Was that the Crypto Crash of 2021?

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by Shaun Richards

Yesterday brought falls and then no little panic to the world of Bitcoin and the other cryptocurrencies. This is how the London Financial Times reported events.

Cryptocurrency markets swung in chaotic trading and related stocks were hit after Chinese regulators signalled a crackdown on the use of digital coins, which have soared in price this year. Bitcoin tumbled as much as 30 per cent to a low of $30,101, before clawing back its losses to less than 8 per cent.

The selling was quite a panic as human emotion took over and I noted people tweeting that it had hit US $32k almost immediately after they had tweeted it had hit US $33k. Those sort of falls are described variously as catching a falling knife or piano as buyers find that purchases immediately go sharply offside. There is an element of time here because there is invariably a bounce if you can hold you position long enough. It is usually triggered by what is called a “capitulation” with someone getting out at any price and this is usually forced.

We also live in a world where according to Finder.com this is true.

A popular myth is that “Elon Musk invented Bitcoin,” and not some anonymous developer known as Satoshi Nakamoto. The founder of Tesla and Spacex denied the speculation a long time ago but 56% of Australians still agree with it.

Anyway in terms of perspective this can be compared to the recent and indeed all-time high for Bitcoin of US $64,778. So we move on with two contexts. Those who bought before this year began remained in profit yesterday but those who bought at the top saw their position halve in price. It would be those in the latter camp getting out yesterday and in some cases at almost any price.

What about the other coins?

They had an even worse day.

Other digital coins were also hit by heavy selling, with ethereum, one of the best-performing cryptocurrencies in the past month, losing a quarter of its value before moderating to losses a little over 20 per cent. More than $8.6bn of positions have been liquidated over the past 24 hours, according to data from bybt.com, a cryptocurrency data provider. ( FT)

If we switch to Dogecoin our subject of the 10th of this month we can remind ourselves of this.

But those who bought the SNL hype were making pretty quick losses and at the time of typing the price is 53.6 cents.

So those who had taken a ride on the Elon Musk wheel of fortune were not enjoying the ride. They will have enjoyed the fall below 28 cents yesterday even less but if they have hung on will have more cheer for the 36.4 cents as I type this. It makes me wonder what on earth went on with that lunar payload which will be financed with Doge? Or indeed this?

DUBAI: A Dubai developer announced on Wednesday it plans to begin accepting Dogecoin as a payment option for its latest project launch, despite recent turbulence in cryptocurrency markets. ( Arab News yesterday)

We can now switch to economics and consider a couple of the functions of money which is to be a medium of exchange and a unit of account. The concept of a unit of account will have failed yesterday and you will have exchanged at what price? Quite what the developers are on about here seems from another world.

This is accomplished using smart contracts for real estate buyers which are automated agreements that use online blockchain technology instead.

As to the moves of the various coins it was a case of Blood Sweat and for some Tears.

What goes up must come down
Spinning Wheel got to go ’round
Talkin’ ’bout your troubles
It’s a cryin’ sin
Ride a painted pony
Let the Spinning Wheel spin
You got no money, you got no home
Spinning Wheel all alone

What caused this?

The trigger came from the People’s Bank of China.

For example, it made clear that institutions must not accept virtual currencies, or use them as a means of payment and settlement. Nor can institutions provide exchange services between cryptocurrencies and the yuan or foreign currencies.

Additionally, institutions were prohibited from providing cryptocurrency saving, trust or pledging services and issuing crypto-related financial products. And virtual currencies must not be used as investment targets by trust and fund products. ( Reuters)

Perhaps they wish to protect Chinese investors from the speculation but in truth it makes me think that they are worried about it being used as a route to get money out of Hong Kong. This is far from the first time they have cracked down on the crypto world so we will have to see how serious they are.

Even through this the Financial Times ended with a bullish sweep. Here is Henri Arslanian, global head of crypto at the consulting company PwC.

“The reality is that we are seeing the continuous entry of institutional players and institutional investors in this space and that is unlikely to slow down any time soon.”

Of course if you are as grand as a “global head of crypto” you have to say that. Although on a day when it looks like some institutional players exited it may not be the best time to say it.

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Speaking of vested interests.

Cathie Wood, founder of Ark Invest, a fund manager that has invested heavily in cryptocurrency-related companies, also reiterated her support for bitcoin. “We go through soul-searching times like this and scrape the models and, yes, our conviction is just as high,” she told Bloomberg Television. ( FT)


We can start with the price of Bitcoin which was just above US $40k when I began typing and is now just above US $39k. It has got to these levels and beyond because of the financial world we live in illustrated kindly by John Cunliffe of the Bank of England only a few minutes ago.

BoE MPC Member Cunliffe: UK House Price Strength In A Recession Is ‘Striking’ ( @LiveSquawk)

Somebody needs to tell him that every single policy he has voted for has contributed to this. Behind this is the fundamental point where we live in a world dominated by zero and indeed negative interest-rates plus QE has been used as a way of boosting asset prices. The trouble is if you are left out or asset poor what do you have as alternatives?

Thus the ground has been fertile for the crypto world as on the other side I note this from Craig Torres of Bloomberg.

If a currency devalued 30%, the government would be overthrown, the army would be in the streets, the banks would be closed, and hyper-inflation would rip through food prices. Bitcoin isn’t a currency, or even a legit payment system.

I replied asking if he had forgotten Argentina and Turkey? There have in fact been rough times for plenty of South American currencies and only a few years ago there was the Egyptian Pound.

But the issue of being money is a genuine one. I noted earlier the problems days like yesterday create for being a medium of exchange. How can you buy anything when the price is so volatile? That is quickly followed by unit of account as that cannot work when you do not have any idea what one Bitcoin is worth. Store of Value breaks into two categories I think as it still works for longer-term investors but for more recent players it has been a rough ride.

Still I suppose in future events like this should male holders very nervous.

Remote-First-Company/CHICAGO–(BUSINESS WIRE)– Coinbase Global, Inc. (COIN) (Nasdaq: COIN) today announced the pricing of $1.25 billion aggregate principal amount of Convertible Senior Notes due 2026 (the “notes”) in a private offering (the “offering”) to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act of 1933, as amended (the “Securities Act”).


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