John wrote: ↑Thu May 12, 2022 9:22 pm
** 12-May-2022 World View: Bitcoin bubble bursting
I've heard several people suggest that the bursting of the
Bitcoin/crypto bubble, which is currently going on, is forcing a lot
of people to sell off billions of dollars in assets to meet margin
calls, and will cause a new financial crisis in the same way that the
bursting of the subprime real estate bubble caused a financial crisis
with the "Lehman moment" in 2008.
The Tether stable coin has some backing but they have never been willing to say exactly what. They have said some was bonds.
The speculation is that much of it is US dollar bonds from Chinese land developers. Some is US treasuries.
Both of these have lost value. So even if the bonds backing Tether was enough to cover $80 billion in tether a year
ago it may not be nearly enough today.
So people are taking their money out of Tether. We could get down to some point, say $40 billion in Tether left,
and run out of backing. If so, then it would tail too. Of course if 2 major "stablecoins" fail, everyone will take their money out of the others. If any of them don't have enough backing (high chance), then they will fail too.
So "contagion" is easy. And, "when the tide goes out you see who is swimming naked".