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Cryptocurrency is a canary in the coal mine for the era of ‘irresponsible risk-taking’ – chief economist Mohamed El-Erian says – and fallout could lead to ‘financial crashes’

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Cryptocurrency investors lost out en masse $2 trillion Since November last year, the list of victims continues Winter cipher It continues to grow.

The downturn was compounded by the collapse of the world’s second largest cryptocurrency exchange, FTX I went bankrupt last month, which led to accusations that its former CEO was running “Ponzi scheme“- who has to reject.

Now, Mohamed El-Erian, chair of Queen’s College at the University of Cambridge, warns that the lack of risk management in the cryptocurrency space could be a canary in the coal mine with broader economic ramifications.

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“What if the irresponsible risk-taking we see in cryptocurrencies is also happening elsewhere…and this cryptocurrency is simply the most structurally fragile of those cases?” he is Requested New York timeEzra Klein in an interview on Friday.

El-Erian believes cryptocurrency’s dark days are not yet a “systemic” risk to the financial system or the broader economy, but says there are signs of malaise everywhere including the impending collapse of the UK. gold market and emerging markets debt crises In places like Sri Lanka.

“What worries me… is that they are simply the Canaries,” he said Tell The New York timeFriday. “These are small fires, but the danger here is that these small fires start to spread and they start to become something bigger.”

El-Erian argued that the Fed has near-zero interest rates and desires it support markets During tough economic times, some investors have been given the “idea that markets are just going up,” creating a strong and dangerous appetite for risk.

The economist, who previously served as CEO of Pimco, said that after the great financial crisis in 2008, the banking system was strictly regulated, but this risk in the entire financial system not only did not disappear.

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“They migrated. They went from banks to non-banks.” And non-bank organizations are less well understood by regulators, less well regulated, and less supervised.

Bank for International Settlements warned Earlier this month, pension funds and other non-bank financial institutions owed nearly $25 trillion in debt that was essentially “hidden” from regulators.

“This off-balance sheet dollar debt poses special political challenges because standard debt statistics do not reach it,” the Bank for International Settlements researchers wrote. “Thus, in times of crisis, policies to restore the smooth flow of short-term dollars in the financial system are put in limbo.”

El-Erian said his biggest fear is that “financial accidents” caused by reckless behavior in non-bank institutions will “return to the real economy”.

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“We saw how bad this world can get in 2008 in the banking system,” he said. “I don’t think it has gotten that bad, but I do worry that this is yet another headwind to high, lasting and inclusive growth. And we desperately need high, lasting and inclusive growth.”

This story originally appeared on Fortune.com

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MicroStrategy is at its lowest level since 2020 after the sales were revealed

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(Bloomberg) — Shares of MicroStrategy touched their lowest level since August 2020 after the enterprise software company, which in recent years has been known as the largest buyer of bitcoin, revealed its first sale of the token.

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The stock fell 1.1 percent to $136.63 on Thursday, down 75 percent this year. Bitcoin rose less than 1% to around $16,590 and is believed to have fallen 64% since the start of the year.

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In a filing on Wednesday, MicroStrategy said it acquired approximately 2,395 Bitcoin between the beginning of November and December 21 through its subsidiary MacroStrategy, and paid out approximately $42.8 million in cash. It then sold 704 of the tokens on Dec. 22 for a total of about $11.8 million, citing tax purposes, before buying another 810 of them two days later.

Matt Malley, chief market strategist for Miller Tabak + Co. Step down as CEO. This news means they don’t seem to want to do that anytime soon.”

Overall, MicroStrategy held about 132,500 bitcoins worth over $4 billion USD as of December 27th. The company paid an average purchase price of $30,397 per bitcoin.

“Given MicroStrategy’s $2.4 billion in leverage, we believe the company may have a lot of leverage over Bitcoin, and may face some liquidity risk,” Jefferies analyst Brent Thiel wrote in a note on Wednesday. Thill has an “underperform” rating on the stock and a price target of $110.

Over the years of the pandemic, MicroStrategy has become well known for its Bitcoin takeovers, largely led by Saylor. Earlier this year, Saylor stepped down from that role and now serves as CEO at the company and continues to lead its bitcoin strategy.

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MicroStrategy was trading around $120 before Saylor first announced the company’s Bitcoin purchases in 2020. The stock reached an all-time high of $1,315 in February 2021.

(Updates to include the stock’s closing price in the second paragraph.)

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Bankman-Fried May File Petition in New York Federal Court Next Week Before Judge Louis Kaplan By Cointelegraph

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Former FTX CEO Sam Bankman-Fried is set to appear in court on the afternoon of January 3 to enter a lawsuit over two counts of wire fraud and six counts of conspiracy against him related to the collapse of cryptocurrency exchange FTX, according to Reuters. mentioned on December 28, citing court records. Bankman-Fried will appear before District Judge Lewis Kaplan in Manhattan.

Judge Kaplan was appointed to hear the case on December 27 after the original judge in the case, Ronnie Abrams, Resigned herself because of connections between FTX and the law firm Davis Polk & Wardwell, where her husband is a partner. The company provided advisory services to FTX in 2021.