When I checked early this morning, Crypto’s leader (BTC) was down into the $23,800 range. Considering the high this week was over $25,000 three days ago; this was hardly encouraging news.
The story out Thursday that got very little play was a joint statement by the Federal Reserve, Comptroller of the Currency, and FDIC. Bottom line is they are worried that Bitcoin and the cryptos could pose a significant risk to traditional banking and financial structures.
Although they didn’t call it a “financial bomb” we will. Because there are two types of risk associated with cryptos. Citing their words:
- Deposits placed by a crypto-asset-related entity that are for the benefit of the crypto-asset-related entity’s customers (end customers). The stability of such deposits may be driven by the behavior of the end customer or crypto-asset sector dynamics, and not solely by the crypto-asset-related entity itself, which is the banking organization’s direct counterparty. The stability of the deposits may be influenced by, for example, periods of stress, market volatility, and related vulnerabilities in the crypto-asset sector, which may or may not be specific to the crypto-asset-related entity. Such deposits can be susceptible to large and rapid inflows as well as outflows, when end customers react to crypto-asset-sector-related market events, media reports, and uncertainty. This
uncertainty and resulting deposit volatility can be exacerbated by end customer confusion related to inaccurate or misleading representations of deposit insurance by a crypto-asset-related entity.
- Deposits that constitute stablecoin-related reserves. The stability of such deposits may be linked to demand for stablecoins, the confidence of stablecoin holders in the stablecoin arrangement, and the stablecoin issuer’s reserve management practices. Such deposits can be susceptible to large and rapid outflows stemming from, for example, unanticipated stablecoin redemptions or dislocations in crypto-asset markets.”
Again, they don’t use the word fin-bomb, but we will because where in a period of experimental finance now. What we are witnessing is, in our view, very much the same kind of “experimental compounding” with new financial elements that blew up uncountable compounding apothecaries in the history of medicine (or merely killed people) with wrong-headed compounds.
A nice parallel, we think, because Crypto is as dependable as leeches and blood-letting in times of old. Well, except leeches are harder to hack, unless you’re Tony F and the GoF crowd.
A thoughtful read of the Wiki entry on what a stablecoin is can be instructive:
A Stablecoin is a type of cryptocurrency where the value of the digital asset is supposed to be pegged to a reference asset, which is either fiat money, exchange-traded commodities (such as precious metals or industrial metals), or another cryptocurrency.
In theory, 1:1 backing by a reference asset could make a stablecoin value track the value of the peg and not be subject to the radical changes in value that are common in the market for many digital assets. In practice, however, stablecoin issuers have not been proven to maintain adequate reserves to support a stable value.”
Of course, Stablecoins (like military intelligence and medical ethics) is a bitch to nail down. Because while underlying asset tracking is proposed, in fact people aren’t playing the Stablecoin con because it will track something you can already buy in dollars (yen, yuan, or whatever). Why bother?
People by Cryptos for gain. (Jeez! Can we get a little clear-headed honesty going, please?) This is like a bubble forming in square of Charmin butt paper because it tracks the FRN paper. (Insanity is contagious and a House of Cards is built on layers of lies!)
Let’s imagine a world where FRN (Federal Reserve Notes) and Crypto have reached parity. And the stablecoin mythos evolves, such that:
A billion of stablecoin (let’s pretend it’s based on Wheat prices) goes into a modestly small FRN bank.
Now, because stablecoins still have price excursions, when the price of Wheat quadruples (this year or next with famine) for example, the stablecoin might increase to four-times (or more) its FRN equivalent.
On Fin-Bomb Day, the stablecoin in something (Wheat) goes to the bank and demands withdrawal of four-times its FRN equivalent.
The bank, not having that kind of money, has to be backstopped by the Fed and the FDIC on a near real-time basis.
Noticing stablecoins backed by wheat have quadrupled, other asset bubbles quickly arise and the whole system convulses into a mighty heap. The government’s only option? A quick war (they’re already laying the groundwork in case) and repudiation of cryptos at all levels.
We often remind readers that China has a total ban on Cryptos and remind readers this may have something to do with what a country learns from being a country for more than 5,000 years. Besides money scams, the Great Wall of China argues they figured out the impacts of open borders as early as 2,300 years ahead of the U.S.
But all this is OK: The U.S. safely maintains world leadership in “Slow Learning.”
Don’t mean to wax on, but stablecoins completely miss the key marketing aspect of Crypto: Greed.
And to those who would protest, I’d point to the PGM metals as being preexisting “stablecoin” proxies. No mania there. Less greed. Smaller volatility plays. A key indicator of greed swings.
The War Party and the Crypto Cons are somewhat interchangeable. Which may have something to do with SBF not dying in jail like Bernie Madoff did in 2021. Go read how SBF Faces 4 Charges In New Indictment, Allegedly Used Straw Donors To Influence 2022 Election.
Not surprised? (You may be a grown-up. Or, like us, Economic Fundamentalist at the Church of the Almighty Dollar.)
And we are not alone: IMF urges governments not to grant cryptocurrencies legal tender status. But, ah-shit, what does the IMF know, right?
But here’s a warning: Beware: Cryptojacking malware hiding behind pirated Final Cut Pro downloads.
Gather round as the government tells us another fairytale!
Personal income increased $131.1 billion (0.6 percent) in January, according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $387.4 billion (2.0 percent) and personal consumption expenditures (PCE) increased $312.5 billion (1.8 percent).
The PCE price index increased 0.6 percent in January. Excluding food and energy, the PCE price index also increased 0.6 percent. Real DPI increased 1.4 percent and Real PCE increased 1.1 percent; goods increased 2.2 percent and services increased 0.6 percent.
So, let’s line ’em up on the bar, shall we?
- Personal income has been resilient even:
- With the market in decline since Nov. 2021
- Soaring federal debt
- New wars
- Higher tax rates going into effect
- Inflation north of 8.7 percent (Social Security measure) or 10.1 (Food prices Labor Dept.)
Hmm. Somehow these illusory statistical personal income gains must be going somewhere else. They seemed to have been hijacked before getting to Uretopia.
Remember that Big-Bad Yellow-Scale 3 down I kept insisting was trying to peek out from our charts? Peeking more’n ever this morning.
The lower green support line in a week, or so, will get interesting if they can’t turn this pig up before then.
We may hit the trend line today as futures degrade pricing…
Let’s do the quick scan to see if life (as we knew it) will still be working come Monday…
Vaccine Deaths targeted red states: CDC confirms 100% of reported Covid-19 Vaccine Deaths were caused by just 5% of batches produced & the majority were sent to red Republican States across the USA. Surely, you’re not surprised, right?
War Pimp Joe is buying more War: US Pledges $2B in Ukraine Security Aid on Invasion Anniversary (thedefensepost.com)
Stories like China calls for a cease-fire and peace talks between Russia and Ukraine : NPR misses the point that China is playing us for time so Russia and the Chinese can provide us a tougher-to-win, two-front-war, later this year.
Your NEXT war is likely to be Ukraine’s grab of Moldova: Towards a general conflagration in Moldova: Russian forces strengthen in Transnistria -Moscow: “Intensive preparations for Ukraine’s invasion”. If, that is, Israel keeps holding back on striking Iran which now has 84 percent enriched bomb flour.
Can’t please ’em all – especially the Climate extremists: ‘Biden and Yellen Should Be Ashamed’: US Picks Ex-Wall Street Executive to Lead World Bank (commondreams.org) So, lemme see, the color checkbox is no longer enough? Is Competence-Free the new woke deal, or what?
Next Week: Looking into the Digital Ball:
- Durable Goods Monday
- Tuesday Housing and International trade. This is our pick for a Big Downer Dart Toss.
- Minor Manufacturing numbers mid-week
- Productivity Thursday
- Take Friday off – it’ll be a yawner.
ATR: Computer Woo-II
For those trying to understand the Big Game with Starlink not working with Outlook, we have done additional testing (which is a wasted day when you’re 74…).
- All the systems work great on?
- CenturyLate/BightSpeed DSL
- ViaSat 2.4 and 5G
- Starlink downloads mail fine BUT
- Starlink generates a “POP3 drop” when trying to send mail.
In the process, I managed to wreck things (experimenting with different wireless drivers (Using Killer Internet 6 series Intel on the moboard. May try a different wireless connection…)
I will also try (*this weekend) some Thunderbird trials to see if it will send/receive via Starlink.
Love the Starlink service and not pleased that Microsoft for whatever reason can’t keep up when I move at faster-than-software speeds.
ShopTalk Sunday will feature Ure’s fiery $249 chocolate chip cookie adventure. And Peoplenomics will see how our new-fangled mechanical trading monster worked this week since we unveiled it Wednesday.
Write when you get rich,