I would love to see the derivative of the two curves in the GDP figure. They might tell us a lot about the functioning/non-functioning of the rule of law and protection of property rights in the world as a whole. There's no reason to think that growth in GDP would be constant as it seems to be in the chart from 1950-present. Knowledge/technology/productivity should follow some sort of exponential curve, as delta-knowledge is based on existing current knowledge. It's clear that massive inflation and government controls in the first world, and lack of rule of law in the rest of the world is massively holding back world economic growth, because think of how bad this chart would be with China excluded.
20 years to hit 10 Million equivalent? How much disruption/global panic/ governmental crisis creation/distraction along the way? The era of the military petro dollar (combating Russia and China, but also influencing Latin America, south east Asia, and to a lesser degree Sub Saharan African countries…. ) has been so immense on our frame of reality, not sure we can fully grok what comes next. I’m fully in favor of the end of these governmental mafias, hegemonies…. While also hoping we don’t enter an era of warlords…. Public infrastructure will continue to be a need for the vast majority of families, and elderly…. Hospitals, roads, water for kids . Perhaps beyond a “Green New Deal”, we can have a “Bitcoin New Deal”…. To advance investment in meaningful futures and experiments…
THE WOLF STREET REPORT: 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. Unlike prior “crypto winters”
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.
Naseem Taleb has written an interesting analysis of Bitcoin:
Bitcoin, Currencies, and Fragility 1 Nassim Nicholas Taleb† ‡ †Universa Investments ‡Tandon School of Engineering, New York University Forthcoming, Quantitative Finance
‘They couldn’t even scream any more. They were just sobbing’: the amateur investors ruined by the crypto crash
Fuelled by hype and hysteria, the market in bitcoin and other cryptocurrencies went from an obscure niche to a $3tn industry. Then the house of cards collapsed
In the gloom of an 18th-century drawing room at the private rehab clinic Castle Craig, near Peebles in the Scottish Borders, Roy, a 29-year-old victim of the global cryptocurrency crash, tells me his story. It is a dazzling summer’s day, but here the mood is sombre. Roy shifts uncomfortably in his chair as he begins.
It all started in February 2021, with a radio advert for Dogecoin, a cryptocurrency promoted by Elon Musk, the founder of Tesla. Intrigued, Roy started Googling, eventually using his credit card to make an initial investment of €2,500 (£2,200) in a range of cryptocurrencies. The value of Roy’s portfolio climbed to €8,000, then €100,000, then €525,000. Roy had entered the market during an adrenalised bull run, meaning an extended period of price growth. A combination of Covid stimulus packages, low interest rates and an unprecedented level of enthusiasm for cryptocurrency among furloughed workers meant the bull was careering out of sight.
Roy started spending all his time watching YouTube videos and speaking to other cryptocurrency enthusiasts in private groups on the messaging app Telegram. He had been treated for cocaine and alcohol addiction twice, but by 2021 he was sober and working as an addiction counsellor, although he was on sick leave as a result of panic attacks brought on by childhood trauma. He soon relapsed. By day, he checked his cryptocurrency wallets every 10 seconds; by night, he set alarms to go off on the hour.
He began fantasising about a life free of financial constraints, in which he would never have to work. “I thought I was on top of the world,” Roy says. “Nobody could tell me anything. Money would fix every single problem I faced from now on.”
Then the cryptocurrency market crashed. The price of bitcoin fell from £42,000 in May 2021 to £23,000 by the end of June. It rallied to an all-time high of £48,000 in November, before diving to £26,000 at the end of January. Since then, it has been in near-continuous freefall. At the time of writing, bitcoin is hovering at £17,000. “It felt like I had lost my life,” says Roy. “Because I had invested everything in crypto. I had built every dream I had on there. So, when it came crashing down, my whole life came crashing down.”
Desperate, Roy made a string of bad bets. The value of his portfolio dwindled to €20,000, then €3,000. “It got so out of control because I saw all my chances to live a better life fading away,” he says. “So I became really desperate and eventually just completely isolated. I didn’t want to see anybody, because I thought I was a failure.”
Most mornings, he would wake up shaking from alcohol withdrawal, order booze online and spend the day drinking and taking drugs. He developed stomach ulcers. “You can’t explain the pain,” he says. “I would drink and puke and drink and puke and drink and hope to keep it in, so the pain would go away. I felt like dying.”
"Take The Tragedy In Sri Lanka And Multiply By Ten": The Fed Just Lobbed A Financial Nuke That Will Obliterate The Global Economy
We are living in a period of mass “Jonestown” economic delusion. Just twenty months ago – central bankers were offering to buy nearly every junk bond known to mankind, dramatically distorting the “true cost of capital.” All the way from crypto to emerging markets – it was a moral hazard overdose. Everyone on earth was borrowing money at fantasy-land bond yields.
Now, the Fed is promising endless rate hikes and $1T of balance sheet reduction onto a planet with emerging market and Euro-zone credit markets in flames.
Russia: President Putin Signs Law Banning Crypto Payments
Just when it finally seemed positive for the crypto industry in Russia with the Central Bank, Bank of Russia gravitating toward a pro-crypto approach, the country’s President signed a law banning crypto payments in the region.
Just when it finally seemed positive for the crypto industry in Russia with the Central Bank, Bank of Russia gravitating toward a pro-crypto approach, the country’s President signed a law banning crypto payments in the region.
The latest update is not an upgrade for the crypto industry in the country. Russian President Vladimir Putin signed a law, banning the use of digital financial assets (DFA) and digital utility rights (DPR) as a means of payment for goods, products, or services in Russia.
The legal document stated,
“It is prohibited to transfer or accept digital financial assets as a consideration for transferred goods, performed works, rendered services, as well as in any other way that allows one to assume payment for goods (works, services) by a digital financial asset, except as otherwise provided by federal laws.”
Furthermore, along with banning crypto payments, the law also levies crypto exchange operators to refuse transactions where it is possible to use such assets as a monetary surrogate. This simplistically means that crypto brokers facilitating payments are now subjected to the national payment system, in turn putting them under the oversight of the country’s financial regulator.
I’m assuming that when you say Bitcoin, you mean the asset also traded under the ticker BTC? I value your insights, so I wanted clarification. There is good reason to think that BSV is Bitcoin, and when considering the diminishing block reward, BSV appears better prepared to handle those challenges.
I would love to see the derivative of the two curves in the GDP figure. They might tell us a lot about the functioning/non-functioning of the rule of law and protection of property rights in the world as a whole. There's no reason to think that growth in GDP would be constant as it seems to be in the chart from 1950-present. Knowledge/technology/productivity should follow some sort of exponential curve, as delta-knowledge is based on existing current knowledge. It's clear that massive inflation and government controls in the first world, and lack of rule of law in the rest of the world is massively holding back world economic growth, because think of how bad this chart would be with China excluded.
20 years to hit 10 Million equivalent? How much disruption/global panic/ governmental crisis creation/distraction along the way? The era of the military petro dollar (combating Russia and China, but also influencing Latin America, south east Asia, and to a lesser degree Sub Saharan African countries…. ) has been so immense on our frame of reality, not sure we can fully grok what comes next. I’m fully in favor of the end of these governmental mafias, hegemonies…. While also hoping we don’t enter an era of warlords…. Public infrastructure will continue to be a need for the vast majority of families, and elderly…. Hospitals, roads, water for kids . Perhaps beyond a “Green New Deal”, we can have a “Bitcoin New Deal”…. To advance investment in meaningful futures and experiments…
A slightly different take on crypto:
THE WOLF STREET REPORT: 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. Unlike prior “crypto winters”
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.
More https://wolfstreet.com/2022/07/09/leverage-interconnectedness-are-blowing-up-crypto-defi/
Very thoughtful. Very interesting. Please continue sharing your thoughts and perspectives on this topic.
Naseem Taleb has written an interesting analysis of Bitcoin:
Bitcoin, Currencies, and Fragility 1 Nassim Nicholas Taleb† ‡ †Universa Investments ‡Tandon School of Engineering, New York University Forthcoming, Quantitative Finance
chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.fooledbyrandomness.com/BTC-QF.pdf
Buyer Beware...
‘They couldn’t even scream any more. They were just sobbing’: the amateur investors ruined by the crypto crash
Fuelled by hype and hysteria, the market in bitcoin and other cryptocurrencies went from an obscure niche to a $3tn industry. Then the house of cards collapsed
In the gloom of an 18th-century drawing room at the private rehab clinic Castle Craig, near Peebles in the Scottish Borders, Roy, a 29-year-old victim of the global cryptocurrency crash, tells me his story. It is a dazzling summer’s day, but here the mood is sombre. Roy shifts uncomfortably in his chair as he begins.
It all started in February 2021, with a radio advert for Dogecoin, a cryptocurrency promoted by Elon Musk, the founder of Tesla. Intrigued, Roy started Googling, eventually using his credit card to make an initial investment of €2,500 (£2,200) in a range of cryptocurrencies. The value of Roy’s portfolio climbed to €8,000, then €100,000, then €525,000. Roy had entered the market during an adrenalised bull run, meaning an extended period of price growth. A combination of Covid stimulus packages, low interest rates and an unprecedented level of enthusiasm for cryptocurrency among furloughed workers meant the bull was careering out of sight.
Roy started spending all his time watching YouTube videos and speaking to other cryptocurrency enthusiasts in private groups on the messaging app Telegram. He had been treated for cocaine and alcohol addiction twice, but by 2021 he was sober and working as an addiction counsellor, although he was on sick leave as a result of panic attacks brought on by childhood trauma. He soon relapsed. By day, he checked his cryptocurrency wallets every 10 seconds; by night, he set alarms to go off on the hour.
He began fantasising about a life free of financial constraints, in which he would never have to work. “I thought I was on top of the world,” Roy says. “Nobody could tell me anything. Money would fix every single problem I faced from now on.”
Then the cryptocurrency market crashed. The price of bitcoin fell from £42,000 in May 2021 to £23,000 by the end of June. It rallied to an all-time high of £48,000 in November, before diving to £26,000 at the end of January. Since then, it has been in near-continuous freefall. At the time of writing, bitcoin is hovering at £17,000. “It felt like I had lost my life,” says Roy. “Because I had invested everything in crypto. I had built every dream I had on there. So, when it came crashing down, my whole life came crashing down.”
Desperate, Roy made a string of bad bets. The value of his portfolio dwindled to €20,000, then €3,000. “It got so out of control because I saw all my chances to live a better life fading away,” he says. “So I became really desperate and eventually just completely isolated. I didn’t want to see anybody, because I thought I was a failure.”
Most mornings, he would wake up shaking from alcohol withdrawal, order booze online and spend the day drinking and taking drugs. He developed stomach ulcers. “You can’t explain the pain,” he says. “I would drink and puke and drink and puke and drink and hope to keep it in, so the pain would go away. I felt like dying.”
https://www.theguardian.com/technology/2022/jul/12/they-couldnt-even-scream-any-more-they-were-just-sobbing-the-amateur-investors-ruined-by-the-crypto-crash?utm_source=pocket-newtab
one more
"Take The Tragedy In Sri Lanka And Multiply By Ten": The Fed Just Lobbed A Financial Nuke That Will Obliterate The Global Economy
We are living in a period of mass “Jonestown” economic delusion. Just twenty months ago – central bankers were offering to buy nearly every junk bond known to mankind, dramatically distorting the “true cost of capital.” All the way from crypto to emerging markets – it was a moral hazard overdose. Everyone on earth was borrowing money at fantasy-land bond yields.
Now, the Fed is promising endless rate hikes and $1T of balance sheet reduction onto a planet with emerging market and Euro-zone credit markets in flames.
https://www.zerohedge.com/markets/take-tragedy-sri-lanka-and-multiply-ten-fed-just-lobbed-financial-nuke-will-obliterate
BREAKING:
Russia: President Putin Signs Law Banning Crypto Payments
Just when it finally seemed positive for the crypto industry in Russia with the Central Bank, Bank of Russia gravitating toward a pro-crypto approach, the country’s President signed a law banning crypto payments in the region.
Just when it finally seemed positive for the crypto industry in Russia with the Central Bank, Bank of Russia gravitating toward a pro-crypto approach, the country’s President signed a law banning crypto payments in the region.
The latest update is not an upgrade for the crypto industry in the country. Russian President Vladimir Putin signed a law, banning the use of digital financial assets (DFA) and digital utility rights (DPR) as a means of payment for goods, products, or services in Russia.
The legal document stated,
“It is prohibited to transfer or accept digital financial assets as a consideration for transferred goods, performed works, rendered services, as well as in any other way that allows one to assume payment for goods (works, services) by a digital financial asset, except as otherwise provided by federal laws.”
Furthermore, along with banning crypto payments, the law also levies crypto exchange operators to refuse transactions where it is possible to use such assets as a monetary surrogate. This simplistically means that crypto brokers facilitating payments are now subjected to the national payment system, in turn putting them under the oversight of the country’s financial regulator.
https://watcher.guru/news/russia-president-putin-signs-law-banning-crypto-payments
>the dollar supply sucked a great deal of those gains into centralized wealth pools whose jobs became protecting those centralized wealth pools
I am assuming that it's somehow different from BTC wealth pools, such as FTX. How exactly?
Interestingly Sam Bankman-Fried is one of the largest contributors to Biden campaign. Coincidence? I don't think so...
I’m assuming that when you say Bitcoin, you mean the asset also traded under the ticker BTC? I value your insights, so I wanted clarification. There is good reason to think that BSV is Bitcoin, and when considering the diminishing block reward, BSV appears better prepared to handle those challenges.