Crypto is the new macro

[ad_1]

Morgan Stanley’s new crypto cover was launched this morning just as Bloomberg published an article noting that “Wall Street is building up a crypto army and paying for the recruits.” And just a day after the crypto world celebrated the 13th anniversary of the Bitcoin whitepaper that preceded the launch of Bitcoin itself in 2009 – at a value of $ 0.0008 each.

The nine-page white paper makes no mention of “hard money” or Austrian economics or the Federal Reserve or bailouts or anything like that. Rather, it explains how this would solve the e-commerce problem related to the need for “non-reversible payments”. Nonetheless, Bitcoin has become the preferred store of value in a world that has been unleashed with central bank money printing. And the original release date of the October 2008 white paper – just weeks after the financial crisis peaked with the Fed’s bailout of AIG – speaks for itself to the crypto community.

Crypto has been so successful that it is, in many ways, the new macro. Morgan Stanley asked one of its top-rated FX strategists, Sheena Shah, to cover it. At a time when Wall Street itself is shrinking, companies have added about “1,000 crypto-related roles since 2018,” according to Bloomberg – and are paying a premium for those hires. It is no coincidence that one of the main macro traders, Mike Novogratz, closed his macro hedge fund in 2015 to launch Galaxy Digital, a crypto investment bank, shortly thereafter. He’s probably even a bigger star now than in his prime.

Or look at Sam Bankman-Fried, who founded FTX, a leading crypto platform, after starting his career trading international ETFs at Jane Street. I know a lot of people myself who used to work in big-name financial firms, but are now creating wealth through roles – or just stakes – in the crypto world. You watch the raft of hedge funds popping up to execute arbitrage deals and things like that and it’s so reminiscent of what hedge funds were doing in the dollarized world fifteen years ago before too much competition and heavy government interference. don’t chase all returns.

We’ve already talked about how Yale researcher Gary Gorton recently published an article titled “Taming Wildcat Stablecoins,” comparing today’s cryptocurrencies to the wild era of “free banking” to United States in the 19th century before regulators created a uniform national currency. He didn’t mean this as a compliment, but for many who now feel their career stuck in the dull macro world, that’s exactly the appeal; crypto being one of the last frontiers to now experience the excitement – and bigger returns – of the “wild, wild west”.

One last point. There will be a lot of desire, especially among crypto purists and die-hard Bitcoiners, to make Wall Street the scapegoat during the upcoming crypto collapse. “See, they ruin everything!” they will scream. But it is the crypto community itself that is currently creating the leverage machine that is now in danger of collapsing, as longtime Bitcoiners like Avanti Bank’s Caitlin Long have warned.

“Too bad Bitcoin prices are being manipulated by [the] same leverage games that affect commerce, ”or traditional finance, she tweeted the other day. Long was not happy with the launch of the Bitcoin futures ETF, leveraged gaming platforms are playing to generate massive returns, and the fact that, as she puts it, only “$ 80 billion of deposit capacity in US dollars support an industry with an asset value of $ 2.6 trillion, “in part thanks to stablecoins.

But is all of this a real surprise given the number of former inhabitants of the dollarized financial world who have already shown up to relive their good old days in the crypto space? Or the simple fact that the human brain can’t seem to resist the allure of leveraged returns, even though they caused the 2008 financial crisis that ushered in the bailouts that have now given rise to crypto first. place.

This is already noted among Bitcoiners. The real debate is not whether the crypto will have its own crisis, but whether someone would be “bailed out” in this case. “There is no bailout in Bitcoin” is quickly becoming a slogan. Whether this actually turns out to be true depends on the extent to which companies “too big to fail” are exposed; dollars are only “worthless” until they are desperately needed to avoid bankruptcy. Crypto is the new macro, and now regulators are scrambling to catch up.

See you at 1 p.m.!

Kelly

Twitter: @KellyCNBC

Instagram: @realkellyevans

[ad_2]