Celsius, which had a reported $12 billion in assets under management when it suspended withdrawals Sunday night, has caused a shockwave in U.S. capital markets.
For a while, I had been asking whether or not crypto was large enough to become the catalyst for a broader shock to capital markets.
Celsius collapsing against a backdrop of rate hikes, blistering CPI numbers from last Friday and equity markets already on edge is answering that question.
Monday morning, Celsius’ implosion is helping fuel a nearly 2% sell off in U.S. markets. In other words, a $12 billion company that’s part of a $2 trillion industry is causing roughly $1 trillion in losses across all U.S. based public companies listed in New York Stock Exchange, Nasdaq Stock Market or OTCQX U.S. Market, based on Sibilis Research’s estimate of total market cap from December 2021.
While regulators may be able to turn somewhat of a blind eye to volatility in crypto markets, they can’t ignore what appears to be contagion with equity markets. After all, once it starts affecting Paul Pelosi and various Fed members’ portfolios of call options and SPY futures, it gets elevated to a matter of national security.
That’s hyperbole, of course, but there’s no doubt many politicians are witnessing the carnage Monday morning and are (1) preparing statements about how more regulation is needed (2) getting ready to press the issue of regulation with Gary Gensler.
Additionally, bitcoin-related stocks are all going to tank together, including Microstrategy (MSTR), which appears to be just a couple bucks away from a massive bitcoin margin call.
Crypto bull Anthony Scaramucci took to CNBC to offer up the advice this morning that people “Don’t look at your 401(k) statement.” While I’m sure this makes sense for him as the entire crypto industry is napalmed in the background, it’s the exact opposite of the reality of what is going to happen today. People are going to look, they are going to worry more, they are going to redeem more of their crypto and they are going to place blame on Celsius and the crypto industry.
June 13th 2022
Hell, crypto might even give the Fed and the government the scapegoat they need to blame the market selloff on. I can hear them now: “Putin crashed the bitcoin market!”
But as it comes to further regulation, stablecoins have already been on the chopping block to be first to be scrutinized from a regulatory standpoint.
This likely means that $80 billion Tether is going to be the next to be scrutinized. If Celsius was the appetizer, Tether would be the main event in terms of a crypto blowup. The time for Tether to ignore pointed questions about its backing has officially come to an end. Regulators must now demand these answers or they know they could be seen as complicit if Tether winds up blowing up next.
Such scrutiny will once again pressure Tether’s peg, as Celsius is likely doing behind the scenes today.
In the words of my friend Kenny Polcari, “…now is the time to grab your coffee and stay awake.”
For those that missed it last night, here is my hour long discussion about Celsius’ implosion with Peter Schiff from last night.
I’d love to hear your thoughts in the comments below.
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