Global Bubble deflation gathered additional momentum this week. The U.S./global tech Bubble collapse accelerated. Hit by panic “runs”, the historic cryptocurrency mania is coming completely unglued. And even more historic Chinese apartment, financial and economic Bubbles continue to falter.
Whether stocks, bonds, crypto, or corporate Credit, many are keen to spot a market bottom. There were some elements of “capitulation” this week. And next week’s option expiration creates the potential for a panicked unwind of bearish hedges and attendant short squeezes. Yet we’re only in the initial phase of what will prove a lengthy and most arduous remediation process. Think secular rather than cyclical – a crisis decades in the making. I am reminded of a quote from early in the “Roaring Twenties” bursting Bubble episode: “Everyone was prepared to hold their ground. But the ground gave way.”
Once again this week, it had all the appearances of one massive global “trade” unraveling. Clearly, de-risking/deleveraging shifted into higher gear. There is seemingly no place to hide.
After beginning the week at $34,000, Bitcoin traded down to $25,488 in early-Thursday panic selling. WSJ: “Crash of TerraUSD Shakes Crypto. ‘There Was a Run on the Bank.’”
May 12 – Wall Street Journal (Alexander Osipovich and Caitlin Ostroff): “The cryptocurrency TerraUSD had one job: Maintain its value at $1 per coin. Since it launched in 2020, it had mostly done that, rarely straying more than a fraction of a penny from its intended price. That made it an island of stability, a place where traders and investors could stash their funds in between forays into the otherwise frenzied crypto market. This week TerraUSD became part of the frenzy too, slumping by more than a third on Monday and then tumbling as low as 23 cents on Wednesday. The collapse saddled investors with billions of dollars in losses. It ricocheted back into other cryptocurrencies…” (more…)