Crypto Update 6/22/22 | Is Sam Bankman-Fried a Modern-Day Robber Baron? - Transcripts

June 22, 2022

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With bitcoin holding at $20,000 and altcoins retracing Tuesday's gains, plus a look at the billionaire bailing out some crypto firms, CoinDesk’s “Markets Daily” is back with the latest news roundup.

Transcript

this episode of Markets Daily is sponsored by CAVA and BCB group.

It's Wednesday june 22nd 2022 this is markets daily from coindesk. I'm Adam B. Levine here again with Adrian blush for your daily news roundup on today's show we're talking Bitcoin a look at the billionaire bailing out some crypto firms, the latest headlines and more. And just a reminder that coindesk is a news source and does not provide investment advice. Mhm Bitcoin hit lows of $19,900 on Wednesday but has since managed to hold just above the 20K mark. The decline came as analysts at Big Banks Morgan Stanley and Goldman Sachs each warned on Tuesday that recession risks are not fully priced in quote. The bear market will not be over until recession arrives at the risk of one is extinguished, morgan Stanley said in a note. Meanwhile, Goldman analysts said stock traders were pricing in a mild recession quote, leaving them exposed to a further deterioration in expectations and quote separately. Citibank pegged the probability of the global economy seeing a recession in the near future at nearly 50%. As central banks quote tighten monetary policy and demand for goods weekends end quote Lawrence's head of Europe and # said that as the market remains turbulent, it will likely continue to oscillate within a range of 19,000 to $22,000. Crypto observers say a long term recovery in Bitcoin prices would take place only when global sentiment turns positive and signs of expansion return Supply shocks for basic necessities could push up prices and eventually cause an economic slowdown city economists said. The team now sees the world economy growing officially at 3% this year and 2.8% in 2023.

That's according to Bloomberg. Taking a step back. Bitcoin has tracked broader markets closely over the past few months, meaning a further slide in broader markets could see Bitcoin falling further over the coming weeks. As traditional banks sound the alarm on the state of the overall global economy quote. It's foolish to forego the wider macro context in which crypto and finance operate. The chief commercial officer at choice said in a telegram message earlier this week, they added recent troubles seen at the crypto lender Celsius and prominent fund three arrows capital have added to quote crypto industry uncertainty and that the market hasn't quote hit the bottom yet elsewhere. Off coins which were up yesterday have reversed course. Salon is down 10% while avalanche and polygons, native tokens are each down around 8%. Today's crypto coverage comes courtesy of coindesk markets analysts La La La Desmond A and Sharia moloch. Bitcoin is currently trading at $20,478. That's down nearly 4% in the last 24 hours while Ether is trading in $1,093 per token. That's down nearly 6% in the same time period according to the Coindesk Price Index.

In traditional markets. Recent volatility and just generally bad times driven in large part by the removal of the U. S. Central bank's market lifting monetary policy Persists. Early morning trading. Saw futures for major indexes sink lower. The NASDAQ 100 dropped by 1.7% while the S. And P. 500 lost a little more than 1.5% overseas. The pan european stock 600 London's footsie 100 each drop by around 1.5 points while Germany's dax plunged by nearly 3% continuing to the east Hong kong's hang seng index fell a bit more than two and a quarter while the shanghai composite dropped by one point to Japan's Nikkei 2 to 5 traded essentially flat And rounding out our coverage with a few important commodities gold traded basically flat off about a quarter of a point. Silver dropped by more than one and a quarter point and in a little bit of good news even if only temporary benchmark rates for crude oil dropped nearly 7% in the last 24 hours. Today's traditional markets coverage rose from coindesk and yahoo finance.

Stay tuned. After the break, we're back with a few quick headlines. We're tracking today with links to the four articles in the show notes for this episode as always. Then after the headlines. Look at SAM Bank man free as his firm leads several big lender bailouts in the crypto sector. We'll be right back

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Turning to big picture news, only about one third of the current bout of high inflation in the United States is demand driven. That's according to research published by the SAN Francisco branch of the Federal reserve on Tuesday, underscoring the difficulties US central bankers face in bringing inflation to heal the Federal Reserve has ramped up the size of its interest rate hikes to historic levels as it tries to reduce inflation back to its 2% goal raising core borrowing costs last week by three quarters of 1% point to a range of 1.5 to 1.75% as it seeks to quote demand across the economy while avoiding a recession. Reuters reports. Meanwhile, the relentless climate, US home values continued in May when median prices shot above $400,000 for the first time. While sales activity slowed under pressure from higher mortgage costs, rapidly rising interest rates are rippling through US markets as the Federal Reserve tries to combat inflation stocks entered a bear market this month. Consumer sentiment has taken a hit and economists are forecasting an increasing likelihood of recession as higher rates threatened to choke off growth. But home buying demand continues to exceed unusually low levels of supply and propelled prices higher. The median existing home price rose 14.8% in May from just one year earlier to $407,600. A record high in data that goes back to 1999, the National Association of Realtors said on Tuesday and that rape was up slightly from just the previous month. The combination of rapidly rising rates and record home prices is squeezing many buyers out of the market and making it especially challenging for first time buyers. The Wall Street Journal reports on this interesting story, but a few comments for myself, many of you will know that the U. S.

Central bank, in addition to supporting debt and equity markets through their extraordinary monetary policy has also until recently been a big buyer of mortgage backed securities for years now, they've hoovered up tens of billions of dollars worth of the assets each month and now with inflation as the increasingly prominent cause of a lot of misery out there, they've stopped that. But where does that leave the housing market in the big picture? It's a good thing, but in the short term it's going to leave a lot of people having made bad choices. One reason housing has become so expensive is because the cost of borrowing large sums of money to buy a house has been artificially inexpensive. In large part thanks to the Federal Reserve's actions, just as tuition costs at colleges and universities exploded at many times. The rate of inflation. Housing is a supply and demand driven market when it's cheap to borrow money, you can afford to borrow more and it only takes two hopeful buyers to start a bidding more. This dynamic is amplified in the real world, where areas with few houses for sale and many would be buyers stretch their personal means to win the prize, the fixed cost on housing over a long period of time, in contrast to the rising and unstable cost of renting and of course eventual ownership of an asset. That seemed for most of our lifetimes to only go up in value. Many homeowners have and will continue to benefit from this dynamic. But it's worth noting that for every winner in this arrangement, there are more losers and that the game is fundamentally rigged. Nothing about the housing market demand for housing or the available supply has changed.

What changed is the U. S. Central bank stopped openly manipulating the cost of money as it relates to mortgages and that changed everything. Turning to international news. The U. K. Government will not implement its proposed version of a controversial rule requiring all centers of funds to private crypto wallets to collect identification details of recipients. A document recently published by the Treasury said based on the feedback received, the british treasury does not think it would make sense to create a debt collection rule for a hosted a private wallets quote, instead of requiring the collection of beneficiary and originator information for all and hosted wallet transfers. Crypto asset businesses will only be expected to collect this information for transactions identified as posing an elevated risk of illicit finance. And quote, that's according to the document, coindesk reports elsewhere. The collapse of terra's USt stable coin has made some investors think twice about buying other stable coins. But it's had the opposite effect on Bermuda's Premier David Burt, He said in an interview that the terror debacle highlights the importance of good regulation vindicating his goal of making his country the world's home for safe innovative assets.

The recent dramatic loss of terror U. S. D. S. Dollar peg is quote validation of the approach we've taken told coindesk during our recent consensus 2022 conference continuing what Bermuda wants is to be the hub of the global stable coin market where it's issued under a regulated environment so investors and citizens can have confidence. He concluded with there are stable coins but then there are regulated stable coins and quote coindesk. Jack Schickler has the details turning to industry news. Crypto broker. Voyager Digital may issue a notice of default to crypto hedge fund three arrows capital. If it fails to make a loan payment, the company said in a statement on Wednesday, Voyager's exposure to three arrows, capital consists of some 15,250 Bitcoin worth approximately $370 million and $350 million worth of U. S. D.

C. Dollar paid stable coins. The company, which has agreed to a loan from Alameda Ventures to secure its assets initially asked for a payment of 25 million U. S. D. C. By june 24th and then requested repayment of the entire amount by june 27th of this year. While several days remain before those deadlines, neither of those amounts have been repaid. Voyagers said in their statement this morning, Dubai based three arrows capital said on june 17th it had suffered heavy losses in the recent market downturn and had hired legal and financial advisors to figure a way out. That's according to a Wall Street Journal report last week, the company was reported to be facing possible insolvency after incurring at least $400 million worth of liquidation coindesk Sheldon Reback has more. Meanwhile, a large wallet at the center of a governance drama over at the salon, a lending platform, Solan started to move millions of dollars worth of cryptocurrencies on Tuesday morning, the company said in a tweet, the move potentially averts the risk of contagion in case of a liquidation that could have cost hundreds of millions of dollars in losses. The anonymous wallet had deposited some 95% of Solans pool of soul tokens and represented at least 88% of dollar pegged us D.

C. borrowing. But that arrangement came close to a margin call last week as the sole price dropped more than 40% to a low of $27, the protocol would have automatically liquidated up to 20% of the large investors collateral. If Saul had hit $22.30 which the firm said would have potentially lead to damage to the broader solano ecosystem. A governance vote was floated by the protocol developers to take control of the account and take steps to manage that risk. But it was rejected by its voting members coindesk Suria Molla reports and finally Republican lawmakers are trying to slam the brakes on any hasty decisions. The Environmental Protection Agency may consider to address potential harm from Cryptocurrency mining businesses urging the regulator to study the claims before taking any action. More than a dozen republicans on the Senate Banking committee and House Financial Services Committee signed a letter last week to the agency's chief that was meant to counter a message from democrats sent in april the democrats. The list of progressives that included Representative Jared Huffman, a democrat from California who leads a subcommittee within the Natural Resources Committee had warned about climate risks and called for more scrutiny. While the republicans expressed more support for the industry, environmental regulators should see quote a comprehensive analysis as it relates to understanding the potential environmental effects of digital asset mining. According to the letter, they insisted that the US government shouldn't do anything to disrupt american leadership in the sector, coindesk, jessy Hamilton's reports and in culture news, here's Adrian blast.

Thank you adam, What's up everybody? Well, in this latest bull market, we saw the Cryptocurrency industry expand and digital currencies became more adopted as an alternative to traditional assets. However, crypto trading has proven to be so addictive to some people that they are forced to seek help. In fact rehab centers where people can seek treatment for addictions like alcohol and gambling are well known and recently, these same facilities have seen an uptick in individuals seeking help controlling their crypto trading

Bloomberg

first reported yesterday and Finn Bold has the story,

Today's featured story is an opinion piece from coindesk stan kun. Today's feature is entitled, is sam bank man freed a modern day robber baron FDX Ceo Sandbank man freed is like a modern day robber baron in at least one way as the digital asset industry tumbles downward in fits and starts. The titan of industry who sometimes skips lacing his shoes, is thinking about ways to prevent calamity and perhaps profit this weekend Bank in free discussed the responsibility he feels to bailout crypto firms in crisis. He repeated the sentiment on twitter where he said the principal concern is mitigating retail losses, disclosing risks and preventing bad debts from spreading across the sector. Quote, I do feel like we have a responsibility to seriously consider stepping in, even if it is at a loss to ourselves to stem contagion. Thank Manfred told NPR continuing, even if we weren't the ones who caused it or we weren't involved. I think that's what's healthy for the ecosystem and I want to do what I can to help it grow and thrive. And quote, there's a historical analogy here Jpmorgan, a leading banker in the time before the Federal Reserve twice stepped in to prevent economic collapses during the panic of 18 93. After a period of intense speculation and consolidation in the emerging railroad and banking industries morgen, Let the Federal Treasury some $65 million in gold to re up its dwindling reserves and from, of faith in the banking system. Then, amid the crisis of 1907, morgen pledged his own capital and led a coalition of wealthy financiers to backstop failing banks, stock exchanges and trust companies, historians think morgan's actions prevented a much deeper recession at the time when the federal government had little ability to manage economic crises. Bank been freed though perhaps less stylish than his gilded age forebears might see a similar historical role to play. Earlier this week, FDX supplied the struggling crypto lender blocked by with some $250 million in credit.

Last week, Bank manfred's trading outfit Alameda Research bailed out crypto broker Voyager Digital. Over the years he's acquired firms like liquid that would have gone under following hacks and has contributed to bailout funds for attack protocols and projects. Of course, these lifelines aren't simply altruistic, but also a way for FT X to expand bank then freed is a self proclaimed effective altruist or capitalist who believes in earning as much as possible to give back as much as possible. It's unclear whether his actions now fall on the former or the latter camps. Perhaps he's intervening today to profit tomorrow, crypto is often compared to the wildcat banking era, a time when financial institutions were essentially able to print their own money and play by their own rules though, there have been attempts to work with governments to achieve regulatory clarity. Crypto sometimes seems to fall outside the norms and safety that's established in the traditional financial sector in recent days, some of the biggest players in crypto, including coin based crypto dot com and Gemini have announced layoffs. Influential hedge funds like three arrows capital appear to be insolvent, while major lenders, Celsius and Babel Finance have paused customer withdrawals, it's impossible to know the knock on effects. If any of these firms falter bank Manfred clarified on twitter that his role is not to save individual firms necessarily. His own firm is slowing hiring and reportedly pulled out of talks to advertise on major League Baseball's Los Angeles, Angeles Jerseys. Crypto is supposed to be guided by certain core principles, including financial transparency and free markets. Perhaps the most important is the idea that autonomous code, not humans, should determine winners and losers and markets ensuring that everyone plays by the same rules. So is there a moral hazard in bank Manfred stepping in even if he's bypassing the guarantees of the Fed despite its lofty ambitions, Crypto is racked with scams, insider trading and a culture of backroom deals today.

The firms that seem at the greatest risk of default are those that are primarily reproducing the worst aspects of the legacy financial system, all without consumer protections, Celsius and three arrows were taking risky bets with client funds and centralized exchanges or black boxes. While some on chain community governed protocols seem to be faring better. That doesn't make them a perfect solution this weekend, developers of the salon, a based lending protocol Solan voted and I'm saying that with air quotes to commandeer a highly leveraged user's wallet to lessen the effects of an expected margin call the dow was formed and the transactions were on chain. But it's striking that this was ever a possible course of action. If crypto learns anything from the ongoing market reckoning, let it be that its only real hope and breaking away from the convoluted, easily corrupted legacy financial system is in real decentralization. Open protocols cannot prevent bad actors but can provide the necessary information for investors to make their own decisions. In his interview with NPR Bank, Manfred noted that the core driver of the market selloff quote had been the Fed end quote, the largest interest rate hike since 1994. An attempt to quell inflation, it may have accelerated and failed to protect is causing markets to puke capital. Though he isn't all doom and gloom. Perhaps seeing himself in the american institution. He noted how the central bank is quote caught between Iraq and a hard place and quote progressive politicians of morgan's day were driven to create the Fed in part after witnessing morgen and his peers influence on the economy. Despite his altruistic intentions, the PTO committee feared that morgen could influence markets for his own game and for his part bank been freed is amenable to working with regulators.

He said he'd spend upwards of a billion dollars in political contributions, in part to earn officials ears. Changes need to be made, especially if Kryptos largest players, are just going to create a worse banking system. But the real change, challenges and opportunities of the crypto industry will happen at the protocol level, not directed by any one person. And that's our show for today. Thank you so much for listening. This episode is edited by Adrian blushed and we'll be back tomorrow with another news roundup and just a reminder that coindesk is a new source and does not provide investment advice.

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