Empire

The State Of Crypto Lending | Membrane Labs

33 snips
Mar 17, 2025
Guest
James Roth
Guest
Carson Cook
Carson Cook and James Roth, co-founders of Membrane Labs, delve into the current state of crypto lending. They explore the impacts of past failures like Terra/Luna and the lessons learned about risk management. The duo discusses how traditional financial institutions are cautiously eyeing the crypto lending landscape amid regulatory uncertainties. They highlight the differences between decentralized finance and traditional lending, while also predicting a shift towards more secure and efficient practices in the evolving market.
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INSIGHT

Leverage-Driven Crypto Cycles and the 2022 Crash

  • Crypto lending markets are driven by high leverage from both retail and institutional investors, leading to volatile price swings.
  • The 2022 crash was exacerbated by interconnectedness, poor underwriting, and operational mismanagement.
ANECDOTE

Interconnectedness of Crypto Lending Players

  • During the last cycle, lenders like BlockFi and Celsius aggregated retail capital, often lending it to entities like Genesis and Three Arrows.
  • Three Arrows Capital's collapse had a systemic impact due to its widespread involvement in the lending market.
INSIGHT

The Domino Effect of the 2022 Crash

  • The collapse of Terra Luna triggered a cascade of failures due to interconnected lending and a loss of confidence.
  • The lack of robust risk management practices and the venture-backed nature of many lenders contributed to the severity of the crash.
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