Even some who have sipped the Kool-Aid accept the latest crypto cracks may be different.
Crypto is creaking. Unfortunately, even those fund managers in normal markets like stocks and bonds who have studiously avoided focusing on this freewheeling asset class, need to pay attention., in part because of cracks in the so-called stablecoins - a misnomer if ever there was one - that glue the market together. Right now the price is down to around $US27,000.
A cryptocurrency ATM in San Francisco. Is crypto heading for a rerun of the 30 per cent crash of last year?Say what you like about crypto, it has a dedicated fan base and impressive staying power. But anyone who got in after the end of 2020 is now underwater and the drivers of this decline seem structural. Even some who have sipped the Kool-Aid accept this time may be different.
One banker tells me his hedge fund clients are watching closely now, with several taking seriously the possibility that a big crash in crypto, if it happens, could be supportive for that most crucial of markets, US government bonds, again on the notion that it would spark a rush to safer places to park cash.So, the question is whether we are heading for a rerun of the 30 per cent crash last year. Signs that tether is under strain add to the sense that this decline in price could be The Big One.
“The rapid growth of stablecoin issuance could, in time, have implications for the functioning of short-term credit markets,” Fitch’s analysts said, pointing to “potential asset contagion risks linked to the liquidation of stablecoin reserve holdings”.
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