How Crypto’s Collapse May Have Done the Economy a Favour | Kanebridge News
Kanebridge News
    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,526,212 (+1.41%)       Melbourne $950,600 (-0.81%)       Brisbane $848,079 (+0.39%)       Adelaide $783,680 (+0.69%)       Perth $722,301 (+0.42%)       Hobart $727,777 (-0.40%)       Darwin $644,340 (-0.88%)       Canberra $873,193 (-2.75%)       National $960,316 (+0.31%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $711,149 (+0.79%)       Melbourne $480,050 (-0.07%)       Brisbane $471,869 (+1.52%)       Adelaide $395,455 (-0.79%)       Perth $396,215 (+0.44%)       Hobart $535,914 (-1.67%)       Darwin $365,715 (+0.11%)       Canberra $487,485 (+1.06%)       National $502,310 (+0.25%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 8,985 (+170)       Melbourne 11,869 (-124)       Brisbane 8,074 (+47)       Adelaide 2,298 (-22)       Perth 6,070 (+20)       Hobart 993 (+24)       Darwin 282 (-4)       Canberra 809 (+43)       National 39,380 (+154)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 7,927 (+125)       Melbourne 6,997 (+50)       Brisbane 1,822 (+3)       Adelaide 488 (+5)       Perth 1,915 (-1)       Hobart 151 (+3)       Darwin 391 (-9)       Canberra 680 (+5)       National 20,371 (+181)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $750 (-$20)       Melbourne $580 ($0)       Brisbane $590 (+$10)       Adelaide $570 (-$5)       Perth $600 ($0)       Hobart $550 ($0)       Darwin $700 (+$5)       Canberra $670 (+$10)       National $633 (-$1)                    UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $700 (-$20)       Melbourne $558 (+$8)       Brisbane $590 ($0)       Adelaide $458 (-$3)       Perth $550 ($0)       Hobart $450 ($0)       Darwin $550 ($0)       Canberra $540 (-$10)       National $559 (-$4)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 5,224 (-134)       Melbourne 5,097 (+90)       Brisbane 3,713 (-84)       Adelaide 1,027 (-3)       Perth 1,568 (-46)       Hobart 471 (-3)       Darwin 127 (+13)       Canberra 658 (-32)       National 17,885 (-199)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 8,171 (-343)       Melbourne 5,447 (-170)       Brisbane 1,682 (-22)       Adelaide 329 (+3)       Perth 561 (-11)       Hobart 159 (-6)       Darwin 176 (+16)       Canberra 597 (-12)       National 17,122 (-545)                HOUSE ANNUAL GROSS YIELDS AND TREND         Sydney 2.56% (↓)       Melbourne 3.17% (↓)     Brisbane 3.62% (↑)        Adelaide 3.78% (↓)       Perth 4.32% (↓)     Hobart 3.93% (↑)      Darwin 5.65% (↑)      Canberra 3.99% (↑)        National 3.43% (↓)            UNIT ANNUAL GROSS YIELDS AND TREND         Sydney 5.12% (↓)       Melbourne 6.04% (↓)       Brisbane 6.50% (↓)     Adelaide 6.02% (↑)        Perth 7.22% (↓)     Hobart 4.37% (↑)      Darwin 7.82% (↑)        Canberra 5.76% (↓)       National 5.79% (↓)            HOUSE RENTAL VACANCY RATES AND TREND       Sydney 1.0% (↑)      Melbourne 0.7% (↑)      Brisbane 0.8% (↑)      Adelaide 0.4% (↑)        Perth 0.4% (↓)       Hobart 1.2% (↓)     Darwin 0.5% (↑)      Canberra 1.5% (↑)      National 0.8% (↑)             UNIT RENTAL VACANCY RATES AND TREND         Sydney 1.3% (↓)     Melbourne 1.6% (↑)      Brisbane 0.9% (↑)      Adelaide 0.5% (↑)      Perth 0.7% (↑)      Hobart 2.2% 2.0% (↑)      Darwin 1.0% (↑)        Canberra 1.7% (↓)     National 1.3% (↑)             AVERAGE DAYS TO SELL HOUSES AND TREND       Sydney 27.0 (↑)        Melbourne 28.3 (↓)     Brisbane 32.3 (↑)      Adelaide 26.3 (↑)      Perth 34.9 (↑)        Hobart 33.4 (↓)     Darwin 48.7 (↑)        Canberra 27.6 (↓)     National 32.3 (↑)             AVERAGE DAYS TO SELL UNITS AND TREND         Sydney 27.0 (↓)       Melbourne 29.0 (↓)     Brisbane 33.0 (↑)        Adelaide 27.5 (↓)     Perth 38.2 (↑)      Hobart 33.4 (↑)      Darwin 48.3 (↑)      Canberra 33.2 (↑)      National 33.7 (↑)            
Share Button

How Crypto’s Collapse May Have Done the Economy a Favour

Crypto’s lack of connections with traditional finance means its problems haven’t spilled over to the economy

By GREG IP
Fri, Nov 25, 2022 8:42amGrey Clock 4 min

This year’s crypto collapse has all the hallmarks of a classic banking crisis: runs, fire sales, contagion.

What it doesn’t have are banks.

Check out the bankruptcy filings of crypto platforms Voyager Digital Holdings Inc., Celsius Network LLC and FTX Trading Ltd. and hedge fund Three Arrows Capital, and you won’t find any banks listed among their largest creditors.

While bankruptcy filings aren’t entirely clear, they describe many of the largest creditors as customers or other crypto-related companies. Crypto companies, in other words, operate in a closed loop, deeply interconnected within that loop but with few apparent connections of significance to traditional finance. This explains how an asset class once worth roughly $3 trillion could lose 72% of its value, and prominent intermediaries could go bust, with no discernible spillovers to the financial system.

“Crypto space…is largely circular,” Yale University economist Gary Gorton and University of Michigan law professor Jeffery Zhang write in a forthcoming paper. “Once crypto banks obtain deposits from investors, these firms borrow, lend, and trade with themselves. They do not interact with firms connected to the real economy.”

A few years from now, things might have been different, given the intensifying pressure on regulators and bankers to embrace crypto. The crypto meltdown may have prevented that—and a much wider crisis.

Crypto has long been marketed as an unregulated, anonymous, frictionless, more accessible alternative to traditional banks and currencies. Yet its mushrooming ecosystem looks a lot like the banking system, accepting deposits and making loans. Messrs. Gorton and Zhang write, “Crypto lending platforms recreated banking all over again… if an entity engages in borrowing and lending, it is economically equivalent to a bank even if it’s not labeled as one.”

And just like the banking system, crypto is leveraged and interconnected, and thus vulnerable to debilitating runs and contagion. This year’s crisis began in May when TerraUSD, a purported stablecoin—i.e., a cryptocurrency that aimed to sustain a constant value against the dollar—collapsed as investors lost faith in its backing asset, a token called Luna. Rumours that Celsius had lost money on Terra and Luna led to a run on its deposits and in July Celsius filed for bankruptcy protection.

Three Arrows, a crypto hedge fund that had invested in Luna, had to liquidate. Losses on a loan to Three Arrows and contagion from Celsius forced Voyager into bankruptcy protection.

Meanwhile FTX’s trading affiliate Alameda Research and Voyager had lent to each other, and Alameda and Celsius also had exposure to each other. But it was the linkages between FTX and Alameda that were the two companies’ undoing. Like many platforms, FTX issued its own cryptocurrency, FTT. After this was revealed to be Alameda’s main asset, Binance, another major platform, said it would dump its own FTT holdings, setting off the run that triggered FTX’s collapse.

Genesis Global Capital, another crypto lender, had exposure to both Three Arrows and Alameda. It has suspended withdrawals and sought outside cash in the wake of FTX’s demise. BlockFi, another crypto lender with exposure to FTX and Alameda, is preparing a bankruptcy filing, the Journal has reported.

The density of connections between these players is nicely illustrated with a sprawling diagram in an October report by the Financial Stability Oversight Council, which brings together federal financial regulators.

To historians, this litany of contagion and collapse is reminiscent of the free banking era from 1837 to 1863 when banks issued their own bank notes, fraud proliferated, and runs, suspensions of withdrawals, and panics occurred regularly. Yet while those crises routinely walloped business activity, crypto’s has largely passed the economy by.

Some investors, from unsophisticated individuals to big venture-capital and pension funds, have sustained losses, some life-changing. But these are qualitatively different from the sorts of losses that threaten the solvency of major lending institutions and the broader financial system’s stability.

To be sure, some loan or investment losses by banks can’t be ruled out. Banks also supply crypto companies with custodial and payment services and hold their cash, such as to back stablecoins. Some small banks that cater to crypto companies have been buffeted by large outflows of deposits.

Traditional finance had little incentive to build connections to crypto because, unlike government bonds or mortgages or commercial loans or even derivatives, crypto played no role in the real economy. It’s largely been shunned as a means of payment except where untraceability is paramount, such as money laundering and ransomware. Much-hyped crypto innovations such as stablecoins and DeFi, a sort of automated exchange, mostly facilitate speculation in crypto rather than useful economic activity.

Crypto’s grubby reputation repelled mainstream financiers like Warren Buffett and JPMorgan Chase & Co. Chief Executive Jamie Dimon, and made regulators deeply skittish about bank involvement. In time this was bound to change, not because crypto was becoming useful but because it was generating so much profit for speculators and their supporting ecosystem.

Several banks have made private-equity investments in crypto companies and many including J.P. Morgan are investing in blockchain, the distributed ledger technology underlying cryptocurrencies. A flood of crypto lobbying money was prodding Congress to create a regulatory framework under which crypto, having failed as an alternative to the dollar, could become a riskier, less regulated alternative to equities.

Now, stained by bankruptcy and scandal, cryptocurrency will have to wait longer—perhaps forever—to be fully embraced by traditional banking. An end to banking crises required the replacement of private currencies with a single national dollar, the creation of the Federal Reserve as lender of last resort, deposit insurance and comprehensive regulation.

It isn’t clear, though, that the same recipe should be applied to crypto: Effective regulation would eliminate much of the efficiency and anonymity that explain its appeal. And while the U.S. economy clearly needed a stable banking system and currency, it will do just fine without crypto.



MOST POPULAR

Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual

Related Stories
Property
Tougher Return-to-Office Policies Are No Remedy for Half-Empty Buildings
By PETER GRANT 04/10/2023
Property
Interest rates stay on hold – for now
By KANEBRIDGE NEWS 03/10/2023
Money
Americans Are Still Spending Like There’s No Tomorrow
By RACHEL WOLFE 03/10/2023
Tougher Return-to-Office Policies Are No Remedy for Half-Empty Buildings

Office owners are struggling with near record-high vacancy rates

By PETER GRANT
Wed, Oct 4, 2023 3 min

First, the good news for office landlords: A post-Labor Day bump nudged return-to-office rates in mid-September to their highest level since the onset of the pandemic.

Now the bad: Office attendance in big cities is still barely half of what it was in 2019, and company get-tough measures are proving largely ineffective at boosting that rate much higher.

Indeed, a number of forces—from the prospect of more Covid-19 cases in the fall to a weakening economy—could push the return rate into reverse, property owners and city officials say.

More than before, chief executives at blue-chip companies are stepping up efforts to fill their workspace. Facebook parent Meta Platforms, Amazon and JPMorgan Chase are among the companies that have recently vowed to get tougher on employees who don’t show upIn August, Meta told employees they could face disciplinary action if they regularly violate new workplace rules.

But these actions haven’t yet moved the national return rate needle much, and a majority of companies remain content to allow employees to work at least part-time remotely despite the tough talk.

Most employees go into offices during the middle of the week, but floors are sparsely populated on Mondays and Fridays. In Chicago, some September days had a return rate of over 66%. But it was below 30% on Fridays. In New York, it ranges from about 25% to 65%, according to Kastle Systems, which tracks security-card swipes.

Overall, the average return rate in the 10 U.S. cities tracked by Kastle Systems matched the recent high of 50.4% of 2019 levels for the week ended Sept. 20, though it slid a little below half the following week.

The disappointing return rates are another blow to office owners who are struggling with vacancy rates near record highs. The national office average vacancy rose to 19.2% last quarter, just below the historical peak of 19.3% in 1991, according to Moody’s Analytics preliminary third-quarter data.

Business leaders in New York, Detroit, Seattle, Atlanta and Houston interviewed by The Wall Street Journal said they have seen only slight improvements in sidewalk activity and attendance in office buildings since Labor Day.

“It feels a little fuller but at the margins,” said Sandy Baruah, chief executive of the Detroit Regional Chamber, a business group.

Lax enforcement of return-to-office rules is one reason employees feel they can still work from home. At a roundtable business discussion in Houston last week, only one of the 12 companies that attended said it would enforce a return-to-office policy in performance reviews.

“It was clearly a minority opinion that the others shook their heads at,” said Kris Larson, chief executive of Central Houston Inc., a group that promotes business in the city and sponsored the meeting.

Making matters worse, business leaders and city officials say they see more forces at work that could slow the return to office than those that could accelerate it.

Covid-19 cases are up and will likely increase further in the fall and winter months. “If we have to go back to distancing and mask protocols, that really breaks the office culture,” said Kathryn Wylde, head of the business group Partnership for New York City.

Many cities are contending with an increase in homelessness and crime. San Francisco, Philadelphia and Washington, D.C., which are struggling with these problems, are among the lowest return-to-office cities in the Kastle System index.

About 90% of members surveyed by the Seattle Metropolitan Chamber of Commerce said that the city couldn’t recover until homelessness and public safety problems were addressed, said Rachel Smith, chief executive. That is taken into account as companies make decisions about returning to the office and how much space they need, she added.

Cuts in government services and transportation are also taking a toll. Wait times for buses run by Houston’s Park & Ride system, one of the most widely used commuter services, have increased partly because of labor shortages, according to Larson of Central Houston.

The commute “is the remaining most significant barrier” to improving return to office, Larson said.

Some landlords say that businesses will have more leverage in enforcing return-to-office mandates if the economy weakens. There are already signs of such a shift in cities that depend heavily on the technology sector, which has been seeing slowing growth and layoffs.

But a full-fledged recession could hurt office returns if it results in widespread layoffs. “Maybe you get some relief in more employees coming back,” said Dylan Burzinski, an analyst with real-estate analytics firm Green Street. “But if there are fewer of those employees, it’s still a net negative for office.”

The sluggish return-to-office rate is leading many city and business leaders to ask the federal government for help. A group from the Great Lakes Metro Chambers Coalition recently met with elected officials in Washington, D.C., lobbying for incentives for businesses that make commitments to U.S. downtowns.

Baruah, from the Detroit chamber, was among the group. He said the chances of such legislation being passed were low. “We might have to reach crisis proportions first,” he said. “But we’re trying to lay the groundwork now.”

MOST POPULAR

Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual

Related Stories
Property
Love Patterns? Try This Design Trick to Pull Any Room Together
By KATE MORGAN 02/10/2023
Money
Frank Stella’s ‘Abra I’ to Lead at Christie’s Post-War to Present Sale
By Casey Farmer 29/09/2023
Money
Inflation trends upwards ahead of RBA meeting
By KANEBRIDGE NEWS 27/09/2023
0
    Your Cart
    Your cart is emptyReturn to Shop