Leverage & Interconnectedness Are Blowing Up Crypto & DeFi – WOLF STREET

Leverage & Interconnectedness Are Blowing Up Crypto & DeFi – WOLF STREET

Blockchain Crypto Market Technology
July 10, 2022 by Coinvasity
THE WOLF STREET REPORTImploded Stocks Brick & Mortar California Daydreamin’ Cars & Trucks Commercial Property Companies & Markets Consumers Credit Bubble Energy Europe’s Dilemmas Federal Reserve Housing Bubble 2 Inflation & Devaluation Jobs Trade Transportation  Crypto lender and broker Voyager Digital, which also took deposits and offered yield products with huge interest rates of up

Imploded Stocks
Brick & Mortar
California Daydreamin’
Cars & Trucks
Commercial Property
Companies & Markets
Credit Bubble
Europe’s Dilemmas
Federal Reserve
Housing Bubble 2
Inflation & Devaluation
Crypto lender and broker Voyager Digital, which also took deposits and offered yield products with huge interest rates of up to 12%, said in a series of tweets today that it is, “actively pursuing a series of strategic alternatives” and that it is “focused on protecting assets and maximizing value for all customers as quickly as possible.” That’s horrifying language for people who have their cryptos on deposit at Voyager and now cannot get their cryptos or anything else out.
What’s different this time about the collapse of cryptos, compared to last time in 2018, are two huge factors that were barely in their infancy back then: massive leverage and interconnectedness.
All these crypto firms lent to each other and borrowed from each other in cryptos, to speculate in cryptos with borrowed cryptos, and they lent out borrowed cryptos, and they posted cryptos as collateral with each other for more leverage, which is now triggering margin calls, forced selling, and wipeouts cascading through the space. This interconnectedness created huge systemic risks within the crypto space that are now coming home to roost.
On Friday, Voyager Digital had suspended trading and withdrawals. In other words, depositors cannot get their cryptos and collateral out. And they cannot get any fiat out either.
These people are unsecured creditors if Voyager files for bankruptcy. Voyager has already hired restructuring and bankruptcy lawyers and consultants.
Voyager got taken down by the crypto hedge fund, Three Arrows Capital, which blew up amid huge leverage when cryptos plunged.
Three Arrows Capital, which was said to have managed about $10 billion of cryptos as of March, was ordered into liquidation by a court in the British Virgin Islands, where it’s legally headquartered. On Friday, it filed for Chapter 15 bankruptcy in the US.
Voyager had lent 15,250 bitcoins and 350 million USD Coins, a stablecoin, to the hedge fund. Combined, that loan amounts to about $650 million at current prices. And Three Arrows had defaulted on that loan.
Three Arrows ran into trouble when cryptos dropped below a certain level and when Luna, in which it was heavily invested, collapsed by 100%, at which point it received margin calls that demanded more collateral, and when that wasn’t forthcoming, its leveraged positions were liquidated by crypto exchanges including BitMEX and Deribit.
Voyager said in the series of tweets today, Sunday, that it has $1.3 billion worth of cryptos left on its platform – presumably put there by depositors – who are now locked out, and that it has $650 million in claims against Three Arrows Capital, which Three Arrows has defaulted on.
Voyager trades on the Toronto stock exchange. On Friday, July 1st, when it announced that it had locked out its depositors, the Toronto Stock Exchange was closed in observance of Canada Day. In the US, where Voyager trades over the counter, its shares plunged 31% on Friday, to 30 cents.
Voyager was founded in 2018 and had started trading in Canada in September 2021 at around 16 Canadian dollars a share, and amid immense crypto hype and hoopla rose to over $21 by peak crypto mania in November 2021. The stock has now collapsed by nearly 100% in 10 months. So that wipeout was fast.
Companies like Voyager are in the space called Decentralized Finance. DeFi is doing what the hated and despised fiat banks are doing, except they’re doing it in cryptos instead of fiat, and there is no deposit insurance, and there is no regulation, and everything goes, and there is no central bank for them, and no protections for depositors. In addition, they lured customers into depositing their cryptos there by promising to pay huge interest rates of up to 20% a year. Which is totally nuts.
And now the two concepts of leverage and interconnectedness are tearing up the cryptos, crypto exchanges, the DeFi outfits, crypto stocks, and crypto hedge funds.
The leverage is mostly hidden and tangled up with other crypto firms, and parts of it surfaces only when something blows up. And the interconnectedness causes the blow-ups to cascade through the crypto space.
So now this is an entirely different game of margin calls, forced selling, bankruptcies and liquidations, and preparations for potential future bankruptcies, the total annihilation of some cryptos, including TerraUSD and Luna, and leaving customers with deposits at crypto exchanges and crypto lending platforms twisting in the wind.
There is no regulation and no deposit insurance, and these customers are just unsecured creditors when these highly leveraged platforms collapse. And the loans that were over-collateralized when bitcoin was at $65,000, triggered margin calls as bitcoin plunged to $19,000, and the lenders can seize the collateral, namely the crypto. But since the lenders also traded in their own accounts, with their customers’ deposits, they too got wiped out when cryptos plunged, and it’s just the beginning.
DeFi platforms are like banks, but they take deposits and make loans all in crypto. They’re highly leveraged. They’re using their customers deposits to trade cryptos in their own accounts, and they lured customer deposits with the promise of huge interest rates. And customers borrowed against their cryptos, using their crypto deposits as collateral, to gamble with more cryptos. Everything was leveraged to the hilt and interconnected. And the whole thing collapsed when crypto prices began to collapse.
It has been three weeks exactly – on June 12th – that one of the largest crypto lenders, Celsius Network, which had managed about $12 billion in cryptos as of May, told users that it is halting all withdrawals, swaps, and transfers between accounts.
It blamed extreme market conditions. It said it needed “to stabilize liquidity and operations.” Customers have not gotten their cryptos out. No one knows what’s going on, except that it isn’t good and that Celsius has hired restructuring and bankruptcy lawyers in preparation for a possible bankruptcy filing.
If Celsius files for bankruptcy, its customers with crypto deposits are unsecured creditors, and they might not be able to recover their cryptos, and unlike bank customers in the despised and hated fiat banking system, there is no government deposit insurance. People are just on their own.
Celsius lured customers with annual percentage yields of over 18% on their crypto deposits. That this was either a scam or a super-high-risk gamble should have been clear to everyone. The only time a company is paying 18% interest on debt is if it’s near default. That’s a very high-risk debt, and bond buyers know this, but apparently, not the customers at Celsius.
At least three other crypto platforms have now blocked customers from withdrawing their crypto deposits or collateral, or have limited the amounts: Babel Finance, CoinFlex, and Finblox.
We’re not talking hated and maligned fiat dollars here, but cryptos. They’re borrowing cryptos from each other, they’re lending cryptos to each other, they’re posting collateral in cryptos with each other, they’re paying interest in cryptos, they’re trading cryptos between each other, and they’re trying to bail each other out in cryptos.
And they have to pay each other back those cryptos, and the cryptos have plunged in value and are gone because of leverage that blew up, and because of the interconnectedness that is spreading those blowups around the system.
Leverage and interconnectedness, which were just in their infancy in 2018 when cryptos blew up last time, are now the dominating factors. Back then it was just folks selling their cryptos. Now stuff is blowing up because of leverage. That’s a much more insidious process.
Leverage in the crypto world takes on other forms as well, as exemplified by MicroStrategy. That’s a dotcom darling whose shares spiked ridiculously during the dotcom boom into early 2000, and then totally collapsed. To keep the share price above the delisting limit, in 2002, the company did a 1-to-10 reverse stock split. Then it scraped by as an enterprise software maker, until 2020, when it announced with huge hype and hoopla that it would begin buying bitcoin as one of its key business strategies, and that it would fund those purchases with leverage.
Part of this leverage would come from issuing unsecured convertible bonds, which the bitcoin-crazed crowd ate up at the time. Even if bitcoin goes to zero, the holders of those unsecured bonds have no rights and cannot do anything as long as the company doesn’t default on the interest or principal payments. So this is stable funding, and the concept of margin call doesn’t apply here.
But then, to buy more crypto when the mood was souring just a tad, it issued bonds that were secured by bitcoin and other corporate assets.
Then in March, the company obtained a $205 million term loan that was collateralized by close to 20,000 bitcoins. The loan agreement required a minimum loan-to-value ratio of 50%. If bitcoin drops below $21,000, the minimum loan-to-value ratio would be violated on this $205 million term loan.
According to a filing with the SEC on Wednesday, MicroStrategy now holds about 129,700 bitcoin that it bought at an average price of about $30,700 each, for a total purchase price of nearly $4 billion.
At the current price of bitcoin of about $19,000, MicroStrategy’s gamble has lost the company $1.4 billion from the acquisition cost – all of it borrowed money.
Upon MicroStrategy’s bitcoin purchase announcements in the summer of 2020, its shares spiked from about $110 to over $1,300 by February 2021, multiplying by over 10 in just 8 months. That’s how braindead crazy the whole market had gotten. At which point the shares began to collapse. They’re now back at $164, down by 87% from the ridiculous peak in February 2021.
This enormous amount of speculation, risk-taking with these gambling tokens, and scamming was one of the more sordid parts of the Everything Bubble. It’s a hugely profitable trade if you ride it up and then sell this stuff to the greater fool, and rake in the hated and soon to be worthless fiat dollars. But unfortunately, lots of people that were gullible enough to go for this, lost lots of money, and will lose lots of money. But that’s how bubbles work, that’s just how it is if you participate in that kind of craziness and don’t get out before it vanishes – and two-thirds of it has already vanished.
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Wolf, “are you a sailboat racer.?”…and “Do you get true and apparent wind with foiling and how it relates to the economy?.” Please do some foiling sail analogies to the true wind pump up with rate hikes. I make 100k Gross and am paycheck to paycheck in miserable “economically” but perfect “climate change” wise San Diego.
Keep us posted on when to buy a house in San Diego. We are relegated to lifelong renters here.
Rat poison squared. Yup.
Why are we seeing bitcoin going back up in price when supposedly it is all doom and gloom .
Because cooler ways to piss away your paycheck require too much driving.
Nothing goes to hell in a straight line.
Huge bounce there. Down $50,000+, up $1,500. Buy the dipski, I’ll be right behind you!
Because HODLers gonna HODL, and the BTFD crowd will dollar cost average all the way to ZERO.
Because politicians will probably end up bailing everyone out. Speculation pays in the US of A.
Yes, but who are the rats? 🙂
Even if you win this rat race….your still a rat!
Hmm…have not seen any mention lately from whence the Coinbase founders came. Their “skills” might reflect their origin. Goldman Sachs, perchance? Hint…don’t bet against me.
“We’re not talking hated and maligned fiat dollars here.”
Um, excuse me, Wolf, but I’m fine with hating and maligning digital fiat all day long. I hope it all goes to zero and wipes them all out. And if in the process it takes Wall Street down 30%, so be it.
Kudos to Voyager Digital for making all this happen. Great job, guys!
Um.. That was sarc on the part of Wolf
I seriously hope that these ponzi-pumping crapto cult leaders, Saylor, Pomp, Thiel & Pal do serious jail time.
As the song says You Ain’t Seen Nothing Yet ,wait till the bond market eEXPLODeS. Turn off the lights party’s over
According to a previous comment, thiel purchased NZ citizenship and a bugout property there, and both he and jacinda ardern are Young Global Leaders. They’ll work something out. Marc Rich did pretty much the same thing in the canton of Zug several decades ago. Grifters predate regulators in history, and if the mark doesn’t cooperate the con folds. Cryptocurrency efficiently targets the larceny in men’s hearts. A memorable line from Paul Newman as Henry Gondorf talking about Chicago in The Sting, 1973: “There’s no point in being a grifter if it’s the same as being a citizen”. When you come by your money through honest work, it feels different than a windfall, and no farmer ever felt really smart because apples were laying all over the orchard.
Najarian brothers
Nah, small operators compared to the Crypto gang. Plus, they like CNBC.
As the other commenters noted, crypto-tulips are not the only garbage investments out there. I do wonder at those who purchased the crypto-tulips at high prices, as opposed to those who bought them for a lark, when they were worth little, like buying one lottery ticket once every five years, even though you know the odds.
We will be seeing many of the stocks bought on margin have to be sold too, because many will not be able to cover their margin calls. That will only happen when the “Federal” bankster Reserve cartel gets tired of giving its bank-owners over a trillion dollars in secret profits each year by keeping inflation high: because the interest rates that they now pay depositors, persons they owe money to, etc., are effectively negative, e.g., if they pay 3% per year while inflation is truly running at 9% per year on the fifteen trillion to twenty trillion in deposits that the banks hold in the US.
I guess that there are addictive personalities, like one fellow that I knew in the 2000s, before the crash, who used his CREDIT CARD to get money to buy stocks. I told him he was nuts, and he laughed and told me he would be rich and I should do the same. To all of you who get wiped out, remember many people have started again and bankruptcy laws are there to HELP those who lose everything (and even let you keep various, significant assets, like homestead houses and large pensions.) E.g., read about OJ and his house in Florida and NFL pension and the lawsuits against him.
I am Dutch, and as kids in school we learned about the tulip bulb mania. I remember quite well the snickering about these stupid people who paid out more than the value of a house for a single tulip bulb. We all were so sure this kind of madness would never get a hold on us. A quaint piece of history, surely never to be repeated…
Well, I personally have avoided all crypto stuff like the plague. But obviously lots of people have not been educated in history, or have not learned from it. And as the saying goes, if you don’t learn from history, you’re doomed to repeat it.
On the positive side, I am now rid of all these smug people making fun of this old geezer because too dumb and set in his ways to understand the new paradigm.
I wonder if this will put an end to those stupid crypto.com credit card commercials? Boy isn’t that a match made in heaven, bit coin and credit cards!
I recently got a Gemini credit card with 1-2% back as Bitcoin. Last time I checked, my ~$11 in Bitcoin has fallen 35% in value LOL.
As a lark my wife and I each put in 200 euros. We were up 100%, now we are down 25..
Good lesson for u always sell half when up 100% ,then u play for free,free,free
Tulip Mania of 1637 was mainly driven by participants outside of the established financial markets. Trading was done in taverns and the authorities warned that the action was outside of their regulated clearing systems.
Cryptos seems similar to Tulips–only huge.
The reason behind both tulip and cryptocurrency craze is the same. To much money in circulation. With little ro use them on.
Cryptos are electronic tulips.
In my opinion, it’s the first World Wide Ponzi
Who loans 650 billion, ouch. “and that it has $650 billion in claims against Three Arrows Capital, which Three Arrows has defaulted on.”
holy cow, bat shit crazy. Thanks Wolf for news you don’t get in the MSM.
“Voyager said in the series of tweets today, Sunday, that it has $1.3 billion worth of cryptos left on its platform – presumably put there by depositors – who are now locked out, and that it has $650 billion in claims against Three Arrows Capital, which Three Arrows has defaulted on.”
Typo, Voyager’s twitter states that it’s $650 Million (not billion). The number seemed to fabulous to me to be true, so I had to check..
Cryptos weren’t necessarily the dumbest idea in and of themselves per se, but they sure did turn into something on a whole new level of stupid..
Thanks. Yes, the billion million thing is what you get with transcripts, and I tried to clean it up, but missed this one.
Recently Gary Gensler, Chairman of the SEC, called bitcoin a commodity and likened other crypto assets to securities. Which is, BTW, pretty much the way Saylor see things. So I guess the SEC will eventually subject cryptos to regulation[1]. Whereas bitcoin will be under the Commodity Futures Trading Commission (CFTC). At least that’s how I understand things to be from what I’ve read, but Wolf, and others on here, no doubt know more about securities and commodities than I do. After all, I’m just a old geezer, a baby boomer, who got blown away by the innovation behind Bitcoin way back in 2014. As I’ve said before, I see it as the innovation of this century. It is necessary for the future evolution of the internet (including peer to peer payment between phones and machines). Time will tell.
[1] So if any of these crypto coins, including stable coins, exchanges and whatever, are Ponzis or illegit in any way the SEC will soon sort them out.
The SEC and other regulators only “sort out Ponzis” after they collapse, and after everyone of the greater fools has gotten wiped out, and long after the big winners left the party.
Very glad to see you say SO, because of the ridicule received when I have said similar, though perhaps not so clearly.
Time and enough to at least ”try” to reclaim the ”integrity” of the SMs, as was done many decades ago to ensure, or at least try to ensure that WE the PEONs would have at least somewhat of a ”level playing field.”
Since then, as is well known by many on Wolf’s Wonder, many or most of the [[constructs]] from those years of the SEC and similar making it more of an even field have gone away…
NOT ”partisan” in USA,,, because ALL,,, repeat ALL of our fed elected folks of all and every stripe have used their advantages to trade with insider information just exactly as JPM did a while back, and for exactly the same reason:::
Who has the communications advantage has the absolute advantage in EVERY market,,, SO FAR…
Ponzi scam schemes are CRIMINAL and the SEC can only investigate and prosecute CIVIL matters, but all CRIMINAL MATTERS ARE WITHIN THE SCOPE AND PROVINCE OF THE FBI at the time they occur and it is up to the FBI to immediately investigate and prosecute.
Calling BitCON a “commodity” is an insult to the intelligence of human beings. Commodities are tangible goods. BitCON does not even remotely qualify as such. Sounds like Gensler is a reckless crypto gambler himself.
We need a full disclosure from every person who would be part of the regulation process as to whether or not they own, or have ever owned, a crypto. Let’s see where their financial interests really lie.
But regulating this garbage is a waste of taxpayer money. It should be banned permanently. Just make it illegal.
BitCON is a commodity as it is sold as a TANGIBLE THING which is comprised of NUMERIC STRINGS and its price fluctuates the very same as a COMMODITY with extreme and absurd volatility just like most all commodities these days. It certainly is not a currency in any sense of the word, but what it really is is just a CRIMINAL FRAUD. It (all 19,000 craptos) doesn’t need to be regulated, but rather shut down entirely and the people behind it sent to prisons.
I just had a look on Investopedia where its says, regards Commodities, “More recently, the definition has expanded to include financial products, such as foreign currencies and indexes. Technological advances have also led to new types of commodities being exchanged in the marketplace. For example, cell phone minutes and bandwidth.”
There’s nothing so constant as change.
Nonsense expands to fill all the room you give it…
Currencies have their own market and don’t need commodity traders manipulating them too.
Cell phone minutes and bandwidth aren’t commodities either. This is just traders wanting to have more places to trade, or rather more markets to disrupt for their personal profit.
Anyone want to offer Beanie Baby and/or Dutch Tulip futures? I’ll swap bitcoin for either…
orange juice
Seems likely that the “frozen” companies are holding each other’s coins.
There may be some retail (dumb) money left there, but the combination of these brittle organizations feels like an MMO game.
Sounds like a “Mexican Standoff” to me!
This plus the Archegos thing are very reminiscent of the cross-listed, cross-owned, cross-invested utility-stock shenanigans that blew up spectacularly during the Great Depression of the 1930s.
Almost… Try too much money printing.
BTC fanatics like that it has a fixed supply at 21m.
It can be moved and stored cheaply. It’s permissionless.
Lightening network can transfer BTC and handle millions of transactions per second for pennies.
“And soon to be worthless fiat dollars,” Wolf Richter, last ¶.
Is a non-trivial chance that crypto is a harbinger of what happens to fiat.
But fiat collapse will be on a much larger scale and likely a longer time frame.
Most of the variables are the same.
Except fiat has the backing of effectively insolvent national governments, which makes the collapse much more complex.
With back-firing sanctions, Biden is doing his dead level best to accelerate the collapse of the dollar being the world reserve currency.
As Putin said,
the West is busy sawing off the limb of the tree that the West is precariously straddling.
Hahaha, yes, that was sarcasm. Glad you took it seriously and ran with it :-]
The sound and wonderful US Dollar is gain great ground every day and will continue doing so and is now around 107 on the DXY.
Just blame it all on us dummy’s who STILL don’t understand how great cryptos are.
But then we’re now at the point where nothing is even holding value, much less making money with inflation roaring along like a mad dog. Holding infinite printed dollars is smarter than crypto at least, right? Some choice.
Definitive lack of understanding of what money are. But then the central banksters have not been willing educators.
Bitcoin might be the prime example on lack of understandig. How can anybody go on and expect 20% interest rate on a currency where the total amount is a known number?
Interest is only possible on Fiat money where the amount grow exponential.
The total amount is finite and always know with bitcoin. That is part of the sales pitch.
Yes, and that make it impossible with interest rate on bitcoins. Interest on money expand the amount of money, any interest rate other than zero inflate the amount of money.
With a finite and known number of bicoins each with their own «serial number» there is no free serial numbers for the bitcoins generated by interest rates.
Najarian brothers are in deep trouble,but there supposedly professional traders ,even some very rich people will be wiped out . This correction is far from over ,wait till housing gets whack a molded . It hasn’t corrected yet 40-50% haircut ,the world could go full circle to 1940 .
What is “deep trouble,” and how do you know this? Details, please. These guys sold their business for almost a billion dollars back in 2016.
Cnbc interview on halftime at noon ,they were steering clients to Voyager and heavily invested . Admitted it on air
No true,buy food,guns ,ammo, get out to country living be self sufficient. U might survive good luck
it stares -> its shares
Hahaha, transcripts have their charm! Thanks.
I did try to clean it up though :-[
“and that it has $650 billion in claims against Three Arrows Capital, which Three Arrows has defaulted on.”
Typo here: that’s million, not billion.
Still bad enough 🙂
Cash is losing 10 percent per year so that is an investment too. In seven years you have half of it gone. Bidenomics? Maybe they are using the debt to save Ukraine’s democracy.
Every dollar-denominated asset is losing the same amount in purchasing power to inflation every year.
The factor that distinguishes the assets is how much they yield and/or gain/lose in value.
So a 10-year Treasury note of $1,000 might pay 3% coupon interest, and when it matures you get 100% of your money back. After 10-years, you collected $300 in interest plus you got your $1,000 back, but you lost purchasing power to inflation over the years.
When you invest in crypto and is loses 100% or 50% that’s on top of the loss of purchasing power due to inflation, and on top of you not receiving any yield.
In other words, there is no escape from inflation. It’s just how much risk you’re willing to take to beat inflation with higher yields or capital gains.
Recently heard that: Money has no value unless there is food/air/water available (in time to prevent starvation).
I.e., all “money” presupposes that food is available.
Seems to be true; seems to be a neglected but vital datum. Any thoughts on this?
Thank goodness leveraging hasn’t plagued other market segments!! /s
I donate to Wolf monthly because I love his insight and he’s dead on. Love it
The question I have is just how much interest, does Microstrategy have to pay?
I looked at their earnings: they don’t actually generate much free cash flow.
And their last loan was floating rate, so interest for that is going to be increasing as the Fed increases the EFF.
Can Microstrategy actually keep up with its bond payments?
I originally thought the price drop was a liquidity squeeze on Microstrategy – it is clear now it was a liquidity squeeze on the DeFi platforms but that still doesn’t mean MSTR is out of the targeting sights.
I’ve been hearing all about this from my nephew who works in the crypto space. It truly is the free market, no government agency to bail you out. Doesn’t bother him or his firm, let the weak hands and foolish minds go is their motto. The space will get rid of many crooks, idiots and competitors, and their form will come out stronger and better positioned. The uneducated speculators and bandwagon crowd who didn’t do their due diligence should take their losses,. This is as it should be. Much better than the 2008-09, housing crisis where what 6 million homeowners were put in foreclosure, but the banks who were equally if not more responsible got bailed out. Plus the banker bonuses were paid out by the government to boot. The little guy got the street and the Law, Wall Street got bonuses and Mercy. Yeah their Regulatory System is so wonderful….and the crypto world is so terrible…..
Your nephew’s got it all figured out.
Yeah, the old Libertarian perspective that business will always do the right thing if you just get that useless regulation out of the way.
One of the most delusional, infantile and demonstrably false perspectives out there.
Sailer pun intended,doesn’t care he is captain of a sinking ship . Will have already cashed out ,
“It’s a hugely profitable trade if you ride it up and then sell this stuff to the greater fool…”
And got off that sinking ship! Not just simply foolish people, but those that think that they can beat the system, are greedier than heck, and gullible. As Mish posted a few days back, these crypto folks exist in an echo chamber.
We need a Wolf-Mish collaboration.
Now about fiat currency…
The great and wonderful US Dollar is doing superbly and is now at 107 on the DXY and will soon break through 110 and go much higher.
Well, the dollar IS up 10% over the British pd. So not doing too badly.
Good for me, ince I needed some parts for my 50 yr old British car.
Mish !
The wedding photographer turned financial guy ?
Is this the one posing as an economic analyst without posessing a single credential to so do ?
That one ?
Please…..Don’t compare Wolf to that one. That one is light years brhind from our host’s earned credibility.
Mish (Mike Shedlock) occasionally has some correct insights into matters such as this recent article:
Why earnings and the stock market will get crushed – Mish
I stopped reading that mish because of the scaremongering and storyline inflation. A little more humility in the dire-prediction business comes in handy when the world stubbornly refuses to end. He was probably fun at weddings too, and can always fall back on that kind of work.
Someone posting on the internet in return for advertising revenue is in the business of monetizing your eyeballs. They can do that by being right and intelligent, like Wolf here, or by being bombastic and inflaming biases. Or a bit of both!
But you know, most of the guys with “economic credentials” have been, to adapt a great Bush-ism, misundereducated, and they’re also suffering from deep conflicts of interest. Between the deceptive book-talking and the outright econincompetence, it’s been painful my wallet whenever I pay attention to any of them.
Guys like Wolf, and sometimes Mish, demonstrably manage to put more facts correctly together than most of the deeply-conflicted “credentialed” analysts.
And once you have a track record of being valuable to your readers, you don’t need credentials anymore.
I will say that if I ever start a Wisdom Seeker School of Practical Economics, then Wolf will be the first to get an honorary Ph.D.! Put all his work together and it’s better (by being truly practical) than most dissertations…
The bloodsuckers gleefully take cover in their degenerate crypts.
Can you explain this using a dependency diagram or something? A picture is better than 1000 words
It’s the transcript of a podcast. There are no charts or diagrams. You can listen to the podcast here:
I don’t know much about tulip bulbs, but I do know that, in spite of all the “I-told-you-so” that people like me were “voting” to attempt to exit a System in which the cards were even more stacked against them. I personally talked many very angry people into instead put their energy into crypto. I still feel it is a worthwhile cause. We were voting for a positive vision for the world, we were voting for common goals between countries often kept apart by old men with lust for power, we were voting against using inflation to pay off our eternal war debts so our seniors didn’t have to eat dog food. Many of us are still willing to bet on a technology that might someday empower people who otherwise have little chance of escaping the inevitable erosion of their economic power. At least we tried!
Your mistake is to go with the childish old chestnut that old men have everything and run everything. It’s based on the lie that you can have everything now. For most people it takes a long time to own a house, to have a wife and children and to put enough money away to retire and by then, if they are lucky with their plan, they are usually old.
Very well said!
Mr. Jim…
How bad are your losses…
I sympathize. I started messing around with crypto in 2016 just out of curiosity. I am mostly a libertarian and all the libertarian bros were talking about it. Its interesting from a technical view.
But it was obvious that it was a bubble fueled by the FED, so I got out in 2021.
Geez, has it been THAT LONG since Bernie Madoff? You’d think promises of huge returns would be a bright red flag.
Apparently, red flags are not visible during a headlong FOMO Stampede. These cattle now find themselves in the stockyard pens awaiting their fate.
“Crypto lender and broker Voyager Digital, which also took deposits and offered yield products with huge interest rates of up to 12%, said in a series of tweets today that it is, “actively pursuing a series of strategic alternatives” and that it is “focused on protecting assets and maximizing value for all customers as quickly as possible.” That’s horrifying language for people who have their cryptos on deposit at Voyager and now cannot get their cryptos or anything else out.”
CNBC: Crypto lender Celsius is a ‘fraud’ and ‘ponzi scheme’, lawsuit claims
Why does gambling with real money in garbage interest anyone at all?
I missed my chance. I should have come out of retirement for a year and made a million in cryptos. (Reminds me of all the money we made flipping properties with liars loans and uber-leverage back in the Eighties.)
Here’s the formula:
A. Start a company that does anything, but with blockchain in the name and brochures.
B. Float an IPO. Make billions.
C. Sell billions of dollars in corporate bonds.
D. Use the IPO and bond cash to speculate in other cryptos.
E. Wire a metric shitload of cash to a bolthole in a country with no extradition policy and get a passport there.
roddy6667: You are not too late. There is room for an “Ultra Stable Coin (USC)” that allows people that are not satisfied with the current failing stable coins to store their Crypto with your new, ultra safe coin. You could even offer “up to 25% interest” with each deposit.
USC will be the safest place ever to store your BTC (or any other token that has value)!
All it takes is a website linked to an offshore bank and a few ads on Twitter.
You forgot the photoshopped picture of you partying with the bro’s in Barbados…. 🙂
” … MicroStrategy now holds about 129,700 bitcoin that it bought at an average price of about $30,700 each ….”
A dead give-away of the absence of fundamental value, and the overwhelming presence of pure sentiment/craze has been BTC hanging around for extended periods at $10,000 price increments. Look at a chart of the last 6 months, lingering for long stretches right around $40k, $30k, $20k. Yes, stocks have these psych-anchors too (S&P $4k), but not like this.
It shows the story overwhelming any link to reality. As for the fiat-haters here, I tell you what, if you don’t prefer the dollars in your accounts today to craypto’s recent vapor and carnage (and indignity, for being SO suckered), then boy, do I have some digital bridges-to-nowhere (with no accountability) to sell you!
But GBTC is still selling at a steep discount to BTC’s NAV*. Despite a few more legs down likely for crypto, there might be something there, if you dare.
*GBTC: Grayscale Bitcoin Trust. BTC: bitcoin. NAV: net asset value.
Dent says Bitcoin bottom ,in 4-7 k range good luck HODL
Likely in the 4 cents to 7 cents range and not a penny more.
Another thing that is collapsing right now is the Puerto Rico based bank controlled by infamous commodities speculator Petie Schiff whose infamous daddy Irwin passed away back in 2016 in the federal hoosegow on tax evasion convictions.
I’ll just add some details here, reported June 30, by the New York Times. Here are the first two paragraphs:
“A bank regulator in Puerto Rico says it has suspended the operations of a boutique online bank that has been the focus of an international tax-evasion investigation and is owned by Peter Schiff, the outspoken libertarian economist and money manager.
“The regulator, the Office of the Commissioner of Financial Institutions of Puerto Rico, issued the cease-and-desist order on Thursday against Euro Pacific Bank, which is based in San Juan, for having inadequate capital levels and compliance controls. Two years earlier, an international group of tax authorities known as the J5 opened an investigation into activities that allowed the bank to serve as a vehicle for suspected tax evasion and money laundering.”
Sadly, like father, like son.
Crypto consumes large quantities of electricity in order to facilitate transactions. They issue some new crypto units each year to pay for the transactions. One business model may switch to transaction fees after some time instead of making more crypto currency. Crypto is not FDIC insured. It may be hacked or stolen. Lost passwords have resulted in major losses. It is like a pirate burying loot then dying without telling others where the gold coins are. There is also risk of competition from another blockchain product that might become a bigger fad. There are thousands of blockchains at risk of collapse.
Do you know first rule of a secret ,if 2 people know it’s not a secret
Wolf wrote: “No one knows what’s going on, except that it isn’t good…..”
Ha! This old fart knows exactly what happened. Cryptos were considered an “investment vehicle” because all along the promoters were planning to drive off with the marks money.
I wonder how many derivatives there are (and who bought them) that are still waiting to blow up?
The interest rates charged by brokerage firms on small loans (under $500,000) is quite high these days and the spread between the Fed Funds rate and such margin loans is much higher than it was 20 years ago. As of 6/17/22, the margin rate at one large firm was 10.75% on margin debt of $20,000 when the Fed Funds rate was 1.75%.
1) Jamaica was more important to the British Empire than the 13 colonies, because the pirates share 1/4 of their loot with the king. They developed fast small ships and new navy tactics attacking their victims. Jamaican “ladies” became the richest women in the world. Unfortunately this treasures island was struck by an earthquake that sunk the pirate sunk with their gold in Jamaica bay.
2) The ME have black gold. US gov try to create a ME NATO shifting the risk
and the financial burden to the ME countries.
3) The 400 millions people in the region might serve together in one Arab army, including Israelis and Palestinians glued together, possibly under Egypt command..
4) With $100 oil, natgas, advance defense industry, petrochemicals, solar and knowledge to solve food shortages and drought, this region united together can flourish economically for decades.
5) The ME is a relay station between India, China and Europe.
6) The world is becoming more connected than dissected, because we must have an enemy.
Almost a year ago or so I did posted comments in this site that these crypto stuff is totally nonsense and is a scam by special interest group of people. How in the world you can pay hundreds..thousands or even millions to a website for some idiotic digital numbers? So what they have computertised the tracking of buying of billions n millions and can cross trade n do wonders exchanging stuff constant. You don’t know who runs those sites. You don’t know how and what goes behind the scene. You never even care if something goes awry. Yeah you must be a damned fool to behaved as such. And a fool and his wealth will go separate ways. So like Hank Paulson….. Janet yellen to appear in congress explaining all the crypto mumbo jumbo to senators for 3 trillion dollars of bailout or the entire banking community collapses.
The world’s biggest crypto scam in 2020 was perpetrated in South Africa by Mirror Trading International. Using a Ponzi scheme, hundreds of thousands of victims were swindled out of US$588 million in Bitcoin.
The founders of South Africa’s largest cryptocurrency exchange have vanished, along with nearly $3.6 billion in Bitcoin, after telling investors the exchange had been hacked. No S.E.C – no recourse on the heist – since the Regulators do not view it as a currency, so the Govt/Police will not pursue the thieves, since “nothing” was stolen. I think I prefer losing my coins this way – rather than the slow bleed, as I double down to the same conclusion = zero…
Woops! Looks like the CFTC is after them!
“The top U.S. commodities watchdog charged South Africa-based bitcoin pool operator Mirror Trading International with $1.7 billion fraud on Thursday, alleging the global, multilevel marketing scheme “misappropriated” all of the bitcoin it amassed.
The Commodity Futures Trading Commission (CFTC) described the case as its “largest ever fraud scheme case involving bitcoin.” It alleged MTI’s key figure, Cornelius Johannes Steynberg, accepted 29,421 BTC from 23,000 Americans “and even more throughout the world” for a commodity pool scheme he wasn’t licensed to run.”
Just hate it when stuff like that happens!
Entire thing is a symptom of a weak central government that is mostly only able to respond to crisis, if even that, sometimes.
Proper government would have banned crypto day one.
Seems to me that the difference from 2018 is simple. The Fed waterfall has dried up. No amount of disconnecting or connecting can start a car when the gas tank is empty.
Another supply-side factor is the cost of energy. Miners have been kicked out of the countries where energy was subsidized, and the energy cost everywhere else is exceeding the breakeven point for selling coins into the system.
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And there was nothing in this jobs report to spook the Fed out of tightening.

QE creates money. QT does the opposite: it destroys money.

Enormous churn and job hopping amid aggressive hiring, near record low layoffs, near record high job openings and quits.

Possibly confusing to folks in the US financial media that in recent months had hyped some new QE by the BOJ.

Pent-up demand in time for the recession when supply might finally rise enough? This messed-up economy will continue to dish up surprises.

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