The lesson that wasn't learned in 2008, is that there wasn't one Bernie Madoff, there is a society full of Bernie Madoffs. And most of them are in the Financial Services industry...
Record stock buybacks kept the casino levitated just long enough for insiders to cash out the tax cut.
"They're buying back from the front door, and shoveling shares out the back door"
"corporate executives authorized $436.6 billion of stock buybacks during the second quarter, according to TrimTabs. That nearly doubled the previous record of $242.1 billion, which was set during the first three months of 2018"
"Double up. We need to bid up this shit show long enough to get out"
I haven't blogged on the topic of BitCon since it lost 70% of value several months ago. Also because the amounts of money involved are chump change compared to what is currently at risk in global stock markets. Nevertheless, I just skimmed Shedlock's missive on the Crypto meltdown. Unfortunately, I didn't learn much aside from the fact that most people don't recognize a Ponzi scheme when they see one...
Record stock buybacks kept the casino levitated just long enough for insiders to cash out the tax cut.
"They're buying back from the front door, and shoveling shares out the back door"
"corporate executives authorized $436.6 billion of stock buybacks during the second quarter, according to TrimTabs. That nearly doubled the previous record of $242.1 billion, which was set during the first three months of 2018"
"Double up. We need to bid up this shit show long enough to get out"
I haven't blogged on the topic of BitCon since it lost 70% of value several months ago. Also because the amounts of money involved are chump change compared to what is currently at risk in global stock markets. Nevertheless, I just skimmed Shedlock's missive on the Crypto meltdown. Unfortunately, I didn't learn much aside from the fact that most people don't recognize a Ponzi scheme when they see one...
His main assertion is that a lot of money was made in the early days of Bitcoin and then a lot was lost in the past year. He calls this "first mover advantage" - just like those who cashed out of the Madoff fraud had first mover advantage. First mover advantage used to be an industrial term, but in today's fucked up lexicon it's applied to Ponzi schemes instead. Regardless, he's only right on a relative percentage basis. On an overall absolute dollar basis and in terms of the number of people affected, very little was made in the early days, and half a trillion was wiped out in the past year.
Below is the combined crypto market cap. Roughly~$20 billion in market cap was accrued during the first nine years of Bitcoin existence when it was a relative novelty. Once it became a mainstream fad, crypto bolted to $750 billion prior to crashing in a matter of months. The amount of money lost in the past year is orders of magnitude greater than the amount of money made during the first nine years.
This is what Prechter explains over and over again, but relatively few people seem to understand. Markets are valued by the marginal transaction. Even if only one person sells, the value of ALL Bitcoins is reduced. The vast majority of money flowed into crypto during the past year, and most of it never made it out. It was merely "revalued".
Which is how people get trapped in risk markets. Escalator up. Elevator down.
The article goes on to debate future mining profitability. Needless to say that the amount of mining hardware sold going forward will crash asymmetrically in correlation with market cap. A big part of the ROI from mining is predicated upon the assumption that the value of what is being mined will increase over time in proportion to the "difficulty" rate.
Last year, Bitcoin narrowly avoided what is called a "chain death" spiral which would occur if mining became unprofitable i.e. due to price collapse. In summary, what would happen is that it would be impossible to sell Bitcoin aka. get out:
"This in turn could mean severe delays in completing Bitcoin transactions."
Here is where this all gets interesting:
The firm lowered its rating to cautious from in line for the semiconductor industry, citing rising chip inventory levels
"Furthermore, elevated inventory and stretched lead times leave no margin for error as any lead time adjustment or demand slowdown could drive a meaningful correction. Risk/reward is the poorest it has been in 3 years."
The companies that made the majority of profit from Cryptocurrencies are the companies that sold equipment to the miners:
Imagine what would happen if everyone was trying to get out of the casino at the same time amid zero liquidity. Because let's say they had been conned again at the end of the cycle. And because insiders had already cashed out via the tax cut and stock buybacks, which held the casino up just long enough for them to get out.
That would be a casino death spiral.
