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Monday, 05/16/2022 4:43:45 PM

Monday, May 16, 2022 4:43:45 PM

Post# of 45226
Crypto’s Crash: 100-to-1 Leverage Goes Poof!



By Pam Martens and Russ Martens
May 16, 2022

Crypto was in full-blown crash mode last week, wiping out more than $300 billion in market value. TerraUSD, a so-called stablecoin that is supposed to trade at a “stable” $1 value, crashed to a few cents on the dollar. Its sister cryptocurrency, Luna, likewise imploded.

Then there was Bitcoin, which Warren Buffett has called “rat poison squared.” Bitcoin plunged further last week and is now down more than 30 percent year-to-date. So much for the hype that it would be an inflation hedge like gold.

Coinbase, the big crypto exchange, knocked more wind out of the sails of the crypto market on Tuesday of last week when it filed its 10-Q (quarterly report) with the Securities and Exchange Commission and essentially said it had no idea what might happen to $256 billion it held for customers. The filing illuminated its shareholders and customers as follows:

“As of March 31, 2022, we held $256 billion in custodial fiat currencies and cryptocurrencies on behalf of customers. Supported crypto assets are not insured or guaranteed by any government or government agency. We have also entered into partnerships with third parties, such as with the Centre Consortium, as a reseller of USDC, where we or our partners receive and hold funds for the benefit of our customers. Our and our partners’ abilities to manage and accurately safeguard these customer assets requires a high level of internal controls. As our business continues to grow and we expand our product and service offerings, we must continue to strengthen our associated internal controls and ensure that our partners do the same. Our success and the success of our offerings requires significant public confidence in our and our partners’ ability to properly manage customers’ balances and handle large and growing transaction volumes and amounts of customer funds. In addition, we are dependent on our partners’ operations, liquidity, and financial condition for the proper maintenance, use, and safekeeping of these customer assets…Moreover, because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors. This may result in customers finding our custodial services more risky and less attractive and any failure to increase our customer base, discontinuation or reduction in use of our platform and products by existing customers as a result could adversely impact our business, operating results, and financial condition.”


Imagine walking into your federally-insured bank to make a deposit into your savings account and being handed a notice that said it had no idea what might happen to your deposits.

Coinbase went public in April of last year and traded as high as $368.90 intraday last year. It closed the trading week last Friday at a share price of $67.87, a decline of 82 percent from its 52-week intraday high.

If the words “pump and dump” are floating around in your head, you can be forgiven. In 2018, Bill Harris, the former CEO of Intuit and PayPal, wrote a detailed critique of Bitcoin for Vox under the headline: “Bitcoin is the greatest scam in history.” Harris wrote:

“In my opinion, it’s a colossal pump-and-dump scheme, the likes of which the world has never seen. In a pump-and-dump game, promoters ‘pump’ up the price of a security creating a speculative frenzy, then ‘dump’ some of their holdings at artificially high prices. And some cryptocurrencies are pure frauds. Ernst & Young estimates that 10 percent of the money raised for initial coin offerings has been stolen.”

Two Nasdaq stocks which hold large positions in Bitcoin on their balance sheets, MicroStrategy and Tesla, also saw their share prices plunge last week.

Tone deaf Goldman Sachs, however, somehow interpreted last week’s market action as a signal to double down. According to the Financial Times over the weekend, “Goldman Sachs and Barclays have invested in Elwood Technologies, the cryptocurrency trading platform founded by British hedge fund billionaire Alan Howard, in a fresh bet on the mainstream adoption of digital assets.”

The dystopian feel to markets and this socio-political era did not go unnoticed at Saturday Night Live. Weekend Update co-anchor Colin Jost offered this take:

“Is it me or does every story sound like the opening voiceover in a Mad Max movie? The year is 2022. A virus rages across the planet. Digital money has collapsed. Infants have nothing to eat. Women are forced to breed. Men are ready to die for gasoline….”

Continued below:
https://wallstreetonparade.com/2022/05/cryptos-crash-100-to-1-leverage-goes-poof/



Dan

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