THE WOLF STREET REPORT: Where’s the Contagion from the Crypto Implosion?

As the FTX collapse shows, the shenanigans guarantee smooth and efficient contagion inside the crypto zone. But beyond it?

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  208 comments for “THE WOLF STREET REPORT: Where’s the Contagion from the Crypto Implosion?

  1. Augustus Frost says:

    Contagion is the equivalent of a “run on the bank”. It’s psychological, not mechanical with no consistent supposed “causal” event.

    • Old Ghost says:

      Crypto brings to mind a quote from a former Prez.

      “You can fool some of the people all of the time, and those are the ones you want to concentrate on.” — George W. Bush (2004)

      The last 10 years will go down as an epic mania.

      • Leo says:

        Will US SEC hold anyone accountable?

        The whole market is full of similar ponzi schemes.

        • Anthony A. says:

          All these guys running the crypto scams make Bernie Madoff look like a saint. And he died in prison.

        • phleep says:

          > The whole market is full of similar ponzi schemes.

          There ARE material differences in degrees of “ponzi-ness.” Businesses like banks and other financial entities have 1) audited financial statements representing 2) assets that actually represent reliable future value/cash flows. If there is a liquidation, an asset like a mortgage security has a future cash flow. It has a cash value now.

          With crypto, it is 100 percent faith. It is not tied to collectible houses or other real-world assets.

        • phleep says:

          > Will US SEC hold anyone accountable?

          Not every token is a “security” within SEC jurisdiction. But plenty are.

          Gensler has been ramping up enforcement, but also in many other areas, and enforcement resources are scarce. IMO, fools who throw money at a cr*pshoot like this stuff, shouldn’t expect immediate gov rescue, especially when many were fanatically anti-gov to start with.

        • Sporkfed says:

          Since Bankman-Fried was a large donor to Democratic
          politicians, probably nothing
          will come of this.

        • Harvey Mushman says:

          – SEC Chair Gary Gensler’s old boss at MIT was Glenn Ellison.
          – His daughter Caroline Ellison is the CEO of FTX sister-company Alameda Research (and Sam Bankman-Fried’s lover apparently).

          Just Sayin…

        • Kurtismayfield says:

          Nothing will happen to any of these people besides a slap on the wrist. The political connections are real.

        • ers says:

          why does the SEC need to be involved? Do you not believe people should be able to spend/invest their own money as they see fit? I agree 100% with you on the fact these are ponzi schemes, but i disagree with you on the premise gov intervention is required.

        • Lune says:

          Why should they? All the crypto fanatics were running around saying we don’t need no stinkin’ regulations, the free market will set us free!

          So why all of a sudden should we rescue them?

          IMHO the SEC and CFTC should work to ensure that no contagion spreads to the markets they *do* regulate, and everyone who believed that central banks, currency regulations, and market regulations were outdated concepts of legacy fiat currencies that were going to be disrupted by smart contracts and Blockchain can face the consequences of their mistaken beliefs. If they’re lucky they will have learned a painful lesson and the value of regulations.

        • VintageVNvet says:

          agree, like totally, with ers and Lune:
          Time and enough to get GUV MINT out of the way and let the markets do the cleansing needed…
          This from one OUT of the SM since mid 1980s for the EXACT same reason, call it ”ponzi” or whatever, it’s a game with many different rules, some explicit some implied, but all sufficiently stacked against WE the PEONs investors than anyone other than an experienced pro should really stay away, similar to these crap toe thingies.

        • Ash Quaraishi says:

          FTX had good relationship with crypto exchange in Ukraine (the most corrupt country in Europe) and with Ukraine Government Crowdfunding entities such as Elliptic using crypto to fund war effort and other things. Did FTX used Ukraine to launder money? SEC should investigate.

        • NBay says:

          Stock market appears to be climbing back over 4000. Not to sound like DC, but I don’t think 1% hike in Dec would tear up the plumbing much.
          But, I am probably the most financially ignorant person here as I don’t play in any assets except CDs. Even T-Bills at present rates wouldn’t change my take home much. Never even bought a house.
          And I have a couple more “downspending” ideas in mind.

        • OTOH/IMHO says:

          The Flounders* in the MSM are doing their best to soft peddle the whole thing- as if SBF had merely bungled, with almost no mention of stealing investors’ money: billions upon billions lost, but in the process, plenty of money showered on the right plants. I saw this in todays WSJ as well as NYT coverage, and it is everywhere. Nor did it appear he had been arrested.
          * From the Urban Dictionary: Reporters with two perfectly good eyes, apparently on the same side of their heads which offers plausible deniability for not reporting what is happening on the bottom.

      • rbblum says:

        But, there are those pesky derivatives as well as a few items that have been rehypothecated multiple times.

    • nat says:

      Contagion isn’t always psycological. Ex: if the collateral for ones leverage elsewher (say stocks) was FTX and the scale is large enough, there will be purely mechanical contagion via margin calls.

      “But leveraging stocks with FTX collateral is beyond stupid.”

      Yes, which is precisely why in this market something roughly equivalent to that could be very likely.

      • rojogrande says:

        Yeah, FWIW I agree contagion isn’t always psychological. The word itself comes from the transmission of disease which is a purely physical phenomenon. As your example implies, most derivatives and financial contracts rely on the solvency of the counterparties to the contract. If your counterparty goes bankrupt you may also go bankrupt simply because they can not honor the contract. That form of contagion is not psychological.

        • OTOH_IMHO says:

          Fractional reserve banking was the original sin of the goldsmiths. What is happening here is fractional reserve banking on steroids plus crystal meth and cocaine. And the Too-Big-To-Fail banks are in it up to their necks as well assigning investment grade street cred to the shakiest assets: “stable coins,” etc.

        • Wolf Richter says:

          That’s funny. There isn’t EVEN a “fractional reserve” requirement in the crypto world. There is nothing. Just hocus-pocus as we’re finding out.

      • Marky says:

        Honestly I’m thinking the same..

        Said to my mom the other day.. be funny if they find out the collateral tied up in them contacts (FTX crap) happens to be people’s fiat assets..

        What if this episode is to show fiat world and crypto world not so far apart even if you weren’t playing crypto??

        This is bass-ackwards world!

        • OTOH_IMHO says:

          The fiat regime, flawed as it is, is at least limited to the extent the national debt can be expanded. The FTX scandal had no limit to its foul expansion.

    • Cryptos Bitter End says:

      The entire cryptocurrency scam ($500B) is similar to the Lehman Brothers scam ($639B). Crypto is one big ponzi and I don’t understand why there isn’t more volatility in the market. FTX is $1B link in the chain link fence. Yes, Sam UNWISE Gamgee admitted this was a ponzi scheme and I don’t understand why the market is blind to this debacle. I guess because you can’t turn crytpo back into real dollars and folks haven’t figured it out. It is all going up in flames.

      • Marky says:

        I like to keep an open mind about crypto.. there just as much volatility in fiat anything including more action since it’s the game everyone playing.

        Your last point is incorrect “payment gateways” are how you accept crypto and settle/convert to your local fiat.
        Coinqvest is one such entity ran on the stellar Blockchain. But this isn’t unique to just this blockchain.
        The problem is that I can’t accept fiat/usd and immediately settle out to crypto. So the system will let you let accept crypto and your given fiat but the reverse is not true.. currently to my knowledge

  2. Yancey Ward says:

    The tide is going out slow on this one.

    • phleep says:

      Huh? Billions are evaporating in days. Bankman-Fried’s fortune collapsed in world record quickness.

      • Auld Kodjer says:

        There is a certain poetry in a “fried bank man”

        • Frederick says:

          Served best with a nice Chianti obviously

        • NBay says:

          Healthier than any other mammal meat. Please see CMAH gene mod, just the short Wiki intro will give you a good overview. When I did drink, I liked Chardonnay best. And we taste more like pork, the Pacific Island cannibals even called early sailors, “long pig”.

        • NBay says:

          And when I took Embryology mid 70’s, even a trained embryologist couldn’t tell the difference between a human and pig embryo for 7 weeks, IIRC.
          Not much PCR, electrophoresis, blots, etc, back then, either.

        • NBay says:

          In Embryology there is a major split in animals. After fertilization there is soon a ball of undifferentiated cells called a Blastula. Finally it invaginates (like poking something in it) and becomes a Gastrula. That invagination later becomes the gut.
          We are in the group where the asshole forms first.
          Seems fitting.

      • Sit23 says:

        His fortune has most certainly not collapsed. He will have a few millions/billions put to one side which should go back to his depositors, but the investigators will refuse to look, as a fair bit of the depositors money went to Sam’s mum’s good friends, the Democrat Party. Who would have thought? Similar to the investigation/loss of laptop that the FBI did on the Hunter Biden “investigation”.

        • Harrold says:

          You have to partisan politics into the discussion? Can you go post on a Q board some place else.

        • Frederick says:

          Hey Harrold Politics IS involved in this Do alittle research on SBFs parents and his large donations
          Let me guess East or West coaster right

        • NBay says:

          Don’t you live in Turkey? And it WAS unnecessary Q-level politics, but what the hell do you care? You took all your big cash pile (“earned here”) and bailed on us!…so ENJOY.
          And yeah, I’m a coastal elite….in fact in HS if I were any more coastal elite I would have been in the damn ocean.

    • RH says:

      Could the CCP cadres that are fleeing China cause this by their liquidation of cryptocrap “investments?” They used that tactic of running mining computers to get cryptocrap to then move their money out of mainland China for years and the wisdom (LOL) of their presitator now that he is there for life is causing thousands to flee.

      Reports are that over $3 trillion dollars were moved out of China. The recession there ie so bad that commodity futures prices reportedly are affected.

      • NBay says:

        Wouldn’t doubt it. Saw a documentary 7-8? years ago on a big crypto mine right below a hydroelectric dam out in “nowhere” China. Good sized metal building with one whole wall almost covered in 3 ft fans, and inside maybe 20 rows of appx 20ft long racks of those (then) $1000 mining machines. Lead man and two techs lived there. Suit in expensive car who brought cameraman (and more mining machines) out was very hush-hush on everything. Very limited filming and answers.
        He probably paid a lot for that very short trip.

    • cb says:

      slow? bitcoin is still priced over $16,000.

  3. butters says:

    It will have some impact on housing. Anecdotal, I have heard of 2 crypto millionaires who have stumbled into ‘slumlording.’

  4. Astronomer Soft says:

    Relatively little contagion. Mainstream institutions mainly went into crypto as equity investments (Ontario pension, Blackrock, etc.) and they’ll lose their equity.

    But banking sector remains insulated from crypto. Thankfully no one was taking crypto as collateral for loan in the “real” banking sector.

    The evaporation of the $2 trillion in paper wealth of crypto won’t make much of a dent, because very little of it was caused by flows of external funds into the crypto ecosystem. Almost all the pumping of crypto was done internally through all the crypto-based leverage schemes that have been cooked up, so the incremental volume was not sucking in too much outside funds. I figure maybe $100 billion of outside funds were sucked into crypto and stolen by the scammers.

    Of course, all the crypto related stocks like HUT, MARA, BITO will take a beating but they’re inconsequential in terms of market capitalization.

    The scammers will try to suck the next generation of marks into the crypto system by saying that this is a normal correction from which bitcoin will recover.

    • joe2 says:

      Right. “prices” are set at the margins and if a pumper buys $1M of bitcoin at $100K, that sets the new price and the price of all bitcoins immediately go to $100K along with the market cap. So if I had bought at $10K, I made a lot of vapor money. And now it is gone. But I just lost a dream. Just shows you need to take money off the table once in a while. BTW, I got out years ago at $19K. Made just enough for a vacation.

      • NBay says:

        I raced dirt bikes in ’65-6 at the exact same place I’m sitting now. Many things happened during that long vacation.

    • Lune says:

      For the most part you’re right, but many of these crypto accounts offer leverage, and the biggest whales (like Bankman-fried) borrowed against their holdings to buy stocks and other stuff. I wouldn’t be surprised if some of the crypto world’s favorites like Tesla and Arkk Ventures go down further as that leverage unwinds.

      But I do agree with you. most of the true believers never diversified their holdings so the contagion will be contained within the crypto world.

  5. Realist says:

    If I haven’t missed something, do these crypto implosions help central banks to remove some of the funny “money” central banks did create during their different versions of QE ?

    Money that didn’t contaminate the real economy on Main Street because it was sloshing around the crypto playground.

    • Augustus Frost says:

      It does reduce purchasing power since it is treated as a form of wealth. It’s possible to borrow using it as collateral (or at least was) and undoubtedly, since many of these people were on paper wealthier, they almost certainly spent more than they otherwise would have.

    • Sit23 says:

      No. I have been told that the money always goes somewhere. It can always be found if the people who are meant to look for it do so.

    • cb says:

      @ Realist
      @ Wolf

      not one FED created dollar will be removed from the system due to the FTX/FTT crypto implosion.

  6. Ed C says:

    Will the offshore online poker casinos that required deposits in cryptos be affected? Will they shut down? Will some US poker players lose out? No big deal unless you are one of them, I guess.

    • phleep says:

      I’ll bet the money laundering business is panicking too!

      Seriously, if you were a creditor of some offshore illegal gambling website, would you think you would get your money back, upon any trouble? (Bankruptcy in the normal onshore legal world is a slow boat to pennies on the dollar after several years, but it is at least a boat of SOME type. That doesn’t apply here.) The only constraint was reputation (keep customers trusting, sending in more money tomorrow), which as we see with the Dark Web, is fraught with theft by “rug-pulls.” The “firm” just disappears with the money. Oops! And these offshore crypto firms all turn out to bear the same kinds of risks.

      • roddy6667 says:

        Supposing you were importing a metric shitload of cocaine and were making payment with crypto. You took delivery of the merch and your transfer went through just fine. Deal over, both sides happy, right? Nope. Crypto collapsed during the transaction and the gentlemen at the Columbian cartel got 10 cents on the dollar. Might be time to make sure your will is up to date.

        • Harrold says:

          Don’t you have to pay first? Do cartel’s finance purchases? How is Goldman Sachs not involved?

  7. Phoenix_Ikki says:

    Tulip ain’t got nothing on this….that SBF and Caroline Ellison, in fact that whole crew is like band geeks on financial steroid, they know how to line up those bag holders for sure.

    This obsession and glamorization with nerdy messiah or generous billionaires that will save us all perhaps help SBF got away with as much as he did..

    • cd says:

      It’s much worse, this is going to hurt democrats, Ukraine was using military aid money in ftx to funnel back to elections, lost it all

      Add to that they were taking money via backdoor update hijacker yesterday and rendering it invisible I would say big trouble brewing

      This is 1000x bigger than madoff

  8. Don says:

    So, did Alameda (Avenue) Research LLC move to Hong Kong from Alameda Ca in 2018 or from somewhere on the Alameda de las Pulgas (Avenue of the Fleas) where the county climate is best by government test and the default racially segregated graveyards for the city of Saint Francis when graveyards were banned by the city in 1902 for more housing before the 1906 earthquake?

  9. zr says:

    I’m just sitting here waiting for the U.S. attorney’s office to announce charges on Sam Bankman-Fraud. Can’t go down without the Feds getting their last punch. see Bill Hwang.

    • joe2 says:

      Musk called it – no charges. He was a big democrat contributor. You think they are going to give the money back?

      • cb says:

        Perhaps he will get the Corzine treatment ,,,, to scale:

        By Ben Protess
        Jan. 5, 2017

        “After more than five years of investigations and negotiations, the curious case of MF Global is finally closed.

        On Thursday, federal regulators announced a $5 million settlement with Jon S. Corzine, who ran MF Global when it collapsed into bankruptcy in 2011 and lost more than $1 billion in customer money.”

    • roddy6667 says:

      Also, the authorities will be filing charges in the Bahamas. Maybe Hong Kong, also. Xi Jiping would make this a showcase to emphasize China’s attitude toward crypto. Property crimes become capital crimes when they exceed a certain monetary value. They might give him a choice, though. Firing squad or lethal injection van.

  10. August West says:

    Never understood this crypto thing. There is no underlying value to it. Even precious metals have jewelry and industrial uses, so there’s always the underlying melt value. With food and energy commodities there is also an end-user utilitarian underlying value. Calling crypto an asset or a commodity was always make-believe. Crypto was a collectible, digital collectible, like physical collectibles along the lines of art works and stamps, corvettes, antiques, etc. And like collectibles that lack any underlying value (stamps, artwork, etc) these crypto things are only worth what someone else will pay, and eventually you run out of people who want them. Another problem with crypto is that anyone who wants some can have it. You just pay the current price and you get some (that is, until it gets scammed away from you, but whatever, for a while you have some). With other (successful as investments) collectibles, there are more people that want them than people who have them. Old Hess toy trucks, old Lionel trains, classic US stamps. They hold price and appreciate in price because new people discover them every year, and want them. When there just are plenty of something (mid 1900’s to present US commemorative stamps, finely made dining room furniture sets, fine silverware, etc) the price can not hold, let alone increase. Try to sell a dining room set sometime….you will wind up having to pay someone to haul it off — no one wants those sets anymore; they have no value. Crypto lacked any physical world utility and suffers from being too available.

    • NoPrep says:

      And of course Wolf Street Mugs. The classic wide version mug, as a rarity, is going to be worth a small fortune one day. Have the latest Kovels’ Antiques and Collectibles price guide handy to see what you can get for it, if you need to sell.

      • Harry Houndstooth says:

        I agree.

      • Shiloh1 says:

        This particular one is a big-time, high-profile connected insider money laundering operation gone off the rails with its pants down.

        Don’t know about the others.

        I’m looking forward to Tom Brady playing longer than George Blanda.

        • NBay says:

          Maybe that long time hatred over the spine breaking hit is what’s driving him?
          Wonder if he’ll ever get to hear fans yell “put in the old man”?

      • MitchV says:

        That’s nothing,the digital token version of the World Street mugs will be worth even more. Send me 100 bitcoins and I’ll sell them to you.

    • Duke says:

      If you live in a country where the government prints money to provide services instead of collecting taxes. And the value of the currency goes down quickly, you would see extraordinary value in a currency, BTC, which can’t be inflated(printed) by any central authority. In fact you see bitcoin adoption is highest in the countries with the worst managed currencies. (most printing)
      Do you know poor people in Argentina buy bricks by the pallet with their paychecks because the next week they will buy only 9/10’s of a pallet. Then they build additions to their house. It’s a better store of value week to week than the A. Peso.

      All fiat currencies are currently printing at different rates to balance out trade with the USD and it’s printing.
      Are there any currencies still on a strict gold standard? NO.
      So all fiat currencies are cash = trash.

      Bitcoiners call all other crypto shitcoins because non bitcoin crypto ‘coins or tokens’ are under a central control vs decentralized bitcoin system.

      FTX SBF basically printed FTT crypto coins from nothing. Venture capitalists were complicit. It was like an overvalued IPO which was run into the ground by deception and bad practices. Nothing to do with bitcoins inherent value.

      • Augustus Frost says:

        BTC isn’t a real currency. It has no scale as a form of payment and never will because of its volatility.

        It’s been in a speculative mania. That’s the source of its appeal to most people who bought and own it, not because they have any intent of using it as an alternative to fiat currency, much less gold.

        Except for the true believers like you, its appeal will evaporate now that the mania is over.

        • Duke says:


          You may not have heard of the lightning network (LN). It is basically a second ledger that lives under the bitcoin ledger. Bitcoin ledger is used for final settlement.

          LN can handle millions of transactions per second at a cost approaching zero. (less than 5 cents now)

      • Harrold says:

        Coincidently, since you mentioned Argentina, that is where Sam Bankman-Fried’s private jet flew to this weekend.

      • Franz Beckenbauer says:

        All crypto depends on Tether. “All” includes Bitcoin. Tether is the thang that keeps crypto going.

        Tether just announced they abandoned their peg to the dollar.

        The dirty little secret of Crypto.

    • joe2 says:

      The basic idea behind Bitcoin at the start was an anonymous, portable, and internationally transferable store of value. That is something of great utility value if not intrinsic value. If true I would hold a significant portion of my assets in it. Go through an airport with a large amount of cash and it has become increasingly common to have it seized under civil forfeiture rules. And I have had cash cards blocked by the US government overseas under a blanket ruling even the issuing bank did not know about.

      Unfortunately it was not true. I worked with it or a while and sold out years ago.

      Volatility killed the store of value, lack of acceptance for payment led to the need for exchanges resulting in high fees, delays, vulnerability to fraud and know your customer rules that killed the anonymity.

      BTW, Pianos are the best example of your position.

    • Mike says:

      The value is (or rather, used to be) that you could move money anonymously without leaving a paper trail. Bitcoin was the preferred method to launder money from online scams in 2014-15, and at the time it worked perfectly.
      Nowadays the exchanges work like banks, you need to provide ID and all transactions are kept in a database accessible by the government.

      • Harrold says:

        Bitcoin was never anonymous. Every single transaction is written to the ledger and maintained forever.

    • Frederick says:

      August West same here Never understood just how criminal it all is

    • eg says:

      Cryptos are electronic gambling tokens.

  11. CreditGB says:

    So if FTX made loans and transfers to its affiliate, and it disappeared, isn’t that simple a bait and switch?

    I think I heard you mention that FTX’s crypto had largely not been converted to fiat currencies. Is it beyond belief that once crypto transfers and loaned to Alameda that they did this and escaped with whatever crypto appreciation that took place during the process?

    It seems ironic that in your Wolf Street Report, you thanked us all for staying to the “bitter end”. I assumed you meant the end of today’s Wolf Street Report. But thinking again, maybe you meant the bitter end of these crypto houses? Sorry, just a bit of dark humor.

    Wolf Street Report is once again spot on. Thanks for doing all that you do.

  12. Rob says:

    Tether implosion up next

  13. BS ini says:

    Crypto always said was Ponzi not necessarily set up as Ponzi but after creation has been promoted and then has moved into a parallel “something “ I don’t want to call currency or storage of wealth. I should have bought BITI when my wife asked about Bitcoin and why were are not buying. I told her go buy some.

    • phleep says:

      SBF himself, in an interview with Matt Levine, back in August or so, said basically what you just said. He admitted (I paraphrase) that something in teh crypto world could be just made up, a “protocol,” which he said was just “a box,” which could be sold as some product, turned into dollars, and maybe the dollars aren’t given back. He was remarkable in his weird candor.

      But that was back when people thought he was a cool genius, not just a thief with a girlfriend running a linked offshore fund, he propped up by sending tons of (apparently) customer money to, using a backdoor programmed into, his own personnel couldn’t see. Much less any auditors, etc. Just another thief, as so much of “digital disruption” has turned out to be, same old cr*p in new wrapping.

      • Harvey Mushman says:

        “Just another thief, as so much of “digital disruption” has turned out to be, same old cr*p in new wrapping.”


    • Depth Charge says:

      “I should have bought BITI when my wife asked about Bitcoin and why were are not buying. I told her go buy some.”

      I would have had a conversation as to why I don’t participate in PONZI schemes, greedfests and multi-level marketing schemes. If she still wanted to buy after that, I’d be looking for a new partner.

  14. Duke says:

    Correction: The price of electricity makes it uneconomical for _SOME_ bitcoin miners to mine profitably. For others who have found cheap power or stranded power sources, (wind power with no buyers at night, or methane off gassing from oil rigs for instance) it still makes sense. Also, as miners take their asics offline, the mining difficulty goes down. So the ‘cost’ to mine self adjusts and keeps the incentive system resilient. For the miners which had leveraged loans to buy their equipment at high prices, they are wiped out. While others who fully owned their equipment can just pause or keep mining depending on the cost/reward day to day.

    BTC is a robust system in this way. Unlike every other crypto. (shitcoins :)

    Because there are no bailouts possible for bitcoin. It acts as the fiat capitalist banking system is supposed to work for companies which are insolvent. They go bankrupt and are liquidated. This is the appeal of bitcoin for true free market believers. No bailouts! Let competition decide winners and losers. Bitcoin is the most sound money ever in that nobody can inflate the amount. No government can print it. Bitcoin market cap is now under 5% of gold. But much more convenient! Which is why bitcoiners believe it will win in the long run.

    Every other crypto was minted and the founders took in large amounts at the ICO or ‘minting’ of the first coins or they kept millions of coins and only sold a few at a starting price. Like an IPO. Bitcoins were all mined with electricity starting at price zero. So they inherently are a store of power/value. As long as it is trusted. If you compare BTC to the currency in Argentina for instance. The BTC volatility is comparatively benign. BTC is flat or up vs Argentina Peso (ARS). So bitcoin is even more attractive to countries with collapsing currencies. Those people move their wealth to USD or US assets or BTC as quickly as possible.

    And don’t even start about bitcoin using more power than entire countries. You have to weigh the cost/benefit. Compared to the current fiat banking system, bitcoin will outperform (be more efficient) as a money technology KW/KW. There is a recent study that says current banking system uses 50x more power than bitcoin would to accomplish the same task.

    MSTR is down from it’s peak. But so are almost every other stock you have documented crashing and the market in general has tanked.

    For perspective on the decision to buy bitcoin on MSTR books:

    “Recently, MicroStrategy founder and executive chairman, Michael Saylor, tweeted that since MicroStrategy adopted a Bitcoin standard, the company stock’s price has recorded a 5 percent gain. In contrast, investments in traditional assets have recorded negative double-digit losses. Saylor added that the performance comparison is based on data compilation from 10 august 2020. The S&P 500 recorded a -34 percent loss within the period mentioned above, while silver had the poorest performance at -61 percent.”

    Since @MicroStrategy adopted a #Bitcoin Standard:

    MSTR +5%

    S&P 500 -34%
    USD -38%
    NASDAQ -41%
    GOLD -50%
    BOND -52%
    SILVER -61%

    Performance vs. BTC since 10 August 2020.

    — Michael Saylor⚡️ (@saylor) October 15, 2022

    BTC has fallen even further now. But the point is clear. BTC was a good choice relative to other options.

    • Frederick says:

      Duke Im calling BS on your numbers Gold is certainly not down 50% since 2020 Silver isnt down 61% either
      I knew this crypto nonsense was a scam all along and thankfully was smart enough to stay far away

      • cd says:

        Excellent call
        Hilarious number throwing

      • DUKE says:

        Hmm.. Yeah. I just copied that from a website. Not sure how they skewed the number. But this is directly from Saylor’s Twitter feed back in October 2022.

        Michael Saylor⚡️
        Oct 21
        adopted a #Bitcoin Standard:

        MSTR +89%
        BTC +61%
        S&P 500 +12%

        NASDAQ -1%
        GOLD -18%
        BOND -23%
        SILVER -33%

        Performance vs USD since 10 Aug 2020.

        Wolf is right. Since the peak it crashed.. But since MSTR bought, compared to other investments, it wasn’t a bad choice. And the further back you go in time, BTC was a great investment. So shit on it now compared to last year if you want. But with a DCA strategy over a few years, no problem. Now if you don’t know why BTC acts like this, one might want to learn more about it.

        • Dan says:

          Duke: These percentage numbers are pure garbage. Why repeat them a second time when that is pointed out. Michael Saylor is a notorious liar.

        • Frederick says:

          Dan Evidently Duke revised his bogus numbers in his second post Still calling BS

        • cb says:

          @ DUKE –

          yea, Saylor’s a credible source …………. -10

        • cb says:

          DUKE said: “But since MSTR bought, compared to other investments, it wasn’t a bad choice.”

          Did you get that from Saylor also?

        • ru82 says:

          Okay for Saylor be not terrible for MSTR investors of bonds. basically sold 500 million in bonds with a 5 year maturity that convert to MSTR stock at $290.

          He also borrowed 1 billion with 5 year maturity that pays zero interest but you make your money by converting to MSTR stock at the price of $1300. The stock was around $1200 when he sold the bond. I would say MSTR is at least 60% down if you average out the price of the stock when he sold the bonds.

          MSTR stock is at $169. I doubt it either of the bonds will be converted. Thus you are not aggregating his his BTC prices.

    • Augustus Frost says:

      BTC is literally nothing. It’s not a legitimate alternative to anything.

      It’s not viable as a functioning currency. Who is going to use it as their currency of reference at any scale when its market price fluctuates so radically?

      It’s also one thing to use it as a “store of value” when the price is going to the moon. Another entirely now that it’s lost 75% in 12 months.

      The limited supply is also irrelevant. Who cares that the supply is limited to 21MM when an infinite number of alternatives can be created at will?

      • Duke says:

        That is like saying, why store value in gold when there is an unlimited amount of sand.
        Gold is better than sand.
        BTC is better than GLD.
        Because of pure scarcity and cost to mine.
        Why do they use cigarettes in prison? Best money available at a place and time.

        • Depth Charge says:

          You’re desperate and you know it. How much money have you lost, Duke? Be honest.

        • rojogrande says:

          “That is like saying, why store value in gold when there is an unlimited amount of sand.”

          The analogy doesn’t work. Sand is not gold and can never become gold. In contrast, a functionally equivalent “bitcoin” can be created with the exact same characteristics as the original BTC.

        • Halibut says:

          I’m almost convinced to buy BTC, Duke.

          What do you estimate for the present value of BTCs next ten years of earnings?

        • David Hall says:

          Gold is not the best conductor of electricity, but is used in microelectronics as it does not tarnish like silver or copper. Gold is used in jewelry more often than sand. Coins and bars are minted in gold. Bitcoin is a misnomer. It is not coinage, but an expensive drain on the power grid and computer systems.

        • NoBadCake says:

          For sand, gold or BTC to be valued it must be in demand and therefore useful.
          “Worthless Just Two Years Ago, West Texas Sand Now Brings in Billions” July 10, 2018

        • Gen Z says:

          Mod, my last post on this thread to stop people from being scammed.

          Gold, sand and cigarettes are TANGIBLE assets that have many uses. Gold has a lot of uses, sand builds homes, cigarettes are consumables.

          But cryptocurrency is backed by NOTHING and accountable to NO ONE.

          That is why the scammers are enjoying their lives with the billions of dollars that they SCAMMED from Americans and Canadians.

          I hope that the American authorities will use the full force of the law against these white-collar scammers.

          I work hard for my money in a factory, so when I read that someone on Reddit is ending their life because their life savings were stolen by crypto kings, that gets at me personally.

        • Pea Sea says:

          It’s over. Let it go.

      • Seen it all before, Bob says:

        You are correct. Bitcoin failed as a currency. It proved to be far too volatile. At least at the moment.

        I’d consider it to be an art form. Like a work of art painted by DaVinci.
        It has worth based on being the first of a kind and of limited quantity.

        If you were lucky enough or had foresight to purchase Bitcoin at 1K/coin or the Mona Lisa for a dollar back in the day, you have done very well.

        If you purchase Bitcoin for $16K or the Mona Lisa for $1B today, you are at the whim of the art market on whether it was a good investment. They are both one of a kind but their demand is based on human psychology. Do people want it and how badly do they want it without any inherent practical value.

        • Duke says:

          If you purchase the Mona Lisa, you can’t click a few buttons and send it anonymously to someone on the other side of the earth for .0001 percent of it’s value. No, nor can you with gold.

          This is a utility of bitcoin. It doesn’t matter if it is volatile if you buy it, send it, convert it back to fiat, or spend it again quickly. So it depends what utility you are trying to get out of it. In this example it is like cash where it is a anonymous, permissionless store of value that enables trade.

          As an investment with returns, that all depends how many people hold it versus spend it. But with a limited supply, and increasing demand to hold and use, that usually equals increase in price per unit.

        • Seen it all before, Bob says:


          You are correct. People can transfer/launder large amount of Bitcoin anywhere in the world without traceability. You can’t do that as easily with famous art.

          Many are asking “Why would they want to?” when dollars would perform the same function.

          My opinion:

          The criminals and terrorists are currently supporting Bitcoin prices.

        • Duke says:


          One of the use cases for crypto/bitcoin is micro payments.
          This is one of the suggested way of getting rid of bots on twitter. Charge a micro fee to post/retweet etc.
          So the bots would not be cost effective.

      • Sams says:

        When measureing two fiat currencies against each other and the exchange value fluctuate a lot, who of them are volatile?

    • Jcohn says:

      Saylor bought 129700 bitcoins at an average price of 30,400.
      At the current price of of 16,000 that is a loss of
      1.867b$ or a loss of 47%.
      The current value of these bitcoins is 2.07b
      while MSTR long term debt is 2.377b from virtually nothing at the end of 2018. . It used this money almost entirely to buy Bitcoin , since its current PPE totals 96 m vs working capital of (-58m) .
      Whatever you think of MSTR software , there is zero doubt that Mr. Saylor does not have a clue on how to value Bitcoin .
      Subtracting the value of Bitcoin from its long term debt results in minus 300m
      What MSTR stock has a market cap of 1.98 b is a complete mystery .

    • Lune says:

      With all due respect you really have drunk the Kool aid. Let me just point out two fallacies:

      There is *no* such thing as a free market. A market where unrelated buyers and sellers can consistently sell to each other requires a ton of regulations to avoid scamming. The only systems that can survive without that regulation are tiny, closed systems where everyone trusts each other.

      While central banks can certainly be corrupt, so can market players. Do you really think the Fed is more corrupt than Goldman Sachs? Do you think GS wouldn’t eat you alive if the SEC weren’t there to (at least in theory) prevent them? The crypto world has faced this before when the MTGOX exchange vanished. And now FTX has done the same. IOW corruption isn’t limited to governments.

      Secondly, you keep bringing up Argentina, as if they’re the only fiat currency that exists. I’ll wholeheartedly agree, don’t buy their fiat. But there are plenty of well managed fiat currencies that are far more reliable and trustworthy than Bitcoin. Heck, even in Argentina, the amount of Bitcoin held is probably vastly outweighed by the amount of USD held. For every Bitcoin being issued in their economy I bet literally a million USD is used instead. IOW your argument isn’t helped by bringing up crappy fiat currencies when good fiat is available pretty much worldwide to anyone who wants it (much more available than Bitcoin).

      Thirdly, you assume there are no large whales holding massive amounts of Bitcoin waiting to dump. Just because they haven’t come out in public doesn’t mean they don’t exist. A significant fraction of all bitcoins minted are unaccounted for (they’re on the Blockchain so we know they exist but they’re in private wallets and we have no idea who owns them). These are functionally equivalent to founders that hold large stashes before an ICO. And they have the power to move the market to maximize their profit just like any founder. Putting your life savings at their mercy is a very risky thing to do.

      There are other mistakes in your posts (you seem to have no clue how the hash rate works; mining a Bitcoin never gets easier. If you have less competition, you have more time to do it but that’s it) but I’ll leave it here.

      Bottomline is, if you haven’t already lost your life savings in the recent Bitcoin crash I highly suggest you learn more about cryptos and not just blindly trust people talking their book.

      • cb says:

        @ Lune –

        A thoughtful, well intentioned post. I hope readers take it for their benefit.

      • Duke says:

        Sure, there are whales, and they probably acquired it cheaper than current price. But if they have held this long, I doubt they are waiting to dump.

        MTGox and FTX are completely separate issues from bitcoin. Has the bitcoin system been hacked?

        I’m not telling anyone to buy BTC. I just chime in when I disagree or people here say something that I think there is another POV on. Maybe only 1% of people use/understand bitcoin at this point. I think I’ve done my homework. But yes, I don’t know the intricacies of the code. The BTC rise in price is unfathomable. It could go to zero. But don’t equate it with the crypto scams out there without a good argument to back it up. All I here is the same tropes repeated here. “I heard its a scam. It has no utility. It’s a ponzi.”

        I don’t think unaccounted for bitcoin are equivalent to founders shares because 1) if they mined them, it cost them money to do so and they were not free. So if they hold, they expect the value to go higher.

        Yes, USD is king. But it loses value by design. The value of the USD goes down by half about every 10 years. Is that not true? So while bitcoin is volatile now, it generally gets more valuable over time.

        I started buying BTC in 2017. Bought lower than current price and higher than current price. It’s not a major portion of my wealth. Yes, I HAVE drunk the Kool Aid though. I’m long BTC.

        Every 10 minutes the difficulty of bitcoin mining adjusts. So if there is less competition it costs less to mine. The amount of bitcoin rewarded goes down over time. However you want to describe it, it is designed to be harder to mine over time and has a well defined supply of 21M with a predictable release rate. The supply of USD is undefined and can fluctuate wildly as we have seen the past few years. This could all change with cheaper electricity and processor speed/efficiency gains.

        I’m hear to learn and I know I’ll get massive pushback, so bring it on. Sorry if I grabbed some bad numbers above. As I said, they aren’t my numbers, the second set is from Saylor himself. I doubt they are BS as he is very diligent. But the first set was definitely wrong and it was second hand from a blog.

        • Augustus Frost says:

          The supply of BTC isn’t the only crypto source.

          BTC has name brand recognition and (near) first mover advantage which I grant you is worth something, but anyone can literally create an open-ended number of cryptos at any time at will.

          Also look at the recent price correlation between BTC and crypto generally versus other “risk assets”. It’s not a diversification or a hedge.

          This makes it evident that the price is contingent upon the broader asset mania. I’m quite positive the bond mania is over with the turn in the credit cycle dating back to 1981.

          Other assets and credit more generally? Not confirmed yet but when it is, this is going to be the biggest and longest bear market in history. There has never been a bigger mania in the history of human civilization and crypto is just a side consequence of it.

          BTC and crypto will not be exempt.

    • eg says:

      That’s a lot of rationalization there, Duke, but hey — “if it’s good enough for you, Jerry, that’s all that matters!”

  15. CreditGB says:

    This is a scale up of an all too familiar scheme. Perhaps one of the most naked examples is the small, closed down, NJ Deli that garnered over $100m in capital investment that vanished via “loans” to another company owned by a friend equally non functioning. That was HWIN and its benefactor E Waste. One attracts the fool’s money then lends or invests it the affiliate to be soaked up by salaries and bonuses with zero product or services produced.

    Here is the concise description of the same scheme now running rampant in most of Wolf’s Imploding Stocks.

    “Not unlike Hometown Deli, E-Waste also had no ongoing business. Yet this didn’t stop Hometown Deli from lending E-Waste $150,000 late last year – even while the deli was closed due to the pandemic.”

    This is “smart money”?

    • Old Ghost says:

      I find it amazing how everything old keeps coming back in new clothes.

      “Decades ago, the mafia had a scam called the “bust-out.” They’d target a small business — the corner store, a machine shop, a soda distributor. After intimidating the owner into handing it over for a pittance, they’d order as much inventory as the suppliers would put on credit. They’d stop paying lenders, max out bank lines, demand customer pre-payments: in short, they’d extract as much cash as possible, as quickly as they could. Then one weekend they’d strip the premises of every last item that might be sold elsewhere — stock, fixtures, furniture, anything — and disappear.”

  16. Brewski says:

    Earlier this year:

    “Both Buffett and Charlie Munger have made hostile comments toward bitcoin in the past. Most famously, Buffett said bitcoin is “probably rat poison squared.” Munger doubled down on that sentiment Saturday.

    “In my life, I try and avoid things that are stupid and evil and make me look bad in comparison to somebody else – and bitcoin does all three,” Munger said. “In the first place, it’s stupid because it’s still likely to go to zero. It’s evil because it undermines the Federal Reserve System … and third, it makes us look foolish compared to the Communist leader in China. He was smart enough to ban bitcoin in China.”

    • RepubAnon says:

      China is a more of a fascist country – it’s just called the Communist Party for marketing and historical purposes.

      • L.Brown says:

        Repub China has always been capitalist and the Sun Yat Sen era is a good starting point for its development. I prefer to call it a totalitarian fascist state as it matches Germany after the 1933 election brought Hitler to power. Italy was also a corporate fascist state with a Duce as opposed to a Fuhrer, but it did have a a Grand Council unlike Germany which was governed by the dictatorial powers given to Hitler by the Enabling Act.There was a Reich Chancellery headed by Hans Lammers and a Hitler Chancellery managed by Philip Bouhler. The legislation authorising the Euthanasia Programme came from Hitler via Bouhler.Lammers never bothered to get it passed into law as he recognised the risk of compromising himself and other civil servants with such legislation.It always had the status of just a memo from the Fuhrer from the terse ,crude way it was worded.
        As for China, during WW2 the State Department Experts summed up Mao the CP as just another nationalist party vying with the Kuomintang under Chiang kai Shek.It necessitated having another vocabulary to try to give the impression of there being a real difference; in reality there was none. Lenin – and you can read it in his writings from the later years of his life,– stated that the Bolshevik Revolution in 1917 had brought only state capitalism to Russia . George Kennan and John Foster Dulles both recognised this as a fact much later on.

    • Harry Houndstooth says:


      Thank you for your Comment !


      Pure wisdom served up fresh daily.

    • Duke says:

      Undermining the Federal Reserve System is entirely the goal of Bitcoin and it’s proponents.

      Of course Bugget/Munger don’t like that, they benefit enormously from asset price inflation due to money printing.
      Buffet is a monopolist.
      The 50% of American’s with zero wealth get crushed by asset price inflation.

      • Anthony A. says:

        If you undermine the Federal Reserve System, what are you going to “value” Bitcoin against?

        • cb says:

          IF Bitcoin has “value”, the absent the FED it would be valued against other things that have value.

          The question is: What value does bitcoin have?

        • Duke says:


          When you travel to other countries, your brain has to adjust to valuing things in the local currency. So unless USD becomes obsolete, you can continue to value BTC – USD. Or you could make the mental switch to value goods in BTC.

      • “Undermining the Federal Reserve System is entirely the goal of Bitcoin and it’s proponents.”

        The bitconners are no different than every other glibertarian fool: Nobody asked you to change things.

        • crazytown says:

          Your name is incorrect, you’ve never had a freethought in your life. Plenty of people (think internationally) aren’t lovers of the federal reserve system.

        • Frederick says:

          Crazytown Have to agree with your sentiments regarding the criminal FED just would rather bring them down with real money aka Gold not some cockamaime contraption called crypto

    • The Real Tony says:

      If they didn’t ban Bitcoin in China the value would be in the millions maybe tens of millions apiece today.

    • cb says:

      Munger and Buffet have a vested interest in supporting the FED and the system that Bailed out the banks and Goldman. The FED has done it’s share of evil doing.

  17. phleep says:

    I’m not sure how much contagion we will see across the traditional economy or finance, but I am sure we are not done seeing financial scandals.

    And some linked spaces. Recall the general 2008 drawdown was what exposed Madoff. Customers were needing cash and demanding redemptions, which he couldn’t meet. Same thing here. And the dotcom crash helped expose Enron. I have no doubt, there are more names out there now, already tipping over. Let their debt roll over into higher interest rates, and bingo!

    • Harvey Mushman says:

      Good Point!

    • Putter says:

      “Let their debt roll over into higher rates, and bingo!”. Sounds like much of the zombie corporate bond market!

    • Wisdom Seeker says:

      Just have to be patient. Major financial implosions take time.

      The writing was on the wall for the Housing Bubble 1 in mid to late 2006. For anyone looking, deep cracks were showing across Credit space in early 2007, but the Bear Stearns canary funds didn’t implode until June 2007, the stock market didn’t peak until Oct 2007, and it wasn’t until Lehman blew up in Sept 2008 that everything fell apart. And then the stock market didn’t bottom for another 6 months.

      Keep in mind that even today, the paper-wealth destruction taking place in the real estate sector utterly dwarfs everything else due to the leverage used. Cryptos are a side-show, there just isn’t enough paper-value in the space.

      • cb says:

        Wisdom seeker said: “Keep in mind that even today, the paper-wealth destruction taking place in the real estate sector utterly dwarfs everything else due to the leverage used..”

        Why aren’t we hearing more about it?

        Ho extensive is it? Where is it taking place?

  18. LordSunbeamTheThird says:

    Its certainly going to be interesting in many areas apart from crypto if the era of low/lowering interest rates is over and we spend a decade following them up.

    However, in this case I think its contagion to the other centralised exchanges and crypto enthusiasts will move onto having their own blockchain (as was the original idea) and in the end it will continue as a shady method of transferring currency internationally. A lot of the crypto enthusiasts truly believe and although personally I don’t, there are millions that do deeply believe so it will go slowly to the financial units in the sky playground imo.

  19. Frank says:

    Surprising to see the professional funds involved. Billions of dollars left in the hands of 27 and 28 year old CEOs. What about audits, due diligence reviews, Board representation? Nevertheless, even if they are embarrassed, their investment in FTX is way smaller than a speed bump.

    (As example, Ontario Pension place $95m in, but reports $245B in net assets and solid history of returns.)

    However, it maybe a tale of woe for the younger and inexperienced FTX and crypto investors, whose financial net worth may be significantly linked to synthetic & technical, but real money to them, financial magic. Of which FTX is but one; as Wolf listed eariler. For this retail investor, who maybe all in, their contagion is likely limited to them personally. Sadly, nevertheless, their losses, (retail customers and retail investors of FTX), there may be significant lifestyle consequences to them.

    As Wolf identified in his decliner list, there is lots of hubris, and stock market industry makes money from hubris too. Dotcom 2000. Subprime 2008. FTX and other money magic decliners 2022. Rinse & Repeat.

    Is retail crypto now marginalized? Is a central bank digital been primed?

    • Frederick says:

      “And its gone” That cartoon keeps popping into my head

      • billytrip says:

        And that was about banks. Who knew an method even more efficient at “and it’s gone” would come along?

        I have yet to understand exactly what happened here but it looks like another case of “conjured assets” with “fanciful valuations” that work just great until they don’t

        I certainly don’t think this is the last of these scams to unravel.

      • Stuart says:


    • Augustus Frost says:

      Professional money managers have been doing stupid things for a long time. Usually, they get away with it because prices are usually rising in the major asset classes.

      As for an explanation, that’s an easy one.

      It isn’t their money. They don’t really care, except to the extent that it leads to customer defections or reduced assets under management which is the source of their fees.

  20. Marshall says:

    How ironic. Crypto was created to make things transparent and decentralized.

    SBF did the exact opposite.

    And the fact he did not say and no one insisted he explain how he could give 8% interest rate on deposited for funds shows you just how stupid people are and gullible.

    They didn’t deserve to lose their money but should.

  21. Michael Engel says:

    For fun and entertainment only : QQQ might fall between 235/260.

  22. Harry Houndstooth says:

    How is this for timing:

    Fidelity Investments is just getting ready to launch “Fidelity Crypto”

    Why do I think this is funny?

    crypto is coming
    Crypto decoded
    Fidelity Crypto
    Get on the early-access list to trade bitcoin and ethereum. Start with the names you know, invest with a name you can trust. Plus, get education that takes the code talk out of crypto.

    • Harvey Mushman says:

      Yeah, I posted about the exact same thing last week. I see it every time I log into Fidelity. It makes me think a lot less of Fidelity. Just makes me think , I won’t ever listen to anything Fidelity has to say.

      • Cold in the Midwest says:

        Agreed Harvey and Harry. Questionable move on Fidelity’s part. I would not be surprised if that program is quietly discontinued. The bad PR cost in the interim is substantial.

        Fortune favors the sensible.

      • L.Brown says:

        That is very interesting. Fidelity must know something not yet ready to be sprung onto the world. The nomenclature for a new currency is usually defined as “digital currency”. From what i have heard talked and read for myself about the world of savings and investment for the masses will be a thing of the past after 2030 when Scwab has his way. Banks, apart from a central bank controlling digital currency and credit accounts for all will be the sole source of this new form of money. In short, Fidelity may well be terminated along with everything else connected with saving and financial matters as we currently know them.

        • Duke says:

          Fidelity and other brokerages HAD to start offering bitcoin products and services because clients were moving money to places where they could hold BTC.

          ‘A Massive Step’—JPMorgan Just Made A Surprise, Game-Changing Bet On Crypto Despite $2 Trillion Bitcoin, Ethereum And Crypto Price Crash
          – Forbes, Nov 6, 2022,08:15am EST

          Bitcoin About-Face: JPMorgan Opens Crypto Trading To All Clients
          Emily MasonForbes Staff
          – Jul 22, 2021,12:00pm EDT

      • cb says:

        Not to mention Fidelity always having Cramer on the screen whenever you walked into their offices. Promote clowns; be considered accordingly.

      • Lili Von Schtupp says:

        Realizing *I* knew more than the ‘financial planners’ Fidelity has put me on the phone with made me realize I don’t believe a thing Fidelity has to say.

        Most literally read off a questionnaire then auto generate a recommended canned product from a list, could not offer the sightest bit of insight or answer any questions regarding basic transactions.

        Wasn’t expecting an investment master, but would have liked someone who could answer basic questions about their products without putting me on hold 5 times. Don’t recall it being this bad 5 years ago.

  23. Volvo P-1800 says:

    “… it should have been clear that an industry that has been producing nothing, burning cash and offering alluring returns, was destined to fail. Yet, it seems that every generation needs to learn by having its own bubble.”

    – Mark Dowding, Bluebay Asset Managment

  24. BuySome says:

    In a deeper, darker voice, “Thanks for staying to the bitter end”. I didn’t hear the fat lady singing, but did get the feeling of Nosferatu hanging over my shoulder. The contagion may not spread further, but that ain’t gonna pull Charlton Heston’s cold dead ass out of the blood soaked fountain. It’s gone far beyond aircoins into a full court press of Tech War. It’s not the hand grenades that are worrisome, it’s the damn mustard gas raining down. “For the sandbags are so warm and high, The wind you won’t feel a blown’ oh, Well I winked at a cailin passing by, Says I, what if it’s snowing oh”. (Pogues lines from The Recruiting Sergeant). At this rate we’ll be lighting cigars with cash, and pumping the leftover go-juice from the long abandoned gas stations which would no longer take paper dollars as they headed into collapsing sales. And the damn mutants will be running around calling for the sacrifice of The Omega Man as as they revell in their new found enlightenment…never mind that the electric grid went kaput. Just put on those dark plastic glasses and avoid the sunlight. You can order hooded robes via Amazon. Praise be the mind that is diseased. Now, strike up the band and don the horned helmut.

  25. historicus says:

    Still short the markets?

  26. Michael Engel says:

    Creepto compete with the banks, especially with the large international banks. The demise of creepto and higher rates was celebrated by the banks.
    XLF daily breached Aug 16 high. XLF weekly breached Mar 15/22 2021 BB. If QQQ will move higher XLF will reach/ breach May 10 2021 hi/lo BB.
    If not XLF will decline. XLF might make a higher high, above last week high, before turning down.

  27. Ricky says:

    From what I’ve been able to/attempt to understand is that FTX was into tokenized stocks and trying to expand their crypto derivative vehicles. As a stable coin (USDC, USDT, ect) is supposed to be backed 1:1 with fiat USD, a tokenized security is supposed to be backed 1:1 with a real share of that security OR a digital Total Return Swap (TRS), according to I remember seeing an article about Archegos using swaps tied to crypto as well.

    If that is accurate, then the contagion spread may also depend on how many of these swaps are held in the Big Bank derivative basket? My guess is that it is ginormous amount.

    It appears as if a former Citidel exec’s and Credit Suisse exec’s were linked with FTX.

    It’s a blitz of information hitting the web combined with rumors from Rumor Mill that is running at full throttle.

    Hard to discern fact and fiction at this point (at least for me) but, obviously we’ll start to find out in about 12 hours or so.

  28. Phoenix_Ikki says:

    This thing is developing so fast I don’t think Wolf will have enough downtime before he has to write another article on another exchange blowing up…

    Latest development is that is getting some not so good attention and might be next in line. If they do fail, that would make it pretty funny to see their name remain everything Lakers play the home game..

  29. Stuart says:

    What I’d like to know is how big is the derivatives market based on crypto products? And who has been playing in that space?

    • josap says:

      My friend Google says:

      A recent research report published by CryptoCompare shows that crypto derivatives currently represent 61.7 percent of the total crypto market, with Changpeng Zhao’s Binance exchange dominating the crypto derivatives space. In May 2022, Binance’s derivatives trading volume accounted for 58 percent of the market’s total $3.19 trillion volume.

  30. Jcohn says:

    The crypto market , has replaced cash as the ultimate method to launder money .
    If crypto is regulated by the the Feds , crypto owners will be forced to disclose their ownership
    And the Feds will tax any gains
    Those who use cryptos because of its lack of transparency will disappear . And taxes on gains will reduce liquidity among crypto owners ,
    These two factors mean one thing -lower demand for Bitcoin .

  31. Roger Davis says:

    At least we’ll always be able to fall back on tulips!

  32. The Real Tony says:

    I still see more value in crypto than in U.S. stocks. Both are based on the greater fool theory and both are ponzi’s but the fundamentals look better in the crypto sector.

    • Augustus Frost says:

      What fundamentals does crypto actually have?

      How can nothing have any fundamentals?

      The stock market is in a raging mania, but it isn’t only money losing cash burn companies.

      • TheAltonRoute says:

        At least Argentine banknotes are something to look at. You can put them in an album, along with “bonos”, Australes, and the previous versions of the peso.

      • Duke says:


        What fundamentals does the USD have?

        USD is centralized controlled currency.
        BTC is decentralized currency.
        They both fluctuate. Take your pick. Look at the charts over time.
        Many people think Bitcoin looks better by design.

        • Augustus Frost says:

          BTC isn’t a functioning currency, no matter how many times you repeat it.

          I know the USD is a poor store of value, long term. But it’s a better one than BTC or any other crypto at current mania prices.

          It was one thing to buy BTC early when it was much cheaper when the risk was nominal. Another thing entirely to buy it at its current and recent mania price.

        • THRILLHOU says:

          @ Duke

          George Orwell said that power is the ability to inflict pain. That power is currently the realm of the Nation/State, or its sponsored minions.

          The fundamental of the USD is power. The power to sanction, to confiscate, to enforce, and to blow stuff up good. The US spends a tremendous amount cultivating this power across multiple concurrent domains (statecraft, taxation policy, military to name a few).

          BTC/Crypto has no such apparatus backing it. And it’s chief power seems to be bilking believers.

          The dividend of Roman rule was Pax Romana, not Pax denarius aureus, and that’s an important distinction.

        • eg says:

          Duke, the “fundamentals” of USD are over 700 military bases around the world, plenty of police, prisons, the IRS and a judicial system.

          And the Bitcoin? How many divisions does it have?

  33. Michael Engel says:

    The blue zone – Pavlov dogs trust the most – seduced investors to invest in creepto and make money every day, every hour. Naive investors money fell into a f*K* rat traps accounts, sucking liquidity.

  34. Franz Beckenbauer says:

    “On March 16, 2008, Bear Stearns, the 85-year-old investment bank, narrowly avoids bankruptcy by its sale to J.P. Morgan Chase and Co. at the shockingly low price of $2 per share.”

    Where’s the contagion ? We’re doing just fine.

    Nothing to see here.

    Move on.

  35. Kurtismayfield says:

    Hey, Jim Cramer said to sell all my crypto. I am getting conflicting messages here, because usually doing the opposite of Cramer’s advice is a good idea.

  36. perpetual perp says:

    Anything with no intrinsic value has no intrinsic value. Crypto desperately needed regulation to link it to the dollar, and dollar denominated assets. Otherwise crypto was only as good as its sales narrative. And all good ponzi schemes start with a great sales narrative. Crypto true believers have a DeFi fantasy that somehow crypto can exist without any tangible collateral. Don’t work without the government connection. Once the government touches that ‘tar baby’ it’s stuck there permanently. The con won? We shall see.

  37. perpetual perp says:

    Crypto won’t disappear entirely because it does have a legitimate purpose: To launder criminal profits and tax cheat money into legitimate monetary sovereign currencies. The crypto goal is for the government to make the fatal mistake of legitimizing crypto; thus compromising the monopoly over money embedded in the domestic currency of record.

    • Sams says:

      Or the governments turn the countries currencies into crypto currencies because of the possibilities the technology provide.

      A serial number/identety book keeping system where the central bank have full controll over the amount of money and interest rates.

      All money traceable, who hold, where did the money come from and where do the money go. With the possibility to reverse any transaction. Or confiscate (tax) the money by serial number/identity. Pinpointing who to tax.

    • NBay says:

      Most all the big banks already do that…..and quite well.

      ..they are called High Net Wealth Funds.

    • Duke says:

      BTC is a good store of value in countries with extreme money inflation. Argentina and Brazil have relatively high bitcoin adoption in the population. There is your use case.

      Most people on here think it is late to buy bitcoin. But the adoption curve is still early and growing quickly.
      Yes, it could go to zero. Just like Hertz or many other stocks when things change. Yes it is a risk. But it could be early. Get off zero as they say.

      • Wolf Richter says:

        In those countries, USD cash is a much better store of value because it hasn’t collapsed by 70%. But BTC has. All Argentines know that.

  38. Swamp Creature says:


    Even a stopped clock is correct 2 times a day. Actually, Jim Cramer has done a complete 180. He’s actually talking common sense for a change. He said to sell into the recent rally. Sell Crypto. He’s correct. The market is going down, except for selected groups.

  39. CreditGB says:

    Fake high end vehicle auctions that take your winning bid payment and instantly transfer it to overseas accounts while you wait for the nonexistent vehicle to be delivered. Holding only the fake “paid invoice” in your hand.

    Fake currency houses with no backing, taking investor currency, transferring and lending to its family or friends run affiliates who then take their salaries and bonuses, before transferring to 3rd tier “vendors” to soak up the last of the cash, all producing nothing whatsoever.

    Fake, closed delicatessens going public, attracting “investors” whose money is then lent to the CEO’s friend’s company that is also closed. Combined their salaries bonuses and other expenses “burn” the investor cash, and they file bankruptcy to liquidate….nothing…. Just documents the investor’s losses.

    Just like the Michael Jackson song says,….”It’s easy as one, two, three…”

    1. Waive a shiny object in front of the useful idiots with free money.
    2. Perform the shell game and transfer the cash out to friends and family businesses.
    3. All insiders having soaked up huge salaries, bonuses, and freshly laundered money.

    And there you stand with nothing but your “paid invoice” and a bankruptcy notice.

    Ah, maybe I’m just a curmudgeon, but I think I’ve seen this movie many many times before. I have a feeling many more sequels of this movie are in the making right now.

  40. random guy 62 says:

    My first problem with all this crypto stuff is that it makes us even more reliant on the internet. Digital dependency is already a big source of fragility in our modern society, and crypto makes it even worse.

    And I am sure some other crypto “project” has already tried to remedy this inconvenient fact, but with enough time, won’t all BTC eventually be held in the inaccessible wallets of dead people?

    • TheAltonRoute says:

      Yep…imagine what could happen involving a cyber war between Russia/China and the US. Will we have to go back to paper stock certificates?

    • CreditGB says:

      That IS an interesting question about inaccessible wallets. Some Joe Sixpack invests big time in BC and is killed in an accident. Maybe no one knows where or what BC he has. What becomes of that?

      As for digital dependency, how many people anywhere could survive even one week of no cell phone, no TV, no computer, maybe just a radio and just you by yourself.

  41. polistra says:

    Even if the numbers were larger, bitcoin would have less effect than other bubbles because it’s a hermetically sealed system. Other bubbles hired real people to make real things, and moved money in and out of the bubble world at a fast pace. Bitcoin absorbed a huge amount of fake QE “money” into a system that is USELESS BY DESIGN. There’s no way to move money in and out fast enough to create real industries that could fail when the bubble popped.

  42. SoCalBeachDude says:

    DM: Sam Bankman-Fried faces criminal probe for ‘gambling’ FTX investors’ cash on Alameda Research as crypto exchanges try to calm market while traders pull $6 BILLION in a week: Bitcoin plunges to $16,525

    Collapse of FTX under investigation by the Manhattan District Attorney’s office
    Probe puts founder Sam Bankman-Fried under threat of criminal charges in US
    Traders have pulled $6 billion from leading exchanges since beginning of crisis
    The head of, a top ten exchange, insisted that it’s ‘business as usual’
    That site saw tens of millions withdrawn across 10.5-hour period this weekend

  43. Great post Wolf, from someone who knows very little about crypto. I did a rough comparison of the GFC, the home mortagage industry was at the time large enough to deleverage the entire system, this event is not, probably because the money supply is far larger (and maybe that was their intent in building MB). The contagion problem is credit, which is superflous to cash and the Feds efforts to curtail that so far have no done much other than the usual main street financial lenders. I feel certain there is a lot more exchange between crypto users and stock markets. The system is pretty loose. If USG wants to be able to sanction bad (foreign) actors, they can’t allow an alternate currency to function. Maybe it comes down the matter of what is Russia (oilgarchs) doing? Crypto to me is libertarian’s cash, but there was a time in the American west when banks were printing their own money and that ended badly, for them.

    • ru82 says:

      What is ironic is that the big selling point for crypts is the security algorithms yet there has never been so many cryptos stolen, hacked, or people scammed than in the crypto market…..ever.

      • Augustus Frost says:

        It starts with poor secure coding practices.

        Who knows what else is missing or defective in their security programs.

    • Wolf Richter says:

      Sorry you lost so much on your cryptos.

    • Gen Z says:

      Crypto scammers were telling their victims that Bitcoin is a hedge against inflation.

      But the RCMP can’t even do a thing when the investors lose their life savings to those scammers. The scammers even bought homes in Canada, and the RCMP doesn’t want to do anything.

  44. Augusto says:

    Actually today the “Market” is selling this as a Good, A Positive. Regulation coming (good), more institutional investing that is professional and fewer dreamer-amateurs-anarchists (double good), getting rid of the weak hands, speculators, fake coins….it’s not bad…it’s actually great…blah, blah, blah, all good buy, buy, buy…..contagion?, that is so 2008…..

  45. Old school says:

    Leverage that makes you filthy rich in a risk on environment wipes you out in a flash when the world changes. More to come til Fed says it’s over.

  46. Gen Z says:

    The Canadian police authorities don’t seem to be serious about these crypto scammers.

    The victims tell their local police department, who tell them to report it to the RCMP, and in turn the RCMP tells them they can’t do anything about it as the scammers are overseas.

    One poster lamented that the police warned him that if he published any YouTube videos or Tweets which “defame” the scammers, he will end up in prison for criminal libel and criminal harassment.

    The post was deleted and the thread was locked.

  47. Jcohn says:

    Crypto investors are crying for government regulation . But government regulation is a double edge sword. Yes, it will help but not eliminate the theft of customer monies via requiring concepts such as segregated accounts .
    But anyone who thinks that the FEDS are going to stop there is completely naive .
    The FEDS will insist upon reporting standards for Crypto similar to that of futures and options , so that they can tax any gains . And such standards will require the reporting of names associated with those gains . As C soon as you that happens , it is game, set and match for money laundering and transactions involving illegal activity activities . And given how much of Cryptos demand is a result of such transactions , the price of crypto is sure to fall.

  48. RickV says:

    I didn’t buy cryptos, so didn’t take the ride up or down. My decision was based on a college experience when I invested $20 in a money chain letter and lost it all. Looking back, it was probably the most important lesson I learned in college.

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