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Building a Bitcoin Prison


Jaydee
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“ Former Assistant Secretary of Housing and investment advisor Catherine Austin Fitts says you have to be careful and fully understand Bitcoin.  Fitts explains, “We do know they want to go to an all-digital system with central bank cryptos.  The easiest way to build the prison is to get freedom lovers everywhere to build the prison for you.  To me, Bitcoin has always been the prototype on the way to building the all-digital crypto system that they would love to put into place.  You have $400 trillion in fiat (currency) and it needs a place to go.  If you are trying to buy up all the gold, silver and farmland, the last thing you need is competition from retail.  They want to shift them into crypto and get them to build the crypto train tracks.  In a funny kind of way, it’s brilliant.

There is talk by big banks that Bitcoin could go to $300,000 per unit by the end of the year.  Fitts thinks, “This is absolutely possible.  This is pure politics.  This has nothing to do with economics.  How much will the central bankers, who can print as much money as they want, spend to get you into this platform?  Your guess is as good as mine.  The sky’s the limit as to how much they can spend.  Remember, once they decide to bring out the central bank currencies, and they have steadily been regulating the crypto currencies, Bitcoin and everything else, so the day they decide to take this to zero, they can do it.  If you are going to invest into cryptos and build our prison for us, what you need to know is this thing could go to $300,000, and it can also go to zero.  This is a highly speculative market, and you need to approach it accordingly.”

Fitts warns of a dark future if the central bankers get everything they want.  Fitts says, “When they decide to shut down our bank accounts and say you all get on crypto, universal basic income and take that injection or you can’t transact on the financial system, this is instituting a totalitarian system through the financial system. . . . When they shut that trap door, what you need to think about is where are you going to buy food?”

In closing, Fitts says, “We are in Never, Never Land.  We have two groups in our society:  One group that can print money, and the other who can earn money.  What we saw last year is the people who could print money declared war on the people who earn money.  They basically said we are going to shut down your businesses, and we are going to suck up and take your market share or buy you out with money we print out of thin air. . . . We have no pandemic.  What this is is an economic war.”

 

https://usawatchdog.com/building-a-bitcoin-prison-catherine-austin-fitts/

 

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2 minutes ago, Moon The Loon said:

If you're foolish enough to buy it now, the pyramid builders will LOVE you for it.

 

Isn't that exactly what people said when it was a $100 and a $1,000 and $10,000?

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News

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On the heels of yet another searing hot round of CPI digits out of the U.S., the Fed went all commando on interest rates last week, lobbing a .75% hike at the inflationary spiral, its third raise this year. Some might characterize this move as an overbearing, heavy-handed offensive.

Other central banks- Britain, Brazil, Saudi Arabia – promptly followed suit.


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Even Switzerland entered the fray with a rare 50 basis point salvo – Swiss Franc Surges Over 2% After SNB Surprises With Rate Hike

All told, nearly four dozen countries around the globe have pushed borrowing costs higher since the beginning of the year  – Interest Rates Rise Around the World, as War and High Inflation Grind On

Spiraling price pressure is everywhere. It’s insidious. It’s impacting the cost of everything, from patio furniture to Snausages. And it’s changing our spending habits, forcing some to give up on life’s little luxuries. For others, the impact is far more profound – One in five Canadians eating less due to food price rises…

As central bankers ponder their next foray, the risks of a full-blown recession intensify. Bloomberg economic models peg the current threat of an economic downturn at a 72% – US faces a Fed-triggered recession that may cost Biden a second term

We’re now on recession watch.


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It’s a volatile predicament: accelerating inflation, overzealous shoot-from-the-hip central bank chiefs, looming economic weakness… not to mention a tapped-out consumer that, according to the University of Michigan’s consumer sentiment index, is waaaaay low – Americans have never felt this bad about the economy (the revolution will not be televised).

The University of Michigan’s consumer sentiment index cratered to 50.2 from 58.4 in an early June reading, according to a Friday report. That reflects the lowest level since regular monthly data collection began in the late 1970s.


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Where the broader markets are concerned, the negative sentiment runs deep – “the liquidation frenzy (margin calls) that erupted recently coincided with hedge funds going on the largest two-day selling spree on record.” 

Broader market sentiment is so bleak, it’s possible we’ll see some positive short-term price trajectory as the market can only stretch so far in one direction before it reverses (somewhat).

 
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Commodity News

Gold? Resilient. Firm

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In the precious metals arena, the party faithful is convinced that the spring is coiling ever tighter. They’re confident we’ll bear witness to the mother of all breakouts before the year winds down. For now, gold is testing key support at $1,830.


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It would be good (constructive) if $1830 holds.

While nearly everything has been laid to waste (look at crypto), this neutral price action in the metal could be characterized as positive.


Crypto – Bitcoin

Precious few asset classes have been spared the relentless, unabated selling pressure we’ve witnessed over the past few months. But investors in the crypto space have had their heads handed to them – Crypto Black Monday: Celsius Suffers Liquidity Crisis, Plummets 70% in One Hour

With Bitcoin having broken through what many thought would stand as strong support at $20k, Peter Schiff weighed in, his pessimism towards crypto largely substantiated. The CEO and chief global strategist of Euro Pacific Capital has been wary of Bitcoin’s steep trajectory since it began defying gravity. A few choice tweets…



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According to strategists at Glassnode, “The current bear market is now entering a phase aligned with the deepest and darkest phases of previous bears,” the strategists wrote in a note. “The market, on average, is barely above its cost basis, and even long-term holders are now being purged from the holder base” – Bitcoin Rout Enters Deepest And Darkest Phase; Entire Market Underwater


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This one is bound to ruffle a few feathers – Bitcoin investors tend to have low financial literacy, according to BoC research

There’s a broad range of opinions out there…

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Bitcoin versus Gold? Being a hardcore ‘gold is real money’ bull, I’m hopelessly biased about which camp I’m pitching my tent.

If we are right about what’s coming down the pike, our diligently prospected shortlist of junior explorecos will go on a tear that will challenge the imagination of even the most fervent gold bull. I’ve seen this movie before. Accumulating asset-rich companies in the early innings of the last bull run earlier this century was akin to buying dollars for dimes.

Moving along…
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CRYPTO WORLD

The death of easy money: Why 20% annual returns are over in crypto lending

PUBLISHED FRI, JUL 29 202212:26 PM EDTUPDATED 20 MIN AGO
SHAREShare Article via FacebookShare Article via TwitterShare Article via LinkedInShare Article via Email
KEY POINTS
  • Developers gathered for various crypto events in Paris last week told CNBC the days of cheap money in crypto are over.
  • Much of the lending corner of the crypto market operates in a black box.
  • Voyager Digital and Celsius competed for users on APY, but a lot of the so-called yield they offered customers wasn’t real.
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Ethereum creator excited for crypto upgrade to minimize gas fees and make the blockchain more scalable
 

PARIS — Celsius and Voyager Digital were once two of the biggest names in the crypto lending space, because they offered retail investors outrageous annual returns, sometimes approaching 20%. Now, both are bankrupt, as a crash in token prices — coupled with an erosion of liquidity following a series of rate hikes by the Federal Reserve — exposed these and other projects promising unsustainable yields.

″$3 trillion of liquidity will likely be taken out of markets globally by central banks over the next 18 months,” said Alkesh Shah, a global crypto and digital asset strategist at Bank of America.

 

But the washout of easy money is being welcomed by some of the world’s top blockchain developers who say that leverage is a drug attracting people looking to make a quick buck — and it takes a system failure of this magnitude to clear out the bad actors.

“If there’s something to learn from this implosion, it is that you should be very wary of people who are very arrogant,” Eylon Aviv told CNBC from the sidelines of EthCC, an annual conference that draws developers and cryptographers to Paris for a week.

“This is one of the common denominators between all of them. It is sort of like a God complex — ‘I’m going to build the best thing, I’m going to be amazing, and I just became a billionaire,’” continued Aviv, who is a principal at Collider Ventures, an early-stage venture capital blockchain and crypto fund based in Tel Aviv.

Much of the turmoil we’ve seen grip crypto markets since May can be traced back to these multibillion-dollar crypto companies with centralized figureheads who call the shots.

“The liquidity crunch affected DeFi yields, but it was a few irresponsible central actors that exacerbated this,” said Walter Teng, a Digital Asset Strategy Associate at Fundstrat Global Advisors.

 

The death of easy money

Back when the Fed’s benchmark rate was virtually zero and government bonds and savings accounts were paying out nominal returns, a lot of people turned to crypto lending platforms instead.

During the boom in digital asset prices, retail investors were able to earn outlandish returns by parking their tokens on now defunct platforms like Celsius and Voyager Digital, as well as Anchor, which was the flagship lending product of a since failed U.S. dollar-pegged stablecoin project called TerraUSD that offered up to 20% annual percentage yields.

The system worked when crypto prices were at record highs, and it was virtually free to borrow cash.

But as research firm Bernstein noted in a recent report, the crypto market, like other risk-on assets, is tightly correlated to Fed policy. And indeed in the last few months, bitcoin along with other major cap tokens have been falling in tandem with these Fed rate hikes.

In an effort to contain spiraling inflation, the Fed hiked its benchmark rate by another 0.75% on Wednesday, taking the funds rate to its highest level in nearly four years.

Technologists gathered in Paris tell CNBC that sucking out the liquidity that’s been sloshing around the system for years means an end to the days of cheap money in crypto.

“We expect greater regulatory protections and required disclosures supporting yields over the next six to twelve months, likely reducing the current high DeFi yields,” said Shah.

Some platforms put client funds into other platforms that similarly offered unrealistic returns, in a sort of dangerous arrangement wherein one break would upend the entire chain. One report drawing on blockchain analytics found that Celsius had at least half a billion dollars invested in the Anchor protocol which offered up to 20% APY to customers.

“The domino effect is just like interbank risk,” explained Nik Bhatia, professor of finance and business economics at the University of Southern California. “If credit has been extended that isn’t properly collateralized or reserved against, failure will beget failure.”

Celsius, which had $25 billion in assets under management less than a year ago, is also being accused of operating a Ponzi scheme by paying early depositors with the money it got from new users.

 

The flowchart shows the crypto firms affected by the implosion of TerraUSD and 3 Arrows Capital's bankruptcy filing.

 
 

CeFi versus DeFi

So far, the fallout in the crypto market has been contained to a very specific corner of the ecosystem known as centralized finance, or CeFi, which is different to decentralized finance, or DeFi.

Though decentralization exists along a spectrum and there is no binary designation separating CeFi from DeFi platforms, there are a few hallmark features which help to place platforms into one of the two camps. CeFi lenders typically adopt a top-down approach wherein a few powerful voices dictate financial flows and how various parts of a platform work, and often operate in a sort of “black box” where borrowers don’t really know how the platform functions. In contrast, DeFi platforms cut out middlemen like lawyers and banks and rely upon code for enforcement. 

A big part of the problem with CeFi crypto lenders was a lack of collateral to backstop loans. In Celsius’ bankruptcy filing, for example, it shows that the company had more than 100,000 creditors, some of whom lent the platform cash without receiving the rights to any collateral to back up the arrangement.

Without real cash behind these loans, the entire arrangement depended upon trust — and the continued flow of easy money to keep it all afloat.

In DeFi, however, borrowers put in more than 100% collateral to backstop the loan. Platforms require this because DeFi is anonymous: Lenders don’t know the borrower’s name or credit score, nor do they have any other real-world metadata about their cash flow or capital upon which to base their decision to extend a loan. Instead, the only thing that matters is the collateral a customer is able to post.

With DeFi, instead of centralized players calling the shots, the exchanges of money are managed by a programmable piece of code called a smart contract. This contract is written on a public blockchain, like ethereum or solana, and it executes when certain conditions are met, negating the need for a central intermediary. 

Consequently, the annual returns advertised by DeFi platforms like Aave and Compound are much lower than what Celsius and Voyager once offered customers, and their rates vary based upon market forces, rather than staying fixed at unsustainable double-digit percentages.

The tokens associated with these lending protocols are both massively up in the last month, which is a reflection of the enthusiasm for this corner of the crypto ecosystem.

“Gross yields (APR/APY) in DeFi are derived from token prices of relevant altcoins that are attributed to different liquidity pools, the prices of which we have seen tumble more than 70% since November,” explained Fundstrat’s Teng.

In practice, DeFi loans function more like sophisticated trading products, rather than a standard loan.

“That’s not a retail or mom-and-pop product. You have to be quite advanced and have a take on the market,” said Otto Jacobsson, who worked in debt capital markets at a bank in London for three years, before transitioning into crypto.

Teng believes lenders who did not aggressively extend uncollateralized loans, or have since liquidated their counterparties, will remain solvent. Genesis’ Michael Moro, for example, has come out to say they have cut significant counter-party risk.

“Rates offered to creditors will, and have, compressed. However, lending remains a hugely profitable business (second only to exchange trading), and prudent risk managers will survive the crypto winter,” said Teng.

In fact Celsius, though itself a CeFi lender, also diversified its holdings in the DeFi ecosystem by parking some of its crypto cash in these decentralized finance platforms as a way to earn yield. Days before declaring bankruptcy, Celsius began to pay back many of its liens with DeFi lenders like Maker and Aave, in order to unlock its collateral.

“This is actually the biggest advertisement to date of how smart contracts work,” explained Andrew Keys, co-founder of Darma Capital, which invests in applications, developer tools, and protocols around ethereum.

“The fact that Celsius is paying back Aave, Compound, and Maker before humans should explain smart contracts to humanity,” continued Keys. “These are persistent software objects that are non-negotiable.”

 

 

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CRYPTO WORLD

Homeless, suicidal, down to last $1,000: Celsius investors beg bankruptcy judge for help

PUBLISHED TUE, AUG 2 20222:21 PM EDTUPDATED 29 MIN AGO
  • Some of the 1.7 million Celsius customers ensnared by the alleged fraud are now directly pleading with the Southern District of New York to help them get their money back.
  • It is the latest sign that bankruptcy court has become the de facto arbiter of crypto policy in the U.S.

:44

Crypto Crackdown: Why federal charges over an alleged Ponzi scheme may only be the tip of the iceberg
 

Celsius Network, once a titan of the crypto lending world, is in bankruptcy proceedings and facing down claims that it was running a Ponzi scheme by paying early depositors with the money it got from new users. Some of the 1.7 million customers ensnared by the alleged fraud are now directly pleading with the Southern District of New York to help them get their money back.

Christian Ostheimer, a 37 year-old living in Connecticut, wrote in a letter included in court exhibits that he trusted Celsius with his retirement savings and has lost more than $30,000, which has brought him into “unsurmountable tax complications.”

 

“It is in your hands, honorable judge to make this a different case were not the lawyers, the attorneys, the big corporations and managers get paid out first but the little man, the mom and pop, the college grad, the granny and grandpa — all those many small unsecured creditors — so that they are not like usual at the end of the chain where they lose everything,” writes Ostheimer.

The question of who gets repaid first — should that day ever come — looms heavy over the bankruptcy proceedings.

At its peak in October 2021, CEO Alex Mashinsky said the crypto lender had $25 billion in assets under management. Now, Celsius is down to $167 million “in cash on hand,” which it says will provide “ample liquidity” to support operations during the restructuring process. Celsius owes its users around $4.7 billion, according to its bankruptcy filing.

That filing also shows that Celsius has more than 100,000 creditors, some of whom lent the platform cash without any collateral to back up the arrangement. The list of its top 50 unsecured creditors includes Sam Bankman-Fried’s trading firm Alameda Research, as well as an investment firm based in the Cayman Islands. Those creditors are likely first in line to get their money back, leaving smaller retail investors holding the bag.

Unlike the traditional banking system, which typically insures customer deposits, there aren’t formal consumer protections in place to safeguard user funds when things go wrong. 

 

Celsius spells out in its terms and conditions that any digital asset transferred to the platform constitutes a loan from the user to Celsius. Because there was no collateral put up by Celsius, customer funds were essentially just unsecured loans to the platform.

Also in the fine print of Celsius’ terms and conditions is a warning that in the event of bankruptcy, “any Eligible Digital Assets used in the Earn Service or as collateral under the Borrow Service may not be recoverable” and that customers “may not have any legal remedies or rights in connection with Celsius’ obligations.” The disclosure reads like an attempt at blanket immunity from legal wrongdoing, should things ever go south.

On July 19, Celsius published a document detailing next steps for customers. In it, they say their chapter 11 bankruptcy plan will “provide customers with the option, at the customers’ election, to recover either cash at a discount or remain ‘long’ crypto,” but it is unclear whether customers will ever see their money again.

The entire process lays bare just how much of crypto regulation in the U.S. happens by enforcement.

The Securities and Exchange Commission has effectively become one of the industry’s top regulators in the country, including weeding out Ponzi and pyramid schemes, and it appears that some precedent will be set in U.S. bankruptcy court in coming months as lawmakers deliberate over formal legislation on Capitol Hill.

Pleas from investors

In the hundreds of letters officially submitted to the court, retail investors beg to be put at the front of the line to receive their money back.

Flori Ohm, a single mother of two college-bound daughters, says that her family has been “severely impacted both in financial and mental health” by the bankruptcy which has left her funds stranded on the platform. Ohm, who also supports her parents, says she can’t sleep or focus on work.

“I am struggling hard [to make a] living,” she writes.

Jeanne Y Savelle, who describes herself as a “little retired old lady” living on a fixed income, says she turned to Celsius in search of a way to supplement her monthly Social Security check to stretch her dollar amid record levels of inflation.

“I purchased my small amount of crypto hoping just to earn enough to help me weather a few years, kind of a safety net,” said Savelle. “Yes, I know, buyer beware but I agree that there has been way too much deception.”

Others have lost everything.

California resident Stephen Bralver says he has less than $1,000 left in his Wells Fargo checking account — now his only source of funds to provide for his family since Celsius suspended all withdrawals.

“There is absolutely no way that I can continue to provide without access to my assets at Celsius,” he writes to Judge Martin Glenn, who is overseeing the Celsius bankruptcy proceedings in New York.

“This is an EMERGENCY situation, simply to keep a roof over my family and food on their table,” continues Bralver’s letter.

Sean Moran of Dublin writes that he lost the family farm in Ireland and his family is homeless.

“Can’t believe that they lied to us on the weekly AMA about not trusting banks whilst all along they we’re wolfs in sheep clothing false promises and misleading information.” He continues, “I’m mentally unstable. Family are distraught with my decisions of trusting Celsius and promising them a better future.”

Beyond the financial devastation described in each of these letters, one recurring theme centers around a sense of betrayal over the breach of trust between Celsius CEO Alex Mashinsky and his customers.

Three weeks after Celsius halted all withdrawals due to “extreme market conditions” — and a few days before the crypto lender ultimately filed for bankruptcy protection — the platform was still advertising in big bold text on its website annual returns of nearly 19%, which paid out weekly.

“Transfer your crypto to Celsius and you could be earning up to 18.63% APY in minutes,” read the website on July 3.

Ralphael DiCicco, who disclosed holdings of roughly $15,557 in crypto assets on Celsius, said he was fooled by the marketing.

“I believed in all the commercials, social media and advertising that showed Celsius was a high yield, low risk savings account. We were ensured that our funds are safer at Celsius than in a bank,” writes DiCicco.

“This money is pretty much my life savings...I hope you can find it the best interest of all parties involved to pay back the smaller investors first...before any restructuring occurs,” continued DiCicco.

Travis Rodgers of Phoenix says that he was told on numerous phone calls to Celsius Network, as recently as two days before it locked depositors’ accounts, that there was no danger to client assets and zero probability of bankruptcy. Rodgers says that he recorded several of those calls. He claims his Celsius holdings total $40,000 across eleven cryptocurrencies, including Cardano’s token ADA.

The weekly ask-me-anything events hosted by Mashinsky on YouTube are mentioned in multiple letters, including one sent in by Stephen Richardson, who itemizes the many ways in which he feels Mashinsky deceived the public in order to lure new customers into the scheme.

Richardson says he watched every single Friday AMA since signing up.

“Alex would talk about how Celsius is safer than banks because they supposedly don’t rehypothecate and use fractional reserve lending like the banks do,” writes Richardson. “I currently have six figures worth of crypto locked in my Celsius account unable to be withdrawn, despite Alex’s claims mere hours before withdrawals were closed that nobody has any issue withdrawing from Celsius and that everything you hear to the contrary is simply ‘fud.’”

Some have even contemplated suicide if they can’t retrieve their funds.

Katie Davis appeals to Judge Glenn about the $138,000 that she and her husband have stranded on the Celsius platform.

“The thought of losing that amount of money is horrifying,” Davis writes.

“If I do not get that back, I will end my life as the loss will impact my family and I significantly,” she shares.

Mashinsky did not immediately respond to CNBC’s request for comment.

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