Cryptocoin Value and Market Trend Discussion

[trog100]

both bitcoin and eth are tanking like crazy at the moment.. things seemed to have improved but it didnt last long..

panic seems the only word that comes to mind..

trog

 

[lexluthermiester]

both bitcoin and eth are tanking like crazy at the moment.. things seemed to have improved but it didnt last long..

panic seems the only word that comes to mind..

trog

With all the crazy that's going on, that is not surprising.

 

[ThrashZone]

both bitcoin and eth are tanking like crazy at the moment.. things seemed to have improved but it didnt last long..

panic seems the only word that comes to mind.. he he..

trog

Hi,
Damn you forgot ending with he he.. so there I fixed it for you

 

[RandallFlagg]

It's getting worse. Broader equity markets seem to have been drug down as well. Treasury bonds, the ultimate safe-haven, have held onto gains but seem to have stalled (prices up, yield down). There may be some domino effects going on here.

 

[Outback Bronze]

Broader equity markets seem to have been drug down as well.

This the start of the quantitative tightening taking hold perhaps?

 

[dragontamer5788]

This the start of the quantitative tightening taking hold perhaps?

Equity back above 0%, so you're wrong, lol. /s

Seriously though: the QT / Fed Rate Hikes / Hawkish Fed behavior has already changed how investors think months ago.

U.S. Fund Flows: Investors Pull Back in September

Tumbling equity markets and declining bond prices drove some investors to the exits.

www.morningstar.com

I've got another topic about the broader financial market if you wanna talk those issues. But there's been no real change for the past few months. The big change to behavior was April or so, when the Fed rate hikes really kicked in. Investors piled out of Bonds, and active-investors began to sell stocks. Passive stock investors did not change their behavior however (and even today, passive stock investors still continue on their buy the dip kind of thinking).

More discussion here:

https://www.techpowerup.com/forums/threads/money-and-investing-savings-accounts-bonds-stocks-options-and-more.298118/

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Whatever is going on today is clearly isolated to the BTC / Cryptocoin world. BTC down, Coinbase Down, FTX down, ETH down.

VTI? BND? SPY? Neutral to even up/positive right now. Clearly uncorrelated.

 

[RandallFlagg]

This the start of the quantitative tightening taking hold perhaps?

That's not my opinion.

From a US perspective - There is still way too much excess cash floating around, and the Fed has barely done anything about it so far. I think there remains real risk of true hyper-inflation, possibly world wide.

To give an example, this is excess savings in the US. Look at where we started in Mar 2020 :

This shows inflation by fairly specific category - blue is deflation, orange is inflation.

Here, I've clicked on all the dark blues and a bunch of the oranges. If you look through these, it's pretty apparent - outside of electronics and a few very specific things like sporting events, prices are rising a whole lot faster than the official CPI. It's just being lowered by those areas where there is 'deflation'.

And just today :

‘Hyperinflation’ And ‘Societal Collapse’—Why The Fed And Inflation Could Cause The Bitcoin Nightmare To Come True

One of the world's biggest hedge funds has warned the global economy is on the path to hyperinflation and risks societal collapse if surging prices are not reined in...

www.forbes.com

The Fed holdings in April 2022:

They've done almost no QT :

 

[Outback Bronze]

Wow nice charts!

Well from what I'm seeing here down under we will have a lot more pain on the way.

 

[RandallFlagg]

Wow nice charts!

Well from what I'm seeing here down under we will have a lot more pain on the way.

This is something to keep in mind. A rising stock market is expected when inflation is goes hyper. The same is likely to be true of crypto :

 

[dragontamer5788]

They've done almost no QT :

You're ignoring the rise of 0% interest rates to 3.75% interest rates, which is incredibly hawkish (and effectively is destroying money).

Proof is in the pudding.

US Savings are now averaging only 3.5% recently. Yes, a lot of people saved up during COVID19 but a lot of that money has been spent / disappeared by now. Pre-COVID19, we were saving 7% or so, so we're well below our "previous" saving rate as a country.

The FOMC is incredibly hawkish, and the "destruction of money" is at the highest rates its been in decades, and likely to grow higher as more-and-more people become concerned about inflation. Furthermore, CPI has dropped to 6.5% (down from 9% earlier this year). We're actually on the right track.

If you think I'm wrong, feel free to buy TIPS (Treasury Inflation Protected Securities), which make more money in times of inflation. I-Bonds are an easier buy IMO as well but have a $10,000 limit. (I did get my I-bonds for the year, locking in at the previous 9.6% inflation rate). Most economic data is showing a severe destruction of cash flow / savings. Inflation continues to decline (though not as much of a decline as we wanted... it is in fact declining by all measures).

Personal Consumption Expenditures Price Index | U.S. Bureau of Economic Analysis (BEA)

Personal Consumption Expenditures Price Index Change from Month One Year Ago April 2023 4.4 % March

www.bea.gov

PCE is the preferred methodology of measuring inflation (even if the US Government itself uses CPI). PCE is down to 6.2% on an annualized basis.

BEA Interactive Data Application

--------

Here are some signs that inflation is calming down

Lately, products that posted some of the most notable price surges last year have seen slumping prices.

www.axios.com

It takes a while for these measures to kick in, but as early as August 2022 we were seeing the effects of this hawkish policy and "demand destruction" so to speak. Used Car inventory shot up dramatically in August. A few months later (September, October), we're seeing more and more signs of inflation calming down.

We need more time, and it probably won't be controlled until late 2023. It just takes a long time for this crap to take effect. But the Fed is on the right track for sure.

This is something to keep in mind. A rising stock market is expected when inflation is goes hyper. The same is likely to be true of crypto :

And how much did the stock market / crypto go up when inflation hit 9% in March?

Too many stocks are growth-strategy, which seems to do poorly during inflation. If the cost of goods goes up, then promises of future-wealth disappears. Inflation is only good if your companies are currently making things. But if you're just a company that constantly promises to "make something awesome later" (but are losing money right now, like Uber, AMC, Gamestop, etc. etc.), then inflation just kills you before you take off.

Seems to be the same thing with cryptocurrencies. They were an awful inflation hedge.

 

[trog100]

wednesday morning here in the UK.. the crypto decline (crash) continues.. bitcoin down at 17k with eth just above 1.2K.. things are not looking good..

trog

 

[RandallFlagg]

You're ignoring the rise of 0% interest rates to 3.75% interest rates, which is incredibly hawkish (and effectively is destroying money).

Proof is in the pudding.

View attachment 269187

US Savings are now averaging only 3.5% recently. Yes, a lot of people saved up during COVID19 but a lot of that money has been spent / disappeared by now. Pre-COVID19, we were saving 7% or so, so we're well below our "previous" saving rate as a country.

The FOMC is incredibly hawkish, and the "destruction of money" is at the highest rates its been in decades, and likely to grow higher as more-and-more people become concerned about inflation. Furthermore, CPI has dropped to 6.5% (down from 9% earlier this year). We're actually on the right track.

If you think I'm wrong, feel free to buy TIPS (Treasury Inflation Protected Securities), which make more money in times of inflation. I-Bonds are an easier buy IMO as well but have a $10,000 limit. (I did get my I-bonds for the year, locking in at the previous 9.6% inflation rate). Most economic data is showing a severe destruction of cash flow / savings. Inflation continues to decline (though not as much of a decline as we wanted... it is in fact declining by all measures).

Personal Consumption Expenditures Price Index | U.S. Bureau of Economic Analysis (BEA)

Personal Consumption Expenditures Price Index Change from Month One Year Ago April 2023 4.4 % March

www.bea.gov

PCE is the preferred methodology of measuring inflation (even if the US Government itself uses CPI). PCE is down to 6.2% on an annualized basis.

BEA Interactive Data Application

View attachment 269188

--------

Here are some signs that inflation is calming down

Lately, products that posted some of the most notable price surges last year have seen slumping prices.

www.axios.com

It takes a while for these measures to kick in, but as early as August 2022 we were seeing the effects of this hawkish policy and "demand destruction" so to speak. Used Car inventory shot up dramatically in August. A few months later (September, October), we're seeing more and more signs of inflation calming down.

We need more time, and it probably won't be controlled until late 2023. It just takes a long time for this crap to take effect. But the Fed is on the right track for sure.



And how much did the stock market / crypto go up when inflation hit 9% in March?

Too many stocks are growth-strategy, which seems to do poorly during inflation. If the cost of goods goes up, then promises of future-wealth disappears. Inflation is only good if your companies are currently making things. But if you're just a company that constantly promises to "make something awesome later" (but are losing money right now, like Uber, AMC, Gamestop, etc. etc.), then inflation just kills you before you take off.

Seems to be the same thing with cryptocurrencies. They were an awful inflation hedge.

High interest rates do not remove money from the economy.

Look up reverse repo and understand who that interest is being paid to.

The only way the Fed removes money from the economy is by selling its assets.

 

[dragontamer5788]

High interest rates do not remove money from the economy.

Look up reverse repo and understand who that interest is being paid to.

The only way the Fed removes money from the economy is by selling its assets.

Have you seen the CCC-loan rate in the past few months? Its gone ballistic, through the roof.

Companies (especially debt-laden companies) are paying 16%+ for their debt, making it harder-and-harder for various loans to be issued to them. This is the destruction of money that I'm talking about. If companies can't borrow (ie: 16% is a LOT more expensive than 7%), then they won't expand.

This lines up perfectly with the +3.75% interest rate hike of the past few months. When the risk-free loan rate is 3.75%, then banks will charge everyone else more. More on mortgages, more on car loans, and more on company-debt. This has an effect of removing money from the economy. Fewer mortgages happen, fewer car loans (and therefore car sales) happen, fewer company debt (and therefore expansion / new companies) happen.

Yeah, the idea is to pay banks 3.75, so that banks charge more for everything they do. We're finally past the ridiculous zero-interest-rate policies and probably for good. The 2010s period of hype is finally over and dead. The times were good for some, but there were too many ridiculous projects funded (WeWork, Uber, MoviePass) that only harmed us as a society IMO. Companies actually have to make money again (especially to service their own debt/operations) again.

And not just a little bit of money either. The lower-grade debt is now 16%+, and expected to rise even more as these interest rate hikes reach 4.5% through 5% (or maybe higher, depending on how high the Fed Rate hikes go). Its a lot harder to run a debt-laden company today at 16% or tomorrow at 20%+, rather than running such a company at 7.5%.

------

Lets look at this Twitter buyout for instance. Twitter borrowed $13 Billion to fund Elon Musk's takeover bid in a leveraged buyout. At 10%, that's $1.3 Billion/year the company needs to make now to fund its debt. At 16%, that's $2 Billion/year. Its big 3700 person x $200,000 per person layoff (I'm guessing $200k per person)? That's only 740-million, aka the difference between 10% and 16%. IE: Twitter's mass layoffs only covered the increase in debt interest-costs from 10% to 16%. He still needs to find another $1.3 Billion in cost savings (and/or revenue) to survive.

EDIT: I dunno how much of the debt was fixed-rate vs adjustable. I assumed adjustable for the above paragraph as a point. There's a HUGE difference from 10% and 16%.

Morgan Stanley and other banks are sitting on Twitter's debt. They're literally unable to sell it to the public. Twitter is "the last" buyout of the last era, and the banks are the bagholders. Who will want to take this debt off of the banks now that we know interest rates are rising higher, and the company has a $13 Billion hole in its asset sheets?

 

[RandallFlagg]

View attachment 269230

Have you seen the CCC-loan rate in the past few months? Its gone ballistic, through the roof.

Companies (especially debt-laden companies) are paying 16%+ for their debt, making it harder-and-harder for various loans to be issued to them. This is the destruction of money that I'm talking about. If companies can't borrow (ie: 16% is a LOT more expensive than 7%), then they won't expand.

This lines up perfectly with the +3.75% interest rate hike of the past few months. When the risk-free loan rate is 3.75%, then banks will charge everyone else more. More on mortgages, more on car loans, and more on company-debt. This has an effect of removing money from the economy. Fewer mortgages happen, fewer car loans (and therefore car sales) happen, fewer company debt (and therefore expansion / new companies) happen.

Yeah, the idea is to pay banks 3.75, so that banks charge more for everything they do. We're finally past the ridiculous zero-interest-rate policies and probably for good. The 2010s period of hype is finally over and dead. The times were good for some, but there were too many ridiculous projects funded (WeWork, Uber, MoviePass) that only harmed us as a society IMO. Companies actually have to make money again (especially to service their own debt/operations) again.

And not just a little bit of money either. The lower-grade debt is now 16%+, and expected to rise even more as these interest rate hikes reach 4.5% through 5% (or maybe higher, depending on how high the Fed Rate hikes go). Its a lot harder to run a debt-laden company today at 16% or tomorrow at 20%+, rather than running such a company at 7.5%.

------

Lets look at this Twitter buyout for instance. Twitter borrowed $13 Billion to fund Elon Musk's takeover bid in a leveraged buyout. At 10%, that's $1.3 Billion/year the company needs to make now to fund its debt. At 16%, that's $2 Billion/year. Its big 3700 person x $200,000 per person layoff (I'm guessing $200k per person)? That's only 740-million, aka the difference between 10% and 16%. IE: Twitter's mass layoffs only covered the increase in debt from 10% to 16%. He still needs to find another $1.3 Billion in cost savings (and/or revenue) to survive.

Morgan Stanley and other banks are sitting on Twitter's debt. They're literally unable to sell it to the public. Twitter is "the last" buyout of the last era, and the banks are the bagholders. Who will want to take this debt off of the banks now that we know interest rates are rising higher, and the company has a $13 Billion hole in its asset sheets?

This is way off topic and you fundamentally don't understand what you are talking about. Higher rates in theory will slow the velocity of money. However, our current rates in the US - and especially in places like the EU - are lower than inflation. Way lower. This means anyone with substantial amounts of cash gets poorer each day. They are better off spending that money on something - property, futures, something. Rates are nowhere near where they need to be.

And if you think inflation is beaten, look beneath the covers of the broad CPI numbers for just a moment. This is core CPI up to September - looks like it accelerated to me :

Back up a bit to 5Y chart and there is nothing but a blip in core inflation - not even as big a dip as the last time inflation supposedly 'peaked' in 2021.

The broad number that includes food and energy flattened - entirely because gas prices went down, and much of that because oil was artificially suppressed by releasing 1M bbl/day from the US SPR. Give it a couple more months and your eyes will be rather forcefully opened to the 'transient' nature of such an action.

As far as I-bonds, I have $40,000 in I-bonds, I started buying them in 2021 and again in early 2022 when I saw this was going out of control and the Fed was doing nothing.

 

[dragontamer5788]

This means anyone with substantial amounts of cash gets poorer each day. They are better off spending that money on something - property, futures, something.

Cash is one of the best performing assets this year. I'm holding onto more cash today than ever before: ~10% or so.

As far as I-bonds, I have $40,000 in I-bonds, I started buying them in 2021 and again in early 2022 when I saw this was going out of control and the Fed was doing nothing.

Then buy TIPS.

Oh wait, inflation went down this year. So TIPS have lost money.

I-Bonds are the easy one, because they can't lose money. TIPS are what you buy if you truly believe inflation will get worse, because inflation MUST go up for TIPS to make money. If we have a decline from 9% inflation to 6% inflation, TIPS lose money

 

[RandallFlagg]

Cash is one of the best performing assets this year. I'm holding onto more cash today than ever before: ~10% or so.

View attachment 269239

View attachment 269240

View attachment 269241

View attachment 269242



Then buy TIPS.

View attachment 269243

Oh wait, inflation went down this year. So TIPS have lost money.

I-Bonds are the easy one, because they can't lose money. TIPS are what you buy if you truly believe inflation will get worse, because inflation MUST go up for TIPS to make money. If we have a decline from 9% inflation to 6% inflation, TIPS lose money

When people say cash is a good place to be, they are usually talking about cash equivalents.

If you have $500,000 and want to 'keep your powder dry' you don't leave it in savings accounts. You put it into a short term (like 1-12 month) bond ladder or CD ladder.

What you are talking about is speculation that the value of the underlying asset will go up or down - *trading* bonds is different from holding to maturity and is very much like trading stocks.

 

[dragontamer5788]

When people say cash is a good place to be, they are usually talking about cash equivalents.

I'm talking Money Market Funds like VMFXX or SWVXX.

If you have $500,000 and want to 'keep your powder dry' you don't leave it in savings accounts. You put it into a short term (like 1-12 month) bond ladder or CD ladder.

Locking into a 0.4% 1Y CD and/or bond in January 2022 is one of the worst things you could have done with your money, aside from locking into a 10Y at 1.6% or 30-year at 2%.

One of the best performers this year is Cash (aka: VMFXX or SWVXX), or maybe BIL (no longer than a 3-month maturity). Even 6-month bonds have been blown out by these incredible rate hikes. VMFXX/SWVXX (and other money market funds) have substantial 1-day and 1-week maturities. They were incredibly hard to beat this year in practice.

The broad number that includes food and energy flattened - entirely because gas prices went down, and much of that because oil was artificially suppressed by releasing 1M bbl/day from the US SPR. Give it a couple more months and your eyes will be rather forcefully opened to the 'transient' nature of such an action.

Remove one more item: shelter.

Sticky Price Consumer Price Index less Food, Energy, and Shelter

Graph and download economic data for Sticky Price Consumer Price Index less Food, Energy, and Shelter (CRESTKCPIXSLTRM679SFRBATL) from Apr 1967 to Oct 2024 about shelter, core, CPI, inflation, rate, price index, indexes, price, and USA.

fred.stlouisfed.org

And that figure is down in the past couple of months (since the Fed's rate hikes began to kick into effect).

Housing prices are only beginning to be affected by these price hikes. But there's only so many houses that can sell at 7% mortgages instead of 3% mortgages.

The other big purchase usually affected by loans is also dropping.

You're going to see cheaper used car prices in the coming months

Wholesale used car prices are falling fast, and should lead to lower prices on car lots.

www.axios.com

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Bringing it back to cryptocurrencies... BTC is a terrible asset right now. Inflation aside.

 

[RandallFlagg]

I'm talking Money Market Funds like VMFXX or SWVXX.


Locking into a 0.4% 1Y CD and/or bond in January 2022 is one of the worst things you could have done with your money, aside from locking into a 10Y at 1.6% or 30-year at 2%.

One of the best performers this year is Cash, or maybe BIL (no longer than a 3-month maturity). Even 6-month bonds have been blown out by these incredible rate hikes.
<snip>

You know there is this thing where people just argue on the internet because they want to be 'right'.

I don't do that with money. Just one post ago you were saying cash, now you're saying short term CDs are horrific. Your number about 0.4% 1Y CD is a hyperbolic distortion of what I said and what is on the market. Do you even know what a bond ladder is?

 

[dragontamer5788]

Do you even know what a bond ladder is?

Yes. My bond ladder is doing worse than my cash position.

Or have you not noticed? My 1Y rates from last year are locked to 0.4%, while my CASH is getting 3.5% from VMFXX. I'm glad that I actually am holding onto some cash.

Have you looked at your bond ladder? Have you calculated your yields from a 1Y bond ladder? You're still locked into November 2021, December 2021, January 2022, Februrary 2022 rates (my ladder is monthly).

What's your ladder? Is it doing better than my VMFXX holdings?

 

[the54thvoid]

At this point, can I add, this is a crypto thread and you've both veered way off topic. Please move your discussions to the other thread with bonds and share info.

https://www.techpowerup.com/forums/threads/money-and-investing-savings-accounts-bonds-stocks-options-and-more.298118/

 

[dragontamer5788]

Bringing us back to topic then... Big drops all around today so far.

BTC at $17,000, I even saw some $16,xxx numbers for a brief few minutes. Volume is huge, tons of people coming in to support the price / buy the dip or something.

Anyone know exactly what is causing this today? FTX / FTX Token / Binance seems to be the main story to follow, but I really don't know.

 

[lexluthermiester]

wednesday morning here in the UK.. the crypto decline (crash) continues.. bitcoin down at 17k with eth just above 1.2K.. things are not looking good..

trog

I'm not so sure. The overall value is up from 45 days ago, but it's still down from 90 days ago.

 

[RandallFlagg]

$36B USD in assets just goes boom. Those affected include Blackrock and Tiger Global.

They will undoubtedly be looking to get their money back from the assets held by FTX.

Those assets would mostly be the bitcoin 'held' by FTX for their customers. Since this isn't a bank and it's unregulated, that's not protected.

Meanwhile, Bankman-Fried deletes a tweet :

Sam Bankman-Fried quietly deletes his claim that FTX customer funds are safe

The future of client assets locked on crypto exchange FTX remains uncertain, with a Binance deal that can bail out the company depending on a closer look at the books.

finance.yahoo.com

 

[kapone32]

Bringing us back to topic then... Big drops all around today so far.

BTC at $17,000, I even saw some $16,xxx numbers for a brief few minutes. Volume is huge, tons of people coming in to support the price / buy the dip or something.

Anyone know exactly what is causing this today? FTX / FTX Token / Binance seems to be the main story to follow, but I really don't know.

You hit the nail on the head it was all over CNBC for the last few months but it has created some huge ripples since the deal was done yesterday. On another note AMD is at $61, Nvidia has lost a ton of money in share price and the situation in Ukraine becomes more complex and dangerous.

 

[dragontamer5788]

$36B USD in assets just goes boom. Those affected include Blackrock and Tiger Global.

So we know that Binance had ~$500 million in FTT that's basically worthless now. But how many cryptocoin funds/exchanges are going to lie about their exposure to FTT now?

Much like how Luna/Terra ended up destroyed Three Arrows Capital (and the collapse of _THAT_ then caused Celsius and Voyager collapses), a collapse of this magnitude is going to chain-react and cause other groups to collapse.

Blackrock on the other hand has 10,000,000 million (aka: 10+ Trillion) in assets. Its a big bank and a few billion dollars gained (or lost) here or there is "basically a Tuesday" for them. I don't see this spreading out to the mainstream economy, aside from embarrassing the cryptobro executives inside of Blackrock.

EDIT: Celsius's collapse was in June, while Terra/Luna's collapse was in May. So these sorts of chain-reactions are delayed by a month or so. I guess we'll find out who was exposed to this risk within the next month or two...