Meet the Crypto-Nomads – The New York Times

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Over there

Some of the world’s largest cryptocurrency exchanges, like Binance and FTX, are not based in the United States. Yet their founders grew up in North America and trace their professional roots back to Wall Street.

US regulations prevent these trading tycoons from offering the products preferred by cryptocurrency investors, so they have traveled overseas, where the rules are more permissive on the riskiest types of transactions. And they will continue to move to avoid repression, report Eric Lipton and DealBooks Ephrat Livni for The Times.

It needed a non-U.S. Base of operations, FTX founder and CEO Sam Bankman-Fried said of his platform, which operates out of Hong Kong. The most important part for us and I think for a lot of the industry as a whole is the derivatives, he said. FTX specializes in this type of transaction, which is prohibited for US retail traders. The exchange raised $ 900 million this week to fund its global expansion, at a valuation of $ 18 billion.

Derivatives exchanges allow traders to gain significant leverage, up to 101 times on FTX and up to 125 times on Binance. This turns a small down payment into a huge bet that can pay off big or lead to forced sales that trigger cascading selloffs and influence the underlying prices of cryptocurrencies. Billions of dollars in investments from clients with ties to the United States have reached some offshore exchanges, despite the ban, according to trade data from last year.

Exchange executives admitted that leverage amplifies volatility, but say few traders actually use the extreme leverage advertised by their platforms. Binance’s Changpeng Zhao said the numbers were a marketing gimmick. Bankman-Fried conceded that maybe it was time to ease the leverage, calling it a double-edged sword.

Seven-day moving average of global Bitcoin transaction volumes by market

I’m not saying it’s going to cause the next financial crisis, said Timothy Massad, former chairman of the Commodity Futures Trading Commission, which regulates derivatives. But could it be something like the butterfly flapping its wings in Brazil and triggering a tornado in Texas? Derivatives of a different kind played a crucial role in the financial crisis of 2008, of course, when the highly leveraged bets on home mortgages went awry and helped trigger the collapse of large financial institutions.

Regulators around the world are turning the screws. Since June, Binance has been the target of finance officials with warnings or other coercive measures in Britain, the Cayman Islands, Hong Kong, Lithuania, Italy, Poland and Thailand, many of them eyeing its highly leveraged derivatives offerings. Meanwhile, with Hong Kong regulators soon reporting potentially restrictive rules, Bankman-Fried said he was considering moving to Singapore. This is where his fellow crypto nomad Zhao resides for now.

Read the full story of the crypto-nomads and in-depth interviews with Bankman-Fried and Zhao.

HERE’S WHAT HAPPENS

People are traveling like in 2019. Airline spending briefly exceeded 2019 levels for the first time since the start of the pandemic. Ticket prices are also on the rise, helping airlines report mostly optimistic profits this week, with domestic leisure travel at or above pre-pandemic levels, but business and international travel are still lagging behind.

Intel says the global semiconductor shortage could extend into 2023. We still have a long way to go, Intel CEO Pat Gelsinger told The Wall Street Journal. General Motors said yesterday that it plans to slow production of pickup trucks due to the chip shortage.

A pingdemia seizes Great Britain. With the increase in Covid cases, more than 600,000 people have been questioned by the government’s testing and tracing app asking them to self-isolate for 10 days because they were near a person being tested positive. This has led to staff shortages of truckers, train drivers, supermarket workers and more.

Amazon is ending its use of the arbitration process to resolve customer disputes. The e-commerce giant informed customers in a five-sentence memo of its updated terms of service. Now, disputes will have to go to federal courts, rather than the private and secret arbitration process, which critics say puts consumers at a disadvantage.

Ransomware-hit tech company obtains key to unlock customer data. Kaseya’s breach this month led to attempts to extort hundreds of the software company’s customers, prompting President Biden to call Russian President Vladimir Putin, where the hacks came from. Kaseya only said that a third party provided a key to unlock victims’ compromised systems.

Uber bets on freight

Uber announced yesterday that it will acquire logistics technology company Transplace from TPG Capital in a deal valued at more than $ 2.2 billion. It is a bet to strengthen the freight activities of Ubers, an important unit but less publicized than the other transport giants.

Daily business briefing

Updated

July 22, 2021, 6:17 p.m. ET

Uber reshaped its business during the pandemic, which took a heavy toll on its basic ridesharing service. The company sold its bicycle and scooter business and bolstered its food delivery division with a $ 2.65 billion deal to acquire Postmates, a $ 1.1 billion deal to buy the delivery business alcohol Drizly and, this week, a partnership with Albertsons.

Uber launched Uber Freight in 2017 and the unit raised $ 500 million from Greenbriar Equity Group last year for a valuation of $ 3.3 billion. Freight represented less than 10% of Ubers’ sales in the first quarter. We are very aggressively developing freight, said Dara Khosrowshahi, CEO of Ubers, at the company’s shareholders meeting in May. And when autonomous technology is developed and when it’s completely safe, we absolutely want autonomous trucks and autonomous drivers, so to speak, to be on the freight platform.

Can Trucking Help Uber Achieve Profitability? That’s the key question as Ubers’ main consumer-facing business grapples with a driver shortage. Uber says the deal will allow it to expand in Mexico and help the loss-making freight division break even (on an operational basis) by the end of next year.

What for most industries were hurricane-like headwinds was a pot of gold for technology.

Dan Ives of Wedbush Securities on the number of tech companies that have experienced a lucrative pandemic. Technology is triumphing in ways that even its most evangelical leaders could not have predicted, writes Timess David Streitfeld, overseeing the Silicon Valley scene.

No one believes in the bond market

Fears that the economic recovery will falter, in part because of the Delta variant of the coronavirus, appears to have faded among stock investors. Bond buyers, however, are still scared. The yield on 10-year Treasuries has been falling for months and remains at just under 1.3%, near the lowest since February, when the outlook for the economy was much weaker. Who to believe?

A drop in yields usually signals a slowdown in growth ahead, which seems at odds with what is happening. Yes, the Delta variant has put some reopening plans on hold, but overall the economy seems to be picking up pretty quickly. Most economists believe 2021’s growth will be the strongest since the mid-1980s.

This has led some Wall Street strategists to conclude that the bond market is broken.

Vincent Deluard, global macro strategist at institutional brokerage firm StoneX, says the long-held belief that bonds are somehow better at predicting the economy than stocks doesn’t make sense in our current situation. The Fed’s stimulus measures included a heavy dose of bond buying, distorting the market. And the popularity of target date funds, which balance stocks and bonds based on investors’ expected retirement date, is also shifting bonds for reasons unrelated to the economy. I find it hard to take seriously that the bond market is saying we’re not going to have inflation and a hot economy, Deluard said.

Tom Atteberry, who heads the FPA New Income bond fund, one of the most conservative in the market, says there’s another possibility: Economic rebounds are getting slower and slower. Growth peaked at around 5% in the 1990s, 4% in the mid-2000s and 3% before the pandemic.

The big difference this time around is that the government spent trillions to pull the economy out of a deep recession. What if it was hiding something fundamentally wrong? What if growth had already peaked? What if the new long-term cap is even lower than before? Atteberry thought about this, but then I come back to no, he said. Rates will go up and the economy will do a lot better than it is now.

READING SPEED

Offers

The Carlyle Group is said to be in talks to raise a $ 27 billion buyout fund, which would be the largest in the industry. (Bloomberg)

Shares of Indian food delivery company Zomato jumped 80% on their first day of trading, despite concerns over its hard-hitting IPO price. (BBC)

Delivery startup Gopuff is in talks with investors, including Blackstone, to raise $ 1 billion. (TechCrunch)

Grills are the latest fad in a scorching IPO market (WSJ)

Former baseball star Alex Rodriguez, the venture capitalist, has backed online brokerage start-up Tornado in hopes of riding the retail investor frenzy. (Bloomberg)

Politics

What the United States can learn from Europe’s experience with National Health Passes. (NYT)

The White House-Facebook coronavirus battle distracts attention from the real issue: We don’t agree on anything. (NYT)

President Biden installed more federal judges in his first six months than any president since Nixon. (Axios)

Congress shouldn’t risk worsening inflation (Times opinion)

The best of the rest

One of the fastest growing and most controversial private equity firms is made up of other private equity firms. (FT)

Twitter and Snap both beat earnings expectations as the ad market recovers. (NYT, CNBC)

What is the price of an uncleaned hotel room? (NYT)

Crocs, the unofficial shoe for the pandemic, says sales will increase by 60% this year. (She, CNBC)

Where’s Larry Page? The Google co-founder is said to have spent time on remote Fijian islands cut off from most travelers during the pandemic. (Initiated)

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