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Does anyone have a view on how "contained" crypto is? I.e. do these failures lead to anything other than pretend value going back to zero? Is there anything rea

Does anyone have a view on how "contained" crypto is? I.e. do these failures lead to anything other than pretend value going back to zero? Is there anything real that somehow depends on crypto (like what happened with mortgages)?

perardi 4y ago
Matt Levine got into this earlier this week. https://www.bloomberg.com/opinion/articles/2022-06-15/crypto-debt-can-be-trouble https://www.bloomberg.com/opinion/articles/2022-06-15/crypto... I just want to block quote the second paragraph, but instead, just the first sentence. “The deeper problem, always, is when you add leverage. Someone who gambled $40,000 on Bitcoin now has $20,000, fine. But someone who bought a Bitcoin with $20,000 of their own money and $20,000 borrowed from someone else now has roughly nothing, which is worse.”
iLoveOncall 4y ago
The global crypto market cap is $893B, it's completely insignificant and will have no impact on anything.
- deleted 4y ago
  [deleted]
- adventured 4y ago
  Definitely close to meaningless next to the implosion going on in other major assets (and the damage that is about to hit housing as well). Just the five US big tech companies (AAPL, MSFT, META, AMZN, GOOGL) are down a combined ~$3.4 trillion so far from the highs.
howlin 4y ago
Seems like the entire capitalization of crypto is around $1 trillion. The total value of housing in the USA is a bit over $40 trillion. So that should give you some sense of scale of the crypto market versus other markets that pose systematic risks.
- nostrademons 4y ago
  Note that the dot-com bubble lost about $1.7T [edited from B] in market cap, off a total of roughly $3T for the sector: https://money.cnn.com/2000/11/09/technology/overview/ https://money.cnn.com/2000/11/09/technology/overview/ In the grand scheme of things crypto is still relatively small, another dot-com bubble or not even that. It's going to be a sideshow for the bloodbath that happens in the public equity and corporate debt markets (and eventually, the housing market), which is just getting started.
  - anonymoushn 4y ago
    $1.7T isn't it
    - nostrademons 4y ago
      Fixed, thanks.
  - nybble41 4y ago
    > Note that the dot-com bubble lost about $1.7T … … in 2000. That would be $2.85T today, going by the official CPI inflation calculator.[0] [0] https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.7&year1=200011&year2=202205 https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.7&year1=2000...
  - thedufer 4y ago
    But the 1T number is mid-crash - I think the pre-crash figure I've seen was around 3T. Adjusted for inflation, crypto is still a bit short of the dot-com crash, but not by a lot, and it doesn't seem like it's over.
    - gbronner 4y ago
      The peak number was not monetizable unlike the door com crash. Dutch and Razzlekhan had five billion dollars worth of crypto, but had trouble buying 500$ Walmart gift cards. The wealth effect really never took hold- there was no market depth and the holders didn't act as if their wealth was real, so they won't change their behavior when it evaporates
anonymoushn 4y ago
Crypto in general contains a lot less uncollateralized debt, surprising chains of counterparty risk, and so on than traditional finance. This is because those defi protocols and exchanges that want to survive have process margin calls and liquidations quickly or be wiped out. 3AC may leave some counterparties in bad situations, but those counterparties are totally insignificant compared to the entities one hears about in traditional finance.
- hiq 4y ago
  > Crypto in general contains a lot less uncollateralized debt, surprising chains of counterparty risk, and so on than traditional finance. I don't think that's obvious at all when you have entities like Tether with unclear off-chain financials. Only the on-chain stuff is transparent and works as you explained.
323 4y ago
People will contradict me on this because it's counterintuitive, but crypto flows are big enough these days that they can move the US stock market. This is quite noticable on days with big crypto-only news. Meaning that crypto is very corellated with the stock market index, and if big selling happens on crypto, the statistical arbitrage algos will sell the stock market to exploit the correlation.
- hiq 4y ago
  Correlation or causation? E.g. there's a big correlation between tech stocks and cryptocurrencies, but it could just be that investors consider them both in a single category (risky assets) and thus buy / sell at the same time.
  - 323 4y ago
    Simplified, why would AAPL or GE stock drop when there is big negative crypto news? This is obviously causation.
    - hiq 4y ago
      > why would AAPL or GE stock drop when there is big negative crypto news? Does this actually happen?

perardi 4y ago

Matt Levine got into this earlier this week. https://www.bloomberg.com/opinion/articles/2022-06-15/crypto-debt-can-be-trouble https://www.bloomberg.com/opinion/articles/2022-06-15/crypto... I just want to block quote the second paragraph, but instead, just the first sentence. “The deeper problem, always, is when you add leverage. Someone who gambled $40,000 on Bitcoin now has $20,000, fine. But someone who bought a Bitcoin with $20,000 of their own money and $20,000 borrowed from someone else now has roughly nothing, which is worse.”

iLoveOncall 4y ago

The global crypto market cap is $893B, it's completely insignificant and will have no impact on anything.

deleted 4y ago
[deleted]
adventured 4y ago
Definitely close to meaningless next to the implosion going on in other major assets (and the damage that is about to hit housing as well). Just the five US big tech companies (AAPL, MSFT, META, AMZN, GOOGL) are down a combined ~$3.4 trillion so far from the highs.

howlin 4y ago

Seems like the entire capitalization of crypto is around $1 trillion. The total value of housing in the USA is a bit over $40 trillion. So that should give you some sense of scale of the crypto market versus other markets that pose systematic risks.

nostrademons 4y ago
Note that the dot-com bubble lost about $1.7T [edited from B] in market cap, off a total of roughly $3T for the sector: https://money.cnn.com/2000/11/09/technology/overview/ https://money.cnn.com/2000/11/09/technology/overview/ In the grand scheme of things crypto is still relatively small, another dot-com bubble or not even that. It's going to be a sideshow for the bloodbath that happens in the public equity and corporate debt markets (and eventually, the housing market), which is just getting started.
- anonymoushn 4y ago
  $1.7T isn't it
  - nostrademons 4y ago
    Fixed, thanks.
- nybble41 4y ago
  > Note that the dot-com bubble lost about $1.7T … … in 2000. That would be $2.85T today, going by the official CPI inflation calculator.[0] [0] https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.7&year1=200011&year2=202205 https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.7&year1=2000...
- thedufer 4y ago
  But the 1T number is mid-crash - I think the pre-crash figure I've seen was around 3T. Adjusted for inflation, crypto is still a bit short of the dot-com crash, but not by a lot, and it doesn't seem like it's over.
  - gbronner 4y ago
    The peak number was not monetizable unlike the door com crash. Dutch and Razzlekhan had five billion dollars worth of crypto, but had trouble buying 500$ Walmart gift cards. The wealth effect really never took hold- there was no market depth and the holders didn't act as if their wealth was real, so they won't change their behavior when it evaporates

anonymoushn 4y ago

Crypto in general contains a lot less uncollateralized debt, surprising chains of counterparty risk, and so on than traditional finance. This is because those defi protocols and exchanges that want to survive have process margin calls and liquidations quickly or be wiped out. 3AC may leave some counterparties in bad situations, but those counterparties are totally insignificant compared to the entities one hears about in traditional finance.

hiq 4y ago
> Crypto in general contains a lot less uncollateralized debt, surprising chains of counterparty risk, and so on than traditional finance. I don't think that's obvious at all when you have entities like Tether with unclear off-chain financials. Only the on-chain stuff is transparent and works as you explained.

323 4y ago

People will contradict me on this because it's counterintuitive, but crypto flows are big enough these days that they can move the US stock market. This is quite noticable on days with big crypto-only news. Meaning that crypto is very corellated with the stock market index, and if big selling happens on crypto, the statistical arbitrage algos will sell the stock market to exploit the correlation.

hiq 4y ago
Correlation or causation? E.g. there's a big correlation between tech stocks and cryptocurrencies, but it could just be that investors consider them both in a single category (risky assets) and thus buy / sell at the same time.
- 323 4y ago
  Simplified, why would AAPL or GE stock drop when there is big negative crypto news? This is obviously causation.
  - hiq 4y ago
    > why would AAPL or GE stock drop when there is big negative crypto news? Does this actually happen?