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.
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.
Crypto is for fools. One day soon we will have one digital asset and it will be Gov. backed and controlled.
I thought MSTR would be the first to go, looks like they are in for a splatter now.
Chris' point about the impending political reaction, led by pandering bloviators who will gladly stroke their constituent bagholders and fools in return for a punch on their meal ticket, will not be favorable to free markets. Loved this line: I can hear them now: “Putin crashed the bitcoin market!” How apt. Make a note -- it's coming.
And Binance just "paused" BTC withdraws to USD this morning. Not a good sign.
This could be the "1929 crash" of cryptos...
I prefer to say I'm a rational Bitcoin Maximalist, which means I'm not very popular in my own cult. That said, 'Engines That Move Markets' (A. Nairn) tells us this has happened before. The difference in the 2022 is the speed and visibility of information and the action it inspires. All of the remoras that attach to a developing technology get to a point where they have to die because they 'suck'. As far as Bitcoin fundamentals; they are still sound, and that's where the intrinsic value argument is (what 'backs' the digital information in your calculator? Casio? Hewlett Packard? The US Fed. Gov.?).
Blockchain is great until it’s not! Crypto is the ‘new new thing’ and of course has proven again why speculating in assets with no intrinsic value because their “going to go up” is a fools errand.
I had a friend call me in Jan/Feb when Bitcoin was trading in the $50k’s asking if I thought it was worth buying. I knew that was the best ‘sell’ signal I had heard. When unsophisticated investors and taxi drivers start giving you investing advice you know it’s a bubble. I did tell my friend not to buy Bitcoin. I pray he took my advice.
In all these bubbles, pure greed is what drives the sentiment. I don’t have a lot of feeling for people that make uninformed and rash investments because something is going to the moon. I made the same mistakes in my 20’s and learned that it is a fools errand! I’m glad I learned my lesson when I was young.
BTW I can’t understand why regulators haven’t been regulating the Bitcoin Industry. Asleep at the wheel again!
Sold a stack of BTC on Saturday in my IRA. Bought back this morning with >10% gain in coins. Staying patient. DXY will start cracking Forex. Bitcoin not crypto.
Long 200k DOGE at .05285 this morning
What a joke. How the heck are these things even allowed to exist and take peoples money. WTF.
Kudos for calling the Microstrategy downfall early, Chris. Makes you wonder where the next cross party risk storm will pop off? That’s a lot of cheddar going up in smoke.
Was driving my truck behind a Tesla with a license plate extolling the virtues of his bitcoin purchases. As I passed him, it looked like the poor fella hadn’t had a decent shit in a few days. Died laughing.
Great analysis, I have really enjoyed watching you and Peter Schiff eviscerate Mashinsky and seeing your predictions come true in real time.
There's needs to be more than a few metaphorical heads on spikes for people to regain trust in crypto, and the financial system in general.
Hopefully the climax of the Fourth Turning won't get too ugly, but we seriously need a clearing out of these corrupt, conflicted, captured, self-interested elites - the sooner we do that, the sooner we can start over.
"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." -- Ain't that the truth?!?!?!
Just sit down and relax along the sidelines
"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!”
WTF do I know. I am a pure bitcoin spectator. “Are you not entertained”…..
Tulips seemed like a great investment, people make $$$.
The only thing most were left with as investment was a tulip bulb, to be watered by tears.
There is always some new thing, which is always going to the moon, which always burns up on re-entry.
Same as it ever was….
Crypto does much better in a Fed easing environment, just like most risk assets. This again proves it is a risk asset and not a store of value. Nothing wrong with being a risk asset as they present better trading opportunity than do safe-haven assets. Moral of the story is Bulls make money and Bears make money, but HODLers get slaughtered.