Market Crash Alert: FTX Could Still Be the Next Lehman Brothers

11.29.22 - FTX Could Be the Trigger to a Major Market Crash

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- InvestorPlace--

Will FTX's collapse ring in a wider market crash like Lehman Brothers in 2008?

• With FTX at the center of a potentially major crypto collapse, parallels to the 2008 financial crisis continue to gain validity.
• Some argue FTX could be the 2022 equivalent of the Lehman Brothers.
• While markets have been relatively stable given the magnitude of FTX's collapse, we could be in a sort of lag before the storm.

As fears continue to swirl that FTX's bankruptcy may lead to a wider market crash, parallels are being made to another once-upon-a-time financial darling: Lehman Brothers. While some maintain FTX's losses will be relatively self-contained, investors shouldn't underestimate the lag between major market catalysts and eventual economic repercussions. It's not too late for FTX to become the next Lehman Brothers.

In 2008, Lehman Brothers, the then-fourth largest investment bank in the country, declared bankruptcy due to overexposure to the collapsing subprime housing market.

For many, this was confirmation that the once-booming real estate industry would give way to a widespread, malicious recession. What followed Lehman's demise was a virtual firestorm of government intervention in order to prevent a wider collapse of our entire economic system, bringing about a major recession in its stead. In 2022, it's not hard to see the analogy with Sam Bankman-Fried's monolithic crypto platform.

FTX was the crypto exchange. It had dozens of brand deals, endorsements from the biggest celebrities, billions of dollars in investments, and a renowned founder. FTX was the second-largest crypto exchange in the world.