Crypto is not too big to fail, even with help from FTX

Lionel Laurent

“TURTLES all the way down” is a handy phrase for describing how the human mind creatively fills in holes of logic. It allegedly springs from one person’s attempt to justify to the philosopher Bertrand Russell her belief that the world was floating on a giant turtle by imagining another turtle underneath it, and then another, to infinity.

The image fits the world of cryptocurrencies, where a recent tumble in the price of Bitcoin, Ether and other tokens has unravelled a complex chain of stablecoins, lending platforms and trading firms that are blowing up simultaneously. What was once a virtuous circle of locked-up tokens yielding interest that would be reinvested ad infinitum is now a vicious one, as margin calls and liquidations take place at algorithmic speed. Every turtle seems to hide another.