Why Did BlockFi Fail?
The $18B Crypto Lender That Collapsed With FTX
📜 What Happened
BlockFi was one of the biggest names in crypto lending — users deposited Bitcoin and earned high interest rates, and BlockFi lent the crypto out to institutions and hedge funds. It was valued at nearly $5 billion in 2021, with $18 billion in assets under management, backed by firms like Bain and Tiger Global. The model was a giant, unregulated margin loan: BlockFi lent aggressively to risky counterparties — including Alameda Research, FTX's sister firm — and pledged collateral that was itself crypto. When FTX collapsed in November 2022, the contagion hit BlockFi instantly: its exposure to Alameda and the falling prices of its collateral wiped it out within weeks. BlockFi filed for bankruptcy days later, users' withdrawal requests frozen, and billions in customer funds were locked in a years-long legal battle.
☠️ The Fatal Mistake
Lending depositors' assets to the riskiest counterparties in the same fragile ecosystem, with leverage so interlinked that one failure took down the whole chain.
🧠 The Lesson (Free for You)
If your business depends on the health of a fragile partner, you are not diversified — you are a hostage. In lending, the only real risk is the one you didn't price: interconnectedness.
📕 The Antidote Book
Financial success is not a hard science — it's a soft skill where behavior trumps intelligence. A janitor who buys and holds can die worth $8 million while a Harvard-educated executive goes bankrupt. Housel's 19 short…
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