Category: Cryptoes

Crypto isn’t the only clown show: Rest of the world has $65 TRILLION in US dollar liabilities — far more than previously estimated

i only have 6 fingers but i’m just a regular guy nothing to see here

Report comes from the BIS, which is like the Central banks’ Central bank. It also releases the best research, but Powell gets 100x more msm coverage, because Amurica.

Hidden leverage…liquidity issues…10x more debt than capital…reminds me of something 🤔. Only we’re talking TRILLIONS here, not a measly bankman fraud scam of just billions.

Full report here (it’s brief): https://www.bis.org/publ/qtrpdf/r_qt2212h.htm

Verbatim excerpts below:

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The missing dollar debt from FX swaps/forwards and currency swaps is huge, adding to the vulnerabilities created by on-balance sheet dollar debts of non-US borrowers. It has reached $26 trillion for non-banks outside the United States, double their on-balance sheet debt. Moreover, it has grown smartly since 2016, despite the often significant premium demanded on dollar swap funding. For banks headquartered outside the United States, dollar debt from these instruments is estimated at $39 trillion, more than double their on-balance sheet dollar debt and more than 10 times their capital.

Dollar dominance is striking in this FX market segment, greater than in any other aspect of dollar use. As a vehicle currency, the US dollar is on one side of 88% of outstanding positions – or $85 trillion. An investor or bank wanting to do an FX swap from, say, Swiss francs into Polish zloty would swap francs for dollars and then dollars for zloty.

Off-balance sheet dollar debt may remain out of sight and out of mind, but only until the next time dollar funding liquidity is squeezed. Then, the hidden leverage and maturity mismatch in pension funds’ and insurance companies’ portfolios – generally supposed to be long-only – could pose a policy challenge. And policies to restore the flow of dollars would still be set in a fog.

SBF (FTX) interviewed by Andrew Ross Sorkin – my meandering and annoyed takes

Worth watching in full. I’ve heard Stephanopoulos’s interview was harder hitting but haven’t watched it yet.

I downloaded an MP3 version of it, so the reactions below are based on his voice and replies alone and not body language, though I’m notably handicapped when it comes to eq:

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Repeatedly distanced himself from Alameda, made clear he ran FTX but claimed not to know what was going on in detail at Alameda — beggars belief considering he owned 90% of Alameda and every prior Alameda CEO was Sam’s close personal friend or *perhaps cough cough* more

Tries to blame the collapse on leverage, which I assume is a hot button issue with regulators and easier to understand by the general public, but annoying that Sorkin doesn’t dig deeper into the obviously fraudulent evidence (like systemic co-mingling and improper usage of customer funds; Alameda front-running / VIP status on FTX exchange; taking out multiple BILLIONS in personal loans, where did those funds go?; the role of close senior execs including Nishad and Gary)

Within FTX structure, shifts blame to regulators (repeatedly claims FTX US and FTX Japan, etc, were ok and solvent because there were stringent regulations). It’s sorta like saying I stole my classmate’s lunch money because the teacher wasn’t in the room

With two Stanford law professors as parents, he clearly understands the importance and practice of “plausible deniability”

His public track record proves beyond a doubt that he is a very effective and disciplined communicator. Just read his many tweet threads. So why would we suddenly assume he’s NOT being disciplined and purposeful in conducting these interviews, despite his *claims* that his lawyers don’t want him to do this?

Hilarious bit at the end where he complains about hypocritical “do-gooderism”, when his publicly stated life’s work was to promote an over-intellectualized neo-facade of do-gooderism known as ineffective altruism. Merriam Webster literally defines a “do gooder” as “an earnest often naive humanitarian or reformer” gtfo of here

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I hope he ends up in jail. I hope it takes many years before he steps foot in a cell, so he has to spend time and brain cells and stress and money defending himself in court and outside it.

But knowing how the American penal system works he’ll probably receive a light sentence served in a cushy minimum security getaway with plenty of utilitarian philosophy books and vegan couscous or whatever the f he pretends to eat

Recommended crypto reads – and a soon-to-be-published podcast

A friend and I are starting a crypto podcast because we’re middle aged crypto nerds who want to hear ourselves talk.

I’ll be posting the links here, and often. We’ve already recorded 4 episodes and will publish them soon, and will also invite guests in the future

There’ll be brief takes on the state of the market and recent crypto news, but the podcast focus will be crypto-related media (like blogs, tweets, and podcasts) that we recommend and why. There’s just an endless torrent of good content, and we want to get wet and then share the water drops (great metaphor right)

Here are some examples that I’ll probably mention in future episodes:

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Reality check on state of crypto today and what causes the bubbles / cycles:

https://threadreaderapp.com/thread/1592177325906726912.html

Imagine a world where the most active investors in traditional finance are Nasdaq Ventures and the NYSE, and the financial information on those listed securities is opaque. That is our reality in the crypto sector. This is what we have created

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Approximately 9 minutes into this episode of All-In, Chamath gives the best explanation of what’s happening with the SBF / FTX fraud circus and mainstream media’s role in it:

https://pca.st/episode/5486ca04-b7c7-4ec8-a57e-65128ed0da7f?t=587.0

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Perhaps my favorite bitcoin analyst, David has rare perspective from decades in tradfi and a unique lens to look at bitcoin price action (namely, focusing on whales):

https://david06280728.substack.com/p/month-end-analysis-b95

That said, and as I intimated above, it is always darkest before dawn and investor sentiment is as dark now as at any point over my thirty years of investing. I suspect a lot of readers did not experience firsthand how frightening the dot-com bubble and GFC were, but I did, so I can assure you that the FUD then was no less compelling than the FUD right now

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Philosophical reflection on crypto market cycles and why we’re here

https://www.visary.io/next/

Free will perhaps exists on micro levels – individual and local – but on a broader scale, the human condition seems to be solidified in its ways and patterns. Markets are a great example where this constantly plays out – especially in the relatively nascent, less-regulated, more free-market crypto space where multiple cycles have occurred, all culminating and correcting in eerily similar ways.

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Thorough explanation of the short and long-term debt cycles as popularized by Ray Dalio (through a bitcoiner’s lens)

https://bitcoinmagazine.com/markets/the-conclusion-of-the-long-term-debt-cycle-and-the-rise-of-bitcoin

In a free-market capitalist economic system, the most important pricing mechanism is that of money. When there is a monopolist institution setting the price of money, the market is inherently not “free.” There is nothing free about reducing the price of money whenever there is an economic downturn, including the most recent injections of hundreds of billions and now trillions of dollars into financial markets whenever a major liquidation of malinvestment occurs.

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One of the more thorough newsletters covering crypto news with brief but thoughtful takes:

https://page1.substack.com/p/round-tripping-677

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Ending with the tooting of my own crypto horn:

https://kevinhabits.com/when-things-become-free/

https://kevinhabits.com/bitcoin-is-a-simple-asset-david-andolfatto/

Random thoughts on the FTX scam implosion fraud

I’ve been following the FTX bankruptcy like a mouse in a cheese cupboard. Aside from bankruptcy lawyers, the clear beneficiary of this whole saga is Elon Musk because crypto Twitter usage must be through the roof if my own recent addiction is remotely indicative.

Some half baked thoughts as this saga continues to unfold, thoughts that I wrote in 30 minutes and are worth exactly what you paid for them:

I’m surprised that BTC and ETH – the ONLY two blue chips in crypto (and don’t let anyone mislead you into thinking there’s any other token that qualifies) – have held up fairly well, price-wise. Of course that may change before I even hit publish

SBF’s level of psychopathy is off the charts. Apparently the term “psychopath” is more accurate than “sociopath” because psychopaths have better emotional regulation and can appear more charming, whereas sociopaths are prone to rage and more erratic behavior. Perhaps SBF is transitioning now from psychopath > sociopath. I’m just a blogger what do I know

Prescription drugs are powerful. There’s a reason they’re “prescription”. And even with all that research and regulation, we still barely understand what they do to our bodies and minds. But it’s clear they’re doing something, perhaps quite powerful, perhaps quite permanent.

Crypto will survive and thrive in the long-term. Nothing fundamental has changed. This was a centralized failure, a massive bank fraud and trading scam. There’s a reason the two most mentioned comparables are Enron (a public corporation) and Madoff (a Wall Street investment fund).

Bear cycles are ALWAYS more painful than you expect. History never repeats, but it rhymes. In 2014-16, it was exchange failure and bitcoin clones. In 2018-2020, it was ICOs and China ban and regulatory fud. In this cycle, it’s comprehensive institutional failure – lenders, exchanges, and funds. Crypto has problems, many of them, and the criticisms are deserved. But the tradfi water we’re floating in is secured by a very fragile opaque aquarium. Swimmers beware.

The end game is approaching with accelerating speed, both in the broader global financial system, and for crypto’s own place inside it. This debacle will prompt hard questions and even harder regulations, but crypto continues its march towards global adoption and growing usage. The crypto tail increasingly wags the tradfi dog. Meanwhile the tradfi dog appears more and more sickly, limping behind its Central Bank owner.

Prices could dip another 50% from here, or we could see a massive wick up through some combination of a short squeeze, flight to quality (altcoins>BTC & ETH), Fed slowdown, and survivors’ euphoria. I don’t know. And if you have patience, it doesn’t really matter.

“Another hard money renaissance will occur in our lifetimes”

I agree:

I’m placing my bets that another hard money renaissance will occur in our lifetimes, as many have before, and that Bitcoin will be a key beneficiary. I don’t believe it will be the /only/ money, but that its role for the generations ahead will be an important one.

Source: https://alphabetasoup.ghost.io/a-penny-spent-a-penny-lent/

And Stable Diffusion’s take on “hard money renaissance, art by leonardo da vinci”: