money that flows into the economy, similar to how JPMorgan and its peers patched up balance sheets and prevented a liquidity crisis from turning into an insolvency crisis.

Today, something similar is potentially happening in the crypto markets as the two heavyweights - FTX and Binance - are rumored to be offering lines of credit to crypto lenders that have been forced to stop withdrawals. These lenders would collapse like any bank if everyone was to withdraw at once. Yet, it's understandable that depositors would want to withdraw their money given steep losses and the potential that their entire deposit could be wiped out.

A liquidity injection from FTX would allow these companies to meet these withdrawals without having to liquidate their investments. In essence, it prevents a downward spiral which would also adversely impact FTX.

Overall, it's a sign that the crypto market is maturing. It's also ironic because these developments are a far cry from the original promise of crypto which was about decentralization and escaping the influence of financial institutions. It's a reminder of the aphorism - there are no atheists in a foxhole.