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> Since the start of this year, macroeconomic and geopolitical factors have weighed on financial markets. This is an incredible couching of the last 9 months o
by woodruffw 4y ago
> Since the start of this year, macroeconomic and geopolitical factors have weighed on financial markets.
This is an incredible couching of the last 9 months of cryptocurrency market behavior. Does anybody actually operate on their belief that "geopolitical factors," rather than astonishing amounts of fraud, are responsible for the current downturn?
- masklinn 4y agoIn fairness the astonishing amounts of fraud have been there all along.
- woodruffw 4y agoVery true! I guess "precipitation of the consequences of fraud" would have been more precise.
- nightski 4y agoAs is true in traditional finance as well. If you want to escape fraud altogether you might as well not have any wealth. The entire 2008 financial crises was due to fraud...
- Sebb767 4y agoPeople are still defrauded without wealth. See loan sharks, for example, or people arguing you should use debt to invest in the newest crypto hype. So even that escape hatch does not work.
- brightball 4y agoYep. Honestly it’s just been a question of whether you were going to try to take advantage on the way up or not.
- knorker 4y ago"It's only when the tide goes out that you find out who's been swimming naked" Fraud and ponzis work fine for a while, but a downturn is exactly what causes its instability to show.
- hoffs 4y agoI guess stripe and others that had layoffs are also full of fraud
- JumpCrisscross 4y ago> rather than astonishing amounts of fraud Macro weighs more on crypto than geopolitics or fraud. Fraud never deterred millions from dumping savings, reputations and careers into this mess. The inflection point, for crypto, as with other risk assets, was the Fed.
- woodruffw 4y agoI don't disagree, but: macro is a forcing function for the collapse of fraudulent schemes. If it was just a macro downturn, we would be seeing a filter between different firms. Instead we're seeing an implosion roughly every month, interspersed with bankruptcies and major headcount cuts.
- programmarchy 4y agoNASDAQ is also down 30%. Crypto was down before the whole FTX scandal, too, so that doesn't explain everything.
- Ekaros 4y agoI think at current moment it is pretty much been shown that crypto is no hedge against other financial markets. It is entirely correlated. And then it has it own host of issues and probably have enough players who can't handle downturn in market... More fun news to come.
- woodruffw 4y agoAre you saying that a YoY decline of 30% in the NASDAQ index is comparable to a 30% employee haircut? I don't think that's how it works.
- programmarchy 4y agoNo, by “also” I was referring to cryptocurrency markets not the 30%.
- woodruffw 4y agoSorry for the confusion. I agree that macro trends are having an effect; I think some of the other threads have a good amount of elaboration on the interaction between the macro economic climate and the crypto downturn (and particularly, why crypto's unique vulnerability to downturns makes it funny to place blame on the broader market).
- rabuse 4y agoCrypto simply followed the overall market effects. People cashed out with the economic downturn on the profits they made, just as they did the stock market.
- JumpCrisscross 4y ago> Crypto simply followed the overall market effects Crypto is performing far worse than even the riskiest decile of the stock market. Which should surprise nobody.
- nightski 4y agoThis is not true. The riskiest stocks are down thousands of %.
- JumpCrisscross 4y ago> riskiest stocks are down thousands of % This isn’t how numbers work. Also, practically every asset class has a member that went to zero. The question is what fraction, and how did the others do. If you bought a basket of super-risky assets, over the past years, they went up like crypto and down less.
- deleted 4y ago[deleted]
- actionablefiber 4y ago> The riskiest stocks are down thousands of %. Huh?
- nabaraz 4y agoNothing can be down more than 100%. Average stocks in S&P are down 55%. Growth stocks are down 70%. S&P is down 18%. Bitcoin is down 60%.
- 4y ago
- setgree 4y agoWe learned about the fraud because of macroeconomic factors! inflation -> rising interest rates -> crypto less attractive [0] -> people ask for their deposits back -> company can't meet obligations -> company folds -> scrutiny -> fraud revealed Is my basic model of things. [0] from https://marginalrevolution.com/marginalrevolution/2022/11/the-ftx-debacle-eli5.html https://marginalrevolution.com/marginalrevolution/2022/11/th...: "When interest rates are very low a dollar in the far future is worth almost as much as a dollar today. Thus, in a regime of low interest-rates, crypto and other projects with (speculative) long-run payoffs could be valued highly. As interest rates rose, however, long-run speculative returns began to look much less attractive than say T-bills and money flocked out of assets in the long-run sector causing prices to plummet."
- woodruffw 4y agoI completely agree! My point was that it's very funny to blame the macro (and even funnier to blame geopolitics), when it's clearly just serving a revelatory purpose.
- function_seven 4y agoSo you're saying that when I get arrested for public indecency, my defense should start with "due to tidal forces and the changing orientation of our Moon, my nether region emerged above the water's surface" Or something like that?
- woodruffw 4y agoI don't know if I'd recommend it, but it'll be roughly as convincing as blaming geopolitics!
- setgree 4y agoMy advice is to repeat Warren Buffet's adage -- "only when the tide goes out do you discover who's been swimming naked" -- and adamantly deny that it has any non-literal meaning whatsoever. Warren was just telling us about something he observed at the beach one time
- SkyPuncher 4y agoRussia's invasion of Ukraine had a very strong impact on investor willingness. It indicated a new period of uncertainty where people preferred having their cash in stable vehicles. I've seen startups struggle to raise in March when less attractive competitors raised with ease in February.
- cwkoss 4y agoTesla is down 52% vs 9 months ago Bitcoin is down 63% vs 9 months ago Just sayin
- quonn 4y agoTesla added many features vs 9 months ago and sold - what? - a million cars? Has Bitcoin even been used to sell a single pizza since then?
- JamesSwift 4y agoYes but by the time the pizza arrived, the guy owed them more bitcoins.
- stuckinhell 4y agoThe fraud seems to get political very quickly with FTX. Sam Bankman donated enormous amounts of money to democrats. He was the second biggest donor behind George Soros. He said he also donated an equivalent amount to establishment republicans via dark money channels. Sam Bankman was clearly a smooth political operator.You don't have meeting with Gary Gensler the head of the SEC otherwise.
- JumpCrisscross 4y ago> Sam Bankman was clearly a smooth political operator No, he wasn’t. This is a myth he crafted for his retail audience. He threw money around. But D.C. is filled with schmucks buying photo ops for millions of dollars. > don't have meeting with Gary Gensler the head of the SEC otherwise You’re saying SBF’s donations, and not his role as CEO of FTX, got him a meeting with FTX’s regulator?
- wpietri 4y agoYeah, if I were one of FTX's regulators, I would be fascinated to meet with him. Or any other big-name crypto person. Assuming they're brave enough to set foot on US territory at all, that is.
- deleted 4y ago[deleted]
- jjtheblunt 4y ago> He said he also donated an equivalent amount to establishment republicans via dark money channels. where did you find that? i've not seen it (yet)
- ceejayoz 4y agohttps://fortune.com/crypto/2022/11/29/sam-bankman-fried-political-donations-democrats-republicans-dark-money/ https://fortune.com/crypto/2022/11/29/sam-bankman-fried-poli... > Sam Bankman-Fried’s donations to Democrats are well documented. In an interview released Tuesday, the former FTX CEO said he similarly funded Republican campaigns—but kept it quiet. > “All my Republican donations were dark,” SBF told crypto influencer and YouTuber Tiffany Fong, referring to political donations that aren’t publicly disclosed. “The reason was not for regulatory reasons, it’s because reporters freak the fuck out if you donate to Republicans. They’re all super liberal, and I didn’t want to have that fight.” His co-CEO also publicly donated millions to Republican causes. https://www.opensecrets.org/outside-spending/donor_detail/2022?id=U0000004758&type=I&super_only=N&name=Salame%2C+Ryan+D https://www.opensecrets.org/outside-spending/donor_detail/20....
- tiahura 4y agoHanlon's razor. The vast majority of crypto advocates are true believers.
- wpietri 4y agoAs a side note, I really like the framing of "operate on their belief" > Does anybody actually operate on their belief that "geopolitical factors," rather than astonishing amounts of fraud, are responsible for the current downturn? What people believe is such a slippery question, especially when those people are participating in or proximate to fraud. It might even be a category error. But pivoting to "operate on" moves the discussion from something unknowable to looking at observable behavior. It's along the lines of "Don't tell me what you value. Show me your budget, and I'll tell you what you value," in that it can skip over whole swathes of PR and other BS. I love this and I'm borrowing it for sure.
- norswap 4y agoIf you look at the numbers, more crypto market cap (both in % and absolute amounts) was lost before any of the scandals than after.
- rich_sasha 4y agoIn fairness, Kraken is regulated and I suspect can't be involved in any of the crypto scams. I'd imagine they really hold deposits as they should etc. So for them it's the fact that markets are down and people aren't punting crypto, rather than "we took the USD deposits, turned them into shit coins and we're insolvent" kind of thing. I think.
- woodruffw 4y agoRight: to be absolutely clear, I'm not accusing Kraken of anything untoward (at least, nothing more untoward than being involved in this whole industry). The statement just came across as very roundabout: we all understand that the current downturn in cryptocurrency is driven in part by a decline in "easy money" from retail customers, which in turn is partially driven by a lot of that "easy money" outright evaporating from fraudulent schemes.
- rich_sasha 4y agoOk, I just meant, when SBF comes out and says, "liquidity crunch, bank run", he means, he stole the money, or charitably, let someone steal it on his watch. Or even more charitably, invested it in an unacceptably stupid way. For Kraken the slowdown is less business. Crypto is down, as are equity markets, and these are highly correlated (go figure - "inflation hedge"). I'm not even sure if FTX blow up itself is bad for them. Not only is a competitor out, but also people might appreciate a regulated crypto exchange. So I think maybe "geopolitical" is not outrageously wrong a term to use here. Any other critiques of crypto are not affected.
- koonsolo 4y agoDidn't I read recently that Meta, Google, and all those companies are laying off people? Not going to talk about Twitter because that's a special case ;).
- UncleMeat 4y agoFor the life of me I cannot understand how every single layoff notice talks about "macroeconomic factors." Inflation and interest rates are up - okay. But real GDP growth (in the US at least) has been positive. Why is everybody acting like unemployment is at 8%, GDP growth is sharply negative, and consumer spending is way down? At least with crypto stuff it makes sense that these companies are losing shitloads of money but with so many companies it seems to be "we expect to be making less money next year so we are cutting staff now."
- danielvf 4y ago*Growth* is down in certain sectors. Many companies were staffing to support and capture possible future growth. When next year is expected to look like this year, a lot fewer people are actually needed.
- Analemma_ 4y agoThe current layoffs are concentrated in the tech sector because that sector experienced huge growth when everybody was stuck at home. With that now over, it’s just a regression to the mean and employment trends are going back to being in line with the rest of the economy.
- kevin_thibedeau 4y agoC-levels want to blame externalities to deflect scrutiny of their poor management.
- lordnacho 4y agoIt's just a standard thing to point at, isn't it? Like a greeting at the start of a letter? Simply what one says?
- jcfrei 4y agoMost companies are to some extent financed with debt. When interest rates go up and loans need to be rolled over they will pay a higher interest rate. The result is a deleveraging (companies taking on less debt) but also reducing expenses (layoffs). The relationship between interest rates and inflation is also usually not linear - ie. inflation is 8% on average, you can charge 8% more for your products but your interest payments might very well double (going from 4% to 8% p.a.).
- HDThoreaun 4y agoWell the ponzi would've kept on rolling if the cheap money hadn't dried up, so in that sense they're right. Macro conditions exposed their fraud.
- g42gregory 4y agoMy understanding is the crypto prices are driven primarily by the amount of liquidity injected in the market. Or, at least, that’s the case in the current cycle. Fraud is bad, but it has less impact.
- vlunkr 4y agoBut doesn't huge amount of fraud dissuade new investors?
- g42gregory 4y agoAbsolutely! And the current investors flee as well. Just less of an overall impact of draining liquidity.
- importantbrian 4y agoEvery tulip bubble is full of fraud. Those markets are chalk full of people looking to get rich quick, and many people looking to get rich quick are willing to do it in a less than scrupulous way.
- pokstad 4y agoThe term “macroeconomic” is becoming a meme with how companies are throwing it around.
- Kiro 4y agoI do. Crypto obviously has a big fraud problem which has infected most if not all of the ecosystem, but I don't think that's the actual reason for the downturn. Crypto has always had a fraud problem and it hasn't scared people and gullible suckers away before. I think outside factors are what drives the speculation.
- Jetrel 4y agoIt's almost like the fundamental basis of crypto is fraud. Like they're not actually selling anything, besides "british south sea company" ~~stock shares~~ coins.