ALEX BRUMMER: Bitcoin is proving an unsafe haven for difficult times
Crypto’s Dangerous Descent: Bitcoin Proves An Unsafe Haven For Difficult Times, Says ALEX BRUMMER
Regulators have often warned about the risks to consumers of exposure to bitcoin and other cryptocurrencies. But it did little to curb the enthusiasm.
Despite the warnings, authorities inadvertently contributed to investors piling up by embracing blockchain as a more secure form of ledger and discussing the possibility of central bank cryptocurrencies.
Rather than drawing a line in the sand, Wall Street and other markets allowed crypto instruments — including exchange traded funds (ETFs) and initial public offerings (IPOs) — to multiply.
Crypto Crisis: Crypto market cap has fallen from a peak of £2.4 trillion (roughly the size of the UK economy) last year to around £700 billion in last trade
Basketball fanatics, who tuned into the NBA finals between Golden State Warriors (the winners) and Boston Celtics last week, were still bombarded with ads for Crypto.com, backed by star Joel Embiid, even as the global price for bitcoin plummeted. used to be.
This was a bit like promoting 110 percent Northern Rock mortgages in the FA Cup final commercials when the subprime mortgage market imploded in 2007-08.
Crypto’s market cap has fallen from a peak of £2.4 trillion (roughly the size of the UK economy) last year to around £700 billion in last trade.
On its way down, bitcoin is dragging companies that provide crypto services and funds to a bad place.
Among those feeling the pain are crypto hedge fund Three Arrows Capital, Asia-based cryptocurrency lender Babel Finance and US lender Celsius. Shares of the ‘secure’ crypto trading platform Coinbase have fallen about 80 percent since the beginning of the year.
Turbulence has led to fears of a cascade of bankruptcies such as we saw at the start of the financial crisis. The big difference is that back then, consumer losses were largely insured in markets where savers could recover their deposits. The implosion is now in the unregulated Wild West.
Bitcoin is proving to be an unsafe haven in difficult times. It is falling like a brick while inflation is rising and interest rates are rising.
The unanswered question is whether the crypto meltdown will be confined to the fringes of the financial system or attack its underpinnings?
One of the possible cracks is the fact that many investors have been buying crypto on margin, which means that as the price falls, brokers demand more cash to cover the losses.
With some 45 percent of crypto investors estimated to be under water, there should be concern that the deficits will spread from the brink to mainstream lenders.
In London last year, Morgan Stanley’s Aussie-American boss James Gorman left no doubt that he was a crypto skeptic, suggesting that bitcoin is anything but worthless.
Not all financial firms have necessarily been as strict in their approach.
Not going anywhere
The best that can be said about EasyJet’s decision to cut its flight schedule this summer is that it faces the reality of staff shortages in the sector before schools start to break up.
That won’t be much comfort to stranded customers or those of us who have booked our flights well in advance and can’t be sure they’re going to take off.
What it does tell us is that EasyJet boss Johan Lundgren shouldn’t have been so ambitious when planning post-pandemic flight schedules.
The constant chopping and changing damages the reputation of an airline that has sought to position itself above the other no-nonsense airlines.
Likewise, the likelihood of further losses, following a £2.2bn deficit during the pandemic, will not inspire shareholder confidence. If there’s a silver lining to this (before someone yells ‘Brexit’ from the sidelines), it’s that this isn’t just any Gatwick event.
Despite multiple runways, Schiphol in the Netherlands has a similar shortage of air traffic controllers, and Paris – notorious for its peak season foes – has similarly disrupted.
Britain could improve things if HMRC stuck its finger in handling new recruits.
Primark owner Associated British Foods isn’t known for rushing fences.
When it opened its first US store in Boston in 2015, it did so cautiously, recognizing how many UK retailers have failed in their US ambition.
It is equally wise online, well aware that the margins do not allow for expensive packaging, delivery and returns.
After an upgrade to its website, it starts modestly with ‘click and collect’ for children’s clothing in 25 stores in the Northwest. If that works, expect a wider rollout. Eat your heart out, pressure Asos and Boohoo.