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Yeah but is crypto causing the crash or just a symptom of it? It doesn’t seem like all the large investment banks and reinsurers are flirting with insolvency d

by CPLX 4y ago

Yeah but is crypto causing the crash or just a symptom of it? It doesn’t seem like all the large investment banks and reinsurers are flirting with insolvency due to crypto exposure. They definitely were due to CDO and mortgages. That distinction seems substantive.

quantified 4y ago
There’s bleed in various areas. Institutional investors own stocks in the companies involved. Microstrategy made owning Bitcoin part of its business. Stupid abounds.
- NicoJuicy 4y ago
  That's because their own business was faultering
  - javert 4y ago
    Is there evidence for that? You have to wonder. But Michael Saylor comes across as a true believer in bitcoin.
fartcannon 4y ago
An opportunistic scapegoating by the banks, maybe. There's quite a lot of astroturfing about crypto (for and against these days). I'd expect a couple decades of conspiracy theories about their role at the very least. But Bitcoin was created as a response to the banks failures in 2008, so maybe they're trying to get ahead of that message returning this time around. Anyone work in PR for mortgage companies? What kinda position are you taking right now?
- nradov 4y ago
  Mortgage companies have been laying off employees and cutting expenses since the Federal Reserve started raising interest rates several months ago. That industry has always gone through boom and bust cycles, and the boom just ended.
deleted 4y ago
[deleted]
t_mann 4y ago
This. Let's not pretend that 'traditional' investors haven't become hooked on expansionary monetary policy too. Pretty much every relevant market segment, from stocks to bonds to real estate, has been overvalued by every traditional metric and still rising for a decade now. With central banks ending the printing bonanza, the time of reckoning has come. The reckoning will be harder in crypto because on top of loose monetary policy, prices have been propped up by money-printing scams like Tether. If crypto wants to prove it has value as a technology and not just a get-rich-quick scheme, it needs to rid itself of the Terras, Tethers and other such actors.
qqqwerty 4y ago
I think 2008 is the wrong analogy. The Dotcom bubble is probably a more instructive comparison. The Dotcom bubble was inflated by a lot of people investing in something they didn't understand. And the crash did not threaten to destabilize the entire financial system. But it did cause a drag on the broader economy, and had fairly significant local impacts. Of course that is just when evaluating the crypto bubble. There are multiple other ongoing problems in the economy, and I am having a harder time figuring out what the impacts will be. Stubborn inflation due to supply chain problems, coupled with rapidly rising interest rates feels like we are going to see a lot of companies get caught in very tough situations. There are a lot of companies out there that are supply constrained right now. I imagine they have been hanging on and avoiding layoffs/downsizing the last year or so in the hopes that once the supply chain issues resolve they can quickly ramp back up to 100%. But if debt/financing gets really expensive or demand starts dropping I think we are going to start seeing a lot of layoffs. I still don't think this leads to a 2008 style crash. But I am a bit uneasy about what happens when you take away the cheap debt that has been fueling the economy for the last decade.
- nradov 4y ago
  The Dotcom bubble companies were mostly not outright scams. Some of them were, in retrospect, obviously stupid ideas. But they were at least trying to bring in revenue, and a few actually succeeded. By contrast, cryptocurrency has no revenue stream. It's a zero-sum game. A better analogy would be the bubble in Beanie Babies that happened around the same time as the Dotcom boom (and drove some early Ebay growth). Idiots were taking out loans to buy up thousands of those toys, thinking that demand would go up forever.
  - Ekaros 4y ago
    Even worst crypto is negative-sum game. It has constant negative revenue stream in mining. Occasionally it is corrected, but not as much as the price increases...
aeternum 4y ago
One substantial risk is the amount of leverage out there. There was tons of it in the crypto ecosystem, and there is a lot in stocks too: https://fred.stlouisfed.org/series/BOGZ1FL663067003Q https://fred.stlouisfed.org/series/BOGZ1FL663067003Q Now as the fed starts pulling money out of circulation by selling it's balance sheet, there's a multiplicative effect on the amount of money siphoned out. Due to this magnificent, it seems very easy for the fed to overcorrect and pull way too much money out of the system. The fed must walk a very fine line in triggering this deleveraging.

by CPLX 4y ago

quantified 4y ago

There’s bleed in various areas. Institutional investors own stocks in the companies involved. Microstrategy made owning Bitcoin part of its business. Stupid abounds.

NicoJuicy 4y ago
That's because their own business was faultering
- javert 4y ago
  Is there evidence for that? You have to wonder. But Michael Saylor comes across as a true believer in bitcoin.

fartcannon 4y ago

An opportunistic scapegoating by the banks, maybe. There's quite a lot of astroturfing about crypto (for and against these days). I'd expect a couple decades of conspiracy theories about their role at the very least. But Bitcoin was created as a response to the banks failures in 2008, so maybe they're trying to get ahead of that message returning this time around. Anyone work in PR for mortgage companies? What kinda position are you taking right now?

nradov 4y ago
Mortgage companies have been laying off employees and cutting expenses since the Federal Reserve started raising interest rates several months ago. That industry has always gone through boom and bust cycles, and the boom just ended.

deleted 4y ago

[deleted]

t_mann 4y ago

This. Let's not pretend that 'traditional' investors haven't become hooked on expansionary monetary policy too. Pretty much every relevant market segment, from stocks to bonds to real estate, has been overvalued by every traditional metric and still rising for a decade now. With central banks ending the printing bonanza, the time of reckoning has come. The reckoning will be harder in crypto because on top of loose monetary policy, prices have been propped up by money-printing scams like Tether. If crypto wants to prove it has value as a technology and not just a get-rich-quick scheme, it needs to rid itself of the Terras, Tethers and other such actors.

qqqwerty 4y ago

I think 2008 is the wrong analogy. The Dotcom bubble is probably a more instructive comparison. The Dotcom bubble was inflated by a lot of people investing in something they didn't understand. And the crash did not threaten to destabilize the entire financial system. But it did cause a drag on the broader economy, and had fairly significant local impacts. Of course that is just when evaluating the crypto bubble. There are multiple other ongoing problems in the economy, and I am having a harder time figuring out what the impacts will be. Stubborn inflation due to supply chain problems, coupled with rapidly rising interest rates feels like we are going to see a lot of companies get caught in very tough situations. There are a lot of companies out there that are supply constrained right now. I imagine they have been hanging on and avoiding layoffs/downsizing the last year or so in the hopes that once the supply chain issues resolve they can quickly ramp back up to 100%. But if debt/financing gets really expensive or demand starts dropping I think we are going to start seeing a lot of layoffs. I still don't think this leads to a 2008 style crash. But I am a bit uneasy about what happens when you take away the cheap debt that has been fueling the economy for the last decade.

nradov 4y ago
The Dotcom bubble companies were mostly not outright scams. Some of them were, in retrospect, obviously stupid ideas. But they were at least trying to bring in revenue, and a few actually succeeded. By contrast, cryptocurrency has no revenue stream. It's a zero-sum game. A better analogy would be the bubble in Beanie Babies that happened around the same time as the Dotcom boom (and drove some early Ebay growth). Idiots were taking out loans to buy up thousands of those toys, thinking that demand would go up forever.
- Ekaros 4y ago
  Even worst crypto is negative-sum game. It has constant negative revenue stream in mining. Occasionally it is corrected, but not as much as the price increases...

aeternum 4y ago

One substantial risk is the amount of leverage out there. There was tons of it in the crypto ecosystem, and there is a lot in stocks too: https://fred.stlouisfed.org/series/BOGZ1FL663067003Q https://fred.stlouisfed.org/series/BOGZ1FL663067003Q Now as the fed starts pulling money out of circulation by selling it's balance sheet, there's a multiplicative effect on the amount of money siphoned out. Due to this magnificent, it seems very easy for the fed to overcorrect and pull way too much money out of the system. The fed must walk a very fine line in triggering this deleveraging.