EL MERCADO DE CRIPTOACTIVOS Y LA ESTABILIDAD FINANCIERA (II)

Estimates are that the real size of the crypto market is more in the range of $10 trillionhttps://t.co/ID8ISaznii https://t.co/WhaQNXjCh8

— Guillermo Ruiz Zapatero (@ruiz_zapatero) June 23, 2022

 Estimates are that the real size of the crypto market is more in the range of $10 trillion. Anyone who thinks that a market of that size can implode without “significant macro-economic implications” is likely not an economist. (Unfortunately, Jerome Powell, the head of the monetary policy setting institution in the United States has a law degree, not an economics degree. And not to put too fine a point on it, but Powell was dead wrong on inflation being transitory and we’re all paying a steep price for that botched forecast.)

EL MERCADO DE CRIPTOACTIVOS Y LA ESTABLILIDAD FINANCIERA (I)

Is the #CryptoThreat to U.S. #FinancialStability $889 Billion or $10 Trillion? https://t.co/CgN3tU8IGJ

It is important to note the entire cryptocurrency market cap is $889.25 billion versus the American GDP, which is $25.34 trillion and an equities market more than $49 trillion

— Guillermo Ruiz Zapatero (@ruiz_zapatero) June 23, 2022

 Powell responded that the Fed was watching those events “very carefully” but the Fed “did not see significant macro-economic implications.” The article goes on to lend credence to this observation from the Fed by noting the following:

“It is important to note the entire cryptocurrency market cap is $889.25 billion versus the American GDP, which is $25.34 trillion, and an equities market that controls more than $49 trillion.”

So exactly how big is the problem? The $889.25 billion market cap for crypto cited by Benzinga is a miniscule part of the problem. That’s just the market value of all of the crypto that trades. And it should be noted that the market cap of crypto stood at $2.7 trillion as of last November, so investors have already experienced a negative wealth effect of $1.8 trillion.

But what about all of the crypto mining stocks that went public and have now lost 70 to 90 percent of investors’ money? What about the loans taken out by the crypto mining companies to buy all of that energy-guzzling computer equipment? What about the billions of dollars in margin loans sitting at federally-insured banks that were made to hedge funds to leverage their crypto bets? What about the bank loans to venture capital firms to invest in hundreds of crypto startup firms?