Cryptocoin Value and Market Trend Discussion

[RandallFlagg]

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...

I basically agree, even the hyperbolic 36B number I gave is not systemic meaning not going a lot outside of Crypto. However, crypto has been damaged badly by these repeated exchange collapses. I expect to see more of that in the coming months and year.

FTX was seen as some kind of crypto exchange savior mere weeks ago, with FTX and Sam Bankman-Fried lauded by the press and most analysts. I looked and found *one* fairly obscure site which had actually done its research some months ago on FTX and did not like what they found. Their focus was on the claims that FTX had 'saved' some other exchanges and their investors, which they concluded was essentially a lie that had been spun up by FTX and the media. They did not have kind words for Bankman-Fried. This one, among hundreds of articles.

Objectively, this would imply that 99% of what one reads about the stability / ability of these exchanges and their leadership is total bunk.

 

[RandallFlagg]

FTX is bankrupt. Bankman-Fried steps down.

Worth noting that "depositors" aka customers are not "stakeholders". That would be Blackrock and so on that funded the company. The people that put up the money to fund them get theirs first :

"FTX said that it would begin a process to review and monetize assets for stakeholders."

FTX Files for Bankruptcy, CEO Sam Bankman-Fried Resigns

The bankruptcy will likely wipe out billions of equity value, leaving investors with stiff losses. It will maroon the crypto and cash deposits belonging to a legion of customers. FTX faces investigations or asset freezes from regulators and prosecutors around the world.

www.wsj.com

After gambling away their "depositors" crypto. Given it is not regulated, I'd bet this is 100% legal.

FTX Tapped Into Customer Accounts to Fund Risky Bets, Setting Up Its Downfall

Crypto exchange FTX lent billions of dollars worth of customer assets to fund bets by its affiliated trading firm, Alameda Research, setting the stage for the exchange’s implosion, a person familiar with the matter said.

www.wsj.com

 

[mb194dc]

We'll find out one way or another soon if it is legal... When things start going majorly wrong in the economy it's quite normal to have blow ups like this.

 

[dragontamer5788]

Worth noting that "depositors" aka customers are not "stakeholders". That would be Blackrock and so on that funded the company. The people that put up the money to fund them get theirs first :

Yup. Celsius 2.0. That should have woken up everyone to the nuances of US bankruptcy law.

Bondholders are more senior than depositors. In the USA, it is assumed that FDIC insurance will cover depositors. This doesn't work of course for unregulated securities, and is just part of the dangers of leaving the main financial system. I dunno if USA bankruptcy holds in this case though... but people really need to be paying attention to the intricacies of how the other crypto-services companies operated. Celsius, Voyager, Mt. Gox, etc. etc.

After gambling away their "depositors" crypto. Given it is not regulated, I'd bet this is 100% legal.

FTX is in the Bahamas. It probably is legal there. Bahamas certainly don't have a reputation of having good financial laws or regulations.

 

[freeagent]

As much as I was miffed with the whole GPU situation a while ago, I hate to see people lose something they worked hard for, and invested in. That sucks.

Sorry fellas.

 

[RandallFlagg]

Before we get the hate for Blackrock, Tiger Capital and so on, people should note that those companies invest other people's money.

So behind those names are millions of normal people, grandma's living off their pension and so on. Those people made a decision to let those companies invest their money, they took less risk and get less return.

Part of the deal when those companies invest in something like FTX via debt issuance or contracted investment capital, is that they get first dibs on any assets in a default. If it were to work any other way, no serious investor would put their money into a Blackrock or Vanguard fund in the first place.

 

[the54thvoid]

Yeah. Pension funds often get shafted when things collapse.

 

[dragontamer5788]

Yeah. Pension funds often get shafted when things collapse.

Its a lose-lose situation. Do you have the Pension fund lose everybody's money? Or do you have (like in the USA), 401k plans and have people lose their own money?

Pension funds allow everyone to blame the fund manager at least. When your own 401k plan collapses, you only really have yourself to blame.

Pension funds certainly give a lot of value when things work. But in these circumstances, seeing them lose hundreds-of-millions of bucks over this does make me worry. They're hurting the people they promised to protect.

 

[RandallFlagg]

Its a lose-lose situation. Do you have the Pension fund lose everybody's money? Or do you have (like in the USA), 401k plans and have people lose their own money?

Pension funds allow everyone to blame the fund manager at least. When your own 401k plan collapses, you only really have yourself to blame.

Pension funds certainly give a lot of value when things work. But in these circumstances, seeing them lose hundreds-of-millions of bucks over this does make me worry. They're hurting the people they promised to protect.

They're not going to lose 100%.

Most of what I've read implies that the creditors will get between 50% and 80% of their capital back, though it likely will take years perhaps a decade. Mt. Gox creditors are still waiting, for example. The depositors are probably SoL.

Pension fund up in Ontario reportedly had 0.05% of their investment in FTX.

 

[Hardcore Games]

I saw some news that FTX was ripped off, seems that BTC etc have had it.

 

[RandallFlagg]

MSN

www.msn.com

 

[LFaWolf]

Argentina and the USA has extradition law in place, so it is a curious decision to go there.

 

[R-T-B]

I saw some news that FTX was ripped off, seems that BTC etc have had it.

Meh, define "had it." It's been way way lower in the past.

Sure stings if you were an investor, but this will not kill it if that was in your fortune telling.

 

[mb194dc]

Argentina and the USA has extradition law in place, so it is a curious decision to go there.

Yup, the DOJ has some long tentacles...

If Bankman-Fried has fled to Argentina with $1 Billion of stolen client funds crypto.,. ?

Going to be in deep, deep trouble.

 

[Outback Bronze]

Um, There is a BTC conference in Argentina to be fair from the 10-13th Nov.

LABITCONF 10th Edition In Argentina - Bitcoin Magazine - Bitcoin News, Articles and Expert Insights

Whether he is attending is anybody guess I suppose.

 

[Bomby569]

The endless parade of exchanges slowly killing crypto will never end.
I remember at the very beginning when everyone warned about not keeping crypto in exchanges.

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.

High interest rates do remove money from the economy. That's their purpose. Cost of money goes up, less money for investment. Money goes to bonds and other non productive products.

 

[RandallFlagg]

The endless parade of exchanges slowly killing crypto will never end.
I remember at the very beginning when everyone warned about not keeping crypto in exchanges.



High interest rates do remove money from the economy. That's their purpose. Cost of money goes up, less money for investment. Money goes to bonds and other non productive products.

Nope. Try again.

 

[LFaWolf]

Took literally 5 seconds -
https://www.investopedia.com/ask/an...rates translate to,for consumers to hold debt.
https://www.econlib.org/library/Enc/MoneySupply.html

 

[RandallFlagg]

Took literally 5 seconds -
https://www.investopedia.com/ask/answers/040715/how-does-money-supply-affect-interest-rates.asp#:~:text=Higher interest rates translate to,for consumers to hold debt.
https://www.econlib.org/library/Enc/MoneySupply.html

If you actually read that, they are saying interest rates 'should' and 'usually'. This is because 'usually' (in the last 50 years) when interest rates rise, the Fed is also doing QT.

Interest rates are not the same as money supply. They affect *velocity* of money, not supply.

Money supply in the US has actually gone up since April 2022. The drawdown in April was due to the Fed opening the Reverse Repo Facility - which pays more interest to banks that deposit there, so as soon as they raised rates banks moved more cash there :

 

[LFaWolf]

Getting off topic here.

For the uninformed of the M1 vs M2 vs M3 - https://www.clearcapital.com/resources/glossary-of-terms/m1-m2-and-m3/#:~:text=M1, M2 and M3 are,large time deposits in banks.
https://en.wikipedia.org/wiki/Money_supply

M1 is down -

M2 is down -

 

[dgianstefani]

I would say buy the dip, but it's going to dip further.

Gold.

Buy gold.

 

[LFaWolf]

I would say buy the dip, but it's going to dip further.

Gold.

I actually think about doing the same thing, but not sure when it will bottom out. I think BTC will be around $10k and Eth will be $500? Hold them for another 3+ years and the cycle will repeat.

 

[dgianstefani]

It's the fertilizer and logistics crash that is impacting the market, I think everything else is secondary or knock-on effects.

By crash, I mean shortage and disruption.

 

[RandallFlagg]

Getting off topic here.

For the uninformed of the M1 vs M2 vs M3 - https://www.clearcapital.com/resources/glossary-of-terms/m1-m2-and-m3/#:~:text=M1, M2 and M3 are,large time deposits in banks.

M1 is down -
View attachment 269812

M2 is down -

View attachment 269813

It's actually not off topic since money supply has a strong correlation to all asset values - including, and especially, highly speculative ones like crypto.

M1 and M2 do not include the banks deposits at the Fed.

That money is included in M3. It has not been destroyed or otherwise sterilized. That money represents excess cash in the system - money that the banks can't find a better use for.

If the Fed were to lower rates, that would mean the Fed pays lower interest on those deposits to the bank, and the banks would then be more likely to seek higher returns elsewhere. i.e., buying bonds or giving out home/auto loans and such.

So yes, raising rates does give the banks a reason not to loan out money on riskier investments. It decreases the velocity of money, as I stated. It does not destroy money.

However, that money is still there. The broad money supply hasn't changed. The banks can pull it back at any time. If for example inflation were to spike to 15%, they would not be likely to want to keep their money in a 3.8% Fed account.

To put this in proper perspective, this is the broad M3 money supply from July 2018 to now.

Pre-covid there was about 15.5T M3. Today there is 21.7T.

That is a 40% expansion of the money supply, and it has barely changed despite 4 months of the Fed selling treasuries.

In fact, the entirety of the change has been from the Fed selling the treasuries it bought with newly fabricated money during the pandemic. About 300B so far.

And here is a little perspective on M1 :

This is why I say there is a very real possibility of hyperinflation.

 

[dgianstefani]

This is why I say there is a very real possibility of hyperinflation.

Combined with famine and war.

Maybe not in the west, we're too insulated and typically exporters of food, but we'll certainly see problems.

Hopefully Crypto sticks around, it's useful for keeping money honest (theoretically).