Leverage & Interconnectedness Are Blowing Up Crypto & DeFi

That’s what’s different this time: Stuff blows up because of leverage and cascades through the crypto space because everything’s interconnected.

By Wolf Richter. This is the transcript of my podcast recorded last Sunday, THE WOLF STREET REPORT.

Crypto lender and broker Voyager Digital, which also took deposits and offered yield products with huge interest rates of up to 12%, said in a series of tweets today that it is, “actively pursuing a series of strategic alternatives” and that it is “focused on protecting assets and maximizing value for all customers as quickly as possible.” That’s horrifying language for people who have their cryptos on deposit at Voyager and now cannot get their cryptos or anything else out.

What’s different this time about the collapse of cryptos, compared to last time in 2018, are two huge factors that were barely in their infancy back then: massive leverage and interconnectedness.

All these crypto firms lent to each other and borrowed from each other in cryptos, to speculate in cryptos with borrowed cryptos, and they lent out borrowed cryptos, and they posted cryptos as collateral with each other for more leverage, which is now triggering margin calls, forced selling, and wipeouts cascading through the space. This interconnectedness created huge systemic risks within the crypto space that are now coming home to roost.

On Friday, Voyager Digital had suspended trading and withdrawals. In other words, depositors cannot get their cryptos and collateral out. And they cannot get any fiat out either.

These people are unsecured creditors if Voyager files for bankruptcy. Voyager has already hired restructuring and bankruptcy lawyers and consultants.

Voyager got taken down by the crypto hedge fund, Three Arrows Capital, which blew up amid huge leverage when cryptos plunged.

Three Arrows Capital, which was said to have managed about $10 billion of cryptos as of March, was ordered into liquidation by a court in the British Virgin Islands, where it’s legally headquartered. On Friday, it filed for Chapter 15 bankruptcy in the US.

Voyager had lent 15,250 bitcoins and 350 million USD Coins, a stablecoin, to the hedge fund. Combined, that loan amounts to about $650 million at current prices. And Three Arrows had defaulted on that loan.

Three Arrows ran into trouble when cryptos dropped below a certain level and when Luna, in which it was heavily invested, collapsed by 100%, at which point it received margin calls that demanded more collateral, and when that wasn’t forthcoming, its leveraged positions were liquidated by crypto exchanges including BitMEX and Deribit.

Voyager said in the series of tweets today, Sunday, that it has $1.3 billion worth of cryptos left on its platform – presumably put there by depositors – who are now locked out, and that it has $650 million in claims against Three Arrows Capital, which Three Arrows has defaulted on.

Voyager trades on the Toronto stock exchange. On Friday, July 1st, when it announced that it had locked out its depositors, the Toronto Stock Exchange was closed in observance of Canada Day. In the US, where Voyager trades over the counter, its shares plunged 31% on Friday, to 30 cents.

Voyager was founded in 2018 and had started trading in Canada in September 2021 at around 16 Canadian dollars a share, and amid immense crypto hype and hoopla rose to over $21 by peak crypto mania in November 2021. The stock has now collapsed by nearly 100% in 10 months. So that wipeout was fast.

Companies like Voyager are in the space called Decentralized Finance. DeFi is doing what the hated and despised fiat banks are doing, except they’re doing it in cryptos instead of fiat, and there is no deposit insurance, and there is no regulation, and everything goes, and there is no central bank for them, and no protections for depositors. In addition, they lured customers into depositing their cryptos there by promising to pay huge interest rates of up to 20% a year. Which is totally nuts.

And now the two concepts of leverage and interconnectedness are tearing up the cryptos, crypto exchanges, the DeFi outfits, crypto stocks, and crypto hedge funds.

The leverage is mostly hidden and tangled up with other crypto firms, and parts of it surfaces only when something blows up. And the interconnectedness causes the blow-ups to cascade through the crypto space.

So now this is an entirely different game of margin calls, forced selling, bankruptcies and liquidations, and preparations for potential future bankruptcies, the total annihilation of some cryptos, including TerraUSD and Luna, and leaving customers with deposits at crypto exchanges and crypto lending platforms twisting in the wind.

There is no regulation and no deposit insurance, and these customers are just unsecured creditors when these highly leveraged platforms collapse. And the loans that were over-collateralized when bitcoin was at $65,000, triggered margin calls as bitcoin plunged to $19,000, and the lenders can seize the collateral, namely the crypto. But since the lenders also traded in their own accounts, with their customers’ deposits, they too got wiped out when cryptos plunged, and it’s just the beginning.

DeFi platforms are like banks, but they take deposits and make loans all in crypto. They’re highly leveraged. They’re using their customers deposits to trade cryptos in their own accounts, and they lured customer deposits with the promise of huge interest rates. And customers borrowed against their cryptos, using their crypto deposits as collateral, to gamble with more cryptos. Everything was leveraged to the hilt and interconnected. And the whole thing collapsed when crypto prices began to collapse.

It has been three weeks exactly – on June 12th – that one of the largest crypto lenders, Celsius Network, which had managed about $12 billion in cryptos as of May, told users that it is halting all withdrawals, swaps, and transfers between accounts.

It blamed extreme market conditions. It said it needed “to stabilize liquidity and operations.” Customers have not gotten their cryptos out. No one knows what’s going on, except that it isn’t good and that Celsius has hired restructuring and bankruptcy lawyers in preparation for a possible bankruptcy filing.

If Celsius files for bankruptcy, its customers with crypto deposits are unsecured creditors, and they might not be able to recover their cryptos, and unlike bank customers in the despised and hated fiat banking system, there is no government deposit insurance. People are just on their own.

Celsius lured customers with annual percentage yields of over 18% on their crypto deposits. That this was either a scam or a super-high-risk gamble should have been clear to everyone. The only time a company is paying 18% interest on debt is if it’s near default. That’s a very high-risk debt, and bond buyers know this, but apparently, not the customers at Celsius.

At least three other crypto platforms have now blocked customers from withdrawing their crypto deposits or collateral, or have limited the amounts: Babel Finance, CoinFlex, and Finblox.

We’re not talking hated and maligned fiat dollars here, but cryptos. They’re borrowing cryptos from each other, they’re lending cryptos to each other, they’re posting collateral in cryptos with each other, they’re paying interest in cryptos, they’re trading cryptos between each other, and they’re trying to bail each other out in cryptos.

And they have to pay each other back those cryptos, and the cryptos have plunged in value and are gone because of leverage that blew up, and because of the interconnectedness that is spreading those blowups around the system.

Leverage and interconnectedness, which were just in their infancy in 2018 when cryptos blew up last time, are now the dominating factors. Back then it was just folks selling their cryptos. Now stuff is blowing up because of leverage. That’s a much more insidious process.

Leverage in the crypto world takes on other forms as well, as exemplified by MicroStrategy. That’s a dotcom darling whose shares spiked ridiculously during the dotcom boom into early 2000, and then totally collapsed. To keep the share price above the delisting limit, in 2002, the company did a 1-to-10 reverse stock split. Then it scraped by as an enterprise software maker, until 2020, when it announced with huge hype and hoopla that it would begin buying bitcoin as one of its key business strategies, and that it would fund those purchases with leverage.

Part of this leverage would come from issuing unsecured convertible bonds, which the bitcoin-crazed crowd ate up at the time. Even if bitcoin goes to zero, the holders of those unsecured bonds have no rights and cannot do anything as long as the company doesn’t default on the interest or principal payments. So this is stable funding, and the concept of margin call doesn’t apply here.

But then, to buy more crypto when the mood was souring just a tad, it issued bonds that were secured by bitcoin and other corporate assets.

Then in March, the company obtained a $205 million term loan that was collateralized by close to 20,000 bitcoins. The loan agreement required a minimum loan-to-value ratio of 50%. If bitcoin drops below $21,000, the minimum loan-to-value ratio would be violated on this $205 million term loan.

According to a filing with the SEC on Wednesday, MicroStrategy now holds about 129,700 bitcoin that it bought at an average price of about $30,700 each, for a total purchase price of nearly $4 billion.

At the current price of bitcoin of about $19,000, MicroStrategy’s gamble has lost the company $1.4 billion from the acquisition cost – all of it borrowed money.

Upon MicroStrategy’s bitcoin purchase announcements in the summer of 2020, its shares spiked from about $110 to over $1,300 by February 2021, multiplying by over 10 in just 8 months. That’s how braindead crazy the whole market had gotten. At which point the shares began to collapse. They’re now back at $164, down by 87% from the ridiculous peak in February 2021.

This enormous amount of speculation, risk-taking with these gambling tokens, and scamming was one of the more sordid parts of the Everything Bubble. It’s a hugely profitable trade if you ride it up and then sell this stuff to the greater fool, and rake in the hated and soon to be worthless fiat dollars. But unfortunately, lots of people that were gullible enough to go for this, lost lots of money, and will lose lots of money. But that’s how bubbles work, that’s just how it is if you participate in that kind of craziness and don’t get out before it vanishes – and two-thirds of it has already vanished.

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  183 comments for “Leverage & Interconnectedness Are Blowing Up Crypto & DeFi

  1. Nathan Brenner says:

    Wolf, “are you a sailboat racer.?”…and “Do you get true and apparent wind with foiling and how it relates to the economy?.” Please do some foiling sail analogies to the true wind pump up with rate hikes. I make 100k Gross and am paycheck to paycheck in miserable “economically” but perfect “climate change” wise San Diego.

    Keep us posted on when to buy a house in San Diego. We are relegated to lifelong renters here.

    • Nathan Brenner says:

      CHECK 1-2-3. I HOPE SMART SAILORS AND FINANCE GUYS RESPOND, AS OPPOSED TO POLICY PEOPLE. OUR ECONONY IS DEAD DUE TO WAGES BEING FIXED FOR 40 YEARS. EVERYTHING BUT WAGES HAS KEPT UP AND THAT IS THE BEGINNING OF AN AUTOCRACY.

      • joedidee says:

        1% GOT ALL THOSE RAISES AND ON TIME
        avg hourly back in 2019 was supposed to be $92 based on old cpi
        —–
        well blood in streets in crypto land
        who’s next???

  2. Halibut says:

    Rat poison squared. Yup.

    • Hans Brink says:

      Why are we seeing bitcoin going back up in price when supposedly it is all doom and gloom .

      • unamused says:

        Because cooler ways to piss away your paycheck require too much driving.

      • Putter says:

        Nothing goes to hell in a straight line.

      • phleep says:

        Huge bounce there. Down $50,000+, up $1,500. Buy the dipski, I’ll be right behind you!

      • Depth Charge says:

        Because HODLers gonna HODL, and the BTFD crowd will dollar cost average all the way to ZERO.

      • SilentC says:

        Because politicians will probably end up bailing everyone out. Speculation pays in the US of A.

      • robert says:

        That was yesterday. Aaaand – it’s down 10%. From then anyway. At this writing.

    • medial axis says:

      Yes, but who are the rats? :-)

      • Thomas Pained says:

        Even if you win this rat race….your still a rat!

      • exiter says:

        Hmm…have not seen any mention lately from whence the Coinbase founders came. Their “skills” might reflect their origin. Goldman Sachs, perchance? Hint…don’t bet against me.

    • Jay says:

      “We’re not talking hated and maligned fiat dollars here.”

      Um, excuse me, Wolf, but I’m fine with hating and maligning digital fiat all day long. I hope it all goes to zero and wipes them all out. And if in the process it takes Wall Street down 30%, so be it.

      Kudos to Voyager Digital for making all this happen. Great job, guys!

  3. TheRustyLM says:

    I seriously hope that these ponzi-pumping crapto cult leaders, Saylor, Pomp, Thiel & Pal do serious jail time.

    • Flea says:

      As the song says You Ain’t Seen Nothing Yet ,wait till the bond market eEXPLODeS. Turn off the lights party’s over

    • rick m says:

      According to a previous comment, thiel purchased NZ citizenship and a bugout property there, and both he and jacinda ardern are Young Global Leaders. They’ll work something out. Marc Rich did pretty much the same thing in the canton of Zug several decades ago. Grifters predate regulators in history, and if the mark doesn’t cooperate the con folds. Cryptocurrency efficiently targets the larceny in men’s hearts. A memorable line from Paul Newman as Henry Gondorf talking about Chicago in The Sting, 1973: “There’s no point in being a grifter if it’s the same as being a citizen”. When you come by your money through honest work, it feels different than a windfall, and no farmer ever felt really smart because apples were laying all over the orchard.

    • Flea says:

      Najarian brothers

      • Anthony A. says:

        Nah, small operators compared to the Crypto gang. Plus, they like CNBC.

    • RH says:

      As the other commenters noted, crypto-tulips are not the only garbage investments out there. I do wonder at those who purchased the crypto-tulips at high prices, as opposed to those who bought them for a lark, when they were worth little, like buying one lottery ticket once every five years, even though you know the odds.

      We will be seeing many of the stocks bought on margin have to be sold too, because many will not be able to cover their margin calls. That will only happen when the “Federal” bankster Reserve cartel gets tired of giving its bank-owners over a trillion dollars in secret profits each year by keeping inflation high: because the interest rates that they now pay depositors, persons they owe money to, etc., are effectively negative, e.g., if they pay 3% per year while inflation is truly running at 9% per year on the fifteen trillion to twenty trillion in deposits that the banks hold in the US.

      I guess that there are addictive personalities, like one fellow that I knew in the 2000s, before the crash, who used his CREDIT CARD to get money to buy stocks. I told him he was nuts, and he laughed and told me he would be rich and I should do the same. To all of you who get wiped out, remember many people have started again and bankruptcy laws are there to HELP those who lose everything (and even let you keep various, significant assets, like homestead houses and large pensions.) E.g., read about OJ and his house in Florida and NFL pension and the lawsuits against him.

    • Old school says:

      It seems like most of this has been caused by easy money policies of the Fed. Maybe if Fed really gets to a real interest rate a lot of the speculation will be burned to a crisp.

      Real capital investment in society yields only about 6% over inflation if the economy is healthy, but the average person doesn’t have the discipline to be a long term investor so it’s leverage and gambling.

      Fed didn’t help by encouraging speculation in stock and housing market.

      • kam says:

        ALL the insanity was birthed by the FED. Many “geniuses and billionaires” got the free ride on the FED’s magic carpet.

  4. Jos Oskam says:

    I am Dutch, and as kids in school we learned about the tulip bulb mania. I remember quite well the snickering about these stupid people who paid out more than the value of a house for a single tulip bulb. We all were so sure this kind of madness would never get a hold on us. A quaint piece of history, surely never to be repeated…

    Well, I personally have avoided all crypto stuff like the plague. But obviously lots of people have not been educated in history, or have not learned from it. And as the saying goes, if you don’t learn from history, you’re doomed to repeat it.

    On the positive side, I am now rid of all these smug people making fun of this old geezer because too dumb and set in his ways to understand the new paradigm.

    • Harvey Mushman says:

      I wonder if this will put an end to those stupid crypto.com credit card commercials? Boy isn’t that a match made in heaven, bit coin and credit cards!

      • Lauren says:

        I recently got a Gemini credit card with 1-2% back as Bitcoin. Last time I checked, my ~$11 in Bitcoin has fallen 35% in value LOL.

    • Jan de Jong says:

      As a lark my wife and I each put in 200 euros. We were up 100%, now we are down 25..

      • Flea says:

        Good lesson for u always sell half when up 100% ,then u play for free,free,free

    • Bob Hoye says:

      Tulip Mania of 1637 was mainly driven by participants outside of the established financial markets. Trading was done in taverns and the authorities warned that the action was outside of their regulated clearing systems.
      Cryptos seems similar to Tulips–only huge.

      • Sams says:

        The reason behind both tulip and cryptocurrency craze is the same. To much money in circulation. With little ro use them on.

        • HowNow says:

          Money in circulation is one thing. Human stupidity and gullibility is another.
          W.C. Fields: “Never give a sucker an even break.”

      • Anthony A. says:

        Cryptos are electronic tulips.

      • Jim says:

        In my opinion, it’s the first World Wide Ponzi

      • Bricks says:

        My college age daughter put $70.00 in some little known crypto about a year ago. About two months later she tells me that there was a huge spike in value and it was worth $40,000. We spent some time talking about the Tulip craze and I convinced her to sell 1/2, she was going to ride the rest to the moon. I think That half is now worth less than $70.00

        A good lesson. BTW, I think as a percentage of gdp the tulip craze was much bigger than all crypto.

        • SpencerG says:

          I cannot tell you how glad that I am that your daughter benefitted so nicely. She got both a $20,000 windfall AND an important lesson that will last for the rest of her life.

        • Wolf Richter says:

          What’s the lesson she learned? That you can make $20,000 without breaking a sweat by betting on a Ponzi scheme if you get out in time?

          I get the impression that she will unlearn that lesson someday.

        • ru82 says:

          Her gain is somebody’s loss. Good advice to sell at least half and now your playing with the houses money,

        • SOL says:

          This is how crypto is done. Good job!

        • SpencerG says:

          LOL… How about this for a lesson Wolf…

          “The only thing Luck HAS to do is CHANGE.”

          Here is another… “Get out while the getting is good!”

          Or a third… “Nothing goes UP in a straight line either.”

    • Steve says:

      Bubbles pop. It’s how they go. Next up, what’s that bidding wars thing? Greed has taken down many of the mightiest. It’s how it goes.

      • Old School says:

        It’s interesting to read about French Assignets and how they lost all their value in seven years. The dropping of fake money into society is not the way to solve financial issues. It leads to greed and corruption.

        Look at the greed and corruption that took place in Iraq and Afghanistan when USA dropped massive amounts of dollars over powering the real economy. It will be the same in Ukraine as supposedly it’s already a pretty corrupt place.

    • Saltcreep says:

      When number go down and keep going down euphoria is replaced with sullenness. Also, with the diamond hands having been rug-pulled by a few too many brazen scams, I suspect we will not quickly return to the same level of mania we’ve seen the past couple of years.

  5. Brigg says:

    Who loans 650 billion, ouch. “and that it has $650 billion in claims against Three Arrows Capital, which Three Arrows has defaulted on.”

  6. Andrew Wilson says:

    holy cow, bat shit crazy. Thanks Wolf for news you don’t get in the MSM.

  7. Josh says:

    Because nothing goes to heck in a straight line?

  8. Harvey Mushman says:

    I don’t know, but the supposed “doom and gloom” is a real catastrophe for a lot of crypto speculators.

  9. will says:

    “Voyager said in the series of tweets today, Sunday, that it has $1.3 billion worth of cryptos left on its platform – presumably put there by depositors – who are now locked out, and that it has $650 billion in claims against Three Arrows Capital, which Three Arrows has defaulted on.”

    Typo, Voyager’s twitter states that it’s $650 Million (not billion). The number seemed to fabulous to me to be true, so I had to check..

    Cryptos weren’t necessarily the dumbest idea in and of themselves per se, but they sure did turn into something on a whole new level of stupid..

  10. medial axis says:

    Recently Gary Gensler, Chairman of the SEC, called bitcoin a commodity and likened other crypto assets to securities. Which is, BTW, pretty much the way Saylor see things. So I guess the SEC will eventually subject cryptos to regulation[1]. Whereas bitcoin will be under the Commodity Futures Trading Commission (CFTC). At least that’s how I understand things to be from what I’ve read, but Wolf, and others on here, no doubt know more about securities and commodities than I do. After all, I’m just a old geezer, a baby boomer, who got blown away by the innovation behind Bitcoin way back in 2014. As I’ve said before, I see it as the innovation of this century. It is necessary for the future evolution of the internet (including peer to peer payment between phones and machines). Time will tell.

    [1] So if any of these crypto coins, including stable coins, exchanges and whatever, are Ponzis or illegit in any way the SEC will soon sort them out.

    • Wolf Richter says:

      The SEC and other regulators only “sort out Ponzis” after they collapse, and after everyone of the greater fools has gotten wiped out, and long after the big winners left the party.

      • VintageVNvet says:

        EXACTLY SO Wolf!
        Very glad to see you say SO, because of the ridicule received when I have said similar, though perhaps not so clearly.
        Time and enough to at least ”try” to reclaim the ”integrity” of the SMs, as was done many decades ago to ensure, or at least try to ensure that WE the PEONs would have at least somewhat of a ”level playing field.”
        Since then, as is well known by many on Wolf’s Wonder, many or most of the [[constructs]] from those years of the SEC and similar making it more of an even field have gone away…
        NOT ”partisan” in USA,,, because ALL,,, repeat ALL of our fed elected folks of all and every stripe have used their advantages to trade with insider information just exactly as JPM did a while back, and for exactly the same reason:::
        Who has the communications advantage has the absolute advantage in EVERY market,,, SO FAR…

      • SoCalBeachDude says:

        Ponzi scam schemes are CRIMINAL and the SEC can only investigate and prosecute CIVIL matters, but all CRIMINAL MATTERS ARE WITHIN THE SCOPE AND PROVINCE OF THE FBI at the time they occur and it is up to the FBI to immediately investigate and prosecute.

    • Depth Charge says:

      Calling BitCON a “commodity” is an insult to the intelligence of human beings. Commodities are tangible goods. BitCON does not even remotely qualify as such. Sounds like Gensler is a reckless crypto gambler himself.

      We need a full disclosure from every person who would be part of the regulation process as to whether or not they own, or have ever owned, a crypto. Let’s see where their financial interests really lie.

      But regulating this garbage is a waste of taxpayer money. It should be banned permanently. Just make it illegal.

      • SoCalBeachDude says:

        BitCON is a commodity as it is sold as a TANGIBLE THING which is comprised of NUMERIC STRINGS and its price fluctuates the very same as a COMMODITY with extreme and absurd volatility just like most all commodities these days. It certainly is not a currency in any sense of the word, but what it really is is just a CRIMINAL FRAUD. It (all 19,000 craptos) doesn’t need to be regulated, but rather shut down entirely and the people behind it sent to prisons.

      • medial axis says:

        I just had a look on Investopedia where its says, regards Commodities, “More recently, the definition has expanded to include financial products, such as foreign currencies and indexes. Technological advances have also led to new types of commodities being exchanged in the marketplace. For example, cell phone minutes and bandwidth.”
        There’s nothing so constant as change.

        • Wisdom Seeker says:

          Nonsense expands to fill all the room you give it…

          Currencies have their own market and don’t need commodity traders manipulating them too.

          Cell phone minutes and bandwidth aren’t commodities either. This is just traders wanting to have more places to trade, or rather more markets to disrupt for their personal profit.

          Anyone want to offer Beanie Baby and/or Dutch Tulip futures? I’ll swap bitcoin for either…

        • Happy1 says:

          Ponzmodities. There, fixed it for you :)

    • cb says:

      commodities:

      wheat
      orange juice
      coffee
      oil
      gold
      etc.

      crypto???

      • medial axis says:

        AIUI, bitcoin is classed as a commodity as it has no issuer and does not promise a return on investment – there is no Bitcoin CEO[1] to make such a promise obviously. Where as all the other crypto have an issuer and many (but I don’t think all) do promise a return hence are classed as securities. I think the SEC et al are in the throes of sorting out what’s what – they’ve not seen the like of crypto before.

        But I’m still learning about all this regulation stuff so do check for yourself. Corrections and criticism of my understanding are welcome.

        [1] Well, other than Craig Satoshi Wright of course :-)

    • ru82 says:

      Crazy how slow the adoption rate for cryptos has been for the exact solution you described. 13 years now and the adoption rate is probably below 15%

      Computers, smartphones, vcrs, and other innovative technologies were all at 70% or higher in comparison. Why, because people saw value or a need.

      So that makes me think the current innovative technology is not very innovative or the business model is all wrong or it is a solution waiting for a problem. As a currency, it has failed.

      As a asset to trade. Cryptos have done well. Pretty cool how you can trade different type of files (cryptos) back and forth and convert the file into cash. But to make money you need to find someone willing to pay you more for that file than what you paid it

  11. Leclerc says:

    Seems likely that the “frozen” companies are holding each other’s coins.

    There may be some retail (dumb) money left there, but the combination of these brittle organizations feels like an MMO game.

    • Harvey Mushman says:

      Sounds like a “Mexican Standoff” to me!

    • Wisdom Seeker says:

      This plus the Archegos thing are very reminiscent of the cross-listed, cross-owned, cross-invested utility-stock shenanigans that blew up spectacularly during the Great Depression of the 1930s.

    • Duke says:

      Almost… Try too much money printing.

      BTC fanatics like that it has a fixed supply at 21m.
      It can be moved and stored cheaply. It’s permissionless.

      Lightening network can transfer BTC and handle millions of transactions per second for pennies.

      • Wolf Richter says:

        That doesn’t answer the question why anyone would need or want BTC or do transactions in BTC. If there is no demand, it doesn’t matter if the supply is limited.

      • rick m says:

        A limited supply means more concentration in fewer hands with no means of increasing with the growth in a healthy economy, unless they change the rules again. Fork that. The same intentional currency and coin shortages in the US early West drove political populism and private mints making California gold into fractional value coins. It’s one way countries control their colonies and dependencies. So it’s not a substitute for fiat money. Moved/stored cheaply, yes. As long as the power and internet are on. Permissionless, but also recourseless. It never belonged to anybody who would care that somebody stole it from you while it was stored somewhere that they said was safe. Lightning network makes sacrifices in security for throughput, or so I’ve read, but if it’s true that is a technical hurdle and those get fixed or superseded. Likewise the technical hurdles keeping quantum computing from busting the Blockchain encryption are necessarily temporary, rendering bc instantly defenseless with no official friends in a predatory world when the computing whizzes get enough qubits to cooperate. Anyone who believes that the tax authorities aren’t all over this already should understand that they have all the time and record-keeping capacity they need. You don’t. Most people who mess with crypto will end up regretting it, I think.

    • ru82 says:

      Since cryptos have a live record of ownership, it should be easy to give them back to the original owners? Somebody somewhere has the customers original cryptos they bought. Just give them back and whoever borrowed them should take the loss

  12. Diogenes says:

    “And soon to be worthless fiat dollars,” Wolf Richter, last ¶.
    Exactly.
    Is a non-trivial chance that crypto is a harbinger of what happens to fiat.
    But fiat collapse will be on a much larger scale and likely a longer time frame.
    Most of the variables are the same.
    Except fiat has the backing of effectively insolvent national governments, which makes the collapse much more complex.
    With back-firing sanctions, Biden is doing his dead level best to accelerate the collapse of the dollar being the world reserve currency.
    As Putin said,
    the West is busy sawing off the limb of the tree that the West is precariously straddling.

    • Wolf Richter says:

      Hahaha, yes, that was sarcasm. Glad you took it seriously and ran with it :-]

    • SoCalBeachDude says:

      The sound and wonderful US Dollar is gain great ground every day and will continue doing so and is now around 107 on the DXY.

  13. Brant Lee says:

    Just blame it all on us dummy’s who STILL don’t understand how great cryptos are.

    But then we’re now at the point where nothing is even holding value, much less making money with inflation roaring along like a mad dog. Holding infinite printed dollars is smarter than crypto at least, right? Some choice.

    • Sams says:

      Definitive lack of understanding of what money are. But then the central banksters have not been willing educators.

      Bitcoin might be the prime example on lack of understandig. How can anybody go on and expect 20% interest rate on a currency where the total amount is a known number?

      Interest is only possible on Fiat money where the amount grow exponential.

      • Ethan in NoVa says:

        The total amount is finite and always know with bitcoin. That is part of the sales pitch.

        • Sams says:

          Yes, and that make it impossible with interest rate on bitcoins. Interest on money expand the amount of money, any interest rate other than zero inflate the amount of money.

          With a finite and known number of bicoins each with their own «serial number» there is no free serial numbers for the bitcoins generated by interest rates.

    • Flea says:

      Najarian brothers are in deep trouble,but there supposedly professional traders ,even some very rich people will be wiped out . This correction is far from over ,wait till housing gets whack a molded . It hasn’t corrected yet 40-50% haircut ,the world could go full circle to 1940 .

      • Depth Charge says:

        What is “deep trouble,” and how do you know this? Details, please. These guys sold their business for almost a billion dollars back in 2016.

        • Flea says:

          Cnbc interview on halftime at noon ,they were steering clients to Voyager and heavily invested . Admitted it on air

    • Flea says:

      No true,buy food,guns ,ammo, get out to country living be self sufficient. U might survive good luck

  14. Volvo P-1800 says:

    Typo.

    it stares -> its shares

  15. YuShan says:

    “and that it has $650 billion in claims against Three Arrows Capital, which Three Arrows has defaulted on.”

    Typo here: that’s million, not billion.
    Still bad enough :)

  16. Felix_47 says:

    Cash is losing 10 percent per year so that is an investment too. In seven years you have half of it gone. Bidenomics? Maybe they are using the debt to save Ukraine’s democracy.

    • Wolf Richter says:

      Felix_47,

      Every dollar-denominated asset is losing the same amount in purchasing power to inflation every year.

      The factor that distinguishes the assets is how much they yield and/or gain/lose in value.

      So a 10-year Treasury note of $1,000 might pay 3% coupon interest, and when it matures you get 100% of your money back. After 10-years, you collected $300 in interest plus you got your $1,000 back, but you lost purchasing power to inflation over the years.

      When you invest in crypto and is loses 100% or 50% that’s on top of the loss of purchasing power due to inflation, and on top of you not receiving any yield.

      In other words, there is no escape from inflation. It’s just how much risk you’re willing to take to beat inflation with higher yields or capital gains.

      • exiter says:

        Recently heard that: Money has no value unless there is food/air/water available (in time to prevent starvation).

        I.e., all “money” presupposes that food is available.

        Seems to be true; seems to be a neglected but vital datum. Any thoughts on this?

        • Old school says:

          There is a saying that you are never more than 3 days away from a revolution if food isn’t available.

    • ru82 says:

      There does not appear to be any place to invest and and lose money. The best strategy now is to reduce losses.

      Stocks are trending lower
      Commodities crashed this past month
      housing is supposed to crash

      Cryptos is just gambling. Sure cryptos can earn interest as but only as long as people want to borrow cryptos to buy more cryptos for leveraging. You do not borrow cryptos to buy a house or a car.

      Compared to cash. The difference in earning interest on cash deposited in a bank is people borrower cash to buy tangible things like land, houses or cars.

      Not sure where there is a safe investment right now.

      • Old School says:

        What you say is true because of Fed policy. There is no broad class of investments where you can get a real return. You might could flip it around and say that then you should be short all assets, but that is risky.

        Seems like with over valuation, Fed telling us they want to take out the froth with QT and interest rate increases its time to make sure your life can handle a recession without being a forced seller of anything.

        Rolling over short term treasuries in your own currency is about as safe as you can go if you want to buy time to see what is going to happen.

        • Miller says:

          “Seems like with over valuation, Fed telling us they want to take out the froth with QT and interest rate increases its time to make sure your life can handle a recession without being a forced seller of anything.”

          Very very true. The Fed’s hand is being forced by inflation right now, a far greater systemic risk than a recession. It’s absolutely time to more fiscally prudent and avoid speculative frenzies. The punch bowl really is being withdrawn because the whole lobby is drunk.

      • Cookdoggie says:

        The only one I see are I Bonds, at least those breakeven with inflation. Maybe someday we can buy more than a pittance of them.

  17. phillip jeffreys says:

    Thank goodness leveraging hasn’t plagued other market segments!! /s

  18. GD says:

    I donate to Wolf monthly because I love his insight and he’s dead on. Love it

  19. c1ue says:

    The question I have is just how much interest, does Microstrategy have to pay?
    I looked at their earnings: they don’t actually generate much free cash flow.
    And their last loan was floating rate, so interest for that is going to be increasing as the Fed increases the EFF.
    Can Microstrategy actually keep up with its bond payments?
    I originally thought the price drop was a liquidity squeeze on Microstrategy – it is clear now it was a liquidity squeeze on the DeFi platforms but that still doesn’t mean MSTR is out of the targeting sights.

  20. BaritoneWoman says:

    Volatility.

  21. Concerned American says:

    Because there are still true believers who are drinking the Koolaid.

  22. Augusto says:

    I’ve been hearing all about this from my nephew who works in the crypto space. It truly is the free market, no government agency to bail you out. Doesn’t bother him or his firm, let the weak hands and foolish minds go is their motto. The space will get rid of many crooks, idiots and competitors, and their form will come out stronger and better positioned. The uneducated speculators and bandwagon crowd who didn’t do their due diligence should take their losses,. This is as it should be. Much better than the 2008-09, housing crisis where what 6 million homeowners were put in foreclosure, but the banks who were equally if not more responsible got bailed out. Plus the banker bonuses were paid out by the government to boot. The little guy got the street and the Law, Wall Street got bonuses and Mercy. Yeah their Regulatory System is so wonderful….and the crypto world is so terrible…..

    • David G LA says:

      Your nephew’s got it all figured out.

    • billytrip says:

      Yeah, the old Libertarian perspective that business will always do the right thing if you just get that useless regulation out of the way.

      One of the most delusional, infantile and demonstrably false perspectives out there.

      • Venkarel says:

        I found that Libertarians” view point relies too much on greed as an incentive. In my opinion, there are much more compelling si…incentives.

  23. Flea says:

    Sailer pun intended,doesn’t care he is captain of a sinking ship . Will have already cashed out ,

    • MiTurn says:

      “It’s a hugely profitable trade if you ride it up and then sell this stuff to the greater fool…”

      And got off that sinking ship! Not just simply foolish people, but those that think that they can beat the system, are greedier than heck, and gullible. As Mish posted a few days back, these crypto folks exist in an echo chamber.

      We need a Wolf-Mish collaboration.

      Now about fiat currency…

      • SoCalBeachDude says:

        The great and wonderful US Dollar is doing superbly and is now at 107 on the DXY and will soon break through 110 and go much higher.

        • Enlightened Libertarian says:

          Well, the dollar IS up 10% over the British pd. So not doing too badly.
          Good for me, ince I needed some parts for my 50 yr old British car.

      • OutsideTheBox says:

        Mish !

        The wedding photographer turned financial guy ?

        Is this the one posing as an economic analyst without posessing a single credential to so do ?

        That one ?

        Please…..Don’t compare Wolf to that one. That one is light years brhind from our host’s earned credibility.

        • SoCalBeachDude says:

          Mish (Mike Shedlock) occasionally has some correct insights into matters such as this recent article:

          Why earnings and the stock market will get crushed – Mish

        • rick m says:

          I stopped reading that mish because of the scaremongering and storyline inflation. A little more humility in the dire-prediction business comes in handy when the world stubbornly refuses to end. He was probably fun at weddings too, and can always fall back on that kind of work.

        • Wisdom Seeker says:

          Someone posting on the internet in return for advertising revenue is in the business of monetizing your eyeballs. They can do that by being right and intelligent, like Wolf here, or by being bombastic and inflaming biases. Or a bit of both!

          But you know, most of the guys with “economic credentials” have been, to adapt a great Bush-ism, misundereducated, and they’re also suffering from deep conflicts of interest. Between the deceptive book-talking and the outright econincompetence, it’s been painful my wallet whenever I pay attention to any of them.

          Guys like Wolf, and sometimes Mish, demonstrably manage to put more facts correctly together than most of the deeply-conflicted “credentialed” analysts.

          And once you have a track record of being valuable to your readers, you don’t need credentials anymore.

          I will say that if I ever start a Wisdom Seeker School of Practical Economics, then Wolf will be the first to get an honorary Ph.D.! Put all his work together and it’s better (by being truly practical) than most dissertations…

      • Jos Oskam says:

        I stopped reading Mish when he was proclaiming mass truck driver unemployment in a few years, due to the advent of fully autonomous self-driving trucks. I don’t trust the advice of anybody uncritically spouting hype.

        I’ll take Wolf’s insight and knowledge over Mish’s any day, thank you.

        • Phil says:

          Agreed, Mish is wrong too often, and the fact that he collaborates with zero hedge is disturbing. I also notice his writing has become nearly illegible over the last few years, in terms of serious typos that butcher meaning, and very little original insight. I think he’s a good example of a broken clock that gets it right every decade or two.

    • Old School says:

      I am too lazy to read the SEC filings for Microstrategy, but I bet the lawyers have their rear end covered by telling you that you can lose all your money if x,y,z happens. If you are a diligent investor, you read all the SEC filings.

  24. drifterprof says:

    The bloodsuckers gleefully take cover in their degenerate crypts.

  25. John hussman says:

    Can you explain this using a dependency diagram or something? A picture is better than 1000 words

  26. Jim Nowak says:

    I don’t know much about tulip bulbs, but I do know that, in spite of all the “I-told-you-so” that people like me were “voting” to attempt to exit a System in which the cards were even more stacked against them. I personally talked many very angry people into instead put their energy into crypto. I still feel it is a worthwhile cause. We were voting for a positive vision for the world, we were voting for common goals between countries often kept apart by old men with lust for power, we were voting against using inflation to pay off our eternal war debts so our seniors didn’t have to eat dog food. Many of us are still willing to bet on a technology that might someday empower people who otherwise have little chance of escaping the inevitable erosion of their economic power. At least we tried!

    • Anthony says:

      Your mistake is to go with the childish old chestnut that old men have everything and run everything. It’s based on the lie that you can have everything now. For most people it takes a long time to own a house, to have a wife and children and to put enough money away to retire and by then, if they are lucky with their plan, they are usually old.

      • Harvey Mushman says:

        @Anthony,

        Very well said!

      • VintageVNvet says:

        It is truly a very very old fashioned ”canard” to suggest men, any men of any age OWN much of anything:::
        What is clear is that WOMEN own ”most” of ”things” as in 100% of something that most actual men value highly,,, and 99% of everything else.
        The propaganda to make men think otherwise is not only egregious, but continuing to be made worse by the constant inundations of/from the WWW these days.
        Worse these days, as always, but appears to be having even more worse effects on many ”good” men who may truly want to do ”The, or at least A right thing.”
        Gonna be a long long ”slug” for many folks who have been subjected to this propaganda, some for many many years from kindergarten until now…

    • COWG says:

      Sooooo…

      Mr. Jim…

      How bad are your losses…

    • elbowwilham says:

      I sympathize. I started messing around with crypto in 2016 just out of curiosity. I am mostly a libertarian and all the libertarian bros were talking about it. Its interesting from a technical view.

      But it was obvious that it was a bubble fueled by the FED, so I got out in 2021.

    • Jos Oskam says:

      Your goals and cause are most certainly laudable and deserve to be achieved in some way. However, I seriously doubt if technology in general and crypto specifically are going to get us there.

      Unfortunately, idealism is all too often exploited by unsavory individuals such as hustlers, conmen, criminals, scammers, grifters and… authorities. Crypto is sold as improving the world, money printing is sold as saving the economy, war is sold as a way to get to peace, technology is sold as the only way forward… the list is endless.

      Too bad life is like that but most of us bear the scars of having wrongly placed our trust in the past. I most certainly am.

    • HowNow says:

      I think that your lofty ideals boil down to this part of your commentary: “Many of us are still willing to bet…”
      In summary, it smells Libertarian: “If I can just make a killing on this alt-currency and can talk the hoi polloi into believing that they should protect MY liberty by keeping the gubmint off my back, all will be good in the world.”
      This new “system” will be wonderful; it’ll correct all the ills of the past monetary system because we have a common interest in making sure that seniors don’t eat dog food.

    • Sandman says:

      This is just ridiculous. The big players in crypto pushing prices up are the “old men with lust for power”. The average joe is at the mercy of the billionaires pushing crypto through endless shilling and marketing. It’s plain and simple GREED. The vast majority of people in crypto are in it to get rich and retire and never have to work. I know so many people that share similar sentiments and almost all of them deep down could care less about the things they say.

  27. CreditGB says:

    Geez, has it been THAT LONG since Bernie Madoff? You’d think promises of huge returns would be a bright red flag.

    Apparently, red flags are not visible during a headlong FOMO Stampede. These cattle now find themselves in the stockyard pens awaiting their fate.

    “Crypto lender and broker Voyager Digital, which also took deposits and offered yield products with huge interest rates of up to 12%, said in a series of tweets today that it is, “actively pursuing a series of strategic alternatives” and that it is “focused on protecting assets and maximizing value for all customers as quickly as possible.” That’s horrifying language for people who have their cryptos on deposit at Voyager and now cannot get their cryptos or anything else out.”

  28. SoCalBeachDude says:

    CNBC: Crypto lender Celsius is a ‘fraud’ and ‘ponzi scheme’, lawsuit claims

  29. SoCalBeachDude says:

    Why does gambling with real money in garbage interest anyone at all?

  30. roddy6667 says:

    I missed my chance. I should have come out of retirement for a year and made a million in cryptos. (Reminds me of all the money we made flipping properties with liars loans and uber-leverage back in the Eighties.)
    Here’s the formula:
    A. Start a company that does anything, but with blockchain in the name and brochures.
    B. Float an IPO. Make billions.
    C. Sell billions of dollars in corporate bonds.
    D. Use the IPO and bond cash to speculate in other cryptos.
    E. Wire a metric shitload of cash to a bolthole in a country with no extradition policy and get a passport there.

    • Anthony A. says:

      roddy6667: You are not too late. There is room for an “Ultra Stable Coin (USC)” that allows people that are not satisfied with the current failing stable coins to store their Crypto with your new, ultra safe coin. You could even offer “up to 25% interest” with each deposit.

      USC will be the safest place ever to store your BTC (or any other token that has value)!

      All it takes is a website linked to an offshore bank and a few ads on Twitter.

  31. phleep says:

    ” … MicroStrategy now holds about 129,700 bitcoin that it bought at an average price of about $30,700 each ….”

    A dead give-away of the absence of fundamental value, and the overwhelming presence of pure sentiment/craze has been BTC hanging around for extended periods at $10,000 price increments. Look at a chart of the last 6 months, lingering for long stretches right around $40k, $30k, $20k. Yes, stocks have these psych-anchors too (S&P $4k), but not like this.

    It shows the story overwhelming any link to reality. As for the fiat-haters here, I tell you what, if you don’t prefer the dollars in your accounts today to craypto’s recent vapor and carnage (and indignity, for being SO suckered), then boy, do I have some digital bridges-to-nowhere (with no accountability) to sell you!

    • phleep says:

      But GBTC is still selling at a steep discount to BTC’s NAV*. Despite a few more legs down likely for crypto, there might be something there, if you dare.

      *GBTC: Grayscale Bitcoin Trust. BTC: bitcoin. NAV: net asset value.

    • historicus says:

      I ask again, who made all the money?
      The issuers of Cryptos, the “miners” leap to mind.
      Certainly those who bought the outstanding cryptos at a low price, then sold them high made money. But who floated the issuance, the outstanding cryptos initially? Who published the chips in the game?

  32. SoCalBeachDude says:

    Another thing that is collapsing right now is the Puerto Rico based bank controlled by infamous commodities speculator Petie Schiff whose infamous daddy Irwin passed away back in 2016 in the federal hoosegow on tax evasion convictions.

    • Wolf Richter says:

      I’ll just add some details here, reported June 30, by the New York Times. Here are the first two paragraphs:

      “A bank regulator in Puerto Rico says it has suspended the operations of a boutique online bank that has been the focus of an international tax-evasion investigation and is owned by Peter Schiff, the outspoken libertarian economist and money manager.

      “The regulator, the Office of the Commissioner of Financial Institutions of Puerto Rico, issued the cease-and-desist order on Thursday against Euro Pacific Bank, which is based in San Juan, for having inadequate capital levels and compliance controls. Two years earlier, an international group of tax authorities known as the J5 opened an investigation into activities that allowed the bank to serve as a vehicle for suspected tax evasion and money laundering.”

  33. David Hall says:

    Crypto consumes large quantities of electricity in order to facilitate transactions. They issue some new crypto units each year to pay for the transactions. One business model may switch to transaction fees after some time instead of making more crypto currency. Crypto is not FDIC insured. It may be hacked or stolen. Lost passwords have resulted in major losses. It is like a pirate burying loot then dying without telling others where the gold coins are. There is also risk of competition from another blockchain product that might become a bigger fad. There are thousands of blockchains at risk of collapse.

  34. Old Ghost says:

    Wolf wrote: “No one knows what’s going on, except that it isn’t good…..”

    Ha! This old fart knows exactly what happened. Cryptos were considered an “investment vehicle” because all along the promoters were planning to drive off with the marks money.

    I wonder how many derivatives there are (and who bought them) that are still waiting to blow up?

    • HowNow says:

      I’m totally against conspiracies, except for this one (that I just thought up): The FED recognized early the inevitable outcome of crypo – blotto. So it’s allowed crypto to ferment and metastasize and, as crypto implodes, the US$ has strengthened.
      That nasty Federal Reserve. They made this mess!!

  35. Anon1970 says:

    The interest rates charged by brokerage firms on small loans (under $500,000) is quite high these days and the spread between the Fed Funds rate and such margin loans is much higher than it was 20 years ago. As of 6/17/22, the margin rate at one large firm was 10.75% on margin debt of $20,000 when the Fed Funds rate was 1.75%.

  36. Michael Engel says:

    1) Jamaica was more important to the British Empire than the 13 colonies, because the pirates share 1/4 of their loot with the king. They developed fast small ships and new navy tactics attacking their victims. Jamaican “ladies” became the richest women in the world. Unfortunately this treasures island was struck by an earthquake that sunk the pirate sunk with their gold in Jamaica bay.
    2) The ME have black gold. US gov try to create a ME NATO shifting the risk
    and the financial burden to the ME countries.
    3) The 400 millions people in the region might serve together in one Arab army, including Israelis and Palestinians glued together, possibly under Egypt command..
    4) With $100 oil, natgas, advance defense industry, petrochemicals, solar and knowledge to solve food shortages and drought, this region united together can flourish economically for decades.
    5) The ME is a relay station between India, China and Europe.
    6) The world is becoming more connected than dissected, because we must have an enemy.

    • Prince Gbanga says:

      > including Israelis and Palestinians glued together

      My generals confirm the wisdom of this strategy. Gluing our soldiers to each other has massively strengthened my country’s military.

      We are experimenting with epoxying soldiers, and believe that if this is successful it will make us the mightiest army the world has ever known.

      Your friendly neighborhood Nigerian Prince

    • HowNow says:

      Good plan! Will they have their own currency? When should I invest?

  37. tang says:

    Almost a year ago or so I did posted comments in this site that these crypto stuff is totally nonsense and is a scam by special interest group of people. How in the world you can pay hundreds..thousands or even millions to a website for some idiotic digital numbers? So what they have computertised the tracking of buying of billions n millions and can cross trade n do wonders exchanging stuff constant. You don’t know who runs those sites. You don’t know how and what goes behind the scene. You never even care if something goes awry. Yeah you must be a damned fool to behaved as such. And a fool and his wealth will go separate ways. So like Hank Paulson….. Janet yellen to appear in congress explaining all the crypto mumbo jumbo to senators for 3 trillion dollars of bailout or the entire banking community collapses.

  38. Seattle Guy says:

    The world’s biggest crypto scam in 2020 was perpetrated in South Africa by Mirror Trading International. Using a Ponzi scheme, hundreds of thousands of victims were swindled out of US$588 million in Bitcoin.
    ——————————-
    The founders of South Africa’s largest cryptocurrency exchange have vanished, along with nearly $3.6 billion in Bitcoin, after telling investors the exchange had been hacked. No S.E.C – no recourse on the heist – since the Regulators do not view it as a currency, so the Govt/Police will not pursue the thieves, since “nothing” was stolen. I think I prefer losing my coins this way – rather than the slow bleed, as I double down to the same conclusion = zero…

    • Anthony A. says:

      Woops! Looks like the CFTC is after them!

      “The top U.S. commodities watchdog charged South Africa-based bitcoin pool operator Mirror Trading International with $1.7 billion fraud on Thursday, alleging the global, multilevel marketing scheme “misappropriated” all of the bitcoin it amassed.

      The Commodity Futures Trading Commission (CFTC) described the case as its “largest ever fraud scheme case involving bitcoin.” It alleged MTI’s key figure, Cornelius Johannes Steynberg, accepted 29,421 BTC from 23,000 Americans “and even more throughout the world” for a commodity pool scheme he wasn’t licensed to run.”

  39. Entire thing is a symptom of a weak central government that is mostly only able to respond to crisis, if even that, sometimes.

    Proper government would have banned crypto day one.

  40. polistra says:

    Seems to me that the difference from 2018 is simple. The Fed waterfall has dried up. No amount of disconnecting or connecting can start a car when the gas tank is empty.

    Another supply-side factor is the cost of energy. Miners have been kicked out of the countries where energy was subsidized, and the energy cost everywhere else is exceeding the breakeven point for selling coins into the system.

  41. SpencerG says:

    We see all of these big numbers but I would like to get a handle on the Average Joe who has propelled Crypto coins to the moon and back. How much are they really “investing” in them. The ones that I know are broke Millennials who are just tossing spare change at them… or wealthy people playing around with minor portions of their portfolios.

    My question is whether there are serious “investors” pushing the prices higher with legitimately significant amounts of cash.

    • unamused says:

      “We see all of these big numbers but I would like to get a handle on the Average Joe who has propelled Crypto coins to the moon and back.”

      Interestingly, cryptocurrencies appear to have been adopted as yet another extremist conservative ideological trope. It’s been the subject of books and articles lately, described in some detail by Aaron Mak on Slate in ‘When Did Crypto Become Republican?: “Pro-Bitcoin” is a mainstream position now—on one side of the aisle.’

      ‘Conservatives aren’t just promoting crypto; they’re minting it. There’s recently been a wave of new right-wing meme cryptocurrencies, from a “Let’s Go Brandon” coin to a slightly more forthright “FJB” coin. Making funny money has become yet another way to own the libs.’

      The description on Amazon of ‘The Politics of Bitcoin: Software as Right-Wing Extremism’, by David Golumbia, runs like this:

      “Since its introduction in 2009, Bitcoin has been widely promoted as a digital currency that will revolutionize everything from online commerce to the nation-state. Yet supporters of Bitcoin and its blockchain technology subscribe to a form of cyberlibertarianism that depends to a surprising extent on far-right political thought. The Politics of Bitcoin exposes how much of the economic and political thought on which this cryptocurrency is based emerges from ideas that travel the gamut, from Milton Friedman, F.A. Hayek, and Ludwig von Mises to Federal Reserve conspiracy theorists.”

      Everybody needs to believe in something, I suppose.

  42. COWG says:

    Did I read correctly where the so called blockchain protection was being bastardized because of the length of time to process it…

    Guess that means the original concept doesn’t play well in the real world….

  43. Michael Engel says:

    Prince Gbanga, good morning.
    Glue together lsn’t good enough. Glue together against a mutual enemy.

    • Anthony A. says:

      He needs to look at the Chinese model…..clay soldiers kept underground and hidden away just waiting for the attack to come.

  44. historicus says:

    What caused the RUSH to cryptos in the first place?
    Irresponsible actions by Central Bankers…the suppression of rates beyond norms, the management by the unelected to the benefit of one group at the designed detriment of another.
    That is what caused the Crypto industry to pop up.
    People running to alternatives.

    • SoCalBeachDude says:

      Nope. What caused that ‘rush’ was stupidity and greed. Nothing but.

    • historicus says:

      Recall all the “cutting edge” people who wanted to be paid only in cryptos?
      Tom Brady was one. Talk about a pay cut.

    • unamused says:

      The Gullible Cynic. There’s some truth to it, but it doesn’t improve the integrity of CC’s on any point or in any way. CC’s do provide a wide array of hopelessly bad alternatives. Great for scams too.

      Research has been done in certain quarters which suggest that the failure of CC’s alone may be sufficient to induce severe global recession. It’s believed they’re big enough, and leveraged enough, and sufficiently interconnected with the conventional financial system to do so.

      Nothing definitive so far. There’s such a variety of massive financial, economic, social, political, and ecological headwinds that it won’t be easy to decide on which ones are making the largest contributions to the projected collapse. Everybody has their favorites.

      • VintageVNvet says:

        Una:
        What you are referring to IMHO is the very very likely ”blaming” of the crash in many markets, now clearly happening in many places and media/markets, on these gambling tokens such as bitcoin, etc.
        That seem inevitable to this old boy who has ”no dog in that fight” with any of the current or recently former favorites, including ”crypto” ,,,current SM,, and current RE markets…
        Gonna be a very interesting next few months and next ”several” years, again IMHO…
        WE, in this case the family WE, are keeping on saving cash to be ready,,, OR NOT,,, for the very very likely lower prices for RE, and other such, including commodities relating to FOODs.
        Thanks again for your comments on Wolf’s Wonder.

        • unamused says:

          Yvw, vvnv. I’m just sorry I can’t be more helpful.

          Recently I told a social worker, who has been slogging through the mud knee-deep and is having trouble dodging the alligators, that Sometimes all you can do about problems is to try to defuse them, and if that doesn’t work, try to get out of range before they detonate.

          For further information try reading the last page of Voltaire’s ‘Candide’.

  45. Ervin says:

    My Fidelity MM account, in a few months went from .01% annual to 1.1% annual and I’m thrilled and not a crypto in sight .

  46. patrick says:

    just a lurker here – and a fascinated observer of the crypto phenomena via my son actually being one of the lucky crypto lottery winners – BUT I have a general question ?- ” is the crypto meltdown capable of bringing down the markets ala the mortgage fraud of 2008?- I don’t have the insight or expertise but would welcome some thoughts – thank you

    • ru82 says:

      It will not spread.

      Most of the leveraged people or firms are firms created via the crypto craze.

      So many people are HODLs and thus most of the float for most cryptos were low. So it did not take a lot of volume to make the price go up very quickly. Same going down. A lot of the wealth that disappeared was unrealized gains.

      • Harvey Mushman says:

        I hope you’re right.
        I just read an article today about how some pension funds have invested in cryptos.

  47. DanS86 says:

    The new gold this crypto coin stuff…LOL!!!

  48. Southern Drawl says:

    I bought a little bit of Luna through Voyager after the dramatic price drop on the *chance* it might burn off all the supply and recover. Voyager was the only place to buy Luna, but the catch was you couldn’t transfer it out. Voyager even had attractive recruitment incentives in the form of $50 referrals. It felt like a scam from the get-go but I only had $200 in there, so I will willing to take a risk.

    It all seems clear now that Voyager never intended on giving up the Luna they were selling and were actively trying to recruit new users to possibly help prevent the compete collapse of their platform by seizing the assets you held with them. I’m only out a couple hundred, but a co-worker of mine had his life savings in crypto held by Voyager. Ouch.

    This is the only crypto I’ve ever bought and I’ll never dabble in it again. It won’t be long now before the crypto space is regulated like the much hated fiat space these crypto bros are trying to escape. At that point, there will be no distinguishing case for holding crypto outside of the obvious ponzi scheme that it is.

    Funny how things tend to come full circle as they do.

  49. Wolf:
    You had a Twitter account until recently and we followed each other. But I don’t find you there now.
    I have a number of times posted a tweet for one of your articles. I will continue to do so unless you advise me that you prefer that I not do that.

    • Wolf Richter says:

      John,

      My twitter account is still there, as always: https://twitter.com/wolfofwolfst

      There are some impersonators out there, so look closely at the spelling. They change one letter and copy all the stuff I have, and it looks like my account, and then they’ll try to sell you some financial scam or crypto scam. So be careful when people from the Twitter universe contact you… it’s not going to be me.

  50. CreditGB says:

    Has anyone seen the founders of 3 Arrows Capital? There’s no answer on the phone, the voicemail is full, and the mail is piling up under their front door. The bankruptcy liquidators are trying to locate them so let the courts know their whereabouts if you can.

    Investors; be patient, we’re sure there is a perfectly reasonable explanation. Maybe you will be able to transfer your investment elsewhere as soon as any assets are located.

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