Bloomberg JUST Exposed Cryptocurrencies (FUD or Not?)

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hey everyone meet kevin here two months

ago i posted this video

called how the complete collapse of

cryptocurrencies

would happen has 194 000 views and folks

yesterday evening a new piece came out

from bloomberg that basically

feels like i watched my video did a

whole crap ton

of research and gave us the scenario as

to how what i

speculated about potentially could

happen two months ago could

actually happen and they gave us the

stats and data and i'm like

i need to share this with you all cause

it's a little intense

let me give you a quick background in

case you didn't watch that video or

didn't remember that video

let me give you a very very simple

introduction to this and then we're

going to get into the stats and figures

so buckle up

this gets a little uh yeah it gets

intense

all right so very basic overview you've

heard of stable coins before maybe you

haven't maybe you've just heard of

tether

or you've heard and this is not just a

tetherfud video don't you've heard about

the

gemini dollar or coin usa whatever

you've

heard about these different coins before

that basically say hey

your coin is worth one dollar it's

pegged to the dollars the value of the

coin is one dollar

and the purpose of having the usdc

whatever the u.s stablecoin

the purpose of this is to be able to

transact cryptocurrencies faster

we don't have to wait for your u.s

dollar to uh to to

show up we could give you a coin and

rather than trying to wire u.s dollars

around or other currencies around

uh which are subject to government

regulation especially in china where

you know chinese government isn't really

too fond of cryptocurrency right now hey

if you had stable coin

well single coins those those aren't the

renminbi so it's uh

something that's not regulated and it

gives you more freedoms so anyway

these stable coins have this allure of

easier blockchain

transactions because they're on the

blockchain but they're also pegged to

the dollar

so the argument is that they'll always

be worth a dollar

and there are many companies that have

or use these table coins and they offer

interest on these stable coins

and in my video from two months ago i

talked about how there's a real

dangerous

opportunity for rehypothecation to get

out of hand

and for massive lending combined with a

price decline in cryptocurrencies

to lead to a complete collapse of stable

coins

now stable coins drop or or collapse

generally when they

do something known as breaking the

dollar so here's the thing

when you have a gemini coin you believe

it is worth

one dollar and that makes sense because

gemini tells you hey look

we audit our sable coin so that

we have 106 million

gemini dollars in circulation and we

have 106 million dollars

in an account well that's fine when you

read the footnote you notice that these

are actually not just sitting in cash

they're invested into

goldman sachs money market funds and

treasury securities

fine let's call those relatively safe

and relatively worth a dollar

but the issue that i came up with in my

other video wasn't necessarily that

the gemini dollar would break the dollar

although it's possible

and this is why every time there seems

to be a little bit of panic in the

crypto spaces

you immediately see brokerages start

freezing withdrawals it's a concern

but what was a bigger issue with my

gemini dollar video was

how many times are these 106 million

dollars lent out

see because if i have gemini dollars and

i want to earn

you know with with gemiini earn or

whatever i want to earn five percent on

my gemini dollar and i authorize the

lending out of this

well that could have been done 10 20

different times

we don't know how many times it could

have been done this could literally

gemini dollars could literally be worth

instead of 106 million dollars which

honestly feels a little long

it could be worth 10 20 50 100

billion dollars the market cap

or or the amount of money circulating

based in the gemini dollar based on

loaned out versions of these existing

assets

could be massive so you could literally

have a million people out there looking

and going oh yeah i got a ton of gemini

dollars thinking it's a savings account

when in reality because they signed up

for earning interest they've

lent it out and now the potential is

that

if for some reason the lending market

collapses one day

they may no longer be able to redeem

their gemini dollars for dollars

because all of these other people are

basically going bankrupt

in some kind of liquidity crisis or some

kind of freezing of withdrawals

totally possible and this is how

cryptocurrencies in that video from two

months ago this is how i

overall made the argument that there is

a risk factor when it comes to stable

coins

they're not guaranteed to be at one

dollar especially if you're turning on

that uh that lending aspect and lots of

things could screw up the market

now we overall went through that sort of

scenario and we're like uh

okay yeah it could happen but hey we'd

have to see a pretty large drop in

bitcoin pricing and the pricing of other

crypto assets well guess what's happened

over the last two months

we've seen kryptos fault a good sizable

chunk

now they're not like massively sold off

it's not like we're at bitcoin 5000 in

that

but this brings up the bloomberg article

and see

this is where i really wonder did

bloomberg

and and credit to them okay did

bloomberg see my video and i'm not

trying to take credit for this okay

but then go really deep on the research

because the research and what i'm going

to show you

is very very good it's incredibly good

now it is opinion piece

but let's put that aside let's look at

some of the research and let's just draw

some conclusions okay

so i'm going to show you the article

we're going to go through the most

important pieces

of it together that brings us to today's

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all right so the piece starts off by

talking about how in 2008

there was a run on a lehman brothers

money market

fund worth 64.8 billion dollars because

1.2 percent of the fund's assets became

worthless

so just 1.2 percent became worthless

and the markets freaked out and

everybody wanted to get their money

because now the sudden things weren't

worth a dollar anymore they were

basically worth 98.9

98.8 cents and all of a sudden there was

this massive run on money markets

and the only way the episode of this

massive run

ended was the treasury department came

in and basically guaranteed all money

market funds

now what's really interesting about

money market funds is yeah sure the

treasury department

the government the sec whatever the

federal reserve they can come bail you

out

but guess who they're not going to bail

out if there's ever a run on stable

coins

because the government don't like stable

coins

at least from what we could tell so far

maybe they'll have like a central bank

digital currency in the future we know

they're working on that

but it's very interesting you do not

have mr bailout man coming to save you

uh or woman because we've got janet

yellen okay

got jerome powell and jana young uh and

so this is where they go into

cryptocurrencies and specifically they

point out

tether now again this is not just tether

fod i want to go through

and i know some of it is going to seem a

little fetish but i want to go through

some of the stats because they're very

very interesting and we'll draw

conclusions here okay

so take a look at this we know that

tethers are supposed to be pegged to a

dollar

and tether says that the dollar is

backed up by whatever tethers reserves

are

well here's what tethers reserves are

made up of 50 percent

is in commercial paper remember how at

lehman brothers

one percent or sorry 1.2 percent

was in commercial paper that became

worthless and with 1.2 percent there was

a massive run on all money markets that

the treasury department

had to bail out okay tether has 50

of their reserves in commercial paper

with no details provided about the

quality

fiduciary deposits represented 18

but more troubling they say 10 was in

corporate bonds

funds and precious metals and 13

were in secured loans to miscellaneous

entities that we have no idea about and

then there was one to two percent

which of of basically tether money that

goes into other

which can include other digital coins so

in other words

people could be like putting their money

into tether borrowing against their

tether to invest in

uh cryptocurrencies but then tether

itself can be investing in if they

wanted to

junk bonds uh other loans

or uh other coins and so it like it

creates this insane

buildup of assets that are actually not

backed by a dollar they're backed by

commercial loans which we have no idea

how good they are

other tokens corporate bonds like this

right here

that this is a scary paragraph and

i'm always concerned that how many other

stable coins are doing this kind of

stuff

now again gemini says no no we use the

treasuries

but it's all in treasuries i don't know

i have no idea

it's money market see here we'll go back

really quick

to oh not cnbc there we go

gemini dollar accounts are held and

maintained by state bank uh

state street bank and trust which keep

in mind

they they like to say oh well there's fa

pass through fdic insurance on this

don't kid yourself you're only getting

fdic insurance if that bank fails

not if the stable coin fails uh now

they're saying that the gemini dollars

are invested into

uh you know treasuries here which is

good

but keep this in mind that gemini dollar

the gemini dollar is actually the

smaller

of the stable coins tether is the

biggest one tethers

huge i mean let's look at it really

quick

gemini dollars at about 106 million you

can go to coin market cap right now

and just look at this for example

tethers market cap

is 61 billion dollars it's literally

let's see 61 61 000 divided by

100 and what was it 107 something like

that

hold on let's grab it real quick here

yeah 107.

all right it's 570 times as large

tether is 570 times as large so even

that gemini might be okay

doesn't remove the risk of all that

rehypothecation that's going on

but the united states tether is that 62

billion dollars of a market cap 80.9

billion

of it has been transacted in the last 24

hours that's two and a half times as

much

as bitcoin gets transacted tether is

very very important to the crypto market

and that is a scary diversification in

terms of

how they're investing their crypto

reserves

all right so then we also have fine

print that says tether and we know this

has the right to delay any redemption or

withdrawal if such delay is

necessary is necessity necessitated

cheese

by the illiquidity or unavailability or

loss of any reserves

in other words if they can't give you

your money because people are running

the bank and everybody wants their money

out of tether

they have the right to pause withdrawals

now they also make this clarification

that here a real money market fund would

never be allowed to do that because

they're regulated by the security and

exchange commission

and there are only certain things you

can invest your money into but tether

doesn't have any of those requirements

and their auditing requirements are

whatever they want

so we don't know uh like with gemiini we

don't know how many times it's lent out

and where does the money go when it's

lent out we don't know to whom it's

being lent

we don't know where those tethers are

going gemini is probably a lot safer

than tether given where tether is

putting all their money but

holy smokers and so we notice here

here's a little bit more talk about look

at this a jp morgan research report

earlier this year said that 50 to 60

percent of all bitcoin trades

are for tether and that a sudden loss of

confidence in tether would likely

generate a severe liquidity shot to

shock to bitcoin markets and so so this

is how you can see like it's all kind of

tied together uh and then we also talk

here about particularly because of the

recent rise in crypto prices

that we've seen over the last few months

in general right if we go six pack six

months back to now

not like the last few weeks where we've

had a little bit of a sell-off

but the argument here is that we know

that leverage

has gone up and but the problem is we

don't know

how much leverage there is in the

stablecoin market

and in the crypto market and so that's

dangerous so if we continue to see

prices fall and then liquidity goes down

you could see withdrawals get shut down

for tether

and that could lead to some big old

issues but wait a minute who has all the

tether well check this out

approximately 65 percent of tether

tokens are held through the chinese

exchange huabi

and that it could be that chinese

investors convert renminbi into tether

in order to trade other cryptocurrencies

while avoiding legal or regulatory

constraints remember china does not like

kryptos right

and this is the scarier part so a ton of

it 65

is in china but the scarier part is that

the top 10

tether addresses hold a quarter of the

market and the top 100 hold

41 of all tokens so it does not take a

lot of people

to start dumping tether to have a

massive

scary result in the crypto market then

they talk a little bit about how

libra was supposed to be this world

stable coin but politicians were afraid

this would

undermine united states sovereignty or

country sovereignty

but fear not tether has its reserves at

a small

bank in the bahamas so don't worry it's

good

all the money's over at the bahamas but

then they end the article by saying hey

maybe we should just have a little bit

more clarity and regulation on these

stable coins and folks

i hate to say it but it's literally what

we talked about two months ago

that we have so little knowledge about

where the stablecoin money is going

and all of the lending that's happening

in the stablecoin market

that we don't actually know how much of

cryptocurrency prices

are just propped up by debt upon debt

but not just debt upon debt debt

issued on the belief that the underlying

asset

is worth a dollar when in reality the

underlying asset is actually just

somebody else's debt like a corporate

bond or a junk bond or whatever

you have to always ask yourself why is

it that they can pay you

four percent five percent eight percent

on your stable coins

it's just it just seems a little too

good to be true

that you could put your savings into a

stable coin get eight percent and not be

exposed to some risk

so i'm a little concerned if you want to

read the article yourself they did

change the title it's can a

cryptocurrency break

the buck i was posted yesterday i

thought it was a really really really

good piece

this is something to pay attention to

and what my recommendation here

is well look first of all i like the

idea of being able to buy the dip in

cryptocurrencies but

i am deathly afraid of how much unknown

leverage there is in the crypto markets

and i've been talking about this for

months

i've got maybe right now about two

percent of my portfolio no

that's wrong i've got about 1.4 of my

portfolio

in bitcoin and ethereum that's it uh

and uh look i love love the premise of

kryptos

but uh and i'm not just trying to do the

oh

fudd sell everything look i'm not

selling i'm looking at buying dips

but i this this kind of stuff makes me a

little nervous

from going like all in or going heavier

in these are just things that i think

are very valid to pay attention to

uh it's not something that's just like

oh let's let's fud sell everything no no

no

it's just when you're an investor you

want to be aware of the upsides

and the downsides and this is one area

that is worth paying attention to

thank you so much for watching this

video folks i'm excited to talk to you

again in the future

let's get another video going subscribe

if you like this kind of content and

folks

we'll see in the next one thanks so much

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