Hacker News Reader

Comment by sharadov | Hacker News Reader

200 Billion in crypto wiped out in 24 hrs is bound to cause ripple effects in traditional finance as well.

"Crypto has at least started to work its way into the real financial system. Some traditional investors also own crypto; if their crypto goes down they might have to sell regular stuff. Some public companies are exposed to crypto (because they are crypto exchanges, because they have levered crypto holdings, etc.), so your boring old index fund might go down when crypto goes down".

https://www.bloomberg.com/opinion/articles/2022-05-12/crypto...

View on HN

By fading the print out after a few interesting paragraphs, you don't make me want to subscribe you just piss me off. That's because you suckered me into reading something I couldn't finish without paying. If you told me that at the beginning of the article, I would have more respect for you and, who knows, might have even considered subscribing. If you are sincere honest journalist don't function like a pimp.

This sort of stuff makes me a militant user of archive.is

https://archive.ph/20220512234058/https://www.bloomberg.com/...

For anyone else looking for access: This particular article is the web version of the excellent daily Money Stuff newsletter by Matt Levine which you can subscribe to for free https://www.bloomberg.com/account/newsletters/money-stuff . It's probably the best newsletter covering the financial industry

Just subscribe to Matt Levine's Money Stuff newsletter which I do. And am not a journalist but have been frequently called a pimp :-) And, sorry that you are having a bad day, go punch a pillow or something..

>so your boring old index fund might go down when crypto goes down

I need someone to explain to me how my S&P 500 blackrock ishares are going to die from crypto. I don't think FAANG, Berkshire, Exxon and Pfitzer are going to notice if all of crypto dropped to zero right now.

How much of FAANG's customers would cease to exist and stop spending if crypto went to zero?

probably less than 1%

How much of a hit it would be on FAANG's market cap if their revenue went down by 1%?

Right, because stock markets never go down when tech companies show signs of declining revenue.

crypto is so insignificant it will be regarded as noise on their PnL

How is "going down" (by some percentage) the same thing as "dropping to zero"?

If they wouldn't be affected by crypto going down by 100%, why would they be affected by crypto going down by less than that?

> I don't think FAANG, Berkshire, Exxon and Pfitzer are going to notice if all of crypto dropped to zero right now.

If some investors are invested in both FANNG and crypto, when they face margin call in the latter they may have to sell the former to cover their position.

do most investors really take out margin loans to buy stocks?

I can understand _some_ investors do it, but i'd imagine it's not a majority.

> do most investors really take out margin loans to buy stocks?

In the scenario I describe, those investors take margin loans to long or short crypto, and when they fail, they sell other assets to cover themselves.

This is just one possibility I describe.

> but i'd imagine it's not a majority.

No one knows. It may take only one institutional investor who lost a gigantic amount of money in crypto trading and were therefore forced to sell stocks to shake the stock market.

1) There are a number of publicly-traded crypto-centric companies, such as Coinbase, Riot Blockchain, Marathon Digital Holdings, and MicroStrategy. Although not part of any major index, investment firms that are undoubtedly have significant exposure to them.

2) There are plenty of crypto ETFs, such as GBTC and BITO, where selloffs there could cause liquidations elsewhere.

3) Major companies themselves now have significant crypto holdings. The most famous being Tesla, but investment banks have been piling into it over the past year. SPY's own State Street announced a 425-man team to head a new division last June.

Reply on news.ycombinator.com