Bitcoin Price Thread
- Thread starter Magna
- Start date
Investors are just beginning to understand the magnitude of the contagion risks within the crypto industry, let alone how much of the crypto pain will spill over into the equity market.
Karen Maley Columnist Jun 19, 2022
https://www.afr.com/companies/finan...-pain-from-the-crypto-carnage-20220619-p5aut8
As bitcoin plunged below $US20,000, more conservative investors might be quietly congratulating themselves on their sagacity in not succumbing to the crypto craziness.
But their smugness may be premature. That’s because the sharp drop in the bitcoin price will inevitably rattle global equity markets.
The global crypto market is in free fall, and the pain is expected to spill into traditional equity markets. Bloomberg
According to an IMF research note Cryptic Connections, “the analysis suggests that crypto and equity markets have become increasingly interconnected across economies over time”.
The Global Financial Stability note, published in January, provides some indication as to the pain that shareholders are likely to feel from the brutal bitcoin sell-off.
“Spillovers from price volatility of the oldest and most popular crypto asset, bitcoin, to the S&P 500 and MSCI emerging markets indices have increased by about 12 to 16 percentage points since the onset of the COVID-19 pandemic, while those from its returns have increased by about 8 to 10 percentage points.”
The note adds that “in absolute terms, spillovers from bitcoin to global equity markets are significant, explaining about 14 to 18 per cent of the variation in equity price volatility and 8 to 10 per cent of the variation in equity returns”.
The note points out that crypto has now moved from the fringes to the mainstream as an asset class, and increasingly sits alongside traditional assets such as stocks and bonds in the investment portfolios of both retail and institutional investors. And this has led to an increased integration between crypto and equity markets.
“Movements in bitcoin prices are associated with a non-trivial share of the variation in US equity prices,” the note says. “Specifically, the volatility in bitcoin prices explains about one-sixth of the volatility in US equity indices, while bitcoin returns explain about one-tenth of the variation in US equity returns.”
More pain is on the way
This suggests that investors everywhere will feel the bitter effects from carnage in crypto markets, which has wiped out trillions of dollars of value as confidence crumbles and liquidity disappears.
Already, global financial conditions have tightened dramatically, as the US Federal Reserve grapples with the highest inflation in four decades, which has pushed the US share market deep into bear market territory.
But investors now worry that global share markets could feel even more pain if investors dump shares to make up for their deepening crypto losses.
The total crypto market value has now slumped to about $US800 billion from a peak of $US3.2 trillion last November, as prices of digital currencies such as bitcoin and ether have plunged.
Hundreds of thousands of shell-shocked retail traders have had their crypto investments liquidated after they failed to meet margin calls to top up their security on loans they took out to buy digital currencies.
More worrying still are the enormous contagion risks that are now becoming apparent within the crypto industry, as the turmoil in the sector has prompted some crypto lenders to suspend or limit redemptions.
A week ago Celsius Network, one of the largest lenders in the crypto world with close to $US12 billion in deposits, announced that it would no longer allow customers to withdraw cash from their accounts because of extreme market conditions.
Other crypto platforms are taking similar steps. Crypto savings app Finblox imposed a limit on withdrawals and stopped paying interest because of uncertainty over the future of the crypto hedge fund Three Arrows Capital, which was backing the company.
Hong Kong-based Babel Finance, another crypto lender, suspended withdrawals on Friday because of what it described as “unusual liquidity pressures”.
Crypto lenders have flourished in the past few years by offering eye-watering yields that dwarfed the interest rates available from regulated banks. Celsius, for instance, paid customers annual percentage yields of up to 18.6 per cent on crypto deposits.
Typically, crypto lenders on-lend these deposits to other crypto investors, providing capital for them to make bets on crypto. They also frequently invested customer deposits in high-yield, high-risk decentralised finance, or DeFi, investments.
Worrying signs
But last month’s $US60 billion implosion of what was supposedly a blue-chip cryptocurrency, TerraUSD, caused investors to worry. TerraUSD was a stablecoin, which was designed to maintain its value of $US1 per coin.
Instead of being backed by cash or US bonds, however, TerraUSD’s supposed stability rested on algorithms that linked its value to a sister cryptocurrency called Luna.
After witnessing the downfall of TerraUSD and Luna, investors increasingly wanted their money back from crypto lenders.
But this created a problem for Celsius which had placed some of the deposits in relatively illiquid investments that had fallen in value. It also faced pressure to increase the collateral for loans it had taken out, which created extra liquidity stains.
If clients continued to withdraw deposits, Celsius would have had little choice but to dump its investments at a substantial loss, triggering fresh declines in crypto prices and causing losses to cascade across the industry.
All the same, the move by crypto lenders to impose controls on withdrawals has fuelled a fresh bout of nervousness in the crypto world.
Crypto lenders, of course, aren’t the only players suffering as the liquidity tide recedes.
Last week, the high-profile crypto hedge fund Three Arrows failed to meet a margin call from lenders to top up security for loans after its highly leveraged bets on crypto turned sour.
As a result, lenders, including two of the biggest crypto financial services groups – BlockFi and Genesis – sold the assets Three Arrows had pledged as collateral for their loans.
According to the Wall Street Journal, Three Arrows has hired legal and financial advisers to help work out a solution for investors and lenders, which could involve asset sales or a rescue by another firm.
‘Not the first to get hit’
In an interview with the Wall Street Journal, Kyle Davies, the co-founder of the hedge fund, said that Three Arrows was able to sustain the losses on its $US200 million investment in Luna, but the sharp declines in prices of bitcoin, ether and other cryptocurrencies had created more problems.
Davies added that Three Arrows was still trying to quantify its losses and value its illiquid assets, which include venture capital investments in dozens of private crypto-related companies and startups.
“We were not the first to get hit … This has been all part of the same contagion that has affected many other firms,” he said.
As if to prove his point, the contagion effects from the problems at Three Arrows have already been felt by the crypto savings app, Finblox, which is one of the crypto platforms that has capped withdrawals.
Investors are just beginning to understand the magnitude of the contagion risks within the crypto industry, let alone how much of the crypto pain will spill over into the equity market.
Karen Maley Columnist Jun 19, 2022
https://www.afr.com/companies/finan...-pain-from-the-crypto-carnage-20220619-p5aut8
As bitcoin plunged below $US20,000, more conservative investors might be quietly congratulating themselves on their sagacity in not succumbing to the crypto craziness.
But their smugness may be premature. That’s because the sharp drop in the bitcoin price will inevitably rattle global equity markets.
The global crypto market is in free fall, and the pain is expected to spill into traditional equity markets. Bloomberg
According to an IMF research note Cryptic Connections, “the analysis suggests that crypto and equity markets have become increasingly interconnected across economies over time”.
The Global Financial Stability note, published in January, provides some indication as to the pain that shareholders are likely to feel from the brutal bitcoin sell-off.
“Spillovers from price volatility of the oldest and most popular crypto asset, bitcoin, to the S&P 500 and MSCI emerging markets indices have increased by about 12 to 16 percentage points since the onset of the COVID-19 pandemic, while those from its returns have increased by about 8 to 10 percentage points.”
The note adds that “in absolute terms, spillovers from bitcoin to global equity markets are significant, explaining about 14 to 18 per cent of the variation in equity price volatility and 8 to 10 per cent of the variation in equity returns”.
The note points out that crypto has now moved from the fringes to the mainstream as an asset class, and increasingly sits alongside traditional assets such as stocks and bonds in the investment portfolios of both retail and institutional investors. And this has led to an increased integration between crypto and equity markets.
“Movements in bitcoin prices are associated with a non-trivial share of the variation in US equity prices,” the note says. “Specifically, the volatility in bitcoin prices explains about one-sixth of the volatility in US equity indices, while bitcoin returns explain about one-tenth of the variation in US equity returns.”
More pain is on the way
This suggests that investors everywhere will feel the bitter effects from carnage in crypto markets, which has wiped out trillions of dollars of value as confidence crumbles and liquidity disappears.
Already, global financial conditions have tightened dramatically, as the US Federal Reserve grapples with the highest inflation in four decades, which has pushed the US share market deep into bear market territory.
But investors now worry that global share markets could feel even more pain if investors dump shares to make up for their deepening crypto losses.
The total crypto market value has now slumped to about $US800 billion from a peak of $US3.2 trillion last November, as prices of digital currencies such as bitcoin and ether have plunged.
Hundreds of thousands of shell-shocked retail traders have had their crypto investments liquidated after they failed to meet margin calls to top up their security on loans they took out to buy digital currencies.
More worrying still are the enormous contagion risks that are now becoming apparent within the crypto industry, as the turmoil in the sector has prompted some crypto lenders to suspend or limit redemptions.
A week ago Celsius Network, one of the largest lenders in the crypto world with close to $US12 billion in deposits, announced that it would no longer allow customers to withdraw cash from their accounts because of extreme market conditions.
Other crypto platforms are taking similar steps. Crypto savings app Finblox imposed a limit on withdrawals and stopped paying interest because of uncertainty over the future of the crypto hedge fund Three Arrows Capital, which was backing the company.
Hong Kong-based Babel Finance, another crypto lender, suspended withdrawals on Friday because of what it described as “unusual liquidity pressures”.
Crypto lenders have flourished in the past few years by offering eye-watering yields that dwarfed the interest rates available from regulated banks. Celsius, for instance, paid customers annual percentage yields of up to 18.6 per cent on crypto deposits.
Typically, crypto lenders on-lend these deposits to other crypto investors, providing capital for them to make bets on crypto. They also frequently invested customer deposits in high-yield, high-risk decentralised finance, or DeFi, investments.
Worrying signs
But last month’s $US60 billion implosion of what was supposedly a blue-chip cryptocurrency, TerraUSD, caused investors to worry. TerraUSD was a stablecoin, which was designed to maintain its value of $US1 per coin.
Instead of being backed by cash or US bonds, however, TerraUSD’s supposed stability rested on algorithms that linked its value to a sister cryptocurrency called Luna.
After witnessing the downfall of TerraUSD and Luna, investors increasingly wanted their money back from crypto lenders.
But this created a problem for Celsius which had placed some of the deposits in relatively illiquid investments that had fallen in value. It also faced pressure to increase the collateral for loans it had taken out, which created extra liquidity stains.
If clients continued to withdraw deposits, Celsius would have had little choice but to dump its investments at a substantial loss, triggering fresh declines in crypto prices and causing losses to cascade across the industry.
All the same, the move by crypto lenders to impose controls on withdrawals has fuelled a fresh bout of nervousness in the crypto world.
Crypto lenders, of course, aren’t the only players suffering as the liquidity tide recedes.
Last week, the high-profile crypto hedge fund Three Arrows failed to meet a margin call from lenders to top up security for loans after its highly leveraged bets on crypto turned sour.
As a result, lenders, including two of the biggest crypto financial services groups – BlockFi and Genesis – sold the assets Three Arrows had pledged as collateral for their loans.
According to the Wall Street Journal, Three Arrows has hired legal and financial advisers to help work out a solution for investors and lenders, which could involve asset sales or a rescue by another firm.
‘Not the first to get hit’
In an interview with the Wall Street Journal, Kyle Davies, the co-founder of the hedge fund, said that Three Arrows was able to sustain the losses on its $US200 million investment in Luna, but the sharp declines in prices of bitcoin, ether and other cryptocurrencies had created more problems.
Davies added that Three Arrows was still trying to quantify its losses and value its illiquid assets, which include venture capital investments in dozens of private crypto-related companies and startups.
“We were not the first to get hit … This has been all part of the same contagion that has affected many other firms,” he said.
As if to prove his point, the contagion effects from the problems at Three Arrows have already been felt by the crypto savings app, Finblox, which is one of the crypto platforms that has capped withdrawals.
Investors are just beginning to understand the magnitude of the contagion risks within the crypto industry, let alone how much of the crypto pain will spill over into the equity market.
On a linear scale the BTC chart looks like a disaster. With a logarithmic chart it's more pleasant. Based on the last two major corrections/dumps, 10K looks very much reasonable.
huge life altering rally in progress
Your bank account only moves lineair, not logaritmic.
You can watch lineair charts if cypto's go up and logaritmic when crypto's go down if that gives you a better feeling.
The writer says the total Crypto market value is 880 billion. I just calculated Apple Stock and its market cap is 2.218 Trillion at Friday's close. And that is just one stock. The idea that this little bitty crypto market is bringing down the stock market is pretty ridiculous. What is bringing this stock market down is the worst President that this country has ever had.
Bitcoin investments will grow ‘immensely’: El Salvador president
Monika Ghosh
Mon, June 20, 2022, 1:57 PM
In this article:
El Salvador President Nayib Bukele took to Twitter on Sunday to reassure Bitcoin investors, claiming such investments are safe and will grow “immensely” after the bear market.
See related article: El Salvador’s Bitcoin adoption, one week on
Fast facts
__________________________________________________
very good entertainment value ;
when the price is going down,
STOP LOOKING AT THE CHART !!!!!
STOP LOOKING AT THE SHRINKING TRADING ACCOUNT!!!!
stop being paranoid.
go and enjoy life !!!
Monika Ghosh
Mon, June 20, 2022, 1:57 PM
In this article:
- BTC-USD
+8.10%
El Salvador President Nayib Bukele took to Twitter on Sunday to reassure Bitcoin investors, claiming such investments are safe and will grow “immensely” after the bear market.
See related article: El Salvador’s Bitcoin adoption, one week on
Fast facts
- “My advice: stop looking at the graph and enjoy life. If you invested in #BTC your investment is safe and its value will immensely grow after the bear market,” Bukele said on this verified Twitter handle.
__________________________________________________
very good entertainment value ;
when the price is going down,
STOP LOOKING AT THE CHART !!!!!
STOP LOOKING AT THE SHRINKING TRADING ACCOUNT!!!!
stop being paranoid.
go and enjoy life !!!
Last edited:
Bitcoin investments will grow ‘immensely’: El Salvador president
Dumb El Salvador is a f'n guinea pig crypto experiment and they don't even know it. Just being blissfully naive and optimistic.
I mean, who gives a sh8t if their country tanks in this lab experiment. They were already nothing before.
Bitcoin has been declared "dead" something like 350 times.
El Salvador is... bad. Looked like Cuba to me so I get what you are saying. We'll see I guess.
If the technology is looked at its clear that the network is not going anywhere. Short of a global calamity BTC will persist and be volatile. Who doesn't like vols?
Thankfully he lost in 2020 and a real president is now at the helm.