Shop Sephari

If everyone stopped using it. That, in five words, is how crypto would go to zero. Still, the journey is more interesting than the destination. The death of ftx, an exchange declared bankrupt on November 11th after a spectacular blow-up, will encourage some people to turn their attention elsewhere. What would have to happen for everyone to give up?
An answer requires a sense of how the industry works. At crypto’s base are blockchains, like Bitcoin and Ethereum, which record transactions verified by computers, a process incentivised by the issuance of new tokens. The Ethereum blockchain validates lines of code, which has made it possible for people to issue their own tokens or build applications. These include stablecoins, which are pegged to real-world currencies, and tokens like Uniswap, which manage decentralised-finance (DeFi) protocols. Major chains and a handful of Ethereum-based tokens, like stablecoins, account for 90% of cryptocurrency value. Big businesses have been built on top of this world, including exchanges, investment funds and lending platforms.
To take out crypto entirely would require killing the underlying blockchain layers. They could either give way first, kicking the stool out from underneath everything else. Or the industry could unravel from the top down, layer by layer like a knitted scarf.
Knocking the stool out is extraordinarily hard, and the current high value of bitcoin and ether makes it even harder. To attack a blockchain and shut it down requires gaining 51% control of the computational power or value of tokens staked to verify transactions. The more valuable the tokens, the more energy it takes to attack a proof-of-work chain, like Bitcoin, and the more money to attack a proof-of-stake chain, like Ethereum. The security of these chains—as measured by the amount someone would have to spend to attack them—is now in the region of $5bn to $10bn. It would require either a government or an extraordinarily rich individual to mount such an attack. And even if Elon Musk was so inclined, he seems a little busy at present.
Unravelling is therefore the more conceivable path. The events of this year have revealed just how prone to this sort of thing crypto is. The implosion that seems to have set the chaos in motion is that of Terra-Luna, a decentralised stablecoin system, worth around $40bn at its peak. It collapsed in May, wiping $200bn off the market capitalisation of crypto. That led a few weeks later to the bankruptcy of several lending platforms and a hedge fund, events which wiped another $200bn off the market cap. The margin calls these platforms faced seem to have imperilled Alameda, the trading firm owned by Sam Bankman-Fried, and led to the decision to use ftx customer funds to plug the gap. When ftx failed, it wiped another $200bn off crypto’s market cap. Now other exchanges and lending platforms looks to be in trouble.
Beady-eyed readers will note that most of this stuff, apart from Terra-Luna, is in the “on top of” category and not actually on-chain tech. DeFi exchanges and lending protocols have continued to whir even as the enterprises more akin to normal businesses have imploded one by one. But the collapse of these enterprises could imperil the underlying tech by taking out chunks of its value, making the chains more exposed to would-be attackers and pushing miners or stakers to switch off their machines. The value of on-chain activity and tokens is self-reinforcing. The more people that use DeFi, the more valuable Ethereum becomes. The higher the price of ether, the higher the hurdle to attack the blockchain and the more confidence people will have that blockchains will endure. This also works in reverse. The more people shy away from crypto out of fear, the less secure it becomes.
The total market cap of cryptocurrencies is currently $820bn. That is 70% below the peak a year ago, but still high compared with most of crypto’s history. It is higher than at the start of last year, for instance, and any point before then, including the peak of the bull market in 2017. Many more layers—such as a major stablecoin, big businesses or perhaps other on-chain protocols—would have to unravel to take crypto’s value back to the levels at which it traded just three or four years ago. Crypto’s reputation has been undermined before. It has collapsed in value repeatedly throughout its lifetime. Although fewer people will use crypto as a result of the ftx collapse, it is very hard to imagine the number will be small enough to take its value to zero.
© 2022 The Economist Newspaper Limited. All rights reserved.
From The Economist, published under licence. The original content can be found on https://www.economist.com/finance-and-economics/2022/11/23/how-crypto-goes-to-zero
Markets held modest gains late Wednesday, as minutes from the most recent meeting of the Federal Open Market Committee suggest monetary tightening will continue, though at a less intense pace, and the policy interest rate may even reach a higher terminal level than initially forecast. That’s as more and more indicators point to slowing growth in the U.S. At the same time, data from Europe suggest things may not be as dire as once feared. Andreas Steno Larsen welcomes Weston Nakamura to talk about central bankers, markets, and the economy (perhaps a little World Cup, too) in the middle of a holiday-shortened trading week in the U.S. Andreas and Weston assess near-term price action in the broader macro context — and separate the hawks from the doves just ahead of Turkey Day. We also hear from Jamie McDonald about position-sizing, portfolio management, and the importance of process in a complex macro environment. Watch the complete “We Got the Message” episode featuring Jamie McDonald here: https://rvtv.io/3F5TtPj. We want to hear from you too – please share your questions, comments, and suggestions! Editor’s Note: Our live chat feature will be unavailable for four to six weeks as we upgrade our video player technology. We apologize for the temporary loss of function. But we assure you the upgrade will more than justify the wait. In the meantime, we will be monitoring the comments section. So, in addition to conversing with your fellow community members, please share your questions there
Strength in the end markets, acquired assets and shareholder-friendly policies are benefiting Donaldson (DCI). Rising costs and expenses, and supply-side challenges are concerning.
Synchrony Financial (SYF) partners with Dutch to roll out an enhanced pet insurance plan for the latter's customers and meet pet care needs.
From saving on Christmas presents to replacing a broken home appliance, the Black Friday sales can be an opportunity to save money – providing you don't get carried away.
We feel now is a pretty good time to analyse Alcidion Group Limited's ( ASX:ALC ) business as it appears the company…
MetLife (MET) puts its foot forward to assist Federal Families in legal matters by making the Federal Legal plan available to them.
Nordstrom's (JWN) Q3 results reflect robust demand for apparel and shoes, and supply-chain optimization efforts. However, inflation and higher inventory are headwinds.
Allegion (ALLE) is benefiting from strength across its end markets, acquisitions and shareholder-friendly actions.
Former FDIC chair Sheila Bair explained to FOX Business how FTX's top 50 investors stand to lose big — but all others will likely see nothing at all.
American Eagle's (AEO) Q3 results reflect gains from improved inventory levels and reduced expenses despite higher markdowns and increased product costs.
The tax-free spin-off of Fortune Brands' (FBHS) cabinets business MasterBrand is expected to be completed on Dec 14, allowing both companies to focus on their core operations.
(Bloomberg) — Australia is moving to strengthen protections for historic sites of its Indigenous peoples in the wake of Rio Tinto Group’s destruction of caves occupied as long as 46,000 years ago, which a senior lawmaker described on Thursday as “legal desecration.”Most Read from BloombergElizabeth Holmes Judge Proposes Texas Prison, Family VisitsAnwar Ibrahim Becomes Malaysia PM After Decades of WaitingChina Covid Cases Jump to Record High, Topping Shanghai OutbreakMost Fed Officials Seek to S
The collapse of that major cryptocurrency exchange could help propel a safer type of crypto exchange to prominence.
GrowGeneration (GRWG) launches its first store in New Jersey to widen its reach to 16 states and further strengthen its operations.
Policy makers need to better understand the importance of Taiwan's role in the health of the global economy, says Chip War author Chris Miller.
Oil prices extended declines on Thursday as European Union leaders continued to discuss a price cap on Russian crude exports. Brent crude, the international standard, fell 0.7% to $85.83 a barrel, down from as high as $89 on Wednesday. West Texas Intermediate, the U.S. benchmark, slipped 0.6% to $77.50 a barrel.
Many seniors are all too familiar with the name Teva Pharmaceutical when they look at their medications as they refill their pill containers each week. Teva is known primarily as a manufacturer of generic drugs. Trading volume in TEVA looks like it has increased since May.
Warren Buffett — the Oracle of Omaha — is widely regarded as one of the greatest investors of all time. Berkshire Hathaway Inc. (NYSE: BRK-A) has returned tens of thousands of percent over the years and consistently outperforms the market. Buffett purchased the company for just $8.3 million in 1965, and it’s now valued at nearly $700 billion, roughly a 10 million percent return. But one of Buffett’s top all-time picks and longest-held positions is one you might not expect. Berkshire Hathaway fir
TOKYO (Reuters) -Oil declined on Thursday, hovering around two-month lows, as the Group of Seven(G7) nations' proposed range for a price cap on Russian oil was higher than current trading levels, alleviating concerns over tight supply. Brent crude futures dipped 50 cents, or 0.6%, to $84.91 a barrel by 0702 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell by 46 cents, or 0.6%, to $77.48 a barrel. Both benchmarks plunged more than 3% on Wednesday on news the planned price cap on Russian oil could be above the current market level.
Henrik Fisker, the CEO of his eponymous EV company, rang the opening bell at the NYSE today to mark a huge milestone for the company. Last week at contract manufacturer Magna’s sprawling plant in Graz, Austria, the company began initial production of its Ocean EV SUV.

source

Shop Sephari

Leave a Reply