The Smartest Guys in the Room

Hey remember when a massive global financial crisis was set off by the collapse of crypto-focused banks Silvergate and Signature? Right, right, of course you do, that was less than two weeks ago. Ok but do you remember when there was a massive hype campaign around crypto-backed NFTS as the future of art and within months the NFT market had collapsed by 99.5%? No you're totally right that was less than two years ago of course you remember.

But OK now imagine your bank account is potentially imperiled by the crisis, what would you say if I told you, even remembering all that, that the thing you should do is take all your cash out of other investments and put it into crypto? You'd call me an absolute dipshit and you'd warn other people not to listen to my advice?

Well that's the difference between me, a trans girl with an internet connection and a few hundred dollars in loose change, you, a dear and loyal reader, and the brain geniuses at the absolute heights of economic power. Because over the last week, as the crisis shuddered through the banks, investors poured 100 BILLION DOLLARS into the crypto market, bringing Bitcoin to a 2 year high, still a ways off its NFT era high but, as of this writing Monday morning, still climbing.

For context, $100 Billion is the amount that the Swiss National Bank distributed to mega-bank UBS to cover the losses it was adding to its books by buying Credit Suisse, a move it made over the weekend. (Remember though, even though UBS only paid fire sale prices of $3 Billion, and even though THAT pennies on the dollar purchase was backed up by an SNB assurance of another $8 billion, this is NOT a bailout). So the Swiss government’s world historic intervention into the financial sector is at the same size as the flow of cash into crypto over the last 10 days.

Oh yeah by the way Credit Suisse, a globally systemic bank, fully imploded.

Crypto bros are of course crowing. Just gonna show you the open from this Bloomberg article about Bitcoin grifters from Saturday:

As members of the media lingered near the entrance of the headquarters of Silicon Valley Bank this week, a Bitcoin true believer seized on an opportunity.

He drove a Budget moving van directly in front of the building’s entrance, so all could see the message plastered on the side: “BE YOUR OWN BANK,” it read, between a doctored image of Federal Reserve Chair Jerome Powell holding a “Buy Bitcoin” sign and the orange logo for the original cryptocurrency.

Now if your experience of guys with vans covered in print-outs spreading messages in the community is similar to mine, it’s not the kind of advocacy you use to make crucial financial decisions.

But in an era where reality TV hosts can tweet insults all the way into the white house, where people believe an epochal pandemic is a government conspiracy to install 5G networks in our brains or that trans children are being given surgeries like pediatricians hand out lollipops, bitcoin doesn’t seem all that crazy. I mean look at all these incredibly smart people claiming that in case of banking collapse, it’s as good as gold, it’s a financial safe haven!

But even those people who somehow don’t think crypto is just an elaborate ponzi scheme recognize that it is by far one of the most volatile monetary instruments in the world, hardly the stuffy safe world of treasury bonds (which, by the way, have had their highest trading volume period since the last major financial crisis over the last two weeks) .

If I had to guess, I’d bet a few people are making a market play on a dead cat bounce, which is to say, a few savvy very rich people pumped some cash into BTC knowing that if it rallied, their more gullible upper middle class clients and coke-addled daytrader peers would suddenly flock into the market, and they could quickly get out with a just-before-the-end-times cash injection.

But I also want to draw attention to the scale of the deposits. Because the 100 Billion in crypto inflows follows after the fed gave around $150 Billion in discount window loans and about $125 B in bridge loans to Signature and Silvergate. So how much money flowed direct from the discount window to Coinbase? We’ll probably never know, but considering who the customers were for SVB, Silvergate and Signature, Id be shocked if a considerable percentage of the dollars didn’t go straight from the Franklin Mint to minting Dogecoin.

You have to admit, if the emergency funds pushed through by the Biden administration evaporate in the crypto market within weeks of their being received, it will be absolutely hilarious. But it’s also the case that the people who have more power than any of us will ever know, who have destroyed the future of the entire planet in the name of an infinite diet of Soylent and EDM, and who were so absolutely bad at doing that they lost their shirts, turn around the second they get any help at all to put all that help, billions of dollars extracted from hours upon hours of excrutiating labor by you and me and millions like us around the globe, plop that straight down on the craps table and yell “let it ride”.

These are the smartest most heavily rewarded people in our society. These are the priests and viziers and prophets and generals of this empire, and they will not be spared in the fires that bring it down.