The Cryptocurrency Trading Journal
- Thread starter Daal
- Start date
In crypto finance, when everybody uses a DeFi protocol, the protocol becomes more valuable, owners of the token usually benefit and liquidity improves further
In old finance, you almost go under, have to raise cash in a desperate fashion and do things that destroy your brand
https://www.bloomberg.com/news/arti...fter-traders-took-on-wall-street?srnd=premium
That's old finance for ya
In old finance, you almost go under, have to raise cash in a desperate fashion and do things that destroy your brand
https://www.bloomberg.com/news/arti...fter-traders-took-on-wall-street?srnd=premium
That's old finance for ya
Polkadot is a very interesting project
https://www.realvision.com/shows/th...c97f854117f4d3ea62350df2291bc62&autoplay=true
https://www.realvision.com/shows/th...c97f854117f4d3ea62350df2291bc62&autoplay=true
https://www.zerohedge.com/markets/robinhood-caps-maximum-holdings-36-stocks-just-one-share
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The problem should be apparent. Clearinghouses were safe because, if there was a problem, the circular trades netted off on settlement. But by aggressively netting off at the margin stage they are no longer as safe. In fact they are very risky. This was highlighted by the near failure of a small clearinghouse in Europe last year. Using BIS data on the penetration of central clearing, and pricing of interest rate derivatives as a proxy of initial margins, I would say that initial margin in the system needs to rise by about 6 times to make the system "safe". Looking at previous periods of rising initial margins in 2000-2002 and 2007-2009, the pro-cyclicality of claringhouses should be obvious.
Finally, cash hoarding and repo market problems could be a sign of counterparties beginning to worry about clearinghouses. If initial margins rise significantly, the only assets that will see a bid will be cash, US treasuries, JGBs, Bunds, Yen and Swiss Franc. Everything else will likely face selling pressure. If a major clearinghouse should fail due to two counterparties failing, then many centrally cleared hedges will also fail. If this happens, you will not receive the cash from your bearish hedge, as the counterparty has gone bust, and the clearinghouse needs to pay from its own capital or even get be recapitalised itself. One way to think about it is that the financial crisis only metastasized when MG failed, because at that point, everyone suddenly became un-hedged, and everyone needed to sell.
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The house of cards is in trouble
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The problem should be apparent. Clearinghouses were safe because, if there was a problem, the circular trades netted off on settlement. But by aggressively netting off at the margin stage they are no longer as safe. In fact they are very risky. This was highlighted by the near failure of a small clearinghouse in Europe last year. Using BIS data on the penetration of central clearing, and pricing of interest rate derivatives as a proxy of initial margins, I would say that initial margin in the system needs to rise by about 6 times to make the system "safe". Looking at previous periods of rising initial margins in 2000-2002 and 2007-2009, the pro-cyclicality of claringhouses should be obvious.
Finally, cash hoarding and repo market problems could be a sign of counterparties beginning to worry about clearinghouses. If initial margins rise significantly, the only assets that will see a bid will be cash, US treasuries, JGBs, Bunds, Yen and Swiss Franc. Everything else will likely face selling pressure. If a major clearinghouse should fail due to two counterparties failing, then many centrally cleared hedges will also fail. If this happens, you will not receive the cash from your bearish hedge, as the counterparty has gone bust, and the clearinghouse needs to pay from its own capital or even get be recapitalised itself. One way to think about it is that the financial crisis only metastasized when MG failed, because at that point, everyone suddenly became un-hedged, and everyone needed to sell.
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The house of cards is in trouble
Not to beat a dead horse, but the fact that the financial system is a house of cards makes it clear that crypto can be much safer. If I own USDC (self custodied in a hardware wallet), those are US dollars cash backed 1-1 with a blockchain entry as proof of ownership.
If I own cash in a brokerage house, I cant be sure I own anything because if the brokers start to go under, the surviving brokers are on the hook for the losers. Not to mention the chances of fails to deliver (cash or securities) of my active trading. Plus USDC you can earn 5%+ in DeFi protocols (taking smart contract risk). USD in a broker you earn 0% and you underwrite the downside of the financial system, ugh...
If I own cash in a brokerage house, I cant be sure I own anything because if the brokers start to go under, the surviving brokers are on the hook for the losers. Not to mention the chances of fails to deliver (cash or securities) of my active trading. Plus USDC you can earn 5%+ in DeFi protocols (taking smart contract risk). USD in a broker you earn 0% and you underwrite the downside of the financial system, ugh...
I have most of my ETH staked on the ETH 2.0 deposit contract and it looks like Vitalik will refund everyone in case ETH2 goes wrong. Nice to know!
Not that this wont lead to a loss, ETH will probably be down 70%+ if ETH2 fails, but at least I get something back to sell and buy Polkadot or something
Microstrategy Net GAAP Income in the last few years
Microstrategy Unrealized profit on Bitcoin so far: Over $1.1B dollars
If/when Tesla joins this, I bet lots will follow. This is a pretty decent way to a dieying/stagnant business to make some profits and the execs get a nice pay day as their option packages go ITM.
This dynamic combined with the asset managers buying might lead to a pretty big bubble on bitcoin. Not too dissimilar to Japanese companies speculating on real estate and land in the 1980's. It feels to me that it still very early in this whole bull cycle
Microstrategy Unrealized profit on Bitcoin so far: Over $1.1B dollars
If/when Tesla joins this, I bet lots will follow. This is a pretty decent way to a dieying/stagnant business to make some profits and the execs get a nice pay day as their option packages go ITM.
This dynamic combined with the asset managers buying might lead to a pretty big bubble on bitcoin. Not too dissimilar to Japanese companies speculating on real estate and land in the 1980's. It feels to me that it still very early in this whole bull cycle
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On January 29, there was unprecedented demand for Kraken services that far exceeded our surge prediction modeling.
For context, $56 billion was traded on our platform in January of this year – more than all the volume transacted for the full year of 2019. This past weekend alone, we saw a 1,000%+ increase in signups. "
https://blog.kraken.com/post/7734/kraken-deploys-system-upgrades-after-surge-in-crypto-interest/
On January 29, there was unprecedented demand for Kraken services that far exceeded our surge prediction modeling.
For context, $56 billion was traded on our platform in January of this year – more than all the volume transacted for the full year of 2019. This past weekend alone, we saw a 1,000%+ increase in signups. "
https://blog.kraken.com/post/7734/kraken-deploys-system-upgrades-after-surge-in-crypto-interest/
Musk is taking a break from twitter, probably because of all his market moving btc tweets making it more expensive for his btc traders to buy
