over9k
So I didn't tell my wife, but I...
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Have you heard about these new things called "NFT's"?
Have you heard about these new things called "NFT's"?Its probably time for a new scam, get rich scheme, Investment I mean.
$2 trillion lost since Nov '21, with $1 trillion lost in the last month.
That money needs to find a home.... ???
Really ? Since when did the 2 trillion actually exist beyond figures on a screen?
Punters/investors had valuations on their holdings on one day and two months later these valuations have evaporated.
There is minimal underlying physical assets in these digital currencies. No factories, products. Some financials services but these are quite expensive to use.
I suggest that money has evaporated into thin air.
And of course the dollar currency that purchased the coins (con .) in the first place
What hasn't disappeared is any borrowings used to purchase the coins.
So that $2Trillion dollars has so far disappeared. No doubt some traders have made a bundle on the way
The tide is going out. Who will be found swimming naked?
“After all, you only find out who is swimming naked when the tide goes out.”
The words of Warren Buffett, the Oracle of Omaha written in his annual letter to the shareholders of Berkshire Hathaway in February 2002 could not be more fitting today.
Back then the horror and market recoil at the 9/11 terrorist attack on America just months before wiped $US1.4 trillion ($2.02 trillion) off the stock market. It was a body blow for the airline industry and the insurance sector.
Today’s steadily retreating tide is powered by something different: a broad scale reset as stimulus comes out of the system. And at the same time the system has new risks embedded in it – war, supply chain and inflation uncertainty.
This is a reset that has either already or will effect bitcoin and cryptocurrencies, NFTs, the buy now, pay later sector, growth stocks with no line of sight to profit and at least the fringes of the mortgage market.
Forget the criminal minds operating across some of these unregulated markets. It is the products themselves that have been unleashed on ordinary Australians that look fallible. Finger pointing has begun with regulators in the crosshairs.
Last week’s disastrous unravelling of TerraUSD shows just how dangerous it is to be exposed to the volatility of crypto as the tide runs out.
TerraUSD is a stablecoin which is used to trade in cryptocurrency markets and was supposedly pegged to the US dollar.
TerraUSD fell because its foundation – the algorithm that underpinned it and pegged it to the dollar to make it stable – was unstable. A series of major withdrawals pushed the price down to US69c which caused the peg to break.
Bitcoin has dropped over 50 per cent since its November high and over 20 per cent in the last ten days. If you bought bitcoin for Christmas that is a sadness.
Enthusiasts, including very clever people have argued that central bank Covid-19 stimulus around the world would destroy the credibility of cash as a store of value. Money printing would destroy the value of cash.
Bitcoin with a cap on the number of coins that could ever be mined would replace cash as the new store of value. And it would have more integrity than gold.
Yet as the monetary cycle tightens again, we see that cash remains the preferred store of value and bitcoin’s volatility (which to be fair the enthusiasts acknowledge) now dominates the investment profile.
Meanwhile the gold price, something people do understand, is up 1.4 per cent (in US dollars) and 6.1 per cent (in Australian dollars) this year.
More disturbing is the systemic risk from the intertwined world of bitcoin and decentralised finance – or DeFi – now emerging. Part of the reason for the bitcoin fall was that the folk behind TerraUSD sold their bitcoin reserves in order to prop up the stablecoin.
Cryptocurrencies are still not economically significant but they have exposed the unsuspecting punter to huge risk and they are unregulated.
At a US senate banking committee hearing last Tuesday, Treasury secretary Janet Yellen called for regulation, noting that the TerraUSD collapse in value “simply illustrates that this is a rapidly growing product and that there are risks to financial stability … they present the same kind of risks that we have known for centuries in connection with bank runs”.
Earlier this month the Wall Street Journal reported that the NFT market was collapsing.
Non-fungible tokens – from Bored Apes to fine art – are effectively a certificate of ownership that sits on the blockchain and lives in the digital world.
Daily NFT sales have fallen from a high of 225,000 in September to 23,000 last week, according to data website NonFungible.
The day of reckoning for buy now, pay later sector which also took off through the pandemic stimulus cannot be far off.
Last week Australian consumer groups and charities sent an open letter to the incoming federal government imploring it to regulate the sector.
The lobbying power in Canberra of the founders of Afterpay, which pioneered BNPL in Australia, has caused even the best in the game of politics to blush with admiration.
The standard pitch from BNPL firms is that they are responsible, they are across the credit risk of their customers and they don’t let customers borrow more if they can’t repay. This is utterly disingenuous.
The fact remains that if you are bank lending to a new borrower, you have no visibility on what could be six or ten different BNPL debts that that person might have.
Both sides of politics are still hiding behind a fig leaf in the BNPL debate – the need to let innovation run free rather than put it under the Credit Act. It is a fig leaf that the Reserve Bank as regulator is also hiding behind. How much misery at the most vulnerable end of society is it going to take before this position is reversed?
TICKY FULLERTON
EDITOR-AT-LARGE, THE AUSTRALIAN BUSINESS REVIEW
Unfortunately for Cryptons I believe you are correct.I had to change my position on BTC after my early morning sentiment, that BTC was to climb today and the rest of the week. True form shows BTC decline further bringing aggression to the argument that crypto will fall further this week. There seems to be a strong hold on that fact looking at the charts...
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So true. Sad to see Kitco, an excellent metals and mining focused news site, allow their interviewers to effectively become promotional shills for crypto, especially Bitcoin. They now give crypto evangelists more coverage on their YT channel than ever who try and convince their audience that Bitcoin is dematerialized gold. The Terra debacle seems to have put a damper on their enthusiasm to interview Bitcoin bulls for the moment.I see much pump and dump on the minutely from Kitco.
Crypto on kitco?So true. Sad to see Kitco, an excellent metals and mining focused news site, allow their interviewers to effectively become promotional shills for crypto, especially Bitcoin. They now give crypto evangelists more coverage on their YT channel than ever who try and convince their audience that Bitcoin is dematerialized gold. The Terra debacle seems to have put a damper on their enthusiasm to interview Bitcoin bulls for the moment.
The cryptocurrency sell-off has exposed those swimming naked
And investors are beginning to discriminate
Financial aphorisms are trotted out by investors in every financial cycle. Think of “Buy the rumour, sell the fact”, or “Markets can stay irrational longer than you can stay solvent”. These sayings have staying power because they often ring true. Today, after a two-year boom, cryptocurrency assets are collapsing in value, and the aphorism that captures the moment is “When the tide goes out, you find out who is swimming naked”.
The crypto slump has been brutal. In November the total market value of cryptocurrencies was almost $3trn. That fell to $2trn by mid-April before plunging by another 35% to just $1.3trn now. Bitcoin has briefly dipped below $29,000, its lowest since late 2020. Crypto’s detractors have long maligned it as useless—unless you are a money-launderer or con-artist—and predicted its demise. The rout raises the question of whether they are right. In fact the picture is rather different: a process of sorting is taking place as the dodgiest parts of the crypto world are exposed, while other parts prove more resilient (see Finance & economics section).
The crypto collapse is part of a broader slump. Red-hot inflation is forcing central banks to tighten monetary policy, triggering a huge sell-off in riskier or long-dated assets such as tech stocks and 30-year bonds. The tech-heavy nasdaq index is down by 29% from its high, whereas the s&p 500 index has shed “just” 18%.
Top of the list of speculative assets receiving a drubbing is crypto. The sell-off has exposed glaring weaknesses. Consider terra, an “algorithmic” stablecoin, whose value is backed by another asset, supposedly making it dependable. On paper users could redeem $1 of terra for $1 worth of another cryptocurrency, luna, which would be issued to meet demand. But luna’s price began to slide in early May, putting two-to-four times pressure on the terra peg. There was a rush to redeem. As luna’s supply ballooned, its price collapsed. On May 10th 350m luna tokens existed; now 6.5trn do. At its peak, luna was worth $40bn and supported $18bn of terra. Now it is worthless, and terra is trading at 10 cents. In hindsight the scheme looks mad.
At the other end of the spectrum is usdc, a stablecoin backed by cash and short-dated Treasury bills which publishes audited financial statements each month. It has done fine. So has dai, another stablecoin that is backed by crypto and run by algorithms. It has a decent degree of transparency and holds at least 1.5 times as much backing as it needs. The supply of the cryptocurrencies it relies on—usdc and ether—is independently controlled.
In the middle of these two extremes is tether, the biggest stablecoin, which briefly dipped below its par value of $1 per token on May 12th. It says it is backed by assets like cash, Treasuries and corporate debt, but its disclosure is awful. Tether refuses to reveal the precise asset mix, claiming this is its “secret sauce”. It had previously been fined by New York’s attorney-general for misleading investors. As the broader market sell-off in the past weeks has intensified, its holders have rightly grown nervous. Since it slipped from its peg, tether holders have redeemed about $9bn-worth of tokens, some 10% of the total.
Investors are now doing what they are supposed to: penalising instruments that are fundamentally flawed or issued by organisations that are badly run. Yet the sell-off has sparked renewed calls for the government to step in. Consumers are in danger of being ripped off. And volatility could yet spill over into the conventional financial system. For example, tether is a key part of the crypto-plumbing and the most liquid base currency for trading between other crypto assets, and between crypto and conventional ones. If it failed the fallout would be bigger.
Some critics would like the crypto system banned; others would like it heavily regulated, just as banks are; still others want regulation but fear that this might be interpreted as an official endorsement. The trouble is that a draconian crackdown would put at risk the benefits that crypto eventually promises, including new financial products that bypass stodgy banks; innovations in property rights; and the possibility of a less centralised financial system.
So what should governments do? The best path would be to accelerate the process of sorting that is under way. Key to this is more reliable information so that retail users and institutions can guard more effectively against fraud. In particular, stablecoins should be forced to disclose their backing—what the assets are, where they are held and who controls them. Some crypto ventures based outside America are beyond easy reach of its regulators, but Uncle Sam could require the big crypto exchanges in America, which are already regulated, to flag which tokens have met disclosure standards. The aphorism that springs to mind is helping the market sort the wheat from the chaff.
The cryptocurrency sell-off has exposed those swimming naked
And investors are beginning to discriminatewww.economist.com
Investors are now doing what they are supposed to: penalising instruments that are fundamentally flawed or issued by organisations that are badly run."
I find that with my interest in Gold it is very useful to know what BTC is up to, or down to as the case may be.So true. Sad to see Kitco, an excellent metals and mining focused news site, allow their interviewers to effectively become promotional shills for crypto, especially Bitcoin. They now give crypto evangelists more coverage on their YT channel than ever who try and convince their audience that Bitcoin is dematerialized gold. The Terra debacle seems to have put a damper on their enthusiasm to interview Bitcoin bulls for the moment.
Interestingly, yesterday when the whole market was getting massacred, bonds, gold, and crypto actually did ok. Perhaps investors simply fleeing and putting their money *anywhere* else other than the usual stocks & etf's?This is an interesting point, especially following the collapse of Terra.
We've seen Bitcoin essentially trade as a high-beta version of US tech, so direction should likely continue to be driven by overall sentiment. However, it will be interesting to see if BTC also gets additional support in the near-term on traders rotating out of alt-coins and into more established names, or if this potentially leads to broad selling across all crypto assets.
Interestingly, yesterday when the whole market was getting massacred, bonds, gold, and crypto actually did ok. Perhaps investors simply fleeing and putting their money *anywhere* else other than the usual stocks & etf's?
But yes, I showed a few pages back how crypto was almost perfectly matching double inverse NDX, so SQQQ becomes your downside protection.
Yeah, I'm left with a bit of a WTF over the last day and into now - crypto's kind of gone nowhere, neither up nor down. You usually see it moving in tandem with NDX futures almost perfectly (no need to post a graph plotting it) and instead yesterday was an almost 5% drop with ETH flat and today we now have futures deep into the green with ETH/BTC pretty much flat again. So no response either way.Last night's correlation breakdown may have stemmed from a weaker US Dollar as yields eased. However, you could also be right, and this could help explain why Bitcoin managed to break above $30k on slightly higher volume while stocks pushed lower.
All trading carries risk, but it should be interesting to watch how this develops heading into the weekend.
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