Rising rates usually ends up showing us who was swimming naked.
The business models that relied on a perpetual supply of new capital, & other overly risky gambles become less attractive to investors when you can go get 5-7% on some boring bond with no risk.
You also have liquidation spirals as speculative investors need to sell asset X because of margin calls on asset Y. Which then causes a margin call on customer2 who owns asset X which has now gone down so they go sell some asset Z.. and so on.
The business models that relied on a perpetual supply of new capital, & other overly risky gambles become less attractive to investors when you can go get 5-7% on some boring bond with no risk.
You also have liquidation spirals as speculative investors need to sell asset X because of margin calls on asset Y. Which then causes a margin call on customer2 who owns asset X which has now gone down so they go sell some asset Z.. and so on.