You’re just “unsecured creditors” if we file for bankruptcy. But hey, CEO tweets: “We have no risk of bankruptcy.”
By Wolf Richter for WOLF STREET.
Crypto exchange Coinbase Global not only rattled its already tortured shareholders when it reported horrific results afterhours on May 10, but also its crypto holders, when it added new language to its quarterly filing with the SEC, explaining what could happen to their cryptos at Coinbase if it files for bankruptcy.
In the same breath, it filed a shelf registration with the SEC to raise more money by selling shares, whose collapse has made selling more shares to raise money much more precarious.
Then Wednesday afternoon, the whole situation was made worse, amid general mayhem in the crypto markets, when the CEO came out with a tweet storm and said among other things, “We have no risk of bankruptcy.” Oopsiespalooza.
Shares of Coinbase [COIN] kathoomphed 26.4% during regular trading today and another 3.2% in afterhours trading to $52.01, down 88% from its intraday peak on April 14, 2021, thereby earning itself a prominent spot in my column, Imploded Stocks.
April 14, 2021, the day the shares peaked, was of course when Coinbase went public in a mega-hype-and-hoopla direct listing at $381 a share. The share price then spiked to $429.54 intraday and closed that day at $328.28, giving the company an inexplicable market cap of about $88 billion.
Well, let me retract that. The market cap was very explicable because these were the craziest times ever, and every bit of hype and hoopla was eagerly absorbed amid the craziest bout of consensual hallucination ever that by far outdid the dotcom bubble.
And these folks got literally thackamuffled to the point where the huge percentage thunkadunk today shows up on this chart as just another step in the stairway to heck:
Revenues, transactions, and users plunged.
Coinbase reported a loss of $429.7 million for Q1. We’ve gotten used to these kinds of horrifying numbers by now. Coinbase is following in the footsteps of a lot of startups where management somehow believes that bigger losses are better losses.
Revenues – most of which it generates through transaction fees – plunged by 35% to $1.2 billion. Both the loss and the plunge in revenues were a lot worse than analysts had expected.
Revenues plunged because monthly transactions plunged and the number of monthly users also dropped. And Coinbase said that it expects the number of transactions and the number of users to fall further in Q2.
Turns out, cryptos aren’t fun anymore. They’re money-sucks – I mean fiat-sucks. Prices are plunging. Bitcoin is now at $27,144, down 60% from the peak in November. How the heck are you supposed to have fun trading, when you get powwoozzled on a daily basis? But Coinbase needs people to trade so that it can extract its fees.
You’re just “unsecured creditors” if we file for bankruptcy.
Then folks started reading the new language in the 10-Q that Coinbase filed with the SEC. It said that if Coinbase files for bankruptcy, while it has your beloved change-the-world cryptos in custody, you and all the others could be treated as “unsecured creditors.”
The new language is in the middle of other delectable morsels and says this:
“Moreover, because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors.”
But hey, “We have no risk of bankruptcy.”
That language caused enough of an uproar that CEO Brian Armstrong decided to do some damage control on Wednesday. In a series of tweets, he tried to soothe the nerves of Coinbase’s users, and extended his “deepest apologies” to them for not including this language sooner, and communicating the inclusion better to the users. He said among other things:
“We have no risk of bankruptcy, however we included a new risk factor based on an SEC requirement called SAB 121, which is a newly required disclosure for public companies that hold crypto assets for third parties.”
He called a bankruptcy filing a “black swan event.” Which was totally reassuring, given the history of black swan events.
This comes amid chaos in the crypto market. Big names are shookalacking. And stablecoins, which are supposed to maintain a value of $1, are becoming unstable. TerraUSD started careening off its $1 range on Monday and promptly kathoomphed to 30 cents, before bouncing, then relapsing, then bouncing, and relapsing again. At the moment, it’s at 60 cents.
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Countdown to rate cut and QE 3…2…
Countdown to QT…
Kinda like last time?
i.e. only until the market throws a tantrum….
The Market will throw a tantrum, a “Spit the entire dummy” tantrum, However the market is greedy and will find a base on that and then bloom.
What really is a concern is inflation, it eats, like rust in metal, slowly but effectively through all assets, everything.
This Genie is out of the bottle and a 0.5 % rise in prime is tickling it with a duck feather. It needs to be contained or it will eat everything.
Unlike last time, this president never talks about the level of the S&P. Very different. Unlike last time, inflation is raging. Thunder’s description is apt.
Bitcoin is death
Don’t worry, when markets go down another Fed head will come out and use his mouth to make it go up again.
The market has been going down, and we’ve been eagerly waiting for Fed heads to come out and make it go up again, and instead they came out and palavered about QT and 50 basis point rate hikes and actually did the rate hikes and made markets go down further. This is just an upside-down world, these days.
Ah, QT, more fed gossip on the quiet.
Fed has blown up assets by squashing rates. Start punching 3% risk premium and higher 10 year treasury rates into a dividend discount calculator and you can see it will not take much to pop market and kick off recession.
Try a 6% 10 year and you will get S&P around 800 depending on what you use for nominal growth rate. Don’t think we will get to 4% on 10 year before it all falls apart.
Who will be the last tightening denier left standing?
@ Wolf Nomi Prins?
Those of us who LIVED through the 70s inflation and the Volker days, who witnessed the grinding of the 90s, the dotcom bust and GFC, we know it’s different this time.
Inflation as you have said so many times, is entrenched in the economy now.
Low interest rates and QE are not on the horizon at the moment.
Inflation is a monster!
How da hell all the central bankers were so callous, it beats me.
“If you don’t do the right thing, the right thing will be forced upon you”
That’s exactly what is happening. They kicked the can down the road too many times.
I am very curious to see the future interactions of:
Fed raising interest rates,
Fed sales and redemptions while not buying Treasuries,
increasing national debt as we airlift cash to Ukraine,
growth of US debt interest
loss of tax revenue with falling stocks and possible recession
BTW, is the student debt an asset that offsets part of the national debt?
Yes, the student loans held by the government are an asset on the government’s balance sheet, and therefore are an asset for taxpayers.
Yes, the $1.6 trillion that the government handed to students was borrowed and that amount borrowed is now included in the $30.5 trillion government debt. It expected to get this money back plus interest (hence an asset).
But by forgiving student loans, the government will no longer have this asset. All it will have is its own debt that funded those student loans, and it will have to continue servicing this debt. And that $1.6 trillion in debt that was used to fund the student loans won’t go away when the student loans are forgiven. Lot’s of people don’t realize this.
“thing will be forced on you”
Quantitative Easing (formerly known as money printing) has always been Savings Rape.
But hey, DC’s short term political interests always come first.
And I think a decent argument can be made that DC authored stealth inflation (appropriating most of the possible consumer savings from the 20 yr China import explosion) has been with us for 20 yrs.
But you are right that now the wheels are completely coming off…DC can’t hide/obscure explosions in auto and housing costs (although it is amazing that the MSM has complete radio silence on these core topics…an accomplishment right up there with 20 years of saying absolute zero about having bank CD returns zero’ed out).
The FED is doing exactly what they are supposed to do.
The CBs did their jobs – they maintained the status quo and propped up their job security. That’s the definition of bureaucracy. Just happens to be against the interests of the majority, which is by design in the USA. Private profits and socialize losses.
Exchange your Bitcoin for a Tesla before its worthless.
Do you mean like TERRA LUNA that was at $86.09 eight days ago and now is 0.0046
Cathie Woods is selling Tesla stock and buying GM
I know you are firmly in the QT-Fed-Has-Finally-Grown-a-Spine camp right now, but the QE-Fed-Has-Chickened-Out-For-20-Years camp is probably entitled to a semi-detailed debate…and what a post it would make!
I’m semi-undecided right now (although 20 years of grotesque DC/Fed mismanagement is an empirical observation, whereas continuing QT is simply a prospective, ahem, speculation…).
My sense is that your QT faith is largely based on DC’s political need to beat back current obvious inflation (vs. 20-yrs-of-steal-the-China-savings-stealth-inflation…) but you may have other arguments for why QT will stick this time, despite well deserved blood on the Street.
And what a post it will make!
This is really funny, after a while. The QT deniers will be dogging this comment section until after QT actually shows up on the charts of the balance sheet, which may be in late June or in July, given the lags and bumpiness of the weekly balance sheet, where every little bump will trigger loud screaming in the denier camp that the Fed is STILL doing QE, and where every drop will cause icy silence in the denier camp. And then, eventually, when QT is clearly visible in the chart, the denier camp will change strategy and switch to “the Fed will re-start QE next week.” It’s always the same, been that way since 2017.
I agree with Wolf on this one. We’re just getting started with the VIX ramifications of ramping up QT. JPowell won’t be the 2nd coming of Volcker, but he’ll be a mini-Me , meaning he’s got to stay the course for quite sometime to tame above 8% inflation. Even with a 1.4% decline last QTR, there’s still a ways to go with taming personal consumption / services.
The perfect storm for oil & natural gas continues to evolve. War in Ukraine, EU at chanting they’re “cuts to Russia oil & gas”, & FJB himself, who just cancelled a new oil & gas lease previously approved in Alaska. These crazy people running DC are fat, dump & happy with high oil & natural gas prices.
Inflation doesn’t go down materially without three things:
1) FJB out of office
2) Russia out of Ukraine
3) JPowell channeling his inner Volcker mini-Me.
The FED is beholden to the Stock Holders.
All corporations are to enhance the stock holders.
As George Vanderbilt said: “The Public be damned.” which, of course, was taken out of context since he followed that phrase with the fact it was the Stock Holders he served. Not the Public.
The FED is doing a very good job. Enhance the assets prices as high as “possible”. Give the Stock Holders time to sell, then make the assess drop, so that the Stock Holders can re-buy at the bottom.
Rinse, Repeat, Rinse, etc.
Thus, the QT will occur. Assets will go down, the public be damned, and the stock holders will do just fine.
Bond rates are coming down, in spite of higher than expected CPI print and record PPI. Why? Because smart investors know that Fed will make a U turn the moment there is any real danger to these loss making corporations and to the asset bubble and holdings of the wealthy. So far losses are paper losses, no real bankruptcies and bond write offs.
Remember Fed is the biggest criminal organization ever created and all this window dressing is because of the upcoming mid terms.
The 10YR has come down a whopping 20-25bp from the recent peak.
Bonds have been in a bear market for over two years, yet UST are still near the lowest rates ever. No market moves in a straight line.
Keep on believing it.
Dying bond bubbles make dead-cat bounces in the same way that dying stock bubbles do.
No, Kunal, I think rates are coming down because they think it’s not going to take 8% or even 5% fed funds to knock inflation down. The Fed won’t be making a U turn to save markets, they’ll be stopping to ensure no overshoot that crushes the economy any worse than necessary.
Theory I like is most of the debt accumulated since GFC didn’t go to productive investments as can be determined by low levels of productivity growth. Now we have auch bigger debt to service, but not the real economy to service the higher debt payments.
Solve the equation for amount of debt service society can service and you will get the maximum real rate. It’s a very low number before the defaults start.
Why are college debt payments suspended with inflation at 8%? I thought we needed to reduce demand. You get rid of debt by sticking it on the government balance sheet and financing it at a negative real rate. FHA and VA loans might be next.
Better check on China
Wolf, I hope you can write an article about the following, thank you.
Not long ago, the Federal Reserve announced that the net assets of U.S. households in the fourth quarter of 2021 rose to about $150.29 trillion, a record high. According to the population of about 332.4 million, the per capita net assets of American residents reached US $452000. Compared with 2019, the net assets of U.S. households increased by $33.5 trillion, with a growth rate of 28.7%.
Among them, the shares held by American residents reached $49.6 trillion. U.S. home ownership rose to $38.1 trillion,
This is part of my quarterly wealth disparity monitor, which looks at this based on Fed data, and categorized by household wealth.
The next quarterly update will come in about two months. This is the prior one through Q4 2021:
When I checked FRED which I infer is based upon the tri-annual survey, “real” median household net worth was a whopping $121K.
Up 10% (adjusted) from 1998.
There is constant movement up and down the distribution and the median now includes people who were too young at the time.
Still, it’s obvious the typical American has gone nowhere financially (at best) during this time, one of if not the weakest performance ever.
This pathetic performance was also during the biggest asset bubble in human history.
What’s the data going to look like when the mania crashes?
It’s a rhetorical question.
I always say you can look at wealth either at market price or the amount of real cash flow the asset can produce.
By suppressing interest rates Fed blew up the first number, but you could make the case that the cash flow of stocks, bonds and real estate is going to be negative in real terms for the next decade.
What is a dividend paying utility or 10 year Treasury worth today paying 3%? Or a REIT paying 4%? Not very much unless inflation gets back down to 2%.
Wall St. bandits win again pocketing billions from brainwashed American Patriots rushing blindly into yet another scheme. 9/11, GFC, QT, COVID n now SPACs. Expecting anything different results is either stupid or madness. Ukraine will be proven in due time, enjoy the latest tale but do follow the money.
Other than letting maturing securities expire, I do not see QT in the cards. That is, unless they sell assets at a loss, which is quite possible since they creat fiat at near zero cost. It is amazing that Wolf beats up the fed with one hand and then defends them with the other. What will he say if proven wrong by the ‘deniers’? Admission?
Letting maturing securities run off the balance sheet without replacement = QT. And the markets obviously understand this. As does everyone else, except maybe you.
Is that the latest thing that tightening deniers now are hiding behind, the verbiage that letting maturing securities run off the balance sheet is suddenly “not tightening?” That’s kind of funny.
I beat up the Fed for letting inflation rage and doing QE for years and repressing interest rates and thereby doing untold damage to many people and the economy for the sole purpose of inflating asset prices. When the Fed finally and in baby steps (“too little too late”) is starting to back off its disastrous policies, it’s a good thing obviously, even if it’s too little too late.
Delusional are we lol. Countdown to QE 4. Months ago you said they would start QT. Still waiting. As I stand here and breath the purchasing power of the dollar is just dust in the wind. The mighty dollar is losing purchasing power against the Russian Ruble, Brazil Real even the Mexican Peso. It so toxic nobody even will take it for oil.
You’re spreading idiotic BS to manipulate. Months ago, I said they would end QE, and they have now ended QE. Months ago, I said they would raise interest rates, and they have now raised interest rates. Months ago, I said that they would do QT after they ended QE and after they started the rate hikes, and now that they ended QE and started the rate hikes, they will do QT. QT will start in June, and we will see the first effects on the balance sheet in late June.
And in terms of the dollar, check out the DXY. The dollar has been red hot.
IMHO Federal Reserve will not show any real concern about the state of markets until indexes fall significantly below the levels that they were at in the fall of 2019 (right before the pandemic). For S&P, that would be something around 3000 (-25% from where it is today). And even then QE is unlikely IMHO; more likely is a temporary delay in rate hikes / QT.
The people who are claiming that the Fed will abandon the fight against inflation for this reason or that are forgetting one thing… NOBODY on today’s Fed wants to go down in the history books as having failed to contain inflation. Their PERSONAL reputations are riding on getting this right in the end.
They will obfuscate the inflation on COVID and RUSSIA. It really has become quite a comedy of failures. Origianly it was you can’t get TP because everybody was buying, then it was you can’t get computer chips because of the shutdowns due to COVID, then you had to pay through the nose for used/new cars due to chip shortages, now gas is at ATH due to RUSSIA… the blame game go round and round
Correct, but apparently, this doesn’t matter.
Reading the financial press, it’s been evident (for months) that FOMC members are “losing face”.
They care a lot more about the opinions of their peer group (economics profession) and having Congress breathing down their necks than many who post here believe.
They ‘already’ have failed to contain inflation. Sounds like ‘inflation’s increase is decreasing’. Personal reputations? HA!
People should read Danielle Di Martino’s book “Fed Up”.
The Fed is a bureaucracy. Nothing’s more important than avoiding undeniable serious error.
Inflation is hitting a very large fraction of the population very hard. Rents and homes at unaffordable levels. Food prices leaping upward. And diesel and gasoline. Hitting both young people and, especially, retirees.
If they don’t get inflation under control Congress will threaten their independence. As a bureaucracy they must defend that above all else.
The stock market and crypto bubble psychology is being broken. As it was dependent on unprecedented money-printing, only even greater money-printing could reinflate it. The Fed cannot start another round of even greater QE.
We’re about to see an absolutely incredible run on the crypto bank “stable coins“. The stock market crash has already wiped out $20 trillion of illusory wealth. The crypto stable coin run will probably wipe out a hundred billion plus of real wealth.
Not sure they care as long as they go as multmillionaires.
This seems to be one of those repetative statements tossed as iron clad truth.
Same as: fed is trapped, they’ll never raise rates, and they will drop rates as soon as market tanks….
If the Fed sticks to its QT and interest rate hikes, I am guessing that the S&P ends up at or below where it was in December 2018. Around 2500.
The idea that the FED is going to ignore inflation and decide to start pumping QE to save the crypto market is on of THE most delusional I’ve yet heard. Just laughable beyond comprehension.
We need an immediat rate increase NOW!
The Fed has no choice now but to taper. Powells most recent statements include gems like: “executing soft landing may be beyond our control”
“Process of getting inflation down will include some pain”
“With perfect hindsight it would have been better to act sooner”
“Inflation is just way too high”
I guess he had to wait for confirmation of reappointment before he could come out with the real truth
I see a lot of people talk about Fed doing a soft landing.
But nobody has defined what is ground level. Is that a 3% CPI? a 5% unemployment rate? Any consideration to asset price levels? Or to its own holdings (which has gone up by $1.5T since Jan 21)?
How much will the QT shed? 2020 levels? 2015 levels?
Or is it a nebulous concept to justify pretty much any monetary action?
good one NBL!
Please keep on here to share YOUR insights with us who are absolutely/certifiably ”learning” on Wolf’s Wonder.
and to be very clear,,, NO sarcasm at all in my comment…
SPY and QQQ can drop another 10% and they still we be above pre-covid.
The FED is not going to push the panic button yet.
These rate hikes are getting some of that margin froth out of the system in both stocks and crytpos.
I am guessing the FED is okay with another 10% drop in the stock market and maybe another 15% to get us back to normal. Coinbase stock is probably is at the level were it should have IPOd.
BTC was between $5k and $10k pre-covid. That is probably the price it should be too.
Regulate them! Wallets and crypto exchanges are just rebranded bank accounts and brokerage accounts.
Crypto coins, nfts and stable coins are still equities and money market funds / securities.
They got away with offering unregulated financial products and now people who used real money to buy this stuff were robbed by the people running it.
They weren’t robbed at gunpoint. People voluntarily bought crypto. The free market is working exactly how it’s supposed to; self regulating and purging the excess. Everyone pays for an education… Some just pay more for it than others.
Perhaps the current administration will implement a CLF program. Crypto loss forgiveness. It is being considered for student loans, so why not crypto losses? Losing money is a form of education, after all.
Fantastic joke ! Made my day, thank you.
Thank you SnakeEater. That is how it should be. People are in control of what they do.
One thing that never ceases to amaze me, is that while riding my bicycle, I see people texting on their phone as they walk. Perhaps they would be better served watching the world around them, and not just the phone’s screen.
I ride silently at speed. Preoccupied pedestrians do not hear me until I below out a warning when they are about to walk into me. It happens far too often.
Azani, I agree: “Regulate them pedestrians!”
Plenty of bikers ride improperly on the sidewalk. A lot of blame to go around.
Pro-tip. If you toss their phone in the street they’ll run in front of a bus to pick it up.
BUY A DAMN BELL!
Hey, I ride on the streets in full accordance with the law and with logic and reason. Many miles are on bike paths that are part of the street system. The Twin Cities has very good integration of the roadways for bicyclists.
The problem, is that most people have no idea that I am going at 25 mph (or more) with any kind of a tailwind. It is deceptive speed to someone not paying attention. I’m smooth as silk in technique and form, plus my bike is whisper-quiet. So, I close down the distance in much shorter time than they assume if they take a quick glance a few seconds prior.
When I have the right-of-way, and am in my zone, I become a machine on a mission. A damn bell? Nope. “Look!” bellowed loudly works wonders.
My fingers are always ready to squeeze the disc brakes, and my bike stops on a dime. As 91B20 says, “It is combat out there.” Always be ready for the unexpected; like an idiot jaywalking with a phone in hand.
The corollary is the same as putting money into a crypto “investment” and assuming it will magically grow in an exponential manner. Look first, then cross the street.
@ Dan Romig,
I’m disappointed you aren’t on a fixie.
I have six bicycles that are all ready to go. Two are fixed gear custom track bikes made with Reynolds 531 tubing. I designed them both.
One for sprints, madisons, kierins and points races. One for time trials. Kierins are fun, for an ex-hockey player; you can hit other riders and knock them up the track! Helmet to kidney area does the job.
IMO, fixed gear bikes are not safe on the streets. If you ride a fixie, more power to you! Be safe, eh?
My two year old road bike is an engineering masterpiece, and by far, my favorite machine to ride or drive. I put more miles on it per year than any other vehicle.
There may be some truth-in-advertising liability issues…
We should now regulate what should have been outright banned as legal investment vehicles? No, this whole house of cards can crash and burn, and its many youthful cult members can join the real service economy and learn what labor is.
so sad, to bad !
I have tulip bulbs, 390 years old to sell, been waiting to get my money back, generation after generation.
I have a sale … 2 for one, $2400 for both, none taxable
I kept a Trezor wallet when I played around with Bitcoin. It was a pain but I think I would recommend a paper wallet/ledger now. Technically you have to keep track of all transactions for taxes. I passed through Coinbase as fast as possible which wasn’t very fast. I found it all a big pain for little gain and left dust wallets all around.
I looked into pirate coin but the process is like a 4 dimensional game of chutes and ladders.
Decentralization and unregulation is the point, because the regulator is the oppressive kleptocracy. Bitcoin good, mania bad.
It’s very odd that crypto assets are not the property of the accountholders, as is the case for a normal brokerage operation like TD Ameritrade or ETrade, etc.
If that’s truly the case, why would anybody hold Bitcoin in a wallet at any Bitcoin marketplace? There appears to be no safe way to hold Bitcoin.
This realization may be the death of bitcoin.
I thought the same thing. Is this coming from the SEC… or the legal department of COINBASE? It has those weasel words favored by lawyers everywhere… “may be considered”… “could be subject to”… “could be treated”
Similarly, your bank account is the property of you, but you are an unsecured creditor depending on the regulations in your country. The banks can make use of your cash, and laws have been put in place around the world to legitimize bailouts using your cash. There is a pecking order, but your cash is on the list a little way down.
Holding Bitcoin or others in an offline wallet is ‘secure’ – this is different from exchange holdings in an account. There are many cases of ‘exit strategies’ and hacking thefts which leave account holders with nothing.
Holding Bitcoin or others in an exchange account is not secure. Holdings of coins should be transferred from exchange accounts to offline wallets to keep your exchange holdings at a minimum.
Holding cash in a coin exchange account is not secure. Many claim FDIC coverage for account holders’ cash up to $250,000 that they claim to offload to banks in comingled accounts but that insurance covers the bank failure, not exchange failure, you have to have confidence that the comingled funds have been allocated correctly in the exchanges’ records, and there is no way to guarantee that the cash has been transferred to comingled accounts anyway. They just claim to do so. Comingled cash has a way of disappearing when custodians become desperate.
Whatever… I’m selling the small amount of Bitcoin that I have with Coinbase. Apparently, I bought it, but others can have claim against my Bitcoin in certain circumstances. It’s not worth my time to check out the details, given the small holding I have.
Plus, gold has been an imperfect but much better hedge against inflation and other aspects of my portfolio. It’s clear Bitcoin is a purely speculative risk asset with no correlation to anything, except other purely speculative assets like ARKK.
You are missing something. If a bank goes bankrupt, the FDIC pays me, and the FED backs the FDIC with ability to print money. I get paid, no matter what.
When Coinbase goes bankrupt, I would get an expensive lesson in greed and stupidity.
I’m not missing something; it’s just complicated. Usually when things are complicated you lose.
Just don’t leave any coins in any exchange account except those you don’t mind losing, transfer them to an offline wallet, and don’t leave any cash in any coin exchange account for the same reason. Then you won’t get an expensive lesson.
IF Coinbase went bankrupt, and IF they offload customers’ funds to the bank as their policy states, and IF they have allocated customers’ funds correctly, and IF they don’t dip into the comingled funds for their own use, then your funds would be available to you from the bank IF the bank accepts documentation from the exchange (IF they can provide it) as to the allocation of funds owned by each customer. No FDIC relief would be necessary unless the bank failed, then IF the customer funds allocation was audited and accepted by the FDIC, the FDIC would compensate customers’ funds accordingly.
That’s a lot of IFs, and probably a lot of time, and probably a lot of Maybes thrown in. There have been a lot of losses by customers in the past.
Also, I have commented several times on this board: try to find the physical address of any of the exchanges that people send hundreds of billions of dollars to. They’re usually mail drops in remote places, and even mail drops for other mail drops.
As I said even thought the transfer/conversion fees and delays will be ridiculous, paper wallet.
All the doorways have tolls.
“Similarly, your bank account is the property of you, but you are an unsecured creditor depending on the regulations in your country. The banks can make use of your cash, and laws have been put in place around the world to legitimize bailouts using your cash. There is a pecking order, but your cash is on the list a little way down.”
That’s because it’s not actually a deposit. It’s a loan to the bank.
An actual bank deposit used to be a custodial arrangement, centuries ago. Now the word “deposit” has multiple different meanings, another being a down payment to buy something.
If bank “deposits” were actually deposited for safekeeping (custody), then banks couldn’t lend it out (legally), the banking system would be a lot less leveraged and sounder, and no interest would be paid. The bank customer would have to pay the bank for the service.
Virtually no one wants that. That’s why we have the designed to fail banking system which exists now.
Bank customers want free account services (checking) and until more recent times, interest on their funds.
Bank shareholders and management want higher profits and stock prices which can only be achieved by lending and leverage.
Those with the most influence in government want leverage to provide credit and growth, some of it fake and some of it real.
I believe this is what basically happened when MF Global blew up. The account holders were commodity traders who owned the contents of their accounts. MF Global kept the cash balances in a bank account. Which in effect made the account holders unsecured creditors of the bank. Which made it simple for MF Global to ship the money to Europe to be rehypothecated.
AFAIK it is relatively safe to hold bitcoins in the “cold storage” (USB device that holds all the info of your crypto assets).
The obvious vulnerability here is that operating system makers for PCs / phones / tablets can easily blacklist these USB devices if government orders them to, thereby rendering these “cold storage” devices inaccessible on those Windows/iOS/Android devices (mainline Linux would be much more difficult for government to strong-arm this way, if possible at all).
There is also an option to use paper wallet/ledger as one of the commenters pointed out above.
Like a friend said, “if you don’t control your keys, you don’t control your wallet”. Friends who’ve done crypto a long time have various strategies – a couple USB keys in separate safe deposit boxes, paper copies, etc. You want to be damn sure your backup protocol is on point.
There was that story a few months back about some poor guy who lost some enormous amount of BTC because he’d recycled the hard drive and realized much later that all that BTC was worth about $500M. Coinbase offers convenience, they’ll manage your keys for you.
Bitcoin is free software, you can download it from the internet (Github) and run it on any computer as well as read the source code if you’d like. Your “wallet” is just a long password ultimately. If you can write down the password, you own the wallet and it can’t be seized. Can’t really be blacklisted period. Its just this “layer 2” systems where it interacts with currency (exchanges etc. ) which exhibit these problems with bankruptcy, seizing, etc. All you have to do to “spend” bitcoins is download and run the software, and type in your password, and your funds appear. Don’t lose the password!
I thought that was reasonable until I bumped into real world problems
1) nobody takes Bitcoin
2) Bitcoin volatility is ridiculously high and seems to be driven by whale pump and dump
3) there is no anonymity with know your customer requirements
4) transaction times and fees are very high – especially ATMs. So high they were a significant plus in mitigating taxes
5) and of course taxes
I am not a blockchain currency bear, but I am waiting for blockchain currency II. And curious as to who has a profit incentive to create it.
A Ring-a-ring o’ roses,
A pocket full of posies,
We all fall down.
This whole space is one giant fraud that should have never been allowed to exist in the first place. It needs to be shut down permanently. As I mentioned in a thread a few weeks back, Coinbase will be going BK and out of business. Google “Coinbase stole my money.” It’s a fraud outfit.
That’s why China banned it
The real mayhem is in the stablecoin complex. Stablecoins are collapsing. The same stablecoins that magically, on many many occasions, stabilized a meltdown of cryptos. So who’ll save the stable coins?
A stable genius?
Genius? A stable coin? Like cow chips or horse sh-t you mean?
The latter have compost value with future yields rising
The tiny country of El Salvador was going to use Bitcoin instead of US dollars. They even had a scheme to use electricity generated by a volcano, and sell “Volcano Bonds” to finance building the geo thermal electric plant.
Alas, I think the scheme is going up in smoke.
Cryptos will probably be known as the ultimate Ponzi scheme off all time. I still remember people who bought this crap to build wealth based on the belief that the government could never track it or tax it. Then Coinbase was ordered by a Federal judge to turn over records of users who had bought, sold, sent, or received more than $20,000 through their accounts in a single year between 2013 and 2015. If you sell your coins for dollars, of course IRS will know about it when you get into your bank account but don’t report it.
Cryptos, in my view, appealed to the most simple-minded rank and file investors. The only thing that made them feel so invincible was the monetary orgy show that Powell put on in the last two years that destroyed any price discovery.
Used to have BTC. Ditched them in 2017, when Bitcoin started to rise too high too fast. Used the profits to by my first 9999 gold bars. Never looked back in the cryptoworld.
Bitcoin appealed to many libertarian types. How many times have I heard decentralized, democratized, etc.?
In Crypto, value store you!
-Well-known crypto hustler Yakov smirnoff
What I can’t understand is, what is the risk of contagion and how many real institutions got involved in some of the riskier crypto projects. I feel like we may look back on today and think this was where it all unraveled. Not just for crypto but the rest of the market.
The funny thing about the wealth effect is that it works both ways. When people feel wealthier (even if from artificial asset price inflation), they spend more. But when they feel poorer (even if from modest deflation of ridiculously priced asset), they spend much, much less. And retreat from the market.
Dark times ahead
Research Michael Saylor and his company MicroStrategy. There’s tons of leverage out there, this is just what is known. At some unknown lower price from here, his company will be margin called and that’s when the fireworks will actually begin.
I suspect that margin calls are already taking place in the crypto space. That is why the drops recently have been so accelerated.
As I type this, DOGECOIN is down to 8 cents (from a high of 74 cents in May of last year) and is down 87% from its high in October of 2021. Both of them were twice as high in the past month.
Based on my talks with some Millennials who are really into these “altcoins” that have no real purpose in life (the altcoins… not the Millennials)… they are getting margin calls and have to sell SOMETHING in order to cover them. Welcome to the Real World kids… borrowing money to buy wisps of air is not a good plan.
Hahaha…this made me laugh..I would argue that some on this forum might disagree..
“Based on my talks with some Millennials who are really into these “altcoins” that have no real purpose in life (the altcoins… not the Millennials)”
Time for Thunkadunk coin?
Can’t wait for houses to Pikadunk.
I prefer “Splat coin”. As in the sound it makes when it hits the ground.
(available for sale = $10,000)
Perhaps this will answer your questions.
They didn’t know until it was too late. In February 2014, the Bitcoin exchange Mt. Gox filed for bankruptcy, with an estimated 850,000 bitcoin lost and thousands of customers left high and dry.
Little has changed eight years later. A mere fraction of the lost bitcoin was recovered. Creditors have waited years to reclaim their assets, and Bitcoiners continue to gamble with their savings by leaving their coins on an exchange.
Exchange juggernaut Coinbase acknowledged in its earnings report Tuesday it holds more than $250 billion in assets on its customers’ behalf, and customers could lose access to their assets if the company ever went bankrupt.
“…Moreover, because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors,” the company stated.
The disclosure made the rounds online, scaring many Bitcoiners – and for good reason. If exchange customers are designated as general unsecured creditors in bankruptcy court, they join a long line of people waiting to claim their bitcoin, a process that can get dragged out for years.
Coinbase CEO Brian Armstrong clarified on Twitter that Coinbase currently has “no risk of bankruptcy,” and the disclosure was made to satisfy a requirement from the Securities and Exchanges Commission.
But Coinbase is just one of many exchanges on the marketplace today, and there is no guarantee your exchange is in good working order. There have been dozens of crypto exchange failures over the years due to hacks, accidents, and chronic mismanagement. And you never know when an exchange could restrict withdrawals.
All this is happening as a “monkey wrench” that I said years ago about about crypto “Monopoly Money”, – backed by a handful of nothing, – helping tank the markets.
And CEO Brian Armstrong saying there is “no Risk of Bankruptcy” – that’s dripping of arrogance, – yeah he doesn’t have to worry because he’s “Madoff” with other people’s money on his yacht(s)!
The total crypto market cap stands at 1.16T, down from about 2T, and the worst is yet to come.
It’s going to be a “catalyst” that will further sink the markets because of crypto panic selling, plus some crypto accounts have been leveraged up to 5x to buy stocks, you only need 20% down to buy, and if it’s used to buy stocks on margin in a brokerage firm, as I suspect, and the firms demand “margin calls”, and there will be defaults, this could be what takes it all down, faster than the Titanic.
Like I have said before all this crypto “snake oil” should have been squashed from the beginning, – it’s pure insanity.
I have ZERO empathy for those that bought this insanity, and now they are talking of regulations, Ha, Ha – Well the Titanic has already set sail and hit the iceberg – it’s a day late and 1T dollars short, forgetabout bailouts!
Well if Coinbase got $88 billion in their IPO last year, then they should be able to absorb $2 billion a year losses for the next 40 years give-or-take.
This math only works with the real money. What Coinbase got is funny-money, and they work in a different manner – by dropping or adding digits to the number. For example, original Coinbase number (stock market valuation in funny-money) was 88 (funny-billions), they dropped one digit, and it became just 8 (funny-billions). Question is, whats next for them ? If they drop another digit, they will have nothing (not even zero).
Coinbase didn’t raise $88 billion at the IPO, or any amount. That was the market cap = number of outstanding shares x share price.
This was a direct listing, and the existing shares just start trading. No new shares were issued, and the company raised no money in the IPO.
But Coinbase had raised over $500 million from venture capital investors in the years before going public.
Keep your eye on the sparrow, Microstrategy, MSTR. CEO converted all their market cap to crypto. El Salvador has about 73M in Bitcoin. COIN holds about 200B, MSTR is about 1.9 billion while the effects of devaluation are felt more at the bottom tier.
WOW… no new money for the company… just cash for the existing shareholders??? These guys can’t even do an IPO right. Nice to know that SOMEBODY is getting rich off Crypto-Mania.
“And CEO Brian Armstrong saying there is “no Risk of Bankruptcy”
Yeah, right. Just like Hank Paulson telling us in ’07 that “the banking system is strong”.
I mailed this Coinbase 10-Q bankruptcy topic suggestion to Wolf the other day, and to my pleasant surprise he followed up on it here today.
I’ve never personally bought any crypto, yet my main concern was the fallout from the Tether stablecoin possibly unravelling (USDT).
Tether (USDT) is an $80 billion stablecoin struggling to maintain its $1 peg as I write this, currently at 98 cents.
If Tether (USDT) unravels, the potential contagion effects could be huge, including a Coinbase bankruptcy among many other nasty surprises.
I totally agree. People don’t realize they are often actually trading stablecoins when exchanging crypto into usable currency. Tether being the biggest.
There is supposed to be 1 tether per $1, which is what makes crypto have the underlying value. But tether has only had about 3% dollar reserves, which means the entire crypto platforms could literally just vanish to zero if people widely realize there isn’t any underlying value.
It appears that was going to happen yesterday, then suddenly Tether has miraculously gone back to $1, and all the wobble is gone.
Breaking the Tether:Dollar peg is nothing less than it deserves seeing as how its integrity is/was based on a pack of lies about exactly what the assets were that was actually backing Tether at any on time: https://www.cftc.gov/PressRoom/PressReleases/8450-21
Back in the days in Amsterdam, at least at the end they had some nice tulips to sooth their pain.
Modern times, i guess.
Anyone foolish enough to pay real money for the privilege of moving nothing around inside nowhere to accomplish no purpose deserves to lose the real money.
Why Warren and Charlie called it Rat Poison,but people don’t listen
The weekly DOW and SPX breached the cloud, following NDX footsteps.
It’ refreshing to see some reason in the markets. Way to go. Just look how insane the valuation of Tesla still is.
But many families will be financially destroyed. Gambling should not be seen as cool. Yes, people are greedy, but they are also mislead.
My friend,who I’ve know since we were 12 , is one of those people who gets easily success to gambling. When we were kids and we used to go to the arcades, to mostly okay videogames, he would disappear only to come back and say he had spent his whole weeks pocket money £3 on a fruit machine. When we got older and started work he would plough his entire wages into these things .
Last year he told me how bit coin was a great investment opportunity and he was going to put all of his family savings into bitcoin, and though he is still up 100% I fear, like may others, they will chase this thing to 0.
I made a lot of pocket change selling free games on pinball machines from the first day I started school. I spent more time playing pinball machines that I did going to school and sleeping. I could beat anyone on the baseball games blindfolded with just a ball and bat.
Crypto’s ethereal nature, along with it’s volatility, makes gold, (the “relic,”) look positively stable.
Paraphrasing James Grant on gold: in addition to it’s lustrous beauty, that it hurts when you drop it on your foot adds to it’s allure.
I’ve been reading a few recent tidbits about fledgling attempts to create a gold-backed digital currency.
I admit this idea intrigues me a little, considering that physical gold can’t be divvied up for tiny purchases.
I read somewhere recently about a paper bill impregnated with gold specs. Verification of content issues would be key (like an assay) was my first thought, but I suspect some industrious materials engineer could overcome that challenge.
The monetary authority won’t supplant it’s own currency, I suppose, but perhaps an enterprising industrialist billionaire?
“The monopoly of government of issuing money has not only deprived us of good money, but has also deprived us of the only process by which we can find out what would be good money.”
– F. A. Hayek, A Free Market Monetary System, lecture Nov. 11, 1977
“Verification of content issues would be key (like an assay) was my first thought, but I suspect some industrious materials engineer could overcome that challenge”
AFAIK they (Aurum) had already overcame this challenge. They
run “goldback” (the very thin gold film sandwitched between two layers of clear polyester, i.e. gold bill) through the machine that shines light through this “goldback”, and does spectral analysis to confirm presence of gold, and its amount. Takes a second, and is highly accurate.
I believe “goldback” is a legal tender in 3 states, but so far didn’t manage to gather big acceptance among merchants (but few do accept it).
By my calculation, gold in “goldback” is about 30% overpriced vs spot market price, which seems acceptable to me because these are real gold money in your real leather wallet, not some electronic record of a promise to hold some gold somewhere on your behalf.
Gold impregnated bills will never work because of Gresham’s Law. Bad money drives out good money in circulation. It would be very easy to extract the gold from paper if inflation in fiat made it worthwhile.
“Trust me, I have your gold right here, believe me, but I will sell you a claim (on or off the ummutable blockchain).” You don’t know where I am, I am in the global cloud. See the problem? Even today’s wonderful trustworthy person is transformed by circumstances. That’s why we have things like banking laws: structures of serious accountability.
LOL. There ARE gold-backed currencies, it’s just that they’re called Exchange-Traded Funds. You own them in a brokerage account (SIPC protection) and pay far smaller fees than in digital/crypto currency space.
Look into GLD, PHYS, etc.
These are divisible down to about the $10-20 level based on share prices.
The main issue would be taxation on capital gains, but that’s also true with crypto and other currencies.
Put them in Roth IRA
Those ETFs do not have the gold they say they do. They exist primarily as a gambling mechanism to divert demand away from physical.
You quite literally just made the case for blockchain tech and cited the reason why crypto will never die.
In your example, you referenced the ability to walk in to any store and transact with any asset – both the consumer and merchant made whole by means of a new technology. But there are inhibitors built into our current legacy financial system that prevent this from being possible, namely: economic finality (the time it takes to finalize a transaction) as a result of the layers of beaurocracy involved in authentication. It’s 3 days to clear a visa payment right now, remember.
An immutable ledger technology which, hypothetically, can accomplish what you’ve posited and genuinely already has. There is a company/crypto named Flexa which has created a collateral token named AMP through which they’ve built the infrastructure using blockchain tech to do exactly what you’ve just described.
As of today, i can open Flexas app on my phone (SPEDN) and walk into a Rona or Baskin Robbins (to name a couple, out of their 40,000 partners) and scan my qr code on a debit machine and voila! I’ve just made a purchase using crypto and no one is the wiser. It’s finalized instantly, fraud-proof for the merchant, completely transparent for anyone to see via a blockchain scan, and rewards investors (instead of rewarding a central entity) by redirecting paid fees to investors via smart contracts c/o decentralization.
Hypothetically, this tech is already available to use for fiat to fiat but lacks widespread adoption. The tech could conceivably collateralize any method of payment, anywhere, anytime.
Reading this comments forum is like diving back into 1990 when everyone was down on the internet and failing to understand the ramifications of the technology. Blockchain is all about personal ownership and destroying monopolistic behaviors that create extraordinary wealth divides. This ‘look at chart and price go down must be worthless’ mindset is just as misunderstood as those who’ve invested in crypto as a means to get rich without understanding what blockchain is good for, and what it isn’t.
I could name 2 other crypto projects that have the potential to completely disrupt and replace current legacy systems (currently worth trillions) but it seems like the cool kids here just want to talk gold and Fed, believing the future will resemble the past.
Actually for MarkB:::
Agree totally with your: ” but it seems like the cool kids here just want to talk gold and Fed, believing the future will resemble the past. ”
Just EXACTLY the same as the cool ”kids” warmongers just want to fight the last war, eh
And we can see exactly how well that is working out right now in eastern Europe, eh?
Gonna continue to be a TON of very sad folks no matter if ”investors” or warmongers IMHO…
Glad NOT to be in either group at this point in time, but still keeping both kinds of powder ”dry” just in case the FFR goes above 5%,,, etc., etc.
Your fiat works great for “tiny purchases.”
Wolf & Wisdom Seeker,
Yes, I understand the flexibility of fiat for ‘tiny purchases’ along with the ETF’s, but I was thinking more along the lines of Judy Shelton wanting sound money to be enforced by true hard asset backing. No more QE on a whim because certain well-connected parties can’t stand to lose money at life’s proverbial blackjack table.
JJ I hear you.
But you know, for any transaction that a “digital currency” could handle, there’s no need whatsoever for a new currency.
Consider foreign exchange when traveling: it used to be you had to buy paper Euros or whatever with your dollars. But now your credit or debit card is set up to swap your dollars (or whatever currency you hold in your account and want to sell), through a market-maker, for whatever currency your counterparty wants to receive. And as the markets have grown, the spreads and fees have gotten quite small in most cases.
But there’s no these trades have to use dollars or other currencies. They could be shares of the S&P500, bond ETF shares, or whatever. Just need an open, active electronic market, with a “tradeable path” between assets you hold and assets your counterparty would like to hold. The gold ETF would often work. Then you could walk into a store anywhere on the planet, sell any asset in your portfolio for gold (or whatever), and then swap that for any item you want to buy from your counterparty.
It’s not barter and it doesn’t require any new currency or asset, just a new trading platform.
Goldmoney from Goldmoney.com has been one to my knowledge for years. I don’t own it and can’t confirm how it actually works.
Ultimately, if you don’t own the physical metal, there is some level of trust in the entity behind it.
It’s a function of confidence.
The problem with crypto “currency” is that it’s actually nothing. Anyone can create a new one any day of the week, regardless of whether the supply for an individual one (like BTC) is limited.
BTC has name recognition and early or first mover advantage but it’s still nothing. No “hard power” backing it, like the USG. It’s not a debt like paper assets subject to direct default, but since it’s just a bunch of 1’s and 0’s, can (and probably will) go to zero anyway.
The allure seems to be missing these days. The all powerful US dollar is kicking sand in gold’s face. The miners have been taken out back and shot as though they were all bankrupt. Precious metals are a lot less precious these days!
Since nobody knows what gold price is going to do I treat miners like I would a company making widgets. If balance sheet is good and PE gets to about 16 it’s on my possible buy list.
They can really just seize all my precious Tulips??
Must wake up from HODLer nightmare.
But wait, they are on the immutable blockchain. Wait, wait — ! The pie in the sky just flew away. You have a certificate to nothing (a bet on your peers’ belief and hope) on a ledger some kid coded into existence.
You are also merely an unsecured creditor of your bank, including the contents of your safety deposit box.
Allegedly you are insured by FDIC for the first $250,000.
But ask FDIC just what percentage of cash it has to secure the entire US bank system.
And how long it would take to get your insured savings from FDIC.
And after the Fed prints the money for the FDIC, just what is the new purchasing power of your allegedly insured savings.
This may be irrelevant, since the bank can merely bail you in as a new equity holder in lieu of being merely an unsecured creditor.
It’s called modern capitalism.
But for whom?
That’s complete nonsense. No customer is being “bailed into” any bank. In fact, when banks fail, you don’t even realize it, as another bank takes over it before you even know anything happened. Your money doesn’t go anywhere.
Well, that may be so in US. But bailing in is precisely what happened in Cyprus in 2013 and in Greece 2015. The bail-in procedure for failing banks was adopted as standard modus operandi for the Eurozone.
Every insurance system (or work of human design) is imperfect. It’s ALL relative, the way down, in this mortal material world. But our FDIC is the best among many more risky things. Do you carry around a paper bitcoin wallet for everyday finance? I thought not. All backstops are NOT created equal, all are created imperfect and unequal. Just as all assets (worth anything) are unequal and fluctuate. A big enough catastrophe can erase any of them.
jeesusmoleesus, that’s a load of stuff there.
The FDIC is an agency of the US government and can borrow from the US Treasury, and the US government is backed by the printing press of the Fed, and the Federal Reserve Board of Governors (whose Chair is Powell) is a federal agency, and the US government will never run out of money. It might destroy the dollar through inflation, but will never run out of money, you just have to understand that. So the FDIC will always be able to pay off its insurance, and you can take that off your worry list.
When the FDIC resolves a bank, the stockholders and preferred stockholders and contingent convertible bonds get bailed in. The FDIC gets all the bank assets, and then pays off the liabilities based on the capital structure, which includes deposits. If there were more liabilities than assets, the FDIC pays out deposit insurance only on the amount of the shortage, which is in the worst case a small portion of the deposits.
So if you think that the FDIC has to be able to cover the total amount of deposits, you show that you don’t understand banking, assets, and liabilities.
I’ve been through three bank failures and never lost a dime. This fearmongering about the FDIC and banks is just pure BS spread by the gold sales industry.
I went through two bank failures in the late 1980s, but never even changed buildings. Bank A failed (they’d usually do this over the weekend), and on Monday there was a sign for Bank B. A few months later, Bank B also failed. Then there was a sign for Bank C.
It only cost me a new box of checks each time.
The FDIC is what kept a sharp recession (Texas in the late 1980s) from becoming a catastrophic depression like the 1930s.
From reading accounts of the 30s (and hearing them directly from grandparents), so many people who would have survived otherwise lost everything because their bank failed. Prudent savers with enough to tide them over a few bad years were tossed out on the dirt roads.
I agree with Wolf. FDIC deposit protection is the closest thing we have to sacrosanct in the financial world. Anyone saying otherwise is just fearmongering to fleece the gullible or not thinking things through.
Was one of them M Bank? That was one of mine in the second half of the 1980s.
It’s ultimately a question of what would happen in a full blown systemic crisis.
Sure, the FDIC through the government can pay off every depositor in full. If that happens, won’t be much consolation if the money isn’t worth much of anything.
It’s the same concept as to whether the USG (or any government) can or can’t default on debt denominated in the national currency.
The answer is both yes and no.
No, because of “printing”
Yes, because of what I just wrote. What matters ultimately to most people is the debtor’s (government here) ability to pay you back (with interest) in (near) full value. “Getting your money back” when it’s worth a fraction or low fraction of it’s initial value is a form of default.
That’s why the USG’s actual credit quality on any longer-term debt is the weakest since at least the Civil War. No different in much if not most of the world.
Read what I said how the FDIC operates when it resolves a bank. Even in a systemic crisis, the amounts the FDIC pays out of its insurance fund to cover depositors are just a small fraction of total deposits because the Fed bails in the stockholders, the preferred stockholders, and the CoCo bond holders, and it gets all the assets, and then it uses the proceeds to pay off the liabilities. The capital shortfall is never huge. You’ve got to get this into your head somehow, even if it hurts. This FDIC gold-bug stuff is really tiring.
No gold bug here.
There has been no real systemic crisis since the early 1930’s. GFC didn’t last long enough and wasn’t deep enough.
A real systemic crisis will be worse than the Great Depression because leverage is a lot higher and the government’s ability to neutralize it is a lot worse too.
Most bank assets are a bag of hot air: unsecured, “secured” by what is actually debt, or in a very low minority of instances, secured by inflated collateral.
Yes, I know something like the Great Depression can supposedly never happen again which is where I presumably disagree with you.
Banking system is also currently a much lower proportion of total system credit. I get that too.
I’m a gold investor but not a gold bug. The gold bug conspiracy and catastrophe theories are truly tiring.
Would NCUA be the same in working principle as FDIC and protected the same as you described?
There’s a silver lining in this.
So much electricity has been squandered on mining this garbage that will now not be justified or needed.
Might relieve some chip shortages too.
Wow, there is a startup idea: reprocesses all the cryptos and turn them back into electricity… Instant unicorn.
I don’t know if cryptos crashing are making tech stocks look any better.
I thought Warren and Charlie responded well to Peter Thiel’s attempted put down of Warren for opposing Bitcoin, calling him “Enemy number one: the sociopathic grandpa from Omaha”. Their response, delivered to a wide audience shortly after Thiel’s derogatory comments were made, without acknowledging that Thiel even exists, which was perfect, clearly explained the absolute folly of crypto, calling it “rat poison squared”. Warren made sense, Thiel’s didn’t. It can’t be good for the “asset class”, if you can call it that, to have its champions put down so publicly and so effectively.
I think Buffet has done well because he is disciplined about not speculating. One of his rules for buying whole companies is that they have a long history of earnings. Why make it more difficult than that?
Thank you, Old School. Perfectly stated. This upcoming crypto debacle may help the current generation understand that reality. Buffett’s investing approach is brilliant in it’s simplicity.
As a refresher, Warren and Charlie on cryptos:
Warren: “rat poison squared”
Charlie: “trading in turds”
Thiel always took pleasure in being the tough guy/bad guy. He is now involved in a fund that wants to disregard all effects of its operations (drilling, whatever) outside of pure profit. OK, But remember that kind of bad boy rebel kid from school? Most of those kids I knew end up in prison or dead. There is a reason conventional wisdom is called that, and Buffet took it to a higher level, with nothing up his sleeve.
Oh, Buffett has a lot up his sleeve, including deep political connections and the ability to swing legislation in his favor in times of great need.
Charlie – “suck it up”
Bailouts and laws are only of benefit to the wealthy
Warren Buffett doesn’t see a halo when he shaves. Peter thiel and the other 1200-odd Young Global Leaders do. If you sweat for your pay, you’re less likely to listen to the larceny in every human soul and resist the temptation of something for nothing. If you got “lucky”and scored big from the Fed skew and CDC interference with the markets, maybe encryption for the sake of encryption as a speculative financial product makes sense to you. Many professional gamblers have a sweet tooth for other games of “chance” where they give back much of their take from their specialty. Technology doesn’t alter human nature so much as it catalyzes it’s potential for good or ill.
Mr. Buffett understands hard work. Mr. Thiel is a club member that doesn’t want to ever have to understand hard work, unless it’s somebody else’s.
Wolf…thank you for a great article on the madness that is Crypto. Having bought Ethereum at $700, sold at $2100, rebought, resold and eventually loosing 18% of my marginal investment swore off the Crypto path to financial madness.
The bonus to your article is the new “Wolf Words”. 🤪🤪
I think some people don’t appreciate that if an enterprise gets into a vulnerable position in financial markets, the vultures are going to try to take you out fast.
OS-a mild semantic point of nature vs. human allegory, but actual vultures have the decency to wait to eat until you have been well and truly taken out by something else…(nature’s perfect crime scene cleaners…).
may we all find a better day.
I am trying to avoid an intense feeling of schadenfreude for every person who actually believed that cryptos and nfts were a legit investment.
They were not, they are not, and you can believe that “trees grow to the sky” and see how that works out for you. I’ll stick with “what goes up must come down” :)
In a interview a smart man said crypto would correct to 4-7 k ,market would see 1000 k dent harry
Or a Supreme Court and a political party that aim to “lesser human being” half of the US population.
Please keep your hands off my uterus.
“But you’re losing 7% to inflation if you hold cash.”
Well I lost 98% of my $10 play money in 12 hours buying Terra Luna. Currently at 2 cents.
Buy the Dip!!
It’s uterUS not uterYOU.
This isn’t over by a long shot. The BTFD crowd has poured in.
I’ll stick with “what goes up must come down” :)
I’ll add “the bigger they are the harder they fall”
BIT DOWN MORE THAN A LITTLE BIT…
CRAPTOS SINK IN THE ABYSS…NEARING WORTHLESS!!!
REALITY FINALLY SINKS IN TO IDIOT SPECULATORS…
More than $200 billion gone in day…
COINBASE warns bankruptcy could wipe out user funds…
Half value vanishes…
Billionaire Wealth Destroyed…
Plummet tests durability of hype-driven industry…
These made up collapse terms just make your otherwise clear reading “bumpy”- and sounds silly
You gotta have sense of humor to get through these crazy times.
Yes just thought of terms whackmuffled and muffleclubbed.
Dave – I respectful disagree. Wolf speaks closer to the truth than almost any publication. You can not make up “consensual hallucination “. I like his writing style.😉
They’re ‘gonna be just fine because as everyone knows, Fortune Favors the Brave.
Most of them will be fine because they are only investing “play money” in Crypto. The ones who aren’t wouldn’t be fine no matter what they “invested” in.
The US Dollar – just as fully expected – is doing absolutely wonderfully well and is up 0.33 to 104.35 on the DXY and is headed for 120 and perhaps significantly higher as it proves its role as the world’s most important and desired currency.
If BTC gets to $20k, it’ll be 70% off its high. I’ve been through 2 previous 80% drawdowns already – this could be my third. Each time, the chorus declares the folly of bitcoin and keens its death knell. Tulips are resurrected to lay on its casket. Yet, despite it all, simply by holding, I’ve several thousand X-ed my investments.
I will say that this time really is different in that we have much more gambling by Big Money playing usual Wall Street games at the margins, often setting price because of btc’s small market cap. How that plays out this cycle is the new wrinkle. We shall see. But bitcoin is not going to zero, it’s only shaking out the weak hands and froth again – as any free market must do.
The core hodlers are rock solid. The fundamental case has not changed. The base protocol makes more converts at every economic level and in every economic sector every year. I’m just trying to figure out what else I can sell to buy more while bitcoin is priced in the $20k’s.
The last two drawdowns were both in low interest rate, QE-fueled environments. There was no inflation like we see today.
Don’t be surprised if this time is simply different, there is no rebound and it just keeps dropping toward zero.
Bitcoin is not a currency and is basically acting like a high growth tech stock. The moment it becomes a threat to power is the moment they simply ban it and it goes to zero. And if you don’t think they can do that (they can, very easily) or would do that (they would, without blinking an eye if it began to undermine the USD), I can assure you they will.
All crypto is going to zero and there will eventually be an official digital dollar that 99.9% of people will preferentially use.
That doesn’t mean we won’t see a BTC bounce to all time highs and beyond, but ultimately, all this stuff is a ponzi that is going to zero.
And before anyone says the USD is also a ponzi, yes, it is. But it’s a ponzi backed by state power and a giant military. That’s the difference.
The USD is also a ponzi, for the time beeing backed by a state with a giant military. 😉
Not sure if this passes muster as allowable content but here are some juicy “findings” by the Queensland O of T (published in various news outlets – although not a fan of the NY Post this is where the following is in print).
“The average Bitcoin investor is a calculating psychopath with an inflated ego”
“They identified that many investors exhibit signs of the “dark tetrad”, a group of four unsavory traits made up of narcissism, Machiavellianism, psychopathy and sadism.”
“in plain English, that means dark tetrads have an inflated sense of self-importance and derive pleasure from the pain of others.
They also find it difficult to empathize with others and are sly and manipulative.”
The most problematic issue for me is the gigantic need for electricity required to “mine” these coins. Plenty out there to research on this topic but basically an environmental & ecological nightmare. Its emblematic of the Human Race’s apparent race to oblivion. The irony being of course the terror of mere mortality.
The “dark tetrad” describes a lot of market participants, not just bitcoin. And it’s true of business logic generally: pump up your brand (narcissism), do whatever it takes to beat the competition (Machiavellian), squeeze your workers and suppliers to boost your own profits (psychopathy and sadism)…
Question: do such people participate in markets because of their personality failings, or do they develop that type of personality because that’s what the “market game” requires to survive?
Is playing the game bad for your mental health?
Buy the damn Dip!
Assuming what you’re saying is even true (I’ve several thousand X-ed my investments), which I happen to suspect is a gross exaggeration, you seem to fail to understand how you were even able to do such thing, and who you had to rely upon to even get there – all of the fools who just got wiped out. So now you need more suckers. Where are you going to get them with no more free sh!t from the government and FED?
You could sell the bitcoin you have now for thousands more than 20k if you think that’s going to happen.
I just noticed coinbase is 6 percent of Ms. Woods fund. That might take yet another big chunk of value. $35 and change premarket. Quite the drop, and there could be more.
Could be? WILL BE! Guaranteed.
The wolves on Wall Street are eating her alive = equals she isn’t smart enough to change her convictions. Terrible manager but still gets her cut,so still in the game
Has anybody asked Cathie Woodshed about her Bitcoin call? It’s looking more laughable by the day.
There is a story about a cat in a convalescent home. Whatever patient it decided it wanted to snuggle with would be the next to die. Cathie Woods is that cat. When ARKK buys a stock, it’s the kiss of death.
That yellow metallic junk has again plunged by $6.90 per ounce to $1845.80 per once and that gray metallic stuff has plummeted by $0.56 per ounce to a new 2022 low of $21.00 per ounce as they both are in the process of reverting to their means of $456 per ounce and $8 per ounce respectively.
I hope so. I’ll buy it by the truckload.
LOL. In generating those “means”, which “dollars” were you using?
1 year returns (in USD)
S&P minus 4%
DJ minus 7%
NASDAQ minus 13%
Bitcoin minus 41%
Gold plus 1%
Gold is hardly a junk, and seems to be quite resistant to general declines everywhere in the markets
My commodity futures fund 40%.
The yield (interest rate) on the benchmark 10 year US Treasuries is nicely back about 3.00% and headed much higher.
You are a bit ahead of yourself?
Liquidity sponge dries up.
Here is your wise guy cobalt…
Not just the bitcoin and NFT are down, all the major indices were down by a significant %. Even the giants paying dividends were down recently. I understand the FAANGMAN and nasdaq stocks. We are looking at a major pull back, bear market or a recession soon.
Nobody says “buy the dip” now. May be its really different this time. Feds will raise the rates to 1.5% by the end of this year. Inflation is so high. Not only in gas prices but food, goods and services. Again, all around the world food production, diseases, social unrest and even war is going on.
“May you live through interesting times…”
PPI just came in HOT again. 1.5% to 2% is not going to cut it.
Japan’s Softbank just reported a full year loss of $13 Billion. Pretty soon, they’ll have to ask the Japanese government for a bailout.
There should never be another bank bailout on earth. Simply make depositors whole and end the companies, distributing assets to smaller, more responsible banks. We are overbanked anyway.
They can thank their fearless leader in charge for that one..a guy stupid enough to pour tons of money in WeWork…winner winner chicken dinner
Question: Can Coinbase change the status of its “depositors” to “unsecured creditors” after the fact? Don’t the terms—or lack of terms—extant at the time of “purchase” prevail? Of course, even if this is true, it itself will have to be argued in bankruptcy court. Because nothing screams bankruptcy like stating “We’re not going bankrupt.”
At the rate it’s going, the depositors’ cryptos will be worthless anyway.
They were always unsecured creditors. Credit slips dot org discussed this a couple months back and I cited it here.
Yes, they were unsecured creditors at Mt. Gox in 2014. Nothing has changed. They were always unsecured creditors. But no one wanted to know it, and the SEC is now apparently pushing exchanges to disclose this publicly so everyone knows, even if they don’t want to know it.
I know one thing…if I had any funds (crypto) in Coinbase, my fingers would be pounding the keyboard today to get my stuff out of there as fast as I can. I suspect there is a run at Coinbase going on right now.
Coinbase simply gives users an error message like “Unable to complete transaction. Please contact us.” And then when the user tries to contact them they are unable to ever reach them. Google “Coinbase stole my money.” The only time people seem to gain traction is when they start blowing the up on a social media site. This company is a fraud outfit, and unregulated.
Bought 10 Terra Luna at $1 each, lost 98% of that overnight. Might as well had played the lottery. At least I get a free play.
You had to understand you’re just gambling. Everybody is trying to hit the lottery. Hard work and saving is how you get ahead. And yeah, it’s HARD.
I knew I’d agree with something you said eventually.
So, with all this legalese, Coinbase essentialy states that in case of bancrupcy, they’ll do a bail-in on customer’s accounts. This reminds me of Cyprus 2013 and Greek 2015.
Hi – was wondering what a few beers would buy me at your mind-place ?
Couple of questions, of course we are talking about opinions…
1. What would you think the SPY or NASDAQ finally bottom out at?
2. How long will this bear market continue, now that it’s been spotted?
3. Any sectors you actually like?
I will share my answers.. to my own questions ;-)
1. no idea. A few months ago, I started comparing this to the dotcom bust. So that’s my model. Back then, the Nasdaq kathoomphed 78%. It went one stock at a time, many of them going down 90% to 100%. It was a terrible shitshow, but our elders told us that this would happen and it happened :-] We’re on the same track so far this year, which started last year, with the first batch starting in February 2021. The S&P 500 went shookalacked 50%+ during the dotcom bust.
1.B. There were some huge mega-bear-market rallies during the dotcom bust, including a 35% Nasdaq rally over the summer of 2000, and everyone thought it was over, and then it went totally to shit afterwards. I expect some of this now too. These are vicious rallies because they suck more people in and then they get spit out half dead.
2. Dotcom bust lasted from March 2000 (actually lots of stocks let go in 1999) through Sep 2002. But The Nasdaq nearly hit its Sep 2002 low again in 2009. It was only QE that pulled those indices up from there. Now QE is gone, and it’s QT. That’s why I think this could be pretty bad. This market cannot stand on its own two feet without the Fed. It’s incredibly precarious.
2.B. Cryptos are toast. This could make the stock market selloff worse because leveraged funds/investors that have a mix of cryptos and stocks are having to sell what they can sell for dollars, and that isn’t easy with cryptos, so they’re selling their most liquid stocks. In addition, lots of publicly traded companies bought cryptos, and that’s now going to shit. So there will be big write-offs and liquidity problems. The whole thing is just such a mess.
3. None. I like cash (shorter-term Treasury securities). I need dry powder for later. During the dotcom bust even the survivors got crushed into small pieces and took a long time to recover.
Number 2, fortunately the aggregate size of the crypto market is small compared to the money supply and much smaller than the mortgage market in 2008.
1. My best guess is NASDAQ around 8K, not sure about the SPY – puts us back 2 years about.
2. 2 Years or more, Presidential elections hold some hope April 2024 ish
3. my opinion is that Oil until around July 22′ / then Gold – SGOL
On a rip roaring Up Rally, SARK (or maybe even on a pullback to 60)
And as Wolf has mentioned, getting it wrong
will leave you crushed in little pieces.
1) I would put NASDAQ bottom at between 9,000 and 10,000. It is hard for an index to drop by half… NASDAQ fell more than that for the Dotcom Bust and just barely that for the Great Recession. This doesn’t feel like one of those times though. The peak was in November at 16,000. At some point the Buy-and-Hold crowd becomes more important than the traders.
2) The bear market will probably just start to go sideways at some point rather than continuing to decline. But I think it will take a lot longer than two years for the Fed to get a handle on inflation. They normally try to avoid doing much in Presidential election years… but this time I think they will have to keep the pressure on just to maintain their credibility. People forget… but Volcker had to do the same thing in the 1984 election… he didn’t keep interest rates at 16 to 22% (like in 81 and 82)… but he DID keep them at 9 to 12%… and those elections were FOUR years after he started… not two!
3) I like your oil play but I think it will last longer than a couple more months. The Kingdom of Saudi Arabia sets the price (and certainly the direction) of oil… and they are benefitting quite handsomely the way things are right now. Nor do they see a benefit to helping Joe Biden out. What will change their minds will be a nuclear deal with Iran. The Iranians have well over 100 million barrels of oil stored on ships and ashore that they cannot sell because of sanctions. The Saudis have ZERO interest in their enemies getting Top Dollar for all that oil.
Other than that I am with Wolf… go to Cash/ST Treasuries and wait for opportunities to arise. Losing 8% to inflation beats losing most of the rest to a declining stock market.
Wolf – well said and I painfully remember those years, and yes there were rallies, and things looked good for awhile.
Then harsh reality took it’s course back then.
Today we have the crypto “rat poison squared” as WB said, and is going to accelerate this mess downward, – Charlie’s Munger “trading in turds” is probably closer, and how people derided these guys with so much experience is crazy, – like they know more than them!
I’m astonished how foolishly big companies/CEO’s/celebrities promoted, supported and jumped on this crypto-insanity, especially “Chatty Cathie” said Bitcoin would go to 500k!
And now they are talking of regulations – LOL
I lived through the DotCom bubble and bust just like Wolf.
I was suckered into the multiple bear rallies. And lost.
I have learned.
The Fed was sleeping back then.
I think the Fed is awake now. Maybe slightly drunk, but they are awake.
If they decide to drop rates to 0 like they did in early 2019, they can keep the party going for any stockholder or homeowner. The rest will be penniless and homeless, but someone must suffer to save this great country, right?
BTW, I have been accused of being a communist on other blogs. This blog is kinder and gentler.
By all definitions, the economy controlled by a consortium of government, banks and private companies is not a free market and is referred to a fascism.
I am not a fascist.
I too think cash and short term Treasuries are the among the best investment here. Its sad when the best investments are guaranteed to lose 7-8% after inflation.
I also like positively yielding TIPS in a ladder. I just bought a Jan 2031 yielding .21 plus inflation. TIPS have been my best performing assets this year, apart from a few oil and commodity stocks [note: I hold the TIPS until maturity not as a spec].
The asset mania is worse than January 2000 and the fundamentals are far weaker.
US stocks are the only manic global stock market (at least of any size) but there was no bond mania and no real estate bubble in 2000.
There was no ZIRP or NIRP, no QE, and government budgets were in much better shape so no fake (or at least a lot less) fake “growth”.
If the bond market really did peak in 2020 and is in the early stages of a major bear market (which I think it is), it won’t be long before every other asset class sucks wind (like stocks now) and with most crashing.
If the US stock market hasn’t peaked, it could have a rip roaring rally with the next bond market retracement but sink after that.
Gold is overpriced (relatively) but could rally with commodities generally. First, commodities were very depressed at the March 2020 low. Second, many are actually necessities which people actually need to survive and not run-of-the mill financial assets. Potentially the beneficiary of future “printing”.
Coinbase is somehow regulated – you may look up ” bitlicense “.
Just now (scared by Mr Richter post) cashed out $5K of USDC and transferred it to my BofA account, w/o any pressing need to do so.
ZERO fees for cashout.
Also previously Coinbase charged $40 for instant bank transfer and ZERO for transfer in 1-3 business days.
Today they lowered their fee for instant transfer from $40 to 55 cents (!!!). And I dont even want to pay 55 f… cents. I am in no rush.
I understand that shit happens. Unlike my HS Wop friend who does screaming cartwheels after winning at the casino and is church-mouse-quiet after losing (which happens much more often) I will admit publicly when/if Coinbase appropriates my remaining USDC stash 😀
What is a “Wop friend?”
Guappo -> Wop = Dago
Term of Endearment used while referring to high school/military service bosom buddies of Italian Ancestry
East coast guys..many of my Connecticut friends were Wops.
Brent – let me tell you something son, – my ancestors were from Italian descent and endured endless pain, discrimination, being spat on, laughed at, beat up, from these people using these terms, – grow TFU – this isn’t funny!!
My Aunts, Grandmothers, Uncles cried to the day they died over such harsh treatments.
If you dont mind I’ll explain the SOP (aka Standard Operating Procedure) 😀
You – upon meeting me somewhere in Chicago South Side:
“Way-ull. Kiss my a$$. Didn’t know whether to salute ya or burp ya. A real live Kraut…”
Grinning self-consciously, slapping dust off of his uniform and saying:
“You can call me whatever you damn well like, long as you call me ‘Sir.’”
Brent boy – you are dealing with the wrong guy, – keep flapping your jaws.
South side of Chicago is fine by me, boy!
Of those Italian relatives some work in Chicago, and let’s say they have alternative careers in “waste management”.
Check your 6 boy, and p*ss up a rope!
Another “make mess” IPO: Dutch Brothers (BROS) down 40% this morning.
Dutch Bros sell coffee from drive up/walkup locations. How can you not make money 💰💰 Nothing is safe💸💸
At least they were actually selling something.
Another fine establishment down the drain, done in by greed.
You mean Wolf people are not buying “stable” coins like Luna
Here is link but you can Google Luna price
But hey, CEO tweets: “We have no risk of bankruptcy.”
Hits my funnybone. Back in the day I’d be ROFL stoned on hashish.
Cryptocurrencies – how to invest in virtually nothing.
for those that think its a complete meltdown, look at Bumble, Squarespace, Figs, Rivian…. must be short covering? up quite a bit in down market. or is this “bottom fishing” by Cathie Wood and others. Not certain how they can make so little or lose so much during the “setup” and doesn’t bode well 18 months from now when cheap capital is less available. Fear breeds fear or opportunity?
Look at their 1 year or 2 year charts. That big uptick you’re talking about is tiny and barely visible and just a minor step on the staircase to heck. You gotta look at the long-term charts, not the daily chart.
That Coinbase CEO made the mistake of saying the quiet part out loud — he and his cronies certainly have no bankruptcy risk, but the schmucks holding the stock aren’t part of the “we” he’s talking about …
Didn’t Tonto say something like that to the Lone Ranger when they were surrounded by Indians?……
Lone Ranger – Tonto, we are surrounded by Indians!
Tonto – What you mean “we” white man?
I have always loved that joke because everybody in America gets it without anyone having to explain it.
“We have no risk of bankruptcy.”
So, we have a cosmic insurance policy that can’t lose, said every con artist from the beginning of time. So, we have a magic deus ex machina that will levitate in and save us all.
But um, pay not attention to the fact that you are an unsecured creditor in the back of a line in a credit stack. We just have to grind through this, hang onto your chips, go down with the ship. I’ll be far away in a lifeboat I already crafted. Never mind the swirling death-spiral.
In distressed finance in corporate American now, creditors and mostly private equity funds have figured out how to cut side deals with managers and equity holders to throw even intermediate creditors under the bus and zero them out. The predation is intensifying, and may go supernova if the market selloffs continue. And THAT is for companies that actually have valuable assets and going value, not ethereal nothings on a blockchain. So how can the faithful unsecured creditors fanboys here expect better treatment from people who already always extracted their value up front and had one foot in the lifeboat, while being pretty untouched in the unregulated or semi-regulated cyber-frontier?
The “People Magazine” perspective based on Wolf’s observations.
CEO Brian Armstrong’s net worth has dropped from $13B at a peak down to $2B in the last few months. Apparently most of his net worth was invested in Coinbase stock and Crypto.
“We have no risk of bankruptcy,” Brian’s new $133M Bel Air estate that he purchased with cash in January should be safe.
Cathie Wood’s ARK funds purchased $28M in Coinbase shares this morning in the hopes of an invite to Brian’s next party. Coinbase shares have bounced from $53/share to $58/share at the time of this printing.
Coinbase posted a $400+million loss for the quarter. What part of that is salaries and bonuses for the top brass? This seems like a few insiders just milking the company for everything it is worth until it collapses.
After losing $10B with Crypto and his company, Brian is diversifying into Bel Air Real Estate (Good move in a RE bubble). He will now have to survive on $2B, or maybe half that, if he doesn’t do more diversification. Sell his Coinbase stock is an obvious solution!
He should listen to Dave Ramsey on diversification of assets. $2B is a terrible amount to waste.
Brian only made $60M in 2020. $1.8M of that was for personal security from his adoring crypto fans.
What do you get for security for $1.8M per year? People want to know.
My prediction is that his experience will be representative for the vast majority of the purported 724 billionaires, by the time the major bear market is over decades from now. Sooner for most.
Forbes listed 13 billionaires in 1982 or 1983. It’s not the result of price inflation but credit market inflation. Total US debt in 1980 purportedly $4.8T. Total debt now purportedly somewhat less than $90T.
That’s where most of the “wealth” came from because it’s obvious the country isn’t anywhere near that much richer or more productive.
I predict a 30% down day in Bitcoin soon, followed by another gradual 30% drop after that, assuming accountholders cannot fully protect their Bitcoins in case of a Coinbase bankruptcy.
Coinbase stock is burned toast.
I can’t predict anything, but I suspect this latest bounce is of the dead cat variety, and it’s going to plummet through the recent lows.
Wow. This has never happened before. NOT! SOS whenever BTC comes down 60% or 80% it’s the end of the world. Never changes. You’d think financial guys would get a clue and idk BUY THE DIP. Come on wake up. Buy when blood is in 5he street.
Buy the dips only if you want to sustain massive losses ahead.
Coinbase was one of Jim Cramers hot picks. He was on record as saying buy, buy, buy, on the way down.
Typical loon nonsense from that nitwit.
Somebody mentioned the “Inverse Cramer ETF” a week or so ago. Lol!!!
Tracking the stock recommendations of Jim Cramer so you can do the opposite.
These guys didn’t get into trouble until they started selling stocks. Now we can glean that their revenue comes in service fees, but still curious how much does it cost to make a COIN and how does that compare to its present value. Then the SEC is going to REGULATE this market and shame if some bad geopolitical actors try to get around sanctions with crypto. Stocks are not selling off so much as they are revaluing, with dinky volume, lower prices once about through futures and derivatives and the buyers and sellers rubber stamp the move, but nobody is giving up their physical shares, just yet. When interest rates rise derivative costs rise. RRPO is almost two T a day! and rising, some sort of liquidity event may befall us. Will the Fed accept stocks as collateral if RRPO breaks?
No, the Federal Reserve never accepts stocks as collateral.
You mean you’ve forgotten that the Fed bought 9B of ETFs, by providing a hedge fund with 10x leverage during the pandemic market crisis? SPV?
“how much does it cost to make a COIN”
Not much actually – you need the source code of the CryptoNote, a decent GCC and few hours to read the documentation and apply what’s written there in practice. And that’s for a more complex algorithm (the one that used to be behind Monero).
For Bitcoin copies – there used to be online tools to create new COINs with a few clicks.
“Production costs for miners are around $34,000” One Bitcoin is currently about $30000. That sounds like a liability to me.
Gold is now down $20 per ounce today and it’s funny watching the major stock indices bounce around like seasick sailors on a boat!
Sibelius “Finlandia” signed by London philharmonic orchestra, today.
A better version was done live at Orchestra Hall, Minneapolis in February 2017 conducted by someone, like Sibelius, from Lahti also.
BIS SACD-9048 ‘Kullervo,’ ‘Kortekangas’ and ‘Finlandia’ with Finland’s YL Male Voice Choir and vocal soloists Lilli Paasikivi & Tommi Hakala.
But it is not in my library since I am not a fan of choir music, though I do have all seven Symphonies on SACD.
Because a nasty storm last night left debris on the roads, I just returned from riding my Minnesota-made OTSO gravel bike instead of my road bike. OTSO: the Finnish symbol for the King of the Forest. A bear that is noble and wise.
We have a lot of Finlanders in Minnesota.
My opinion is that it would be wise for Finland to stay alone; strong and free.
England signed a defense pact with Finland
Ah, good deal I would think.
NATO was not something that was a good option IMO.
“… someone, like Sibelius, from Lahti also”
but Sibelius was born in Hämeenlinna
My mistake. Thanks for catching it. Osmo is leaving at the end of this year after 19 seasons. I will miss him.
As a thank you to Wolf a while back, I sent him a BIS SACD & CD of Sibelius’ 2nd & 5th, which are on one disc.
US gov was not invited.
=still curious how much does it cost to make a COIN=
One may still satisfy his idle scientific curiosity by reading MSM newspapers like NYT & WSJ
“Going for Broke in Cryptoland” – NYT,April 2021
NYT writer paid $7 + $300 in banking fees and created his very own crypto coin aptly named IdiotCoin
He posted on his website all warnings and disclaimers he could think of – yet the avalanche of messages from prospective “investors” started ASAP:
“Should we buy your coin ???”
We missed the boat for riches. At least I did.
“There is a sucker born every minute” – PT Barnum
” The early bird gets the worm” – Author Unknown.
“Not long ago, the suckers had cash. Now they don’t because they were suckered by someone other than me” – Bob
I never even waited for this proverbial boat to riches 😀
Squirreling away 2 Gold Eagles 20 years ago when gold price hit the rock bottom was/is my total preparation for SHTF moment.
The rest of my savings in mid-$100K will slowly melt away.
SERENITY NOW !!! (famous phrase from Seinfeld)
Also the title of old movie “Never give a sucker an even break” (1941) perfectly captures the Spirit of Modern Times.Gov & Financial Devils will never rest…
Bob/Brent-“…ahhhh, yes…” says Mr. Fields. “…and I can just see Mr. Barnum spinning in his grave and cursing the gods that he was born in the wrong century…”.
may we all find a better day.
Any AI trying to parse this column will be flummoxed.
I think that was the purpose in the back of my mind. Maybe algos will lock up and short circuit and burn through the motherboards while running in endless circles :-]
We are Half way here Already !
I don’t know if anyone spotted the ‘brilliant Fed latest idea to ask Corporations to a Hiring Freeze”…. I guess to help mop up their mess from QE & zero interest rates
What happened to the economy during stagflation?
economy in the 1970s, many things come to mind:
High oil prices – Check
Inflation – Check
Unemployment – not yet, see above
Recession – ‘the Feds “Soft Landing”
Thanks for bringing what the Fed said about urging companies to do a “Hiring Freeze” – I was astonished when I read this, and had to confirm it as true.
This is pure madness, and the Fed whom I have criticized for years, makes me question if they are totally insane.
Yeah – let jobless people walk the streets, that’s beyond insanity for so many reasons!
This maybe the stupidest idea I have EVER heard coming from the Fed, – their reasoning is below ZERO!
Hiring freezes actually make me think the Fed knows what they are doing.
They are decreasing demand to stop inflation since the supply chains are still so messed up that increasing supply is not an immediate solution.
Is it better to hire more and lay off the excess employees when Fed drives demand down, or to just not hire at all with anticipation of the Fed solution?
From a business perspective, not hiring drive down all wage costs.
However, from a business perspective, not growing drives down stock values.
The Fed wants both to control inflation.
From an employee perspective, this is bad for increased wages.
The Fed knows what they are trying to do it whether we like it or not. This is strangely comforting.
Hi Bob, JPM – Jamie Diamond put the odds of FED achieving the much sought after “soft landing” at 33% on May 4th, not great odds IMHO.
Prepare for a recession, that will lead to demand destruction, lower oil, wages and higher unemployment.
Seen it all before, Bob,
Has this insane idea EVER been done anywhere, and worked? – I never heard of such a thing being done, and being successful! – it’s a “experiment idea”, like chopping a hole in a boat to let the water out!
Reminds me when Nixon did a wage and price freeze in ’71 – guess what? – it failed.
These jobless people will lose whatever assets they have, go bankrupt, depend on the social network, won’t pay taxes, even resort to crime, making it a Titanic failure!
” it’s a “experiment idea”, like chopping a hole in a boat to let the water out!”
As long as the Fed has the response to plug the massive leak quickly, it will work.
Otherwise, you are correct, we will sink like the Titanic.
The Fed supercomputers are running 24/7 to respond to this task. I hope. Otherwise, they need to go to a bi-daily 3 martini lunch to get the required response to this complex control system.
A Controls Engineer by education.
@Seen it all before, Bob, – You haven’t:
You failed to answer my question and failed to understand the failure on Nixon’s “experiment idea” – I was working at that day in Aug 1971, and it failed horribly.
Again – These jobless people will lose whatever assets they have, go bankrupt, depend on the social network, won’t pay taxes, even resort to crime, create a worse economy in epic ways – common sense doesn’t exist these days.
I have a degree in engineering and economics, – except I don’t throw it people’s faces.
I was only 5 years old in 1971, so obviously you have seen more than I have.
I do know the current processing technology for controls is so much more advanced than 1971. I hope you also know this.
Control systems now fly high performance fighter jets that would be unflyable in by mere mortals in 1971 or now.
I am only a mere mortal with my opinions and engineering knowledge that I never intend to throw in anyone’s face.
I’d trust a supercomputer over a 3 martini lunch Fed Chairman.
@Seen it all before, Bob,
Apology accepted, the job was in ’71 and was a summer dock worker before college, – but the meager wages I made, and my up and coming raise was squished, and every nickel counted then – though gas was .19 cents – LOL
My career in computers started in ’75 and hasn’t ended, – so I’m aware of what tech can and can’t do – lost count of the number of languages and platforms, and databases I have worked on, and still are tons more to learn, it’s never ending.
Yes, – I agree, and hope the Feds AI supercomputers are working 24/7/365 to figure out this mess.
Hope for the best, and prepare for the worst.
Regards – Martok
Replying to Martok:
Doubtful that the Fed has any AI supercomputers at work on this.
Thought to be sure, it was now 20 years ago, my younger daughter was a research associate at the Fed in Washington and was working hard at bringing some order out of chaos in the Excel spreadsheet Visual Basic code they were using. Perhaps today they’re using some Python and R.
Keep in mind that the analysis is done by economists, likely using whatever tools they used in grad school, not software people.
You are speculating about something 20yrs ago, and applying it to today, – you got to be kidding me!
In the computer business 20 yrs is centuries of changes and developments that I personally seen, and been part of for over 47 years.
Anybody can rent AI supercomputer time in the cloud, and it would be hard to believe the Fed is not using supercomputers to test and
back-test all kinds of economic scenarios, and talking with all sorts of advisors 24/7/365
They ain’t using Excel spreadsheets and basic today, trust me – LOL
“The Fed knows what they are trying to do it whether we like it or not. This is strangely comforting.”
It doesn’t mean they know what they are actually doing, much less that it will succeed.
There are no “wizards behind the curtain”. This faith of yours is just more of your belief in the effectiveness of central planning, evident in your posts both here and on the Doctor Housing Bubble blog.
Augustus, or should I call you Flyover?
I enjoy both blogs. Wolf’s blog is much more general and focuses on all parts of the economy.
I believe in Central Economic Emergency Response but not Central Planning.
If a crisis occurs, a Central Economic Emergency Response is needed to prevent massive suffering, and save lives.
An analogy would be the control systems on an airliner. If a sudden wind gust hits the plane and an engine falls off, the central computers take over from the pilot and control thousands of airplane functions in milliseconds to prevent a crash and save lives. Hence my trust in computers and AI.
Over history, the Fed did not respond or did not respond fast enough to crises. The Great Depression, the Dotcom boom/bust and the GFC were cases of the Fed sleeping during the bubble inflation and reacting far too slowly after the pop.
The reaction during the pandemic was much better. Millions of unemployed potentially starving people kicked out to the streets was avoided. The likely alternative with no control may have been triple the amount of deaths before the vaccine was released. The problem now is that they over-reacted and Inflation and bubbles inflated even faster. They are now releasing control. No more QE. Bubbles are deflating. Can they a soft landing with one engine be achieved?
IMHO, they should have continued this back in 2018 when they last started it. Instead for unknown reasons, they drove interest rates to 0 in 2019 and restarted QE. This was during the so-called “Greatest Economy Ever”. They threw gasoline on a manageable fire.
Will the Fed go back to sleep after this is done and let capitalism return or will we go from perceived crisis to perceived crisis? The Fed should not be active but they should not allow the economy to fly into a hurricane again if it can be avoided.
Funny how the stairway to heaven eventually mean reverts to a stairway to hell.
Terra blockchain halted after LUNA, stablecoin UST losses
Wolf – Apropos of the “Imploded Stocks” column, would it be worth generating an actual index / list of ALL stocks that are down by some % from their 52-week (or all-time) highs?
If there’s room for a helper – I have access to the data and software needed to auto-generate an updated list weekly. From that one could look at “new entries to the club” each week.
Can you search/list in terms of drawdown “from all-time high” such as 2 years ago?
Let’s discuss this via email.
Ya’ll read my mind. I’d personally love to see this.
Yes, we can do something very much like that. My current dataset covers ~3000 US domiciled companies, basically a stock index of the large, mid- and small-cap companies that meet certain criteria for investability. Generating a basic list of implosions within that data is trivial, at least until they fall out of the index due to low share price or market cap or whatever. Enlarging the index is not hard, but we should figure out what’s really desired before I try that.
I’ll tell be in touch by email tonight / tomorrow.
Wisdom Seeker, you man of many talents
Yes, Thank you!
Please help Wolf with extracting this data.
It is worth hundreds, if not thousands of dollars in donations/beer mugs.
The US Dollar is now at 104.89 and about to cross over 105 on the DXY and is doing wonderfully making imports from Europe much less expensive by the minute!
….and US manufactured items somewhat less competitive by the minute?
Can one invest in DXY as a fund ??
I wouldn’t buy it now. It’s already had a big run.
What happens when DXY hits 105?
Remember when simply having “blockchain” in your name guaranteed a prosperous IPO?
@roddy – I remember the same in 1999 and 2000, – that if a IPO had a “computer server” that would be prosperous too!
Being in IT at that time, – made us all laugh!
DXY breached Mar 23 2020 high and Jan 2017 high. It might backup
for a while, before moving up.
Gold books worst day in about a week, surging dollar sinks prices to 3-month low
DXY in a 7 years trading range. BB #2 : Mar 9/23 2015, 100.39/ 96.16
might be visited, next.
If DXY explode, bad things can happen.
Now for the big one: how could all of this mess spell trouble for housing? How much of the same leverage in Cryptos and stocks do you sense in housing that needs to be sold off as quickly as possible when phones start ringing with margin calls?
In some markets, such as San Francisco, Silicon Valley, Austin, etc., this has got to have an impact with some lag.
Big sustained Nasdaq draw-downs were in the past tracked by a housing downturn (rents, prices) with a lag of some time. But the key words are “big” and “sustained” — in other words a market that stays shitty for a long time to where startups start laying off people and running out of money. We’re starting to see the first little bitty signs of it, but not enough to make a dent, and given the labor shortage, young-ish tech workers are getting picked up very quickly. So patience.
Yes, patience. With Twitter and FB having hiring freezes; firing high flying executives, I believe you are right. But I sense the “lag” you mentioned might be a lot shorter this time due to the massive leverage and recklessness that have caused this bubble to evolve. Many of these young engineers that you mentioned definitely made purchasing decisions with their stock options, but now many are in your imploded stocks columns.
In 2000 most everyone I knew bought stocks with savings, but this time with leverage.
When employees at a startup that’s done an IPO exercise their stock options they generate a taxable event, the profit being the very large difference between their exercise price and the inflated IPO price. Those who are true believers often will not sell enough shares, when finally allowed to after the six-month lockup, to pay the taxes on that short-term gain, because they’re sure the stock they now hold will keep rising; if it doesn’t, and instead falls, they are in for a world of hurt at tax time. They can’t deduct the loss in share value, because they didn’t pay full price for the shares — their cost basis is the low exercise price of their employee options. If the exercise price was, say, $25 and the market price when they exercised was $100, they owe tax on $75 per share — even if the shares later decline to $10. Ergo the wise course is to sell enough shares simultaneous with exercise to pay the tax, but true believers and greedy folk won’t do that, and will be in deep, deep doodoo at tax time. This will have a significant delayed impact in certain areas.
I agree with you. If the stock market has actually peaked, the lag effect should be noticeably shorter this time. A lot more debt and leverage now, not just in the US, but all over the world.
This outcome isn’t directly contingent on a US supposed “black swan” event.
Nothing the FRB can do that about that either.
In another comment above you are talking about tracking stock price collapses. There is a site named layoffs.fyi that is tracking layoffs. I don’t recognize many of the startups but Wolfstreet favorite Carvana is near the top. It might be a good reference to use depending on how comprehensive it is.
Serial money losing public companies must collectively employ several million. Add in companies with ridiculously overpriced share prices and weak balance sheets and the number is a lot more.
There will be plenty of pink slips to cut costs in an effort to meet EPS estimates if this is the start of a a real bear market.
I conclude the bond market did peak two years ago but don’ consider stocks confirmed, yet.
Divergence between stocks and bonds lasted almost two years (March 2020 vs January 2022) but don’t remember if this is unprecedented. It hasn’t happened since 1994 which was “lift off” for the asset mania. Fairly confident about that.
Wall Street is once again expecting central bankers to intervene to stem the market decline.
While 0.5% federal funds rate increases in June & July are pretty much locked in, FFR futures-implied rates for late 2022 and early 2023 have come down noticeably, mirroring the recent slide in longer-term bond yields.
JP with another 4 years for doing such a great job with support from both sides of the aisle. Will he actually do something now…
I’ll stick with “what goes up must come down” :)
I’ll add “the bigger they are the harder they fall”
Mkts are going/ gone DOWN every day since last Thurday,Today 6th days they went down again, except for a fraction gain in Nasdaq near the closing end.
Unless PJ brings back QE, there is NO hope for the dip buyers!
With so much volatility, buying puts without hedges, is NOT the strategy in option trading. But gain will be made as a whole by going against the mkt (with some hedges, always) in this ongoing secular Bear mkt.
If the mkts go DOWN tomorrow, WAtch out for Monday (crash!?)
Let’s wait n see!
I see Fed reorganizing a bit. Do you think they are moving forward on QT and rate increases to capture inflation through November, regardless of stock falls?
your answer has already been answered… by the fed… last week.
Think of this way: the more stocks fall, the less the Fed has to raise rates because sagging markets for a sustained period of time take a bite out of demand, which would take pressure off inflation, and that’s what the Fed wants to achieve. This would be much softer for the economy (not for asset prices) than jacking up interest rates into the sky. Former NY Fed Prez Dudley verbalized that explicitly in a Bloomberg editorial a couple of weeks ago.
This is an important concept here, and Dudley came out and said it, though no one currently at the Fed is allowed to say it.
“Ladies and gentlemen, this is your captain Powell. As we start our descent towards a soft landing, please make sure your seat backs and tray tables are in their full upright position. Make sure your seat belt is securely fastened and all carry-on luggage is stowed underneath the seat in front of you or in the overhead bins. Thank you.”
And would you all kindly…put your head between your legs and kiss your ass Goodbye!
OK.. seems dangerous to consider overall demand to fall from a decline in portfolios, no? Asset holders are still buying general everyday goods, goods that the less fortunate/fixed population are trying to buy. sure, portfolios can leverage the purchase of large assets and add to perceived wealth effect, but asset holders, i would think, aren’t touched by everyday goods/commodities inflation. Wouldn’t they would continue their everyday purchasing habits with little regard to % increase here and there? maybe that’s more a micro point of view.. a quick search of Dudley comments shows that as of a few days ago, he’s now in a 5-6% rate camp.
That’s the theory of the “wealth effect,” that the Fed believes in and has discussed in many papers, and is the official policy of the Fed: driving up asset prices creates demand, mostly at the high end, such as expensive vehicles, expensive home remods, yachts, etc., which then spreads from there into the rest of the economy through the jobs and the secondary demand this creates.
If this is true, then the reverse Wealth Effect is also true, and the Fed would therefor target it now, in that someone who had a portfolio of $2 million, and now has a portfolio of $800,000 is likely a little more careful with spending on luxury cars and expensive remods, which takes some demand off the table in those areas, which then spread from there via jobs and secondary demand into the rest of the economy.
Tax increases would do the same. But it would be political suicide for ANY government that lost control of inflation to try to regain control by raising taxes on the people who are suffering from the effects of the high inflation. The only examples I am aware of where it has worked is when the IMF has required tax increases for a bailout… but even then the government gets the blame… as it should.
1) The DOW is a hammer candle in a downtrend, on higher volume.
When vol is high market makers participate. Good things might happen.
2) NDX retraced 0.50 of the wave from Mar 2020 low to Nov high.
3) SPX, hesitating doji on low volume. The downtrend line from Jan 24 to Feb 24 lows might be next, before moving up.
4) For entertainment only.
AAPL : a long legged doji on very high vol. Market makers participate.
The markets might move up.
1) There is inflation in Europe, but Finland sent the German 3M to minus (-)0.607 and the 10Y to 0.865. The long duration invert. // US 10Y : 2.886 < 7Y and the 30y < 20Y.
2) USD is rising, gold is down.
3) Next week creeptos will rise.
I had 25k in cash sitting with Coinbase to buy when/if Bitcoin collapsed far enough. As soon as their “unsecured creditors” comment came out I pulled my cash out. I’m sure I’m not even close to the only one. If I wanted to be an unsecured creditor I would have purchased bonds.
If crypto goes the way of the Dodo bird, what are we going to do with all the extra electricity? Crash in energy prices in our future?
RR-use at the increasing number of EV charging stations?
may we all find a better day.
Powell was just confirmed for another term. CNBC has an article fawning over him, with some choice quotes from Congress:
““Chairman Powell’s leadership has helped spur economic growth while preserving the best capitalized banking system in American history,” Sen. Patrick Toomey, the ranking Republican on the Senate Banking Committee, said in a statement.”
“He orchestrated a series of maneuvers aimed at pulling the nation out of its steepest downturn in history, using a blend of lending and market-boosting programs combined with slashing interest rates to near-zero and instituting a bond-buying program that would explode the Fed’s holdings to $9 trillion.
More recently, Powell and the Fed have faced another crisis — the worst inflation surge since the early 1980s, with price increases running at more than 8% annually for the past two months. Powell has faced some criticism for moving too slowly to address the threat, though the Fed last week raised benchmark rates by half a percentage point, the most aggressive move in 22 years.”
I love how the paragraph two above is presented separately from the one one above, as if the two aren’t related.
Powell was not strong. There’s nothing strong about printing money. Tons of people have tried it before. Powell only got away with it more than most other bankers, because of our unique currency status. Did anyone praise Zimbabwe or Venezuela’s central bankers? If not, why not.
All this while ,he and fed members ,congress and connected people,stole America ,hell to pay
Powell is the enemy of the working man.
and the darling of the bipartisan Senate
Hopefully this mayhem will hold and Bitcoin and Terra coin don’t do a rip your face off turnaround..I doubt it will but stranger things have happened before .
For now though I do enjoy seeing the likes of Saynor or Do Kwok get their comeuppance however short live that might be..
Face-ripping rally currently underway. Never underestimate gambling addictions. Ever. Many gamblers will never stop until they are flat broke. Then they jump off the highest building they can.
Some people seemingly bought all in on the dip on Luna at 15p which I assume was a fraction of recent levels… and then it fell to 0.03p or something haha.
Lessons starting to be learned.
I see a flight for “safety” to
Bitcoin, or cash.
Tether type tokens crashing out, and exchanges failing.
It’s all about the leverage.
This goes from the theft of the global commons.
BTC IS necessary; IS the watch
Eth will be the world record of everything
Time to time
Search the concept Global Public-Private Partnership GPPP, NAC, Sustainable Development Goals…