>banks to become even riskier with deposits as they get to keep the profits if their risky bets payoff and get bailed out if they fail
This isn't true, is it? While they do get to keep profits, if the bets don't pay off, the bankers - shareholders, bondholders, employees, executives - all get wiped out (as happened with SI, Signature and SVB). The depositors get bailed out.
They get to keep profits if they win, but lose everything if they don't. No moral hazard, right?
FTX seems to be processing withdrawals normally. For the life of me, I can't understand why journalists love to speculate instead of doing a 5-second search on EtherScan.
Nothing happens in finance because it is "the morally right thing". It's all a game of incentives. Wall Street Banks take disproportionate risks because they are incentivized to do so.
The interesting thing here is how the un-bailout-able nature of ETH affects the players in Crypto. Because ETH can't be magically printed, the VCs have to decide if they will walk away or bail out the retail end users. It looks like they decided to do the latter.
This has happened more than once in Crypto - I can think of the Binance hack, where Binance bailed out the users. OpenSea has also been covering ETH lost by its users who had their Bored Apes stolen because of user mistakes.
I wonder what it is about Crypto that causes large players to cover user loses. I need to learn more.
This is interesting. The hacker did not return the ETH, so the $320M has come from the deep-pocketed investors and VCs behind Solana/Wormhole.
Interesting to note that the VCs are bailing out the retail users here, instead of the usual flow where taxpayers are on the hook for bailing out too-big-to-fail WallStreet banks.