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Why is crypto crashing? A Q&A on bitcoin, luna and other falling cryptocurrencies

Why are bitcoin and luna crashing? What's terraUSD? What's next for crypto? We answer some questions as cryptocurrency markets plungeWhy are bitcoin and luna crashing? What's terraUSD? What's next for crypto? We answer some questions as cryptocurrency markets plunge.....»»

Category: topSource: latimesMay 13th, 2022

Circle CEO says Terra"s implosion has given lawmakers the impetus to speed up crypto regulation

Circle CEO Jeremy Allaire said the collapse of Terra has accelerated the need for the federal government to regulate the crypto industry. Circle CEO Jeremy Allaire.Heidi Gutman/CNBC/NBCU Photo Bank/NBCUniversal via Getty Images The CEO of crypto platform Circle says TerraUSD's crash will help fast-track crypto regulation.  Jeremy Allaire said the crypto "blowup" has accelerated the need for tighter grips on the industry. There are several "very viable legislative proposals" on the table, Allaire told Yahoo Finance.  The chief executive of cryptocurrency company Circle said the recent collapse of major stablecoin TerraUSD and other tokens has given legislators fuel to speed up crypto regulation. "When you have a major blowup, it's certainly going to accelerate the need for Congress to act and establish some perimeters around who and what is involved in operating a dollar stablecoin in the United States of America," Jeremy Allaire said in a Monday interview with Yahoo Finance.Last week, the cryptocurrency market recently experienced a savage sell-off that saw the prices of ether, cardano, solana, and dogecoin tumble. It came on the back of TerraUSD and sister coin luna tanking in what experts labeled a "death spiral." TerraUSD (UST), which was supposed to be pegged to the dollar, had tumbled to $0.375 last week in a dramatically "de-peg" while luna, which is free-floating, sank 97% to effectively trade at zero. TerraUSD was last trading at just $0.088 on Tuesday after falling 17% in the early hours of the day, while luna was down 7% trading at $0.00018188 at 8:15 ET. Luna hit an all-time high of $119.18 on April 5, according to CoinMarketCap. Allaire said the downfall of these "unstable stablecoins," such as UST was "entirely predictable," adding that there are several "very viable legislative proposals" on the table for the US government to tighten grips on the crypto industry as a result. He went on to address the impact the damage the crash has left on the crypto industry as a whole. "I think it's hurt retail investors, the ecosystem as a whole, and so there's been some damage done," Allaire said. Individuals have also been left scarred by TerraUSD's crash, he added. "The really unfortunate thing here is that so many individuals and leaders in the digital asset space bought the hype, promoted the hype, and I think that's hurt people." Circle runs the USDC stablecoin, which has remained anchored at 1:1 to the dollar throughout the turmoil elsewhere.His comments echo sentiments expressed by the cofounder of ethereum Vitalik Buterin who thinks holders of TerraUSD and luna should be compensated following the collapse.Buterin also alluded to subsequent government intervention, like Allaire, saying a government backstop was an "obvious precedent" in reimbursing people who have lost assets, referencing coverage of $250,000 per person.      The Luna Foundation Guard, spearheaded by founder Do Kwon, piped up about the roughly 3.5 billion worth of bitcoin that disappeared after a crypto bloodbath last week. In a tweet Monday, the non-profit organization, announced it sold almost all of the bitcoin in its reserve in an attempt to defend the stablecoin backed by blockchain Terra, known as TerraUSD (UST), from crashing. According to the tweet, nearly 80,394 bitcoin were purchased by the Luna Foundation Guard amounting to over $3 billion, but as of Monday, the organization said it had just 313 bitcoins worth about $9.3 million, left in its reserve. The foundation said it would use the remaining reserves to "compensate users of UST," starting with "smallest holders first." "We are still debating through various distribution methods, updates to follow soon," Luna Foundation Guard said.    Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 17th, 2022

As Terra"s stablecoin collapses and luna hits zero, the crypto project simply switches off its network

Terraform Labs has completely halted the network after luna plunged more than 99%, having earlier failed to stem the decline. Terraform Labs switched off the network after the plunge in its two cryptocurrencies.StefaNikolic/Getty Images Terraform Labs has switched off the network that runs the TerraUSD and luna tokens, after both crashed dramatically. The organization said it was trying to come up with solutions to the problem after one of the biggest collapses in crypto history. TerraUSD, a supposed stablecoin, buckled to $0.15 while the luna cryptocurrency fell effectively 100% to zero. After the dramatic collapse in the cryptocurrencies TerraUSD and luna, administrators responded overnight by pausing the network and then resuming it — effectively turning the computer off and on again.But the move could not stem the plunge in luna, which crashed to effectively zero.Terraform Labs, the company behind the crypto project, has now completely switched off the network, in agreement with "validators" who oversee transactions.The company said on Twitter it is trying to come up with a plan to save the project and that it would update worried investors soon.Will Chen, a crypto developer connected to Terra, said the network's members were trying to come up with solutions to "salvage the remaining value in the ecosystem."Major crypto exchange Binance suspended trading in TerraUSD, also called UST, and luna. Other exchanges continued to allow investors to trade the cryptos, although the suspension of the network means the trades may not be settled.It caps a tumultuous few days for the cryptocurrency project.Before it came undone, TerraUSD was the world's third-largest stablecoin — a type of cryptocurrency that is designed to always be worth $1. Stablecoins are widely used by crypto investors as places to store money while they trade.But TerraUSD "depegged" from the dollar at the weekend during a turbulent period for digital assets and financial markets more generally.The depegging and weaknesses in the token's design triggered a loss of confidence in the project which also dragged down its sister cryptocurrency, luna, which is free-floating.TerraUSD last traded at around $0.15 early Friday morning, far off the $1 mark. The stablecoin's market capitalization plunged from $18.6 billion to less than $2 billion within a week.Luna had plunged effectively 100% from over $80 a token a week ago to zero as of Friday, destroying around $28 billion worth of value in a matter of days.Terra's failure sent shockwaves across the crypto market, contributing to sharp falls in bitcoin and ethereum on Thursday. Both cryptos rebounded by around 10% on Friday, however."There could be significant negative repercussions for cryptocurrencies and digital finance if investors lose confidence in stablecoins," Monsur Hussain, an analyst at Fitch Ratings, said.Yet he added: "Links between crypto markets and regulated financial markets remain weak. We expect this to limit the potential for crypto market volatility to spill over and cause wider financial instability."Read more: A crypto trading behemoth lays out how UST remains a 'material tail risk' that could continue to send prices falling through a 3-part self-destructive cycle — and 2 ways its positioning for further volatility ahead of a key market eventRead the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 13th, 2022

Luna and Terra"s stablecoin UST are both crashing: Here"s a guide to tether, USD Coin, terra and other reserve-backed cryptocurrencies

Terra's algorithmic stablecoin UST appears to have entered a death spiral. Here's a guide to the largest stablecoins and the issues in the ecosystem. Tether, USD Coin, and Dai are the three largest stablecoins by market capitalization, according to the price-tracking website CoinMarketCap.Muhammed Akan/Shutterstock Stablecoins are cryptocurrencies whose value is pegged to a reserve asset like a fiat currency or gold. They're supposed to offer investors an accessible entry and exit point into the crypto market without the volatility. But Terra's UST has decoupled from its 1:1 dollar peg and plunged below $0.50 in what could be a "death spiral". Terra's algorithmic stablecoin is the biggest story in crypto right now.UST, which is supposed to be pegged to the dollar, has seen its price crater in recent days against a backdrop of significant volatility in the crypto market.On Saturday, UST started to lose its peg to the dollar and the ecosystem's governance token LUNA, which plays a role in maintaining the stability of UST, fell 15% in 24 hours.Having traded at around $80 on Friday, LUNA has since plunged 95% to $2.50. UST, which is supposed to trade at $1, is currently trading around $0.50, according to data from FTX.Stablecoins derive their value from being pegged to another asset, which is supposed to make them much less volatile than other cryptocurrencies like bitcoin and ethereum. Some stablecoins, like UST, use a combination of algorithms and reserves to maintain the peg.UST's plunge could potentially provide ammunition for stablecoin critics. Back in September, Securities and Exchange Commission chair Gary Gensler compared stablecoins to casino "poker chips".Insider has compiled a guide of our stories on the largest stablecoins, the key players in the market, and Terra's crash below.So, why is Terra's UST crashing?The algorithmic stablecoin UST uses a burning mechanism and a reserve of digital assets, such as bitcoin, to maintain its peg to the dollar.Some crypto investors love the concept of algorithmic stablecoins, because using an algorithm to maintain the peg keeps the asset outside the scope of regulators and governments. Others hate them, because it's a complex process to maintain the crypto asset's price stability.Read more: Algorithmic stablecoin UST has struggled to maintain its peg amid the crypto crash. We spoke to 6 crypto-investing heavyweights who are sounding the alarm on the project — and one who's making a bull case.Read more: TerraUSD stablecoin plunges to $0.30 as traders warn of 'death spiral' and investors await rescue planRead more: A crypto trading behemoth lays out how UST remains a 'material tail risk' that could continue to send prices falling through a 3-part self-destructive cycle — and 2 ways its positioning for further volatility ahead of a key market eventUST isn't the only stablecoin, right?Terra's UST is one of many publicly-listed stablecoins. The two largest by market capitalization are tether (USDT) and circle (USDC), which are allegedly backed by fiat reserves, although tether has faced significant scrutiny after an investigation found it had overstated its US dollar backing.Some stablecoins are backed by other fiat currencies, or by precious metals like gold and silver.Read more: Tether's tech chief shares his expectations for crypto regulation as Evergrande's debt crisis spotlights the quality of assets in stablecoins' reservesRead more: The Circle founder Jeremy Allaire explains why he thinks bitcoin will eventually surpass gold to hit $1 million — and charts his route to testifying before Congress last year as one of crypto's 'grown-ups'Read more: The founder of a gold-backed cryptocurrency breaks down why now is the perfect time for investors to buy stablecoins - and explains his prediction that inflation could become "even worse than the 1970s"What even is a stablecoin, and should I buy them?The stablecoin landscape can be confusing with new projects continually launching  and governments from all over the world making attempting to regulate the ecosystem.Investors currently have almost no protection if their stablecoin collapses, which is bad news for UST holders if it continues to plummet.Read more: A guide to the top 3 stablecoins by market capitalization, as the debate rages whether these tokens are the future of crypto or unregulated 'poker chips'Read more: Cryptocurrencies, stablecoins and central-bank digital currencies are all the rage. We break down what they are and what you need to know about themRead more: Crypto billionaire Michael Novogratz lays out the 'excesses in crypto that should be swatted down' — and joins Sam Bankman-Fried in sharing his vision for the future of stablecoin regulation as scrutiny intensifiesRead the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 11th, 2022

TerraUSD stablecoin tumbles and luna token plunges 97% as rescue attempts fail to avert "death spiral"

The crash in supposed stablecoin TerraUSD has caused dismay in cryptocurrency markets, and comes during a brutal period for digital assets. Cryptocurrency markets have been hit with a wave of selling in recent weeks.agnormark/Getty Images TerraUSD hit a low of $0.30 Wednesday as the supposed stablecoin slid further away from its peg after confidence evaporated. Sister cryptocurrency luna tumbled more than 97% as rescue efforts from Terraform Labs appeared to fail. Analysts labeled the drops a "death spiral" and questioned whether confidence would ever return to the Terra project. TerraUSD, a major stablecoin which is supposed to be fixed at $1, tumbled on Wednesday to as low as $0.30 as confidence in the crypto project evaporated.Its sister cryptocurrency luna dropped more than 97% as rescue efforts failed to avert what analysts have called a "death spiral" that has shocked digital-asset investors.UST had tumbled to $0.375 Wednesday as of 9.31 a.m. ET, according to Coingecko, having earlier dropped as low as $0.306.Luna, which is free-floating, was down 97% to $0.869. It traded as high as $116 in April.The dramatic drop in TerraUSD and luna is a "death spiral" that could see confidence in the stablecoin evaporate entirely, analysts at research house Fundstrat said in a note.TerraUSD was the world's third-biggest stablecoin before its dramatic "de-peg" from the dollar in recent days.Stablecoins are cryptocurrencies that are designed to trade at $1 per token, giving traders a supposedly stable place to park their cash while they trade.TerraUSD works slightly differently from tether and Circle's USD Coin, the two biggest stablecoins, which are both backed by liquid assets. Instead, it relies on its ties to cryptocurrency luna to maintain its value. Investors can exchange one unit of TerraUSD for $1 of luna. If the price of TerraUSD slips below $1, investors are incentivized to buy TerraUSD so they can exchange it for luna and make a small profit, and vice versa when the price moves above $1. This so-called arbitrage is supposed to push TerraUSD's price back to $1.But the system has broken down in recent days as cracks have started to show in crypto assets during a period of heavy selling in financial markets."The exact reason UST became untethered from the dollar remains unclear, but on Saturday, hundreds of millions of dollars worth of both UST and luna were rapidly sold across exchanges, pushing UST to around 98 cents," analysts at Coinbase said in a note. They added that soon "panic set in."Do Kwon, the co-founder of Terraform Labs, the group behind UST, scrambled to put together rescue plans on Wednesday but they appeared to have little effect on the assets' prices.He issued $1.5 billion of loans in UST and bitcoin Tuesday to try to encourage arbitrage investors to boost the cryptocurrencies.Bryn Solomon of crypto trading firm Mgnr.io said: "At this stage, I don't think these firms will have the risk appetite to support it. Algorithmic stables are a confidence game. Once confidence is lost, it's game over."Read more:A crypto trading behemoth lays out how UST remains a 'material tail risk' that could continue to send prices falling through a 3-part self-destructive cycle — and 2 ways its positioning for further volatility ahead of a key market eventRead the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 11th, 2022

Terra"s stablecoin UST is crashing: Here"s a guide to tether, USD Coin, terra and other reserve-backed cryptocurrencies

Terra's algorithmic stablecoin UST appears to have entered a death spiral. Here's a guide to the largest stablecoins and the issues in the ecosystem. Tether, USD Coin, and Dai are the three largest stablecoins by market capitalization, according to the price-tracking website CoinMarketCap.Muhammed Akan/Shutterstock Stablecoins are cryptocurrencies whose value is pegged to a reserve asset like a fiat currency or gold. They're supposed to offer investors an accessible entry and exit point into the crypto market without the volatility. But Terra's UST has decoupled from its 1:1 dollar peg and plunged below $0.50 in what could be a "death spiral". Terra's algorithmic stablecoin is the biggest story in crypto right now.UST, which is supposed to be pegged to the dollar, has seen its price crater in recent days against a backdrop of significant volatility in the crypto market.On Saturday, UST started to lose its peg to the dollar and the ecosystem's governance token LUNA, which plays a role in maintaining the stability of UST, fell 15% in 24 hours.Having traded at around $80 on Friday, LUNA has since plunged 95% to $2.50. UST, which is supposed to trade at $1, is currently trading around $0.50, according to data from FTX.Stablecoins derive their value from being pegged to another asset, which is supposed to make them much less volatile than other cryptocurrencies like bitcoin and ethereum. Some stablecoins, like UST, use a combination of algorithms and reserves to maintain the peg.UST's plunge could potentially provide ammunition for stablecoin critics. Back in September, Securities and Exchange Commission chair Gary Gensler compared stablecoins to casino "poker chips".Insider has compiled a guide of our stories on the largest stablecoins, the key players in the market, and Terra's crash below.So, why is Terra's UST crashing?The algorithmic stablecoin UST uses a burning mechanism and a reserve of digital assets, such as bitcoin, to maintain its peg to the dollar.Some crypto investors love the concept of algorithmic stablecoins, because using an algorithm to maintain the peg keeps the asset outside the scope of regulators and governments. Others hate them, because it's a complex process to maintain the crypto asset's price stability.Read more: Algorithmic stablecoin UST has struggled to maintain its peg amid the crypto crash. We spoke to 6 crypto-investing heavyweights who are sounding the alarm on the project — and one who's making a bull case.Read more: TerraUSD stablecoin plunges to $0.30 as traders warn of 'death spiral' and investors await rescue planRead more: A crypto trading behemoth lays out how UST remains a 'material tail risk' that could continue to send prices falling through a 3-part self-destructive cycle — and 2 ways its positioning for further volatility ahead of a key market eventUST isn't the only stablecoin, right?Terra's UST is one of many publicly-listed stablecoins. The two largest by market capitalization are tether (USDT) and circle (USDC), which are allegedly backed by fiat reserves, although tether has faced significant scrutiny after an investigation found it had overstated its US dollar backing.Some stablecoins are backed by other fiat currencies, or by precious metals like gold and silver.Read more: Tether's tech chief shares his expectations for crypto regulation as Evergrande's debt crisis spotlights the quality of assets in stablecoins' reservesRead more: The Circle founder Jeremy Allaire explains why he thinks bitcoin will eventually surpass gold to hit $1 million — and charts his route to testifying before Congress last year as one of crypto's 'grown-ups'Read more: The founder of a gold-backed cryptocurrency breaks down why now is the perfect time for investors to buy stablecoins - and explains his prediction that inflation could become "even worse than the 1970s"What even is a stablecoin, and should I buy them?The stablecoin landscape can be confusing with new projects continually launching  and governments from all over the world making attempting to regulate the ecosystem.Investors currently have almost no protection if their stablecoin collapses, which is bad news for UST holders if it continues to plummet.Read more: A guide to the top 3 stablecoins by market capitalization, as the debate rages whether these tokens are the future of crypto or unregulated 'poker chips'Read more: Cryptocurrencies, stablecoins and central-bank digital currencies are all the rage. We break down what they are and what you need to know about themRead more: Crypto billionaire Michael Novogratz lays out the 'excesses in crypto that should be swatted down' — and joins Sam Bankman-Fried in sharing his vision for the future of stablecoin regulation as scrutiny intensifiesRead the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 11th, 2022

Here’s Why Bitcoin and Other Cryptocurrencies Keep Crashing

The current slide of Bitcoin and other cryptocurrencies is being caused by a combination of short-term and long-term factors. Bitcoin took a brutal fall on Monday, briefly dipping below $30,000 for the first time since July 2021. The world’s largest cryptocurrency is now worth less than half of what it was in the fall. Other cryptocurrencies, like Ether and BNB, have seen similar falls, while trading volumes have also tapered off on major exchanges. Some experts are now warning of a “crypto winter,” in which the sector’s astonishing growth is replaced by an extended period of contraction. The current slide of Bitcoin and other cryptocurrencies is being caused by a combination of short-term and long-term inputs, including larger financial markets and the crashing of a major stablecoin. Here are some of the main factors leading to the current slump. [time-brightcove not-tgx=”true”] Bitcoin is connected to the rest of the financial market. Crypto evangelists have long hoped that the independent nature of crypto would make it resistant to inflation and crises. Bitcoin, the number one cryptocurrency, has no central issuer or authority controlling it. That independence from government, many argued, should ensure that Bitcoin would hold its value through economic dips, international wars or drastic policy changes. But the last couple of years have proven this is false. When the coronavirus pandemic crushed global markets in March 2020, so too fell Bitcoin, falling by 57%. Stock markets and cryptocurrencies then both recovered and rose at a staggering rate, which analysts believe was caused by a combination of free time, disposable income, and pandemic-relief money pumped into the world by governments. But lately, investors have been wary that change is in the air, as inflation led the Federal Reserve and other central banks to raise interest rates. For investors looking for a safe port, Bitcoin, which swings wildly by nature, may seem too risky. Bitcoin’s fall comes on the heels of the Dow and Nasdaq’s worst single-day declines since 2020, as well as the S&P 500 hitting its nadir in the past year. The market has been unsettled by Russia’s invasion of Ukraine, which has exacerbated inflation, supply chain issues and oil prices. Slowed growth in China amidst COVID-19 outbreaks there are also contributing to financial anxieties. Some crypto evangelists predict that Bitcoin’s price will decouple from the stock market down the road—but for now, the two are very much intertwined. Crypto is inherently volatile. Even the biggest crypto boosters will tell you that success in the crypto world is far from guaranteed. Its volatility is part of its very appeal to many speculators: that they could make money at rates far faster than that of normal stock brokers. But with the promise of the boom also comes that of the bust. Since Bitcoin’s inception in 2009, there have been several major bear- and bull- cycles, with short-term investors alternately flooding the market and then losing interest. Many exchanges, especially during high times, offer inherently risky propositions, allowing traders to invest with borrowed crypto. If prices start to drop, whether due to big investors selling off their shares or other reasons, a lack of actual cash flow can contribute to even faster free-falls. The volume of people investing in crypto at any given time is highly variable as well: More than half of traders who held crypto at the end of 2021 had only entered the market that year, according to crypto firm Grayscale Investments. And it’s no accident that crypto crashes tend to occur over weekends. That’s when investors tend to tune out, so the ones who are making trades can make bigger waves. Worries about regulation and security breaches Given that crypto derives some of its value from people’s belief in it, markets can be rattled by surrounding skepticism or policy changes. China’s crackdown on bitcoin mining in mid-2021, for example, led to Bitcoin crashing from $65,000 in April to $35,000 in June. The total market capitalization of crypto similarly fell around that time when Elon Musk announced Tesla would no longer accept bitcoin for payments in May 2021, citing environmental reasons. Many crypto investors have watched anxiously as governments of countries central to crypto trading or mining—including the U.S., China, India and Germany—have moved toward regulation. Meanwhile, crypto has been shaken by a wave of hacks and security breaches, including a $600 million hack of the Ethereum sidechain Ronin. These hacks have shaken consumer confidence in crypto and slowed growth from new potential buyers entering the field. The number of real-world use cases that would bring newcomers into the crypto space seems to be slowing this year, Edward Moya, senior market analyst at Oanda, told CBS News. “There’s a belief that mainstream adoption [of Bitcoin] is taking a lot longer than people expected,” Moya said. “Right now, what we’re seeing is that the crypto market is in a wait-and-see mode.” UST Some experts also believe that the recent struggles of UST, TerraUSD, one of the largest stablecoins, played a role in the most recent Bitcoin crash. TerraUSD, also known as UST, is a token that is designed to always be worth $1, but sank below 70 cents on Monday as holders panicked and sold off their tokens en masse in a pseudo-bank-run. In order to defend UST’s price, the Luna Foundation Guard, which safeguards the stablecoin, drained its $1.3 billion bitcoin reserve and bought $850 million more in Bitcoin. “That [action could] add meaningful sell pressure on bitcoin and could drag down markets with it,” Corey Miller, growth lead at dYdX, told TechCrunch. Caleb Franzen, a senior market analyst at Cubic Analytics, explained in the same article that “historically negative performance” and “historically negative sentiment” can lead to “continued selloff,” which impacts prices negatively. Big picture Whether the crypto slide continues remains to be seen. Some believe that things will only get worse as more and more investors panic. But after the price of Bitcoin dropped below $30,000, its price corrected when evangelists “bought the dip,” or entered the market at a discounted rate. They believe that amidst its day-to-day turbulence, Bitcoin will continue its zoomed-out growth pattern that it has displayed over the last decade......»»

Category: topSource: timeMay 11th, 2022

TerraUSD stablecoin plunges to $0.30 as traders warn of "death spiral" and investors await rescue plan

The crash in supposed stablecoin TerraUSD has caused dismay in cryptocurrency markets during a brutal period for digital assets. Cryptocurrency markets have been hit with a wave of selling in recent weeks.agnormark/Getty Images Stablecoin TerraUSD slid to a low of $0.30 Wednesday and luna plunged as analysts warned of a "death spiral." TerraUSD is supposed to be worth $1 at all times but has dramatically de-pegged from the dollar. Anxious investors are awaiting the details of a rescue plan from Terraform Labs founder Do Kwon. TerraUSD, one of the world's biggest stablecoins, tumbled as low as $0.30 Wednesday as traders warned of a "death spiral" in an asset that should supposedly be pegged to the dollar.Holders of TerraUSD, or UST, and sister cryptocurrency luna were left anxiously waiting for details of a rescue plan, which founder Do Kwon said on Tuesday was coming soon.UST had tumbled to $0.474 Wednesday as of 5.59 a.m. ET time, according to Coingecko, having earlier dropped as low as $0.306. The fall triggered alarm across the crypto community, given that the token is supposed to trade at $1 at all times.Luna, the free-floating cryptocurrency intimately tied to TerraUSD, was down 87% on Wednesday to $3.71 as confidence in the network collapse. It traded as high as $116 in April.The dramatic drop in TerraUSD and luna is a "death spiral" that could see confidence in the stablecoin evaporate entirely, analysts at research house Fundstrat said in a note.TerraUSD was the world's third-biggest stablecoin before its dramatic "de-peg" from the dollar over the weekend.Stablecoins are cryptocurrencies that are designed to trade at $1, giving traders a supposedly stable place to park their cash while they trade, saving them the hassle of converting into and out of physical dollars.TerraUSD works slightly differently from tether and Circle's USD Coin, the two biggest stablecoins, which are both backed by liquid assets. Instead, it relies on its ties to cryptocurrency luna to maintain its value. Investors can exchange one unit of TerraUSD for $1 of luna. If the price of TerraUSD slips below $1, investors are incentivized to buy TerraUSD so they can exchange it for luna and make a small profit and vice versa when the price moves above $1. This so-called arbitrage is supposed to keep TerraUSD steady.But the system has broken down in recent days as cracks have started to show in crypto assets, during a period of heavy selling in financial markets more generally.Do Kwon, the co-founder of Terraform Labs, the group behind UST, said Tuesday that he was close to announcing a recovery plan.The promise of a new plan came after he issued $1.5 billion of loans in UST and bitcoin to try to encourage arbitrage investors to boost the cryptocurrency's price.But analysts were skeptical. Fundstrat said even if a rescue plan succeeds, it's too early to say whether trust in the stablecoin will recover.Bryn Solomon of crypto trading firm Mgnr.io said: "At this stage, I don't think these firms will have the risk appetite to support it. Algorithmic stables are a confidence game. Once confidence is lost, it's game over."Read more:A crypto trading behemoth lays out how UST remains a 'material tail risk' that could continue to send prices falling through a 3-part self-destructive cycle — and 2 ways its positioning for further volatility ahead of a key market eventRead the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 11th, 2022

A controversial stablecoin is "breaking the buck." Here"s what that means, and why it"s such a big deal.

The TerraUSD algorithmic stablecoin dropped to as low as $0.67 in a sell-off that was sparked over the weekend. A chart shows the TerraUSD coin falling below 70 cents on May 9, 2022CoinGecko  TerraUSD fell below its $1 peg in a weekend selloff. The fall of the token and its sister coin luna put the spotlight on algorithmic stablecoins.  The value of such cryptocurrencies are set by a computer algorithm.  The recent plunge of the TerraUSD cryptocurrency below its peg to the US dollar is highlighting vulnerabilities in so-called algorithmic stablecoins, two experts told Insider on Tuesday.  TerraUSD is the fourth-largest stablecoin in the cryptocurrency market, according to CoinMarketCap. Heavy selling in TerraUSD — or UST — that started over the weekend prompted it to lose its $1 peg twice, with the Monday's move taking it as low as $0.67, according to CoinGecko data. UST's price is maintained by its sister coin called luna, which itself on Tuesday fell by 41%. UST traded at around $0.90 on Tuesday. "The problem with an algorithmic stablecoin is there's no formula that can currently predict everything that's going to happen, and to my knowledge, there isn't a very successful Artificial Intelligence algorithm that self-adjusts," said Mark Fidelman, direct of SmartBlocks, an agency that develops marketing strategies for cryptocurrency technology and businesses. He's also the host of the "Cryptonized" podcast on YouTube. The value of algorithmic stablecoins is set by a computer algorithm. Those digital assets are unlike so-called traditional stablecoins which are backed up by fiat currency and hard assets such as government bonds or gold.There's a balancing act in UST. If it drops below $1, traders can take them out of circulation by "burning" them in exchange for $1 of luna. If UST climbs above $1, traders sell luna to convert into UST, pushing its price down.Crypto observers over the weekend reportedly witnessed large withdrawals of UST from Anchor Protocol, which acts as a bank for the token. One big holder dumped $285 million worth of the token, crypto news site CoinTelegraph reported.The Luna Foundation Guard, a non-profit aimed at growing the terra ecosystem and that oversees that UST holds its peg to the dollar, deployed $1.5 billion in capital to allay market concerns around UST. UST, however, de-pegged for a second time and luna slid in value. The foundation said Monday it loaned $750 million worth of bitcoin to trading firms to help protect the UST peg and loaned 750 million in UST to accumulate bitcoin as market conditions normalized. The Luna Foundation's reserves as of Tuesday stood at $195 million, a drop of 83% from the previous day, according to a breakdown of its reserves the foundation makes available on its Twitter page. The reserves were made of the Avalanche token, the luna token and UST itself. "When pressure was put on it and the underlying assets associated with it started to decline and the reserves couldn't fill that staking, then the peg breaks," Adam Carlton, chief executive of PinkPanda Holdings, told Insider. PinkPanda provides consulting services on digital assets and is building a mobile app for users to access cryptocurrencies, NFTs and the metaverse. The UST and luna price drops came after a rough week for US equities as investors continued to price in expectations for the Federal Reserve to aggressively raise interest rates to cool down inflation that in March kicked up to a 41-year high. Cryptocurrencies including bitcoin also suffered losses alongside the broader equity market. "Theoretically [holding the dollar peg] works when you don't have market volatility or you have reserves but what we saw with UST is it doesn't work when you have extreme market volatility, which we know is incredibly common in cryptocurrency," said Carlton. Last week, LFG said it had bought $1.5 billion worth of bitcoin to add to its reserves. It has said in the past it intends to acquire $10 billion in bitcoin for its reserves."The problem is you're collateralizing now a cryptocurrency with yet another cryptocurrency. So there's just no tie into real-world assets," said Carlton. "Everyone has put US dollars into all these funds – they put it into bitcoin,  they put it into UST, they put it into luna," said Carlton. "And then as people sell and withdraw back into fiat, then they all decline … so it's a very much a compounding effect." There are some stablecoins that are "pretty predictable," enough so that institutions use them, said Fidelman."So if one of the pillars of that foundation breaks then it calls a lot of other things into the question. Cryptos are an emerging, new market and there needs to be more confidence in it for new people, new investors, new institutions to get involved in it," he said. "Now, is it going to be devastating to crypto? Absolutely not. But you can see some of the impact - whether it's related to luna or not - that it's having on the overall crypto market," Fidelman said. Read the original article on Business Insider.....»»

Category: personnelSource: nytMay 10th, 2022

A tale of two altcoins: Shiba inu"s star fades, while solana shines, as investors favor real-use tokens

Investors have shunned meme tokens like shiba inu in favor of cryptocurrencies with more real-life use cases, such as solana and ether. Shiba inu and sol id-work/ Getty Images and Skorzewiak/ Shutterstock Shiba inu fell by as much as 40% over the last week, while DeFi token solana has climbed 21%. Investors have started turning away from meme coins to those that have real use cases. This week, investors were unnerved by a scam in a Squid Game-themed token and by shiba inu whale activity. Sign up here for our daily newsletter, 10 Things Before the Opening Bell. Shiba inu lost some of its recent appeal this week, falling by as much as 40% over the week in the seven days to Friday. Investors have shunned meme tokens in favor of cryptocurrencies with more real-life use cases, such as solana and ether.The dogecoin-inspired meme coin was down around 5% on the day to $0.00005164, having touched a low this week of $0.00004130 on the Coinbase exchange, marking a drop of almost 40% week-on-week.The coin's rapid rise, coupled with developments elsewhere in the crypto space that have lured investors into more established tokens, unleashed a wave of profit-taking, particularly in light of the fact that most shiba inu in circulation is concentrated in very few hands - meaning there is a strong chance of even deeper losses."There are a load of shib coins out there to sell and whales with big bags to offload. The fact that a few whales hold much of the supply can actually make it easy to push prices up, but of course small-time traders will never know when whales will sell," Ali Beikverdi, CEO and co-founder of bitHolla, an exchange software company said. By way of example, shiba inu holders were unnerved earlier this week when the second biggest shib address started moving $2.3 billion worth of the coin from its wallet. That wallet only accounts for 7% of shiba inu in circulation, while the largest holds 41%, according to Coinmarketcap data.Added to that, a blistering rally in a "Squid Game" token - inspired by the hit Korean series on Netflix - ended in that coin crashing to 0 from closer to $3,000 in hours. This event rekindled concern over the potential for scams in the crypto market."Indeed, investors don't like to lose money. What happened with the Squid Game token caused a high level of discomfort amongst investors," Ryan Wilkinson, Head of Product at Blockasset.co, an NFT marketplace built on the solana network said. Meanwhile, investors have flocked to coins with real use cases, such as those linked to decentralized finance and non-fungible tokens, like ether, solana and avalanche.Solana's sol token has gained 21% so far this week and hit record highs above $250, while avalanche's avax has risen 18% this week and ether - the second most-traded cryptocurrency after bitcoin - has gained 1.6%."Solana is undoubtedly one of the hottest blockchains today, as its usability and eco-friendliness are reverberating across the blockchain industry," Wilkinson said. "The number of decentralized finance (DeFi) applications and non-fungible tokens (NFT) being floated atop the blockchain is the ultimate source of boosted demand for sol," he said.Ether benefitted from the announcement of the launch of micro futures by CME - the biggest derivatives exchange - as well as the growing momentum around NFTs and the metaverse, much of which runs on ethereum. Regardless of the scandals and scams that seem to follow meme cryptos and social tokens, at times, some market watchers believe these more speculative coins will persist. "Meme tokens will have a big part in the cryptocurrency space," Marcus Sotiriou, sales trader at digital asset broker GlobalBlock, said. "We've had evidence with coins like DOGE and SHIB that this is the case. In a world where we are all connected by social media, these communities can be very powerful, and they take advantage of network effects." Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 5th, 2021

Waypoints On The Road To Currency Destruction (And How To Avoid It)

Waypoints On The Road To Currency Destruction (And How To Avoid It) Authored by Alasdair Macleod via GoldMoney.com, The few economists who recognise classical human subjectivity see the dangers of a looming currency collapse. It can easily be avoided by halting currency expansion and cutting government spending so that their budgets balance. No democratic government nor any of its agencies have the required mandate or conviction to act, so fiat currencies face ruin. These are some waypoints to look for on the road to their destruction: Monetary policy will be challenged by rising prices and stalling economies. Central banks will almost certainly err towards accelerating inflationism in a bid to support economic growth. The inevitability of rising bond yields and falling equity markets that follows can only be alleviated by increasing QE, not tapering it. Look for official support for financial markets by increased QE. Central banks will then have to choose between crashing their economies and protecting their currencies or letting their currencies slide. The currency is likely to be deemed less important, until it is too late. Realising that it is currency going down rather than prices rising, the public reject the currency entirely and it rapidly becomes valueless. Once the process starts there is no hope for the currency. But before we consider these events, we must address the broader point about what the alternative safety to a fiat collapse is to be: cryptocurrencies led by bitcoin, or metallic money to which people have always returned when state fiat money has failed in the past. Introduction When expected events begin to unfold, they can be marked by waypoints. These include predictable government responses, and the confused statements of analysts who are unfamiliar with the circumstances. We see this today in the early stages of an inflation that threatens to become a terminal cancer for fiat currencies. Harder to judge is the human element, the pace at which realisation dawns and the public’s consequential response to the discovery that their currency is being debauched and their wealth being transferred stealthily to the state. But history can provide some guidance. If we consider the evidence from Austria before the First World War, we see that the economic prophets who truly understood economics became thoroughly despondent long before the First World War and the currency collapse of the early 1920s. Carl Menger, the father of subjectivity in marginal price theory became depressed by what he foresaw. As von Mises in his Memoirs wrote of Menger’s discouragement and premature silence, “His keen intellect had recognized in which direction Austria, Europe, and the world were pointed; he saw this greatest and highest of all civilizations rushing toward the abyss”. Mises then recorded a conversation his great-uncle had had with Menger’s brother, which referred to comments made by Menger at about the turn of the century, when he reportedly said, “The policies being pursued by the European powers will lead to a terrible war ending with gruesome revolutions, the extinction of European culture and destruction of prosperity for people of all nations. In anticipation of these inevitable events, all that can be recommended are investments in gold hoards and the securities of the two Scandinavian countries” [presumably being on the periphery of European events]. The few economists who have studied American and European monetary and economic policies dispassionately and how they have evolved since the Nixon shock will resonate with Menger’s concerns. Mises also noted that this “pessimism consumed all sharp-sighted Austrians”. Menger’s pupil and friend, Crown Prince Rudolf, successor to the Austro-Hungarian throne took his own life and that of his lover in 1889 because of his despair over the future of his empire and that of European civilisation, and not because of his love affair. As with all historical comparisons, today’s decline in American hegemony is only a most generalised repetition of the process by which an empire dies. But from this distance of over a century from events in Vienna it is easy to forget how important the Hapsburgs were and that before Napoleon the Austro-Hungarian empire had been the largest and most important of the European empires. But putting aside the obvious differences between then and now, today we see little or no evidence of cutting-edge economists sharing the despair of the early Austrians. There is a good reason why this despair is absent today. Instead of economists independent from the state, universities, and professorial sponsorship, the entire economic profession is paid for by governments and their departments to promote statist intervention in the economic affairs of humanity. Feeding off statistics, mathematics is every policy-makers and investor’s religion. But economics is not a natural science governed by mathematics, like physics or chemistry, but a social science governed by markets; markets being forums where humans interact to satisfy their needs and wants, to exchange their production for consumption, and to manage their savings and capital. As Hayek said of his friend Keynes, Keynes was a mathematician and not an economist. Today we can confidently state that students are taught mathematics and not economics. Economists are no longer economists, but statisticians and mathematicians devoid of the a priori reasoning that was central to the science before Keynes. With the entire profession taught to believe in statist intervention, perhaps we should not be surprised that economists are not ringing the alarm bells warning of the consequences of decades of state manipulation of markets and of the catastrophe that evolves from denying there is any difference between money and currency, that is gold or silver, and infinitely expandable promissory notes and credit. Even many modern “Austrians” seem oblivious to the danger of a fiat money collapse, let alone the dire economic consequences. Among them there is even an antipathy against metallic money, which suggests they have not fully absorbed the theories of money and credit so lucidly explained by their earlier mentors. Hopefully, the decline of America and its dollar hegemony we will not result in military conflict, let alone one on the scale of the 1914-18 European catastrophe. But that might be a vain hope. In today’s America we see a hegemon struggling to get to terms with its decline and the reality that the rise of Asia cannot be stopped. But what concerns us here is the more obvious and immediate problem of its currency, dollars backed by nothing more than the faith and credit of the declining US Government. It is not too late to avoid a complete collapse of the dollar-led global currency regime, but there is no sign that the measures to avoid it will be taken. And with the exclusive dominance of mathematical economists: neo-Keynesians, monetarists, and modern monetary theorists alike, there is hardly anyone, like Menger, Mises, and the other Austrian economists who, before the First World War foresaw the economic and monetary consequences of unfettered statism and inflationary financing. Bitcoin — the canary in the currency mine We find ourselves not being warned of potential inflationary dangers by the state-educated pseudo-economists but by a motley crowd of geeks and speculators instead, who have grasped the relative price effect from different rates of currency issuance. Bitcoin’s quantity is capped while those of fiat currencies are not. All you need to exploit this simple fact is believe and convince yourself and others that bitcoin is the replacement currency of tomorrow for the comparison between bitcoin and state fiat to appear valid. This was certainly the story being promoted by crypto enthusiasts from shortly after bitcoin’s first trade until the end of last year. But they have become increasingly convinced that the future for bitcoin is not so much as a currency (after all, while its price in dollars is rising it is in no one’s interest to use it as a medium for exchanging goods), but simply that, like a stock index on steroids, it is the inflation hedge par excellence. And for fear of missing out, even investing institutions run by custodians of other peoples’ money are now piling in. But an index based on equities has the fundamental prop under it of being comprised of stocks the objective of which is to earn money for shareholders by selling goods and services for profit. With bitcoin there are no underlying earnings and nothing which is inflation-linked. In that sense it is a chimera. An argument has therefore developed, with investors and speculators buying bitcoin only because the relative rate of issue relative to fiat currencies is capped, which is expected to drive the price still higher as governments continue to print their currencies. The underlying rationale, that bitcoin is a replacement currency for state fiat currencies has been disproved and I have little more to add in this respect. It cannot be used for economic calculation, because for a borrower there is uncertainty of repayment value. Nor does bitcoin as a rival to state currencies hold water because no central bank will permit it to act as such. This is one reason why they are heading private cryptocurrencies off at the pass by developing their own, state-issued, and state-controlled digital currencies which can be used for economic calculation. Not only has the argument for ever rising bitcoin prices become its sole support, but the underlying rationale, that cryptocurrencies such as bitcoin qualify as a medium for transactions and will be permitted to replace state-issued fiat currencies cannot apply. By identifying relative rates of currency issue as a valuation factor the tech-savvy millennial generation has understood a partial truism. The other part of which they appear not to be fully aware is that the effect of monetary inflation is to undermine a currency’s purchasing power. It is a separate argument from one based solely on relative rates of currency issue. However, having half the story understood at least is an advance from not comprehending any of it, and when further rises in prices for goods become widely expected, as they appear to be beginning to today, crypto fans are likely to learn the consequences of monetary inflation earlier than their non-tech predecessors, and perhaps even before state-educated economists as well. For now, investors are being enticed by nothing other than the promise of riches to buy bitcoin as an inflation hedge, being disappointed by gold’s non-performance. In a recent quote in the UK’s Daily Telegraph a Morgan Stanley analyst stated just that: “We believe the perception of bitcoin as a better inflation hedge than gold is the main reason for the current upswing… triggering a shift away from gold [funds] into bitcoin funds since September”. But without the prop of being a credible form of replacement money the only reason to buy bitcoin is that circular argument: it should be bought because it is being bought. Furthermore, buying bitcoin funds dissipates potential bitcoin demand, because for a bitcoin fund to qualify as a regulated investment, obtaining regulatory permission is easiest when a fund deals mostly or wholly in contracts on a regulated futures exchange instead of the underlying unregulated bitcoin. In other words, much of the demand for bitcoin is being side-lined into paper versions rather than for bitcoin itself. Bubbles based on pure speculation always fail. That is not to say that speculative flows won’t drive bitcoin’s price higher still; as a possibility it seems highly likely. But that is for speculators, not those who seek protection from evolving economic and monetary events. Attention should be paid to Menger’s reported words 120 years ago, quoted above, that “In anticipation of these inevitable events, all that can be recommended are investments in gold hoards and the securities of the two Scandinavian countries” — except the securities of the two Scandinavian countries offer no escape today. That being the case, the price of gold measured in bitcoin would appear to present a remarkable opportunity for lucky holders of bitcoin and similar private-sector cryptocurrencies. This is shown in Figure 1 below. Since April 2015, the ratio of gold to bitcoin prices has fallen from over 5 to 0.03, a decline of over 99%. We have established why bitcoin has advanced: it is now due solely to the madness of an investing crowd, given that it is apparent that it will have no monetary role in the future. Market participants have either forgotten about or turned their backs against the metallic monies of millennia which have always returned as circulating media when state-issued fiat currencies fail. Why gold is under-owned and unappreciated Bitcoin is just part of this story: the other is the central banks’ resistance to rivalry to their fiat currencies from sound money. When US citizens were banned from owning gold coin, gold bullion, and gold certificates by executive order in 1933, the US Government’s desire to escape the discipline of gold as money became public. The resetting of international currency arrangements at Bretton Woods replaced gold with the dollar as the reserve currency with convertibility into gold limited to central banks and certain post-war supranational organisations. Even that failed, leading to the Bretton Woods agreement being suspended by President Nixon in 1971. Led by the US Fed, ever since the Nixon shock central banks have run a propaganda campaign to convince their private sectors that gold’s historic role as the money “of last resort” had been made redundant through the magic of monetary progress. That propaganda campaign is now fifty years old and encompasses the entire working lives of employees in all financial sectors. The dollar myth as the ultimate form of money is now fully institutionalised. In parallel with statist propaganda there has been a fundamental reform of the financial system to permit the development of various forms of derivatives. While derivatives previously existed in limited quantities, their massive expansion since the mid-eighties big-bang and the repeal of the Glass-Steagall Act created the means to absorb speculative demand for all commodities, including metallic money. According to the Bank for International Settlements, outstanding notional amounts of gold OTC derivatives at the end of last year stood at $834bn, to which must be added derivatives on regulated markets totalling a further $100bn. Together they are the equivalent together of over 15,000 tonnes of gold. There is little doubt that, like bank credit, the financial system’s ability to create paper gold out of thin air has had a profound effect on the price. Backing this inflation of derivative paper has been the expansion of bank and shadow bank credit. That is now coming to an end, with the implementation of the latest phase of Basel 3 banking regulations. Basel 3 and the net stable funding ratio If you Google it, you find that Basel 3 is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the financial crisis of 2007-09. It was a crisis centred on derivatives, which highlighted the inadequacies of minimum capital requirements, banking supervision and market discipline, the three pillars of banking regulation. Basel 3 is gradually being introduced, but the regulations which concern gold and silver derivatives are what specifically concern us. Curbing balance sheet risk from inappropriate funding of precious metal derivative positions has already been introduced in Europe, Switzerland, and the US with the introduction of the net stable funding ratio. The last major financial jurisdiction to be affected is the UK, which introduces appropriate regulations from the first trading day of 1922 — in only nine weeks’ time. Put briefly, a bank will no longer be able to run unrestricted derivative assets and liabilities without them being tied together. In other words, if a bank has a derivative as an asset on its balance sheet, it must relate specifically to and match a liability for netting purposes and be otherwise unencumbered if a balance sheet funding penalty is to be avoided. If a bank owns unencumbered physical gold as an asset, it can match that against a customer’s unallocated account without a funding penalty, if it has successfully sought and obtained regulatory permission to do so. Two consequences follow. The first is that a bullion bank can only run an uneven book if it is prepared to accept a funding penalty through the application of the net stable funding ratio.[iii]Therefore, liquidity will almost certainly be withdrawn from futures and forwards markets, at least because banks want to appear fully compliant with the regulations. And the second is that most of the BIS gold derivative number of $834bn referred to above reflects bullion banks liabilities to their gold deposit accounts. By the year-end bullion banks will want to remove them, and the only way this can be achieved is by paying off customer gold accounts in fiat currency. There could be thousands of tonnes equivalent of paper gold to reconcile in this way, leaving gold account depositors to either abandon their gold exposure entirely or to buy physical replacements in the market. And while the gaff is being blown on gold forwards and futures, reconciling central bank swaps and leases could also emerge as a problem. In short, the factors that have suppressed the gold price since the early 1970s are not only coming to an end but are being reversed. The liquidation of paper gold threatens a gold liquidity crisis, which in the past would have been resolved by making bullion available through central bank gold swaps. But with central banks already owed bullion by the commercial banks and increasingly concerned about monetary inflation, this facility may be restricted. For the leading central banks, the introduction of Basel 3’s net stable funding ratio therefore comes at a difficult time. They are already fighting to convince their markets that inflation is only a transient price effect and are beginning to reluctantly admit it is more intractable than they thought. The last thing they need is for the gold price to be forced higher by their own regulations, adding to fears of yet higher inflation to come. But for individuals seeking to escape a fiat money catastrophe it appears that the ratio of gold to bitcoin is at an extreme of overvaluation for bitcoin and an extreme undervaluation for gold. The next waypoints in understanding inflation Because bitcoin has introduced the concept of relative rates of issue for currencies, the masses of the millennial generations will be alerted to the debasement of fiat currencies sooner than they would otherwise have been. We are less interested in how this is reflected in cryptocurrency prices than how this knowledge changes relations between consumers and state currencies. Statist economists and monetary policy makers at the major central banks insist that higher prices for consumer goods are being driven by a combination of increased spending, which was stored up during covid lockdowns, and logistics disruption. To this can be added labour problems, with acute shortages in certain industry sectors and absenteeism due to continuing covid infections. Furthermore, energy and other input costs for businesses have been rising rapidly. Monetary policy makers are aware that a wider consumer panic over rising prices must be avoided. They understand that continuing reports of product shortages will risk encouraging consumer stockpiling, driving consumer prices even higher. They will fear that interest rates would have to be increased significantly to bring price inflation back under control. But growth in the major economies appears to be stalling, which in the Keynesian playbook calls for lower interest rates and monetary stimulation instead. This leads us to... Waypoint 1. Commentary in the main-stream media has yet to address this dilemma. It is to be expected at any time. Following our first waypoint, we can assume that interest rates will be forced to rise by markets beginning to discount further losses of currency purchasing power for which interest compensation is demanded. That will inevitably terminate the bull market in equities because it undermines bond prices, pushing up yields and disrupting relative valuations. Figure 2 shows that this process has probably started, though markets are not yet discounting a rise in bond yields beyond a minor amount. The technical message from this chart confirms that the 10-year UST yield is set to go significantly higher, affecting government borrowing adversely through rising interest costs. And when the bear market in these bonds becomes more obvious to investors and foreign holders of them alike, funding the government deficit will become much more difficult. The scale of the rise in fixed interest yields is likely to take market participants and policy planners alike by surprise. The only way in which monetary policy planners can attempt to control rising bond yields and to stop equities sliding into a bear market is to increase the pace of currency creation, particularly through enhanced QE. But for now, the Fed’s stated intention is to taper QE, not increase it. This leads us to... Waypoint 2. No anticipation of this dilemma in the media or independent commentary has yet been detected. Look out for it. In the run up to the northern hemisphere winter and the Christmas shopping season, energy prices and fuel costs are set to rise further. There is no sign of product shortages being resolved. The danger is that with continuing product shortages, consumers will push their purchases of goods not immediately needed even further into the future in case they become unavailable. This will drive consumer prices even higher, creating expectations of yet higher interest rates in financial markets. The Fed will have a straightforward choice: resist market pressures for higher interest rates to save financial markets, stave off insolvencies by over-leveraged borrowers and minimise government funding costs; or protect the dollar by raising the funds rate sufficiently to take all expectation of higher rates out of the market and ignore the financial carnage. This will be next... Waypoint 3. No anticipation of this dilemma in the media or independent commentary has yet been detected. There is a specific danger developing from consumer demand leading to a general stockpiling goods. When the process goes beyond a certain point the consequences of consumers disposing of their currency and credit in favour of goods become apparent. Currency no longer works as the objective value in a transaction, this role being switched to goods, because people begin to buy goods just to get rid of currency. When that process starts in earnest, the fate of the currency is sealed. A hundred years ago this was called the crack-up boom, the final abandonment of currency. Waypoint 4. No anticipation of the final nails in the fiat currency coffin is currently anticipated. When it is, the fate of the currency will have already been sealed. Summary and conclusions Those of us not under the direct management of the US monetary policies will not escape the consequences. All western central banks accept the dollar as their reserve currency and not metallic money, so events affecting the dollar affect all the other fiat currencies. Furthermore, the other major central banks led by the Bank of Japan, European Central Bank, and the Bank of England are pursuing similarly inflationary monetary policies. Central bank groupthink is concreted into global monetary policies. Without a change in their mandate the end of modern currencies is only a matter of time — and a shortening one at that. The dying days of fiat are foreshadowed by the speculative fervour in bitcoin and other leading cryptocurrencies. A new millennial tech-savvy class of investors has got at least half the message, that fiat currency quantities are being inflated. That a significant element of the population has grasped this much about currencies early challenges the long-held wisdom that not one in a million understands money, which allows governments to oversee a limitless expansion of currency and credit for significant periods of time. Therefore, the danger to state inflationism is that significant numbers will act sooner to avoid currency depreciation by dumping it in favour of goods. It is a process that once started is impossible to stop. While the establishment appears vaguely aware of this danger, it lacks the theoretical knowledge to deal with it. Ninety years of denying classical economics in favour of Keynesianism and other statist monetary theories are too embedded in the official mind. And in the absence of understanding the destructive forces of inflationism, prescient individuals seeking protection for their families, close friends and themselves have no option but to reduce their dependency on fiat currencies and all ephemeral financial assets tied to them. These include savings deposits and “stores of wealth”, particularly fixed-interest bonds and equities. The fashionable alternative is distributed ledger cryptocurrencies which are beyond the interference of the state, exemplified by the rise and rise of bitcoin. But this article points out that this has now become dominated by speculation, so much so that in their ignorance of catallactics investors are discarding metallic money in favour of bitcoin. This is a mistake. There are sound reasons why metallic money, gold and silver, have always been money used as a medium of exchange. And as Figure 1 in this article illustrates, relative to bitcoin gold is now less than 1% of its value in 2016. Bitcoin is the bubble; gold has become the anti-bubble. The systematic suppression of gold in favour of the dollar as the world’s reserve currency is now coming to an end. The fact that westerners hardly own any bullion as part of their savings is a mistake they will rue, if, as seems inevitable, current monetary and economic policies persist. Tyler Durden Fri, 10/29/2021 - 22:00.....»»

Category: blogSource: zerohedgeOct 29th, 2021

Billionaire investor Bill Miller touts Amazon and bitcoin, warns of a new investing paradigm, and takes aim at Warren Buffett"s crypto critique. Here are Miller"s 10 best quotes from a new interview.

Miller said he's learned some expensive lessons during the market downturn, and trumpeted the buying opportunities available for brave investors. Bill Miller.Fox Business Bill Miller touted his longstanding bets on Amazon and bitcoin during a recent podcast. Investors are in a new era of rising rates and inflation, the Miller Value Partners boss said. Miller took aim at Warren Buffett's criticism of bitcoin as an unproductive, worthless asset. Bill Miller trumpeted his signature bets on Amazon stock and bitcoin, diagnosed a new paradigm for investors, and took aim at Warren Buffett's infamous criticism of cryptocurrencies during a recent episode of the "Richer, Wiser, Happier" podcast.The founder and investment chief of Miller Value Partners — who keeps 80% of his personal wealth in Amazon and bitcoin — also bemoaned the current market downturn, and underscored the buying opportunities emerging for brave investors.Here are Miller's 10 best quotes, lightly edited for length and clarity:1. "Since November of last year, the tuition has been very high for me, a very expensive lesson. I should ask President Biden for some student-debt forgiveness here for the tuition payments that I've made." (Miller was joking about what he's learned from seeing Amazon, bitcoin, and other key holdings plunge in value.)2. "I've gotten margin calls, and that's painful because you have to sell stuff that you do not want to sell. Then once the things are sold, you also have to pay tax. I don't like to pay tax any more than the next person does." (Miller noted his cost base on Amazon stock and bitcoin was effectively zero, so he would have to pay significant taxes on his gains.)3. "We're in a regime change. It's a different investing environment when you have secularly rising interest rates, secularly rising inflation, the Fed tightening, and war in Ukraine."4. "When people say, 'What's the best investment decision you ever made?' Buying Amazon in the IPO. 'What's the worst ever?' Selling a share of Amazon."5. "We've tended to look for things that ideally you wouldn't have to sell because they've hit your valuation target. If that valuation target keeps moving forward at a pretty rapid rate, then that's great because you can just keep it, as Buffett says, forever. The kind of business he likes to buy and stick in Berkshire Hathaway."6. "One of the things that I really like in this market is that you can basically buy public leveraged buyouts. They've got a lot of debt on their balance sheet, but that debt is going to disappear over the next several years. The best thing that happened to them is inflation, because the debt is fixed cost, and interest rates are rising, so the value of their debt obligations is falling in real terms."7. "Bitcoin is the only economic entity in the world where the supply is unaffected by the demand." (Miller noted that if the gold price soars, more people will mine gold and supply will increase, whereas there's a fixed supply of bitcoin.)8. "I consider bitcoin an insurance policy against financial catastrophe." (Miller gave the example of a national government privatizing a country's banks and emptying its citizens' accounts, and suggested bitcoin would provide an escape from the seizures.)9. "Buffett said, 'I wouldn't give you $25 for all the bitcoins in the world.' He's said that bitcoin is a non-productive asset and therefore he can't value it. Fair enough. If the only thing that you think you can value are productive assets, then no one's making you buy it, right? So ignore it. The objective of investing is not to own productive assets, the objective is to make money."10. "Mike Novogratz got a big Luna tattoo on his arm months ago, with the wolf howling at the moon. It's like, 'Whoops, maybe you should have got a bitcoin beaver on your arm, or something a little more enduring.'"Read more: NFTs are holding up better than cryptocurrencies amid the market turmoil, according to this AI-driven blockchain firm. An expert explains why they behave differently — and reveals the best categories to ownRead the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 25th, 2022

The crypto crash and the future of bitcoin — 3 perspectives from an economist, a researcher, and an investor

Experts from the Frankfurt School of Finance, Emden Research, and Rudy Capital spoke with Insider about how they saw the future of cryptocurrencies. From left: Timo Emden, Philipp Sandner, and Thomas Faber.Emden/ Thomas Faber /Frankfurt School Blockchain Center / filo /Namthip Muanthongthae / Getty Images Crypto markets have recently crashed as part of a global sell-off in risky assets. Bitcoin has fallen by 25% in the past month, while Luna has lost 99% of its value. Three crypto experts told Insider how they saw the future of cryptocurrencies. This is an edited, translated version of an article that originally appeared on May 21, 2022.TerraUSD (UST) — a stablecoin that uses an algorithm to maintain its value by keeping it pegged to the US dollar — recently broke away from its dollar peg, which caused its sister coin Luna to lose over 99% of its value.In an interview with Insider, Philipp Sandner, the head of the Frankfurt School Blockchain Center at the Frankfurt School of Finance & Management, said bitcoin and other crypto tokens had been "dragged along" with the crash of UST and Luna.Sandner said the collapse resulted from numerous overvaluations and inflated token prices, which he referred to as "almost monstrous structures" that have emerged in the cryptosystem. But it's not just UST that's causing problems for bitcoin and the crypto world. Rising interest rates also affect prices, said the crypto analyst Timo Emden of Emden Research, a research firm that focuses on cryptocurrencies and blockchain. "The days of 'cheap money' are over.""Rising interest rates are proving to be poison for risky asset classes," he said. "The fear of rapid interest-rate hikes, especially by the US Federal Reserve, is taking away one of bitcoin and company's most important stimuli in recent months," he continued, alluding to the record-low interest rates of the past few years.Bitcoin and other cryptocurrencies also appear to be correlated with tech stocks, as the crypto crash comes on the back of a sell-off in more established stocks.But Emden believed that it's still a "fantastic and promising" technology."All the swan songs to bitcoin are, in my view, too early," Emden said. But from a fundamental and technical point of view, the outlook has "clouded over considerably," he added.On bitcoin's price, Emden added that "a slide to $20,000 should not come as too much of a surprise."For the crypto analyst Thomas Faber of Rudy Capital, the current macro view is "relatively gloomy." But he feels the long-term outlook "remains positive." "Nothing has changed in the foundations, value propositions, and visions of most crypto projects," Faber said. "Its disruptive firepower in many areas, such as decentralized finance, remains unchanged and will continue to gain momentum in the coming years," he added. But in the short term, he said, investors should expect further declines.Emden said the recent crash indicated the current aversion to risky asset classes. "Investors are fleeing their investments in panic," he said. "No one wants to catch the falling knife at the moment. Bargain hunters continue to stay away. The fundamental, as well as the technical, situation remains clouded. The stock-market lights are still red," Emden added.Many investors must decide whether to try to wait out the crash or sell off their remaining book profits at the "last second," he said."So there's a danger of the downward spiral continuing. Momentum has developed, which is difficult to stop," Emden continued. He added that investors should prepare for further uncertainties in the coming hours and days.For Sandner, the crypto crash leaves "a lot of scorched earth" for investors, especially those who "never really engaged with cryptocurrencies, but just invested in any old tokens."The professor believed that we were in one of the "worst crises for crypto assets.""Being part of the crypto scene has given me a thick skin over the years," Sandner said.He's experienced such crashes a few times. He said the first time you experience a crash, "you're shocked. The second time, you're also shocked because you thought it wouldn't happen again. But then you realize that crypto markets, just like stock markets, are often incredibly overvalued."Sandner believed this wouldn't be the last crypto crash: "Sometime in a few years, bitcoin will plummet again." He said this volatility provided an argument for stricter regulation to contain crypto's "wild growth."Sandner said that many people "have lost a lot of money" and now don't have the resources or the will to invest more, so they're "turning their backs" on crypto. He added that this creates a lack of liquidity and means the price can't rise.Sandner didn't believe that crypto prices would continue to fall further at the moment. "My gut feeling is that we've reached the bottom," he said.Bitcoin has fallen by about 25% in the past month, while ethereum has fallen by about 35%, and solana by about 50%. It appears that the tokens all correlate with each other, Sandner said.If bitcoin fell another 25%, then because of the correlation, the other cryptocurrencies would fall another 35% or 50%, which means they would have crashed by about 75% in just a few weeks, he added."Maybe a lot of things were inflated, but I can't see the tokens only holding around 20% of their original value," Sandner said. But he added that "anything is possible with bitcoin."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 25th, 2022

JPMorgan backs bitcoin to rise 28% and says cryptocurrencies are now its preferred alternative asset

The investment bank now thinks bitcoin and digital assets should rebound after the great sell-off of 2021 and 2022. Bitcoin has tumbled in 2022 but JPMorgan has warmed to the asset.SOPA Images/Getty Images JPMorgan said it thinks bitcoin's fair price is 28% higher than its current level, saying it sees opportunities in crypto markets. Cryptocurrencies have fallen dramatically in 2022 as investors have ditched riskier investments as storm clouds have gathered. But JPMorgan said it sees "upside" for bitcoin and crypto markets more generally after the sell-off, making digital assets a preferred alternative investment. JPMorgan has said bitcoin's fair price is 28% higher than its current level, implying "significant upside from here" after a dramatic sell-off in cryptocurrencies.The bank said in a note Wednesday that cryptos have overtaken real estate as one of its preferred "alternative assets" — assets that don't fall into typical categories such as stocks and bonds.It said it was sticking to its view that $38,000 was a fair price for bitcoin. That figure was 28% higher than bitcoin's $29,722 level on Wednesday morning."The past month's crypto market correction looks more like capitulation relative to last January/February and going forward we see upside for bitcoin and crypto markets more generally," the bank's strategists, including Nikolaos Panigirtzoglou, said in the note.Cryptocurrencies have tumbled in 2022 as rising inflation and interest rates, the war in Ukraine, and a slowdown in China have caused investors to ditch assets deemed to be risky.Bitcoin is down around 37% for the year, while ethereum has tumbled roughly 48%. The total market value of all cryptocurrencies has plunged from around $3 trillion in November to $1.3 trillion in May.However, JPMorgan said the sell-off had hurt cryptocurrencies more than other alternative investments such as private equity, private debt, and real estate. That suggests there's more room for cryptos to rebound, strategists said in the note."We thus replace real estate with digital assets as our preferred alternative asset class along with hedge funds," they wrote.The dramatic collapse of the TerraUSD stablecoin and connected luna cryptocurrency had soured sentiment among many crypto investors, the strategists said. But they added that there is so far little sign that venture capital funding into crypto is drying up.However, the investment bank said it was now less keen on alternative investments, switching them to a ranking of "underweight" from "overweight" previously.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 25th, 2022

Peter Schiff: The Fed Girds For Battle

Peter Schiff: The Fed Girds For Battle Via SchiffGold.com, It’s the Fed’s “hold my beer” moment. After more than a year in which Federal Reserve leadership appeared clueless, pollyannish, and indecisive, the Fed is conducting a full-throated messaging campaign to show that it is as serious as cancer about the inflation surge that is scaring the bejesus out of consumers, investors, and economists. Their public pronouncements in recent weeks go something like this: “Out of a good faith misreading of post-pandemic data we had concluded, mistakenly as it happens, that the inflation wave, which began in 2021, was transitory. But now that we know it is not, we are moving with great speed and resolve to bring the problem to heel. Given the power of our tools, the underlying strength of our economy, and our hard-earned credibility, we are confident we can get the job done quickly, and without inflicting undue harm on the economy. We will continue until inflation gets closer to our 2% target. And so, if you don’t mind, kind sir, please step aside and let us do the job we were created to do. We got this!” This newly found resolve may assure many that at least the Fed is no longer in denial and has a plan to get us out of this mess. In reality, these open-mouth operations are simply a desperate Hail Mary designed to convince us that the Fed can do what it clearly has no stomach or power to do. I would suggest that Fed officials hold onto their beers and drink. They are going to need it. While most observers have focused on Chairman Jerome Powell’s press conference last week as the clearest insight into the Fed’s thinking, I think more can be gleaned from the extensive conversation two days later in Minneapolis between Christopher Waller, a member of the Federal Reserve Board of Governors (a current voting member of the FOMC) and Neel Kashkari, the President of the Federal Reserve Bank of Minneapolis (and an FOMC alternative member). In particular, Waller offered a very clear assessment of the Fed’s battle plan. Right off the bat, he confronted mounting criticism that the Fed failed to read the economy accurately over the past 18 months, thereby grossly miscalculating policy, which let the inflation genie out of the bottle. His defense, which essentially boils down to “don’t blame us, no one with mainstream credentials in government, economics, or finance saw this coming,” is both bizarre and inadvertently illuminative. Not only does this ignore the 2021 predictions of former Treasury Secretary Larry Summers, who used to have at least some mainstream credibility, but it completely ignores all those like me who had been shouting from the rooftops that this danger was lurking. Waller’s admission, which shows how deeply embedded Fed leaders are in their own echo chamber, is more of an indictment of the entire economic elite rather than an excuse for their errors. Waller then admitted that inflation data that was released way back in September 2021 revealed to them that the “transitory story’ that they had been spinning since the beginning of 2021, would no longer hold water. He explained that members of the FOMC were so alarmed that they immediately responded with plans to roll out new messaging that hinted strongly at tighter policy. Say what? They determined nine months ago that very high inflation had been running rampant for the better part of a year, that it showed no signs of slowing, that the Fed Funds rate (which was then at 0%, and likely 800 basis points below the rate of inflation) was adding fuel to the fire, and the only thing they were prepared to do was to start talking tougher? The Fed did not implement its first rate hike (25 basis points) until March of this year, fully seven months later! And during that entire time, it continued to expand its balance sheet by hundreds of billions of dollars through quantitative easing rather than immediately stopping the program or, better yet, reversing it. That’s insane. Captain, there is a huge gash in the hull of the ship but rather than try to repair the damage now, let’s think about how we are going to word our next few press releases! Instead of taking bold steps back in the fourth quarter of last year to get ahead of the curve, or to at least not fall far further behind, the Fed irresponsibly took a slow and muted path. Given its admitted understanding of the conditions nine months ago, its actions seem hard to justify. Despite these past missteps, Waller claims that the Fed is well-suited to make up for lost time. Emboldened by what he sees as a “historically” strong labor market, Waller believes the current economy can absorb the negative effects of higher interest rates without succumbing to recession. As a result, he predicts the Fed will not be deterred by weaker jobs or economic reports that may emerge in the coming months. In fact, he claims such data would be welcome developments. In his view, the economy needs to lose jobs to be put back into balance. Reduced hiring, he argues, will diminish upward wage pressure, which he sees as the root cause of inflation. To justify his confidence that higher rates will kill inflation but not the broad economy, Waller took pains to draw a sharp contrast between today’s conditions and those that predominated in the late 1970s/early 1980s, which was the last time the Fed confronted nearly double-digit inflation with bold monetary tightening. Back then, the sharp rise in interest rates brought down inflation AND plunged the country into a recession. But as he views the current economy as benefiting from a “historically strong” labor market, he believes that fate will be avoided. But Waller is looking at the rear-view mirror. He assumes that the economy that arose during the last decade of almost zero percent interest rates and historically stimulative fiscal policy will persist after those props are removed. But now, as rates increase and stimulus is removed, the economy must contract and change. We are already seeing such a change in the more speculative end of the economy. That’s where the problems are usually first manifest. In case you hadn’t noticed, the wheels are coming off the technology and the cryptocurrency sectors. The technology-heavy Nasdaq composite index is down more than 25% thus far this year. The ARK Innovation ETF, which tracks the highest-flying growth-oriented technology, and “new economy” stocks are down 56%. E-commerce bellwethers such as Netflix and Shopify are down even more. The carnage in the crypto space is also spectacular. Although bitcoin is down about 60% from its high, that’s the good news. Lesser-known cryptos are down 70% or 80%. Some have been nearly wiped out completely, even those “stable” coins that were supposed to be pegged to the dollar. The pain extends to the businesses that worked in the crypto space. Financial firm Microstrategies, which borrowed to invest in bitcoin, is down 60% year to date while Coinbase, the crypto trading platform, is down 72%. (Bear in mind that all the losses listed above are just this calendar year. If you started measuring from the November 2021 highs, the losses are significantly greater.) Recall that the Recession of 2001 and 2002 largely resulted from the implosion of the dot-com bubble when the pain in Silicon Valley rippled through the broader economy. But this time the outsized gains were even bigger and less tethered to reality. Many tech firms have already announced large-scale layoffs. Hundreds of thousands of highly paid workers may suddenly find themselves looking for jobs. Falling stock prices may also encourage recent retirees, who may have been coaxed out of the labor force by oversized stock market gains, or millennials who’ve been trading meme stocks and cryptocurrencies on Robinhood for a living, to join former Netflix, Twitter and Peloton employees in looking for work. Boom will go bust, and the unemployment rate may rise much quicker than Fed models suggest. Waller also, somewhat bizarrely, believes that the Fed’s job will now be made easier by higher credibility than it had in the late 1970s when Paul Volcker went to war against high inflation. His theory holds that the Fed’s routine failures to confront inflation for much of the 1970s had diminished its credibility, making Volcker’s task that much harder. But by raising rates to nearly 20% in 1980, Volcker restored the credibility, which, in Waller’s view, the Fed holds to this day. He argues that since the Fed has already demonstrated it can do the job, the people are assured it can do it again. This is laughable. Firstly, the Fed has largely “won” the battle against inflation in recent years by lying about it. The CPI has been changed and weakened so many times since 1980 that the index barely resembles the one used by Volcker. Secondly, the Fed has been routinely backing off from tough choices since the Great Recession of 2008. The taper tantrum of 2013, its painfully slow decisions to lift rates from zero in 2015, the rapid pivot away from tightening to easing in December of 2018, all speak to its jitters in the face of turmoil. Thirdly, the Fed’s repeated failures to recognize dangerous bubbles in the stock and real estate markets and its pathetic predictions about the mortgage problems in 2007 being “contained” to subprime, or inflation in 2021 being “transitory,” all add to the vaudevillian nature of its economic insight. If Powell and Waller believe, despite all its recent failures, that the Fed can draw on a 40-year-old mystique generated by a man who passed away more than two years ago, they are in for a very rude awakening. Left out of the discussion between Kashkari and Waller about the differences between the 1970s and today is how much more leverage we must contend with today and how much higher stock, bond and real estate prices are in relation to the overall economy. Back in 1980, those asset prices had been falling or stagnant for the better part of a decade. Consequently, there weren’t that many gains left to lose. Now stocks, bonds, and real estate are still not far off from record highs. The bursting of those bubbles, which could result from higher interest rates, will be much more recessionary than what happened in 1980. So, interest rate increases in 2022 and 2023 may be high enough to burst the debt bubble and plunge the economy into another financial crisis, but they will not be nearly high enough to kill inflation. If the Fed has to reverse course to stimulate an economy in recession, while inflation remains well above its 2% target, the dollar will likely collapse, sending commodity prices and the costs of imported goods upward. As Fed officials tell us how they are ready for battle and that they have the enemy in their sights, I can’t help thinking about “Baghdad Bob,” the hapless spokesman for Saddam Hussein who boldly pronounced in live interviews how the U.S. invasion was failing even as American tanks lumbered into the scene behind him. We can laugh at their predicament. But we won’t laugh long. Tyler Durden Fri, 05/20/2022 - 12:25.....»»

Category: blogSource: zerohedgeMay 20th, 2022

These were the 5 worst performing cryptos over the past week amid bitcoin bear market

With more than 19,000 cryptocurrencies in existence and counting, there are more than triple the number of crypto coins than there are US stocks. Jack Taylor/Getty ImagesWhile bitcoin and ethereum dominate the headlines, there are more than 19,000 crypto coins.With less liquidity and more volatility, these alternative cryptocurrencies can deliver investors massive losses or gains in a short period of time.These were the five worst performing cryptocurrencies over the past week, according to data from CoinMarketCap.Bitcoin's bear market has sucked the life out of many popular cryptocurrencies, with the total crypto market capitalization falling from $3 trillion to around $1.3 trillion today. With more than 19,000 cryptocurrencies in existence and counting, there are more than triple the number of crypto coins than there are US exchange-listed stocks. That massive amount of supply makes it nearly impossible to keep track of all the big movers in the crypto sector outside of well known coins like bitcoin, ether, and dogecoin.The surge in new crypto coins came amid a massive bull market for the sector in 2021, but a more than 50% decline in bitcoin from its November high has dragged the whole sector lower, especially smaller coins that saw extraordinary gains last year like solana, cardano, and polkadot. The implosion of Luna and its related stablecoin, TerraUSD, has also dented confidence in the crypto space and has some investors questioning the stability of other $1 pegged coins. With less liquidity and more volatility, these alternative cryptocurrencies can deliver investors massive losses or gains in a short period of time. For example, squid game token fell 99% in a single day last year after delivering swift gains of 75,000%.Keeping an eye on the weekly winners and losers can help investors identify which coins are beginning to gain and lose traction in the crypto community.These were the five worst performing cryptocurrencies with a market value of more than $1 billion over the past week, according to data from CoinMarketCap.5. Theta NetworkSymbol: THETAMarket Value: $1.3 billion7-Day Performance: -14.5%CoinMarketCap4. Shiba InuSymbol: SHIBMarket Value: $6.5 billion7-Day Performance: -16.7%CoinMarketCap3. AvalancheSymbol: AVAXMarket Value: $8.4 billion7-Day Performance: -19.5%CoinMarketCap2. Internet ComputerSymbol: ICPMarket Value: $1.9 billion7-Day Performance: -19.8%CoinMarketCap1. NEAR ProtocolSymbol: NEARMarket Value: $4.2 billion7-Day Performance: -20.1%CoinMarketCapRead the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 20th, 2022

Global shares get pummeled by investor fears of economic slowdown as inflation heats up

Retailers like Target and Walmart are warning about the impact of inflation on customers, while Wall Street believes the risk of recession is rising. Traders have been cheered by earnings but are still concerned about inflation.Spencer Platt/ Getty Images Global shares slid Thursday, under pressure from investor concern about surging inflation and slowing growth. Major retailers like Target and Walmart have warned about the impact of rising prices on their customers. The S&P 500 on Wednesday saw its biggest one-day loss since the height of the pandemic in March 2020. Global shares dropped on Thursday, as evidence of mounting inflation around the world fueled investor fears of a slowdown in economic growth, which hit tech stocks and cryptocurrencies. Several major US retailers, including Target and Walmart, have warned about the impact of rising prices on the consumer. Meanwhile, the number of voices on Wall Street predicting recession is growing, with Goldman Sachs CEO David Solomon the latest to sound the alarm.The MSCI All World index fell 0.7% on the day, heading for a seventh consecutive weekly loss. The index, a broad gauge of global equities, has lost about 18% so far this year, roughly in line with the S&P 500.On Wednesday, US stock indexes suffered their biggest one-day fall since the depths of the pandemic, with the S&P 500 losing 4%, and the Nasdaq 100 falling 5.1%.Index futures suggested no respite at the start of trading later. S&P 500 and Dow Jones futures were down 0.5%, while those on the tech-heavy Nasdaq 100 were 1.7% lower."The brief bounce in risk assets in the first half of the week looks to have now turned entirely, as inflation and growth fears reassert themselves," strategists at IG said in a daily note."The inability of stocks to rally for more than a few days sends a message that investors remain firmly pessimistic for the time being." In Europe, the pan-continental STOXX 600 fell 2.4%, under pressure from losses in financial services and tech stocks. London's FTSE 100 was among the worst-performing indices in the region, shedding 2.7% in its largest one-day fall since early March. The slide followed inflation data on Wednesday that showed consumer price pressures in April hit their highest level in 40 years. With fears growing over the prospect of the world economy experiencing stagflation — a toxic combination of high inflation and slowing growth — government bond yields eased, reflecting a rise in their price, but were still heading for another weekly increase.The yield on the 10-year Treasury note briefly rose above 3% on Wednesday before subsiding overnight. The yield was last at 2.828%, down 6 basis points."More broadly, yesterday, it was another day where deleveraging was back at the top of the agenda, with equities falling once more — yesterday's bear market rally didn't last long! — and bonds selling-off a little, with the 10-year Treasury popping above 3% once more," Caxton FX strategist Michael Brown said.  "The technical picture is as grim as the fundamental one for equities, with the S&P future again failing to remain above 4,050, and having broken sub-4,000 once more," he added.In cryptocurrencies, bitcoin dropped 3.4% on the day to around $28,904, while ether lost almost 6% to trade at $1,918. Solana and cardano each fell 10%. The market has regained some ground in the past week, but sentiment is fragile. Bitcoin has fallen for an unprecedented seven weeks in a row, which analysts at crypto exchange Coinbase said was a record. "Putting that figure into historical perspective, it's close to the 62% decline that BTC experienced in the early pandemic panic of 2020 — but well short of the 80%-plus selloff the cryptocurrency saw during the 2018 bear market," they said.Read more:Are we in a housing bubble? We asked 32 experts, and most said no. They explain their answers and offer insight about what we could see with housing prices in the coming months.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 19th, 2022

Bitcoin could fall another 40% if it fails to hold the key support level of $27,000, Fairlead"s Katie Stockton says

"The recent breakdown below the weekly cloud [support] reflected negative intermediate-term momentum," Katie Stockton said. A Bitcoin coin lies on a screen showing the BitcoinFernando Gutierrez-Juarez/picture alliance via Getty ImagesBitcoin's sharp decline amid the Terra implosion led the cryptocurrency to test an important support level at $27,200. If bitcoin decisively breaks that support level, the crypto could drift 40% lower to $18,300, Katie Stockton of Fairlead Strategies said."The recent breakdown below the weekly cloud [support] reflected negative intermediate-term momentum," Stockton said.Bitcoin's months-long decline has led the cryptocurrency to recently test and so far hold an important support level at $27,200, Fairlead Strategies' Katie Stockton highlighted in a note on Monday.The decline in bitcoin and other cryptocurrencies accelerated over the past week following the implosion of Terra, an algorithmic based stablecoin that broke the buck and fell more than 90%. The failure of that stablecoin tested the confidence of crypto investors and drove a brief dip in bitcoin to as low as $25,401.Bitcoin has since recovered and is trading above the important psychological price point of $30,000 as of Tuesday morning.But if the crypto fails to decisively hold $27,200 as support, defined as two weekly Friday closes below that level, then the cryptocurrency could fall another 40% from current levels to $18,300, Stockton said."The recent breakdown below the weekly cloud [support] reflected negative intermediate-term momentum, which increases risk beyond the near term," Stockton said. Both the intermediate-term and long-term momentum trends for bitcoin are currently categorized as "bearish" by Stockton, while its short-term momentum trend is "neutral.""Short-term oversold indicators support further stabilization following the successful test of support, based in part on the DeMARK Indicators," Stockton said. If bitcoin can stabilize and rise amid a risk-on rally, Stockton has her eye on potential resistance around the declining 50-day moving average, which currently sits around $39,000. That would represent potential gains of 30% if bitcoin tests that resistance level, which is falling lower and lower by the day given the ongoing downtrend in the cryptocurrency. Bitcoin has dropped 57% from its record high of about $69,000 in November, erasing $700 billion in market value, according to data from CoinMarketCap. Altogether, the total crypto market value has fallen from a peak of around $3 trillion to $1.3 trillion today."Risk is heightened from a long-term perspective, noting the monthly MACD is on a 'sell' signal and the monthly stochastics are not yet oversold," Stockton concluded.  StockCharts.comRead the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 17th, 2022

Investors ploughed $300 million into bitcoin last week as Terra"s stablecoin went into meltdown

It was a "strong signal that investors saw the recent UST stablecoin de-peg and its associated broad sell-off as a buying opportunity," CoinShares said. Bitcoin fans flocked to the token as the crypto market majorly suffered last week.Namthip Muanthongthae Investors poured a record $274 million into crypto assets last week, even as terraUSD crashed, CoinShares found.  The main driver was bitcoin, which logged $299 million in inflows during the crypto rout, it said. This was a strong signal that investors saw the UST stablecoin de-peg and the broader sell-off as a buying opportunity, it said. Investors poured a record amount of money into crypto assets last week, even as the collapse in terraUSD spurred a wider market sell-off, according to CoinShares.Leading cryptocurrency bitcoin was the biggest winner, logging $299 million in weekly inflows, CoinShares said in a report published Monday.While outflows for ethereum, solana, polkadot and others weighed on the total, digital asset investment products overall saw $274 million in inflows in the week to May 13. That was the highest weekly tally this year, according to the report, which analyzes institutional digital-asset flows.That was a "strong signal that investors saw the recent UST stablecoin de-peg and its associated broad sell-off as a buying opportunity," James Butterfill, investment strategist at CoinShares, said in his report.Last week's brutal crypto rout was spurred by the collapse of stablecoin terraUSD (UST), which lost its peg to the dollar to tumble to as low as $0.30 on Wednesday. Its free-floating sister token luna also sank more than 97% in what analysts called a "death spiral" denting confidence in UST.The sell-off dragged down bitcoin, which plummeted below $25,500 on Wednesday to its lowest level since December 2020. But its weekly inflows showed investors jumped into the cryptocurrency as its price slid."Bitcoin was the primary benefactor, with inflows totaling US$299m last week, suggesting investors were flocking to the safety of the largest digital asset," Butterfill said. While leading cryptocurrency bitcoin racked up inflows, second-place ether saw $27 million in outflows as its price fell more than 20%. That brought monthly outflows to $42 million, and year-to-date to $236 million, in what Coinshares described as a "steady trickle out".Solano also dragged on the overall total, with just above $5 million leaving the coin, while polkadot shed $0.6 million.Cryptocurrencies have fallen in 2022 so far as investors wavered on high-risk assets as the Federal Reserve curtails its ultra-easy money policy in an effort to combat sky-high inflation. In addition, the CEO of crypto company Circle and others have suggested that Terra's downfall may well prompt lawmakers to move faster on bringing in crypto regulation, given many retail investors logged big losses as UST and luna lost almost all their value. That has left some increasingly pessimistic about the future of the sector.Last week, a lack of confidence was seen in areas outside cryptocurrencies, according to CoinShares."Blockchain equity investors panicked, with outflows totaling US$51m, the third largest outflow on record," Butterfill said.Read more: Cash is king for retail traders right now, according to 7 investors who expect a prolonged bear market for stocks, bonds, and cryptocurrenciesRead the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 17th, 2022

What Terra"s "Hyperinflationary" Collapse Teaches About "Crypto" & Bitcoin

What Terra's 'Hyperinflationary' Collapse Teaches About 'Crypto' & Bitcoin Update (0900ET): After the dramatic collapse in the cryptocurrencies TerraUSD and luna, administrators responded overnight by pausing the network and then resuming it  - effectively turning the computer off and on again. But the move could not stem the plunge in luna, which crashed to effectively zero. So, as BI reports, Terraform Labs, the company behind the crypto project, has now completely switched off the network, in agreement with "validators" who oversee transactions. The company said on Twitter it is trying to come up with a plan to save the project and that it would update worried investors soon. Will Chen, a crypto developer connected to Terra, said the network's members were trying to come up with solutions to "salvage the remaining value in the ecosystem." Major crypto exchange Binance suspended trading in TerraUSD, also called UST, and luna. Other exchanges continued to allow investors to trade the cryptos, although the suspension of the network means the trades may not be settled. Data released on May 13 confirms that overnight, the embattled cryptocurrency’s supply expanded to an eye-watering 6.9 trillion LUNA. Supply increases, which began in earnest on May 8, took a turn for the nonsensical in recent days in a move reminiscent of hyperinflationary fiat currencies. “Even if LUNA and UST survive this episode, in the long run there must be some genius protocol changes effected to bolster market confidence that the marketcap of LUNA will always exceed the UST float,” Arthur Hayes, former CEO of derivatives platform BitMEX, wrote in the first of a series of blog posts on stablecoins, titled “Luna Brothers, Inc.” released May 13: “I have no idea how to accomplish this.” *  *  * And so, as yet another altcoin nears zero, Bitcoin Magazine's 'NAMCIOS' writes that the event reminds the community why Bitcoin is the only authentic cryptocurrency. Terra is crumbling. The blockchain project home to the popular algorithmic stablecoin TerraUSD (UST), which had recently become the fourth-largest stablecoin by market value but now sits at fifth, is near collapse as UST repeatedly fails to sustain its $1 peg and LUNA, the blockchain’s native token, nears zero. Terraform Labs, the tech start-up behind the development of Terra, halted the production of new blocks on the network on Thursday “to prevent goverance attacks following severe $LUNA inflation and a significantly reduced cost of attack,” it said on Twitter. A governance attack became less expensive because of the nearly-free price of LUNA – an attacker could cheaply acquire enough LUNA tokens to socially attack the network by forcing a majority vote. (Since Terra relies on a derivation of proof-of-stake (PoS) for consensus instead of hardware and electricity as in Bitcoin’s proof-of-work (PoW), coin ownership equals power. In Bitcoin, the amount of BTC you own doesn’t grant you more power on the network.) The network went live a couple of hours later as the software patch was released. This is another important difference between a network like Terra and Bitcoin: while in the former a minority of entities that can vote on things like halting the network, Bitcoin’s true decentralization makes it immune to the whims of any specific group. HOW DOES UST WORK? Stablecoins are digital representations of value in the form of tokens that attemptively maintain a one-to-one parity with a fiat currency like the U.S. dollar. Tether (USDT) and USD Coin (USDC) lead the market capitalization rank and are the most popular and widely-used stablecoins. However, they are issued (minted) and destroyed (burned) by centralized entities that also maintain the necessary dollar-equivalent reserves to back the coin. Terra’s UST, on the other hand, sought to become a stablecoin whose minting and burning process was performed programmatically by a computer program – an algorithmic process. Under the hood, Terra “promises” that people can exchange 1 UST for $1 worth of LUNA (whose value fluctuates freely according to supply and demand) at any given time. If UST breaks its peg to the upside, arbitrageurs can exchange $1 worth of LUNA for 1 UST, capitalizing on the premium with an instant profit. If it breaks the peg to the downside, traders can exchange 1 UST for $1 worth of LUNA also for an instant profit. WHAT DOES BITCOIN HAVE TO DO WITH THIS? Terra grew in awareness among the Bitcoin community after Terraform Labs founder Do Kwon said earlier this year that the project would acquire up to $10 billion of bitcoin for the reserves of UST. The purchases would be made and coordinated by the Luna Foundation Guard (LFG), a nonprofit organization based in Singapore that works to cultivate demand for Terra’s stablecoins and “buttress the stability of the UST peg and foster the growth of the Terra ecosystem.” While corporate treasury allocations to bitcoin grew in popularity over the past couple of years on the heels of MicroStrategy’s continuous BTC buys, LFG’s move represented the first major BTC allocation as a reserve asset by a cryptocurrency project. The news was met with a mix of enthusiasm and skepticism among the community. Bitcoin Magazine reported at the time that the algorithmic maneuver employed by the UST stablecoin to maintain its peg was of doubtful sustainability, and the bitcoin purchases did not make UST a stablecoin “backed by bitcoin.” Even Terraform Labs acknowledged that “questions persist about the sustainability of algorithmic stablecoin pegs.” Terraform Labs also discussed how there needs to be enough demand for Terra stablecoins in the broader cryptocurrency ecosystem to “absorb the short-term volatility of speculative market cycles” and guarantee a better chance of achieving long-term success. This is what the project sought with BTC – create demand for UST by conferring more confidence in peg sustainability. HOW DID TERRA IMPLODE? Given the many open questions about the sustainability of such an algorithmically-sustained peg, Terra’s design failed to hold in a period of stress. As UST began losing its peg to the downside, extra pressure was consequently put on LUNA due to the massive amount of UST increasingly trying to exit and exchange As UST began losing its peg to the downside, traders sought to exit by redeeming each of their UST for $1 worth of LUNA. However, given the fast pace of devaluation, a massive amount of UST tried exiting – more than what Terra was able to exchange for LUNA. That stretched out the on-chain swap spread to 40% and put extra pressure on LUNA, sending its price south sharply. The token then went down a “death spiral.” WHAT DOES THIS TEACH US? In short, it can be argued that the lesson learned from this is: alternative cryptocurrency projects (altcoins) are but an experiment, while Bitcoin is the only tried and tested peer-to-peer digital money. Bitcoin was born out of the ideals of the cypherpunks, a group of early cryptographers with a shared vision that got together to explore what privacy could mean in the then-upcoming digital world – especially as it relates to money. The cypherpunk movement was spun out, for the most part, of the work of Dr. David Chaum, a cryptography pioneer that brought the mathematical technology out of the hands of government bureaucrats and into the realm of public knowledge. His explorations kick-started an entire line of work, dedicated to finding how society could port peer-to-peer money – cash – to a digitized economy. With a clear goal in mind, those mathematicians began crafting what a solution could look like through research and experimentation. Decades later, Satoshi Nakamoto would put it all together and add their own spin to arrive at Bitcoin, the first and only decentralized and trustless form of digital money. As Bitcoin grew in popularity, alternative forms of what came to be known as a cryptocurrency – a currency that exists in the digital realm through the usage of cryptography – started to be created. While those coins initially were born to compete with Bitcoin, a whole new slew of projects later began to emerge with different value propositions while putting their own spin to the blockchain, consensus and cryptography that made Bitcoin work. Nakamoto designed the Bitcoin protocol to leverage PoW, a consensus mechanism that relies on computing power and free competition to mint new BTC on Bitcoin’s blockchain. The bitcoin mining race, as it is known, comprises thousands of miners scattered around the world with a single objective – find the next valid block and receive bitcoin as reward. The altcoins, however, have mostly drifted away from PoW to favor other novel consensus mechanisms. The most popular alternative, PoS, allows participants to lock their holdings of the given project’s native token to become block creators instead of letting them compete with mining hardware and electricity to mine new coins. While PoW brings real-world costs to miners, costs in PoS are merely digital and represent the amount of money spent to buy those coins being staked. The assumption with PoS is that staking those coins ensures miners have skin in the game and are hence encouraged to behave honestly, but there is no evidence that such commitment is enough of an incentive. Moreover, in cases where a strong devaluation happens as with LUNA, the network risks being hit with a governance attack and may find itself having to take totalitarian actions like halting block production of what was supposed to be a permissionless and unstoppable decentralized network. The PoW-PoS dynamic is important also because it highlights the experimental nature of altcoins. Instead of copycatting Bitcoin’s model – a strategy that has been proved unsuccessful time and again – new altcoin projects attempt to “innovate” by copying some parts of Bitcoin’s design and changing up others. As a result, projects being launched today drift away from most of the ideals underpinning the cypherpunk movement that started decades ago. Such projects call themselves decentralized but for the most part have a founding team that hardly ever drops its controlling position and can steer every decision that happens on the network. With such a strong desire to innovate, “crypto” projects for the most part end up creating artificial problems that don’t exist so they can invent a novel solution. Dr. Chaum and the cypherpunks spotted a clear problem in society: How will we have money in the digital age that cannot be spent twice without a centralized authority keeping track of balances? It took decades of research for many specialized scientists and mathematicians of different backgrounds to ultimately culminate in an elegant solution to this problem. Today, however, cryptocurrency teams take but a couple of years from idea generation to a minimum viable product, not enjoying an organic growth in favor of huge amounts of capital that disproportionately favors insiders at the expense of the regular user. I’ve lost everything pic.twitter.com/drDrKMV0Gp — xNFT pat.sol (@PDocHLG) May 12, 2022 Tyler Durden Fri, 05/13/2022 - 12:08.....»»

Category: worldSource: nytMay 13th, 2022

Futures Jump As Crypto Turmoil Fades, Dip Buyers Make Cautious Appearance

Futures Jump As Crypto Turmoil Fades, Dip Buyers Make Cautious Appearance After dropping to the edge of a bear market, with Eminis sliding to precisely 3,855 or exactly 20% lower than the all time high, US index futures rebounded sharply from the brink (the same way they did on Dec 24, 2018 when the S&P spent a few minutes in a bear market) as the stabilization of much of the cryptosphere (where no new stablecoins suddenly cratered to 0) and an overnight easing in Treasury yields provided some relief after a two-day slide. Nasdaq 100 futures climbed 1.7% as of 730 a.m. in New York. S&P 500 futures were also higher, rising 1.1%, as high as 3976 after dropping to 2,855 yesterday. Twitter shares plunged as much as 26% in New York premarket trading after Elon Musk tweeted that his deal for the social media company was "temporarily on hold." Yields on 10-year US Treasury yields fell for a fourth consecutive day on Thursday, reaching 2.85%, before edging higher again on Friday. The dollar index dipped but remains on course for its longest streak of weekly gains since 2018, while bitcoin and ether reversed several days of harrowing losses to rise back over 30,000 and 2,000, respectively. Abating panic in the cryptocurrency market was among the highlights of a risk-on environment on the last day of the week. Bitcoin added about $1,800 to top $30,000. US cryptocurrency-exposed stocks including Riot Blockchain Inc. and Marathon Digital Holdings Inc. also rallied premarket. In notable premarket moves, Twitter slumped 21% after bidder Elon Musk tweeted deal was “temporarily on hold” pending details about fake accounts. On the other end, Robinhood surged 20% after cryptocurrency billionaire Sam Bankman-Fried snapped up a 7.6% stake, while Affirm jumped 30% after earnings. Cryptocurrency-exposed stocks climbed as digital assets started to rebound after the recent rout linked to the implosion of the TerraUSD stablecoin. Coinbase rose 11% despite being sued over its role in the promotion and trading of a stablecoin that purportedly had its value pegged to the price of the Japanese yen.  Bank stocks rose in premarket trading Friday, putting them on track to snap a six-day losing streak. Here are all the notable premarket movers: Twitter (TWTR US) shares slump as much as 19% premarket after Musk says deal is “temporarily on hold pending details”. Tesla (TSLA US) shares hit a session high, rising nearly 5% on the news Megacap tech stocks and semiconductor makers rally in US premarket trading amid a broad rebound across growth sectors, while Korean chip peer Samsung was said to be in talks to hike chipmaking prices. Apple (AAPL US) +2.1%, Meta Platforms (FB US) +2.4%, Microsoft (MSFT US) +1.8% Robinhood (HOOD US) shares surge as much as 27% in U.S. premarket trading after cryptocurrency billionaire Sam Bankman-Fried disclosed a new 7.6% stake in the online brokerage Cryptocurrency-exposed stocks climb in US premarket trading as digital assets started to rebound after the recent rout linked to the implosion of the TerraUSD stablecoin. Riot Blockchain (RIOT US) +7.9%, Marathon Digital (MARA US) +7.2% US-listed Chinese stocks rise in premarket trading, with sentiment boosted by the Fed’s pushback on speculation of steeper interest-rate hikes and Shanghai’s new timeline to end a grueling lockdown. Alibaba (BABA US) +3.3%, JD.com (JD US) +4%, Pinduoduo (PDD US) +4.3%. New Relic (NEWR US) declined 9% in postmarket. It delivered a mixed fourth quarter, according to analysts, with revenue growth coming in ahead of consensus, albeit with a lower beat compared to the last period Figs (FIGS US) sinks as much as 27% in US premarket trading, with Cowen saying that the scrubs maker’s cut to its full-year 2022 sales growth and Ebitda margin guidance is “well below” previous guidance Compass (COMP US) jumpped 7% in extended trading after the real-estate software company reported larger-than-expected revenues in the first quarter, despite guiding toward lower- than-expected second-quarter revenue First Solar Inc. (FSLR US) shares gained 2.8% in extended trading on Thursday, as Piper Sandler upgrades the stock to overweight from neutral Stocks have plunged this year as traders fretted over the impact tighter monetary will have on growth, with the S&P 500 dropping to precisely 20% from its recent peak before bouncing. On Thursday, Fed Chair Jerome Powell on Thursday reaffirmed that the central bank is likely to raise interest rates by a half percentage point at each of its next two meetings, while leaving open the possibility it could do more. The Fed chair also said that whether a soft landing can be executed or not may depend on factors that they cannot control but added they have tools to get inflation under control and that it will ultimately be more painful if high inflation is not dealt with and becomes entrenched. Furthermore, he noted that with perfect hindsight, it would have been better to have hiked rates sooner, according to Reuters. As the Federal Reserve embarks on interest-rate hikes to tame surging inflation, expensive growth shares, including the tech sector, have suffered as higher rates mean a bigger discount for the present value of future profits. This marks a shift in investor outlook after tech stocks had been some of the market’s best performers for years.  “While we continue to see positives for the market, investor sentiment isn’t likely to turn until we get greater clarity on the 3Rs -- rates, recession and risk,” said Mark Haefele, chief investment officer, UBS Global Wealth Management. “Until then, we favor parts of the market that should outperform in an environment of rising policy rates, slowing growth, and geopolitical uncertainty.” At $1.1 billion, tech stocks suffered their biggest outflows so far this year in the week to May 11, second only to financials, which lost $2.6 billion, Bank of America CIO Michael Hartnett wrote in a note, citing EPFR Global data. By contrast, US stocks overall noted their first inflow in five weeks at $93 million. It’s a “very tough time,” Kathy Entwistle, managing director at Morgan Stanley Private Wealth Management, said on Bloomberg Television. “We’re holding just still and quiet and patient and waiting for some more insights as to where we’re going. We still see a lot of volatility on the horizon." In Europe, the Stoxx 600 Index rose 1.2% as the lowest valuations since the start of the pandemic drew buyers. Banks and technology stocks led gains, while autos and telecommunication shares underperformed.  Here are Europe's biggest movers: Evotec shares rise as much as 9.5% after Deutsche Bank analyst Falko Friedrichs raised the recommendation to buy from hold, citing a unique opportunity to invest in a firm with an entire partnered drug pipeline “for free.” Deutsche Telekom shares advance 1.8% after raising full-year outlook for adjusted Ebitda after leases, reflecting higher forecasts for T-Mobile US. Freenet shares gain as much as 4.8% 1Q results show a good start to the year, and there may be scope for a guidance upgrade in 1H22, Citi (buy) writes in note Fortum shares advance as much as 11% on Friday -- the biggest intraday gain since 2009 -- after SEB and Danske Bank raised their recommendation on the stock citing the Finnish utility’s Russia exit and de-risking related to Uniper gas contracts. UCB shares fall as much as 17% after the company said the US FDA said it can’t approve UCB’s psoriasis treatment bimekizumab in its current form, forcing the company and analysts to reasses 2022 expectations. Drax falls as much as 7.6% and is among weakest performers in the Stoxx 600 on Friday after Credit Suisse gives the stock its only negative rating, moving to underperform on elevated power prices. SalMar drops as much as 4%, falling alongside peers in the Norwegian salmon and seafood sector, after a slew of several companies in the sector reported 1Q earnings that came in below expectations. Unipol and UnipolSai drop in Milan trading after releasing first-quarter results and the 2022-2024 strategic plan; analysts note lower-than-expected cumulative dividends in plan for UnipolSai. European Union nations said it may be time to consider delaying a push to ban Russian oil if the bloc can’t persuade Hungary to back the embargo. Wheat production in Ukraine, one of the biggest growers, will fall by one-third compared to last year, according to a US forecast. Earlier in the session, Asian stocks rallied as battered technology shares bounced back, with the regional benchmark still on track for its worst weekly losing streak since 2015 on worries about higher interest rates and lockdowns in China. The MSCI Asia Pacific Index rose as much as 1.8%, advancing with US futures as comments from Federal Reserve Chair Jerome Powell signaled rate hikes of more than 50 basis points may be unlikely. SoftBank was among the biggest boosts after its results, along with Tencent and TSMC. Traders said Friday’s rebound was largely driven by the unwinding of short positions following the recent selloff, with many still nervous about how China’s virus measures can complicate the already murky global economic outlook. The Asian equity measure was on track for its sixth-straight weekly decline, down 2.5% in the past five sessions. “We have to be watchful on the impact of China’s lockdowns, that’s going to have an effect on inflation as well as on growth,” said Jumpei Tanaka, a strategist at Pictet. “Up until now, the earnings outlook hasn’t been lowered that much. The market has been adjusting valuations because of the Fed’s rate hikes. The next key point is how corporate earnings will be affected.” Japan’s Nikkei rose 2.6%, boosted by gains in Tokyo Electron after strong profits as well as SoftBank. In Hong Kong, the Hang Seng Tech Index jumped 4.5%. India’s key equity indexes fell for a 6th straight session and posted their longest stretch of weekly losses in two years as investors’ appetite faded on the back of the local currency’s plunge to a record low and disappointing earnings.  The S&P BSE Sensex declined 0.3% to 52,793.62 in Mumbai after erasing advance of as much as 1.6% during the session. The NSE Nifty 50 Index retreated 0.2% to its lowest level since July 30. Both gauges have retreated 3.7% and 3.8% for the week respectively and fallen for a fifth straight week, their longest run of losses since April 2020. “The fear of rising inflation and expectations of more rate hikes in the near term are weighing on investors’ minds,” according to Kotak Securities analyst Amol Athawale.“Traders are selling at every opportunity given that there seems to be no respite from the negative news flows.” The Sensex and Nifty are now about 14.5% off their peak levels in Oct.  Ten of the 19 sector sub-indexes compiled by BSE Ltd. dropped on Friday, led by metal companies. For the week, utilities stock gauge was the worst performer, dropping about 11%.  ICICI Bank contributed the most to the Sensex’s decline, easing 2.7%. Out of 30 shares in the Sensex index, 15 rose while rest fell. In rates, Treasuries were pressured lower as stock futures pushed through Thursday’s session highs, following gains across European equities. 10-year TSY yields rose to around 2.90%, cheaper by 5bp on the day and sitting close to session highs into early session -- both bunds and gilts underperform slightly across the sector. Risk sentiment was boosted by a rebound in cryptocurrencies, leaving Treasury yields cheaper by up to 6bp across long-end of the curve where 20-year sector underperforms. Long-end led losses steepening 5s30s by 2bp on the day and 2s10s by 2.8bp. The Dollar issuance slate is empty so far; six deals were priced for $11.5b Thursday, taking weekly total to $21.7b vs. $30b projected -- two names decided to stand down. Bund, gilt and UST curves bear-steepen. Peripheral spreads widen, short-dated BTPs lag, widening 5bps to core. Yields on Japan’s debt fell even as those on Treasuries rise across the curve in Asia amid higher equities. In FX, the Bloomberg Dollar Spot Index slumped and the greenback weakened against all of it Group-of-10 peers apart from the yen as investor demand for haven assets ebbed after Federal Reserve Chair Jerome Powell pushed back against speculation of more aggressive interest-rate hikes. Risk sensitive Scandinavian currencies as well ask the Australian dollar led gains. The main theme in the FX options space Friday is gamma selloff following the large swings this week. Still, demand for low-delta exposure on a haven basis remains better bid, with greenback topside in good demand versus the euro and the pound. European government bonds followed US Treasuries lower, snapping a recent rally. Treasury yields rose by 3-7 bps as the curve bear- steepened. The yen pared early weakness after BOJ’s Kuroda stressed FX stability. China’s yuan strengthens against the dollar following warnings from the CBIRC with gains fading following soft loan data. In commodities, Crude futures advance, WTI gains stall near $108. Base metals trade poorly with much of the LME complex down over 1%. Spot gold trades in a narrow range near $1,823/oz. In crypto, Bitcoin rose back above $30,000.  Binance said that withdrawals for Lunar and UST will open when the market becomes more stable, will suspend spot trading for LUNA/BUSD and UST/BUSD at 09:30BST, May 13th. To the day ahead now, and data releases include Euro Area industrial production for March, along with the University of Michigan’s preliminary consumer sentiment index for May. Otherwise, central bank speakers include the Fed’s Kashkari and Mester, as well as the ECB’s Centeno, Nagel and Schnabel. Market Snapshot S&P 500 futures up 1.1% to 3,970.75 STOXX Europe 600 up 1.2% to 429.53 MXAP up 1.7% to 160.25 MXAPJ up 1.9% to 522.21 Nikkei up 2.6% to 26,427.65 Topix up 1.9% to 1,864.20 Hang Seng Index up 2.7% to 19,898.77 Shanghai Composite up 1.0% to 3,084.28 Sensex up 1.2% to 53,564.26 Australia S&P/ASX 200 up 1.9% to 7,075.11 Kospi up 2.1% to 2,604.24 German 10Y yield little changed at 0.91% Euro up 0.2% to $1.0403 Brent Futures up 0.8% to $108.30/bbl Gold spot up 0.0% to $1,822.04 U.S. Dollar Index down 0.25% to 104.59 Top Overnight News from Bloomberg Calls are growing for China’s government to sell more bonds to pay for extra stimulus to boost an economy facing its greatest challenges since the initial few months of the pandemic in 2020 For global investors trying to gauge the fallout from surging interest rates and slowing economic growth, Hong Kong is quickly emerging as a must-watch market. While Hong Kong’s $466 billion foreign-reserves stockpile and plentiful interbank liquidity suggest little chance of an imminent crisis, signs of financial stress are building UK Chancellor of the Exchequer Rishi Sunak said the Brexit settlement in Northern Ireland is causing economic and political harm and called on the European Union to be flexible, comments likely to be seen as an attempt to publicly align himself with Boris Johnson after reports of a rift With the U.K. wilting under the fastest inflation in three decades, supermarkets are raising prices at an even quicker rate, according to a new analysis prepared for Bloomberg. That’s turning the screws on shoppers who are already grappling with higher gas and heating bills and falling real incomes Some EU nations are saying it may be time to consider delaying a push to ban Russian oil so they can proceed with the rest of a proposed sanctions package if the bloc can’t persuade Hungary to back the embargo Beijing reported a slight increase in new Covid-19 cases after officials late Wednesday denied the city will be locked down amid growing concern the Chinese capital’s response to a persistent outbreak is about to be intensified Investors are deep in risk-off mood with outflows from stocks, bonds, cash and gold, Bank of America strategists said, citing EPFR Global data A more detailed look at global markets courtesy of Newsquawk APAC stocks were firmer as risk momentum picked up following on from the volatile session on Wall St where the major indices finished mixed but almost wiped out all losses after a late ramp up heading into the close. ASX 200 traded with respectable gains and back above the 7,000 level with tech frontrunning the advances. Nikkei 225 outperformed as focus remained on earnings, while SoftBank surged amid buyback hopes and despite a record loss. Hang Seng and Shanghai Comp joined in on the elated mood with Hong Kong led by strength in tech, although the advances in the mainland were moderated by the mixed COVID headlines with Beijing to conduct the next round of mass COVID testing, while Shanghai aims to achieve zero community spread by the middle of this month and is considering expanding the scale of output resumption. Top Asian News Shanghai Vice Mayor said they aim to have no community spread of coronavirus by mid-May and are considering expanding the scale of production resumption, while they will aim to open up, ease traffic restrictions and open shops in an orderly manner, according to Reuters. Shanghai is to prioritise resuming classes for grades 9, 11 and 12, while supermarkets, convenience and department stores will resume offline operations in an orderly manner and other services such as hairdressing will open gradually, according to Global Times. China Banking and Insurance Regulatory Commission says the Yuan's weakening is not sustainable, adding do not bet on the unilateral devaluation and appreciation or you could face unnecessary losses; retreat in the Yuan was normal market reaction.. BoJ Governor Kuroda said Japan still hasn't achieved a situation where inflation is stably and sustainably at 2%, while the expected rise in inflation is driven mostly by energy costs and is lacking sustainability. Kuroda reiterated the BoJ must continue monetary easing to reach its price target and it is premature to debate an exit from ultra-easy policy, while he also said it is appropriate to maintain the current dovish forward guidance on interest rates, according to Reuters. North Korea said around 350k have shown fever symptoms of an 'unknown cause' and 187.8k are being treated in isolation, while it reported 18k COVID-19 cases and 6 died from a fever in which one was confirmed as a COVID death, according to KCNA and Yonhap. European bourses are firmer as the rebound from Thursday's selloff continues, Euro Stoxx 50 +1.3%. US futures are similarly bolstered across the board, NQ outpacing peers modestly as Tech recoups, ES +0.9%. Samsung (005930 KS) is reportedly in talks to hike chipmaking prices by up to 20%, according to Bloomberg sources. Elon Musk says the Twitter (TWTR) deal is temporarily on hold, pending details supporting the calculation that spam/fake accounts represent less than 5% of users. Pressure in TWTR subsequent extended to -13% in the pre-market; extending to -19% after five-minutes. Top European News UK PM Johnson is considering as many as 90k job cuts in civil service, according to ITV. GVS Shares Rise After Agreeing to Buy Haemotronic for EU212m EU Starts to Consider Oil Sanctions Delay as Hungary Digs In UCB Plunges After FDA Says It Can’t Approve Psoriasis Drug Now Black Bankers Fight to Hold Finance Accountable for Its Promises FX Dollar and Yen shed some safe haven gains as risk sentiment recovers ahead of the weekend; DXY slips from fresh 2022 peak at 104.920, though still positive, and USD/JPY up near 129.00 vs new retracement low circa 127.50. Aussie takes advantage of pickup in risk appetite and Yuan bounce amidst verbal intervention; AUD/USD hovering under 0.6900 from sub-0.6850 yesterday, USD/CNH and USD/CNY around 6.8000 vs 6.8370 and 6.8110. Euro, Pound and Franc regroup, but remain vulnerable around psychological levels; 1.0400, 1.2200 and parity in EUR/USD, Cable and USD/CHF respectively. Loonie off recent lows post hawkish BoC comments and pre Q1 Loans Survey, USD/CAD close to 1.3000 and 1.1bln option expiry interest between 1.2990 and the round number. Peso underpinned after 50 bp Banxico hike as 1 of the 5 voters dissented for 75 bp. Czech Koruna caught between CNB minutes underlining dovish leaning of new head and Holub opining that May’s hike may not be the final one. Fixed Income Bonds bounce after conceding ground to recovering risk assets. Bunds find support just ahead of 154.00, Gilts in the low 120.00 zone and 10 year T-note at 119-07. Curves re-steepen after decent US 30 year sale completes the Quarterly Refunding remit and attention turns to 20 year and 10 year TIPS auctions next week. Commodities WTI and Brent are firmer moving with the broad rebound in risk-assets, however, upside is capped amid the EU considering omitting the proposed Russia oil embargo from the 6th sanctions round. WTI resides around USD 107/bbl (106.29-108.13 intraday range) and Brent trades just under USD 109/bbl (107.79-109.79 intraday range). Spot gold is contained around USD 1820/oz, though it is coming under modest pressure as the DXY picks up most recently. US Event Calendar 08:30: April Import Price Index MoM, est. 0.6%, prior 2.6%; YoY, est. 12.2%, prior 12.5% 08:30: April Export Price Index MoM, est. 0.7%, prior 4.5%; YoY, est. 19.2%, prior 18.8% 10:00: May U. of Mich. Sentiment, est. 64.0, prior 65.2; Current Conditions, est. 69.3, prior 69.4; Expectations, est. 61.5, prior 62.5 10:00: May U. of Mich. 1 Yr Inflation, est. 5.5%, prior 5.4%; 5-10 Yr Inflation, prior 3.0% DB's Jim Reid concludes the overnight wrap As those working in this industry know, spreadsheet errors can have consequences – often costly ones. My fiancée doesn’t spend as much time on Excel as I do, but with our wedding coming up in July, she’s been using a spreadsheet to keep track of the number of guests. I privately regard this sheet to be an abomination, so in the interests of our future marriage I’ve tried to avoid the subject. But a couple of weeks ago I was told that we needed more guests and had to extend further invites, since we were up against the reception venue’s minimum. This I duly did, although having already invited my friends, I mostly resorted to being a lot more generous on my plus-one policy. At the weekend however, she showed me the spreadsheet. It turned out she hadn’t extended the range on the guest list sum function, and we were already comfortably above what we needed. I won’t tell you how much these extra invites have cost us. Thankfully as a primary school teacher she doesn’t teach Excel to her 5- and 6-year-olds, although I then discovered with even more alarm that she’s considered the spreadsheet expert at her school… It’s been a costly few weeks in markets too as investors have priced in growing recession risks, and over the last 24 hours we’ve seen some incredible intraday volatility across a range of asset classes. At one point in the New York afternoon, the S&P 500 had been down -1.94% at the lows, which left it just shy of a -20% decline since its all-time closing peak that would mark the formal start of a bear market. But then in the final hour there was a major recovery that meant the index only saw a modest -0.13% fall on the day, even if that still marked a fresh one-year low. Futures markets are implying we’re going to see that rally extended today, with those for the S&P up +0.92% this morning. But even if we do see a recovery of that sort of magnitude, then the major losses we’ve already seen this week mean it would still be the first time in over a decade that the index has posted 6 consecutive weekly declines. That pattern of deep losses followed by a late recovery was echoed more broadly yesterday, with the NASDAQ paring back losses of more than -2% on the day to eke out a marginal +0.06% advance. For the FANG+ index (-0.30%), the late recovery wasn’t enough to bring it back into positive territory, and there was a significant milestone reached since its latest slump means it’s now more than -40% beneath its all-time high, which surpasses its losses during the Covid selloff of 2020 when it was “only” down by -34% from peak to trough. European equities lost ground too, and the STOXX 600 (-0.75%) similarly saw a second-half recovery, having been as low as -2.41% earlier in the day. Unlike in April, when the equity declines were triggered by the prospect of a more aggressive Fed tightening cycle and went hand-in-hand with sovereign bond losses, this week’s declines have much more obviously surrounded global growth risks, which you can see in the way that Fed Funds futures are now beginning to take out some of the tightening they’d been pricing in over the year ahead. Only yesterday, the futures-implied rate by the FOMC’s December meeting came down by -5.3bps to still be beneath its level from 3 weeks earlier, which marks a change from the almost relentless march higher we’ve seen over the last 8 months. In fact the only major interruption to that trend so far has come from Russia’s invasion of Ukraine in late-February, before the inflationary consequences of the conflict reasserted themselves on market pricing. With investors expecting less monetary tightening and seeking out safe havens, yesterday witnessed a major sovereign bond rally across countries and maturities. The 10yr Treasury yield came down -7.3bps to 2.85%, and at the front-end of the curve, 2yr yields were down -7.8bps to 2.56%. This came on a day with another round of Fed speakers sounding the same tune of late, including Chair Powell who said that +50bp hikes at the next two meetings were probably appropriate. Meanwhile, he sounded an even more pessimistic tone on the path of the economy given the impending tightening, noting that getting inflation back to target would “include some pain” and that whether a soft landing can be arranged is up to matters beyond the Fed’s control. Over in Europe the declines were even larger, with yields on 10yr bunds (-14.6bps) undergoing their biggest daily move since the start of March, as yields on 10yr OATs (-13.8bps), BTPs (18.4bps) and gilts (-16.5bps) saw similar declines. A noticeable feature of the recent sovereign bond rally is how investors’ expectations of future inflation have come down significantly over recent days, with the 10yr German breakeven falling from a peak of 2.98% on May 2 to just 2.29% yesterday, which is an even faster decline than the one seen during the initial phase of the Covid pandemic in March 2020. That flight to havens was evident in foreign exchange markets too, where the dollar index strengthened a further +0.97% to levels not seen since 2002. Conversely, that saw the euro close beneath the $1.04 mark for the first time since late-2016, although the traditional safe haven of the Japanese Yen was the top-performing G10 currency yesterday, strengthening +1.27% against the US Dollar and +2.61% against the Euro. When it came to cryptocurrencies, Bitcoin hit an intraday low of $25,425 shortly after the European open, which is the first time it’s traded that low since late 2020, before recovering its losses to end the session higher at $28,546, and this morning it’s rebounded another +6.34% to hit $30,356. Overnight in Asia we’ve seen a significant rebound in equity markets too, with the Nikkei (+2.52%), the Hang Seng (+2.00%) and the KOSPI (+1.72%) all seeing sizeable advances, and the Shanghai Comp (+0.56%) also posting a solid gain. Those earlier comments from Chair Powell after the US close have supported risk appetite, particularly since he echoed his previous comments about the Fed being on course for further 50bp hikes at the next couple of meetings, rather than moving towards 75bps in the aftermath of the stronger-than-expected CPI reading. A number of yesterday’s other moves have also begun to unwind, with the Japanese Yen down -0.50% against the US Dollar this morning, whilst yields on 10yr Treasuries have risen +3.6bps overnight. Separately in Shanghai, officials said that they planned to stop community spread of Covid-19 and start reopening by May 20, which is the first time that a timeline has been put forward as to when the lockdown might end. Elsewhere yesterday, there was a significant +13.50% rise in European natural gas futures after Gazprom said that gas flows wouldn’t be able to go through the Yamal pipeline because of Russian-imposed sanctions on European companies. But on the other hand, Bloomberg reported that some EU nations were considering a delay in sanctioning Russian oil in light of Hungarian opposition, and instead pushing ahead with the rest of the sanctions package. There were also further signs of the geopolitical shifts as a result of Russia’s invasion, after Finland’s President and Prime Minister endorsed NATO membership, saying the country should apply “without delay”. Staying on the political sphere, tensions have continued to fester between the UK and the EU over the Northern Ireland Protocol, and yesterday’s statements from the two sides indicated there was a difficult phone call between UK Foreign Secretary Truss and EU Commission Vice President Šefčovič. The UK Foreign Office’s readout of the call said that “if the EU would not show the requisite flexibility … we would have no choice but to act.” Then Šefčovič said in his own statement that it was “of serious concern that the UK government intends to embark on the path of unilateral action.” So one to watch into next week given press reports we could hear more from the UK side then. Looking at yesterday’s data, the US PPI reading added to the picture of elevated inflationary pressures. The headline monthly gain for April came in at +0.5% as expected, but the March reading was revised up two-tenths to +1.6%, meaning that the year-on-year figure only came down to +11.0% (vs. +10.7% expected). We also had the weekly initial jobless claims for the week through May 7, which came in at 203k (vs. 193k expected). And in the UK, the Q1 GDP reading was a bit below consensus at +0.8% (vs. +1.0% expected), and looking at the monthly reading for March specifically there was actually a -0.1% contraction (vs unchanged expected). To the day ahead now, and data releases include Euro Area industrial production for March, along with the University of Michigan’s preliminary consumer sentiment index for May. Otherwise, central bank speakers include the Fed’s Kashkari and Mester, as well as the ECB’s Centeno, Nagel and Schnabel. Tyler Durden Fri, 05/13/2022 - 07:56.....»»

Category: smallbizSource: nytMay 13th, 2022