kairos notes

[kairos]

Something to get your head around:

Head Line:

A major asset class crashed 42% in 14 days, wiping out $1.02trn in value in an orgy of liquidation of people up to 100 x levered, with very low regulation. Many tokens fell up to 70%, including unregulated lending and borrowing biz.

— Raoul Pal (@RaoulGMI) May 25, 2021

Beneath the head line:

Crypto had a major, major VAR-shock test and NOTHING happened.

Leverage liquidation was offset by overcollateralisation. No one was left holding the baby.
No firm went under.
The Fed didn't need to step in.
Defi didn't break and carried on near normal

There were no daisy chains of collateral losses.
There was no collateral pressure.
Stablecoins remained stable.
A few exchanges went down for an hour or two. No exchange big losses occurred, no need to mutualise losses either.
No protocol failed.
No firms needed rapid funding.

No one had open ended losses.
The system didn't break.
It offered zero systemic risk to the broader financial world.

Speculators lost money and that is it.