It doesn’t seem like all the large investment banks and reinsurers are flirting with insolvency due to crypto exposure.
They definitely were due to CDO and mortgages. That distinction seems substantive.
The Dotcom bubble was inflated by a lot of people investing in something they didn't understand. And the crash did not threaten to destabilize the entire financial system. But it did cause a drag on the broader economy, and had fairly significant local impacts.
Of course that is just when evaluating the crypto bubble. There are multiple other ongoing problems in the economy, and I am having a harder time figuring out what the impacts will be. Stubborn inflation due to supply chain problems, coupled with rapidly rising interest rates feels like we are going to see a lot of companies get caught in very tough situations. There are a lot of companies out there that are supply constrained right now. I imagine they have been hanging on and avoiding layoffs/downsizing the last year or so in the hopes that once the supply chain issues resolve they can quickly ramp back up to 100%. But if debt/financing gets really expensive or demand starts dropping I think we are going to start seeing a lot of layoffs. I still don't think this leads to a 2008 style crash. But I am a bit uneasy about what happens when you take away the cheap debt that has been fueling the economy for the last decade.
By contrast, cryptocurrency has no revenue stream. It's a zero-sum game. A better analogy would be the bubble in Beanie Babies that happened around the same time as the Dotcom boom (and drove some early Ebay growth). Idiots were taking out loans to buy up thousands of those toys, thinking that demand would go up forever.
The reckoning will be harder in crypto because on top of loose monetary policy, prices have been propped up by money-printing scams like Tether. If crypto wants to prove it has value as a technology and not just a get-rich-quick scheme, it needs to rid itself of the Terras, Tethers and other such actors.
But Bitcoin was created as a response to the banks failures in 2008, so maybe they're trying to get ahead of that message returning this time around.
Anyone work in PR for mortgage companies? What kinda position are you taking right now?
https://fred.stlouisfed.org/series/BOGZ1FL663067003Q
Now as the fed starts pulling money out of circulation by selling it's balance sheet, there's a multiplicative effect on the amount of money siphoned out.
Due to this magnificent, it seems very easy for the fed to overcorrect and pull way too much money out of the system. The fed must walk a very fine line in triggering this deleveraging.
You have to wonder. But Michael Saylor comes across as a true believer in bitcoin.