CRYPTO BANK RUN? Will Celsius, Tether and others go the way of Luna?
I think we got to talk about the crypto world. You and i occasionally have talked about it. You follow it much closer than i do. Uh theres some crazy things going on in the crypto world. Just last night celsius network essentially stopped redemptions. Then this morning i saw binance this had to stop uh redemptions. It is um. This is part of the the bottoming process or part of pain. Warren buffett calls when the tide goes out. You see, whos swimming naked, sometimes were surprised by whos naked, so uh. What do you thinks going on this is this is wild to watch from the sidelines, yeah yeah, i mean its typical bear market activity in the crypto space. You know its been through cycles in the past and first thing that happens when you get big sell offs is you know, exchanges will lock up, they wont, let you uh, you know, redeem your tokens, they will let you liquidate. You know those types of things, and you know it happened back in march that you know, with the stock market its uh intentional uh, with these companies its its not its. You know its a liquidity thing, so they dont have the reserves. So, like tether, the big stable coin tether i mean they dont have full reserves and if they, if they had a run, if people started redeeming timber at tether at scale, they could not cover the redemptions with cash. Theyd have to stop so thats whats going on people are wanting to withdraw their assets from celsius, and you know some of their rewards that theyre getting because basically, what that is, is you stake your crypto there and then they pay you back with like kind or They, you know print celsius, tokens and pay.
You back in that and theyre offering these crazy apys that they just cant cover they cant. I mean the bull market when everybodys coming in liquidity is coming in markets going up, but when markets correct, these are the types of things that start to happen, and you see the structural. You know foundational cracks in the system that you know get exploited like you said the tide goes out and you can see who doesnt have any drawers on and thats thats whats happening, but its just typical stuff yeah. I mean the celsius network. The little bit. Ive read about it this morning, after yesterdays kind of it was all over my feed right. They stopped stop. You, you cant, get your money out, classic bank run um yeah, they were offering like 20 ap. You know interest and folks that should have been a clue. You know, i think they just raised like 800 million dollars in the in the public markets and they were just living on debt and hopium and when the market turned and you had luna blow up seemingly seemingly yesterday. I think it was three weeks ago and then you have this c e l coin, which is uh celsius coined dropped 97. You had to know that most of their balance sheet, which at one time was 12 billion, was this fake coin and yeah. Then they dont have enough. They dont have enough assets to pay off the 8 million and it just blows up, and then everybody runs at the same time and its well just it works as long as everythings going up.
You have buyers and things like that, but when people lose their money to leave the space – and you know when you go to redeem your rewards and sell them and liquidate those, you know so, if youre earning celsius for staking your crypto there uh, you know the Only way you can actually turn that into cash is to sell it. So if everybody unlocks and starts selling thats what happens so, it becomes a bankroom kind of what happened to luna. You know same thing: they hit a staking thing and you know the other thing with celsius: theyre a lending and a borrowing network. So you can take your crypto and you can borrow off of it and thats kind of been their game right, as people will stake and theyll lend that out to other people and its multi, multiple layers of levered up kind of like the housing market. Back in 0, 809, the way those uh cdos repackaged and leveraged up – and there was you – know – 100 time, letters in the system cryptos the same way: theres, probably a thousand x leverage with celsius crypto in the system. Tether does the same thing they take. You know if you buy tether, you have to send them your money, they issue you tether you, then you can go out and buy crypto with that. But then they take your money and they buy. You know um commercial debt with it. They you know they buy.
You know risky assets with it, thinking that youre never going to redeem it, because you just keep using your tether in and out of your positions, and you know they could at when the markets good and like they did last year before this correction and before all Eyes were on tether, they could just print tether out of thin air because they control the system go out and buy assets, liquidate it to generate cash thats what they were doing and to put markets up and down. They cant get away with that right now, because the markets tanking, so they cant just go out and print. You know a billion dollars worth of tether and buy bitcoin and liquidate it, because now people are on to them. Theyre tracking these transactions celsius was kind of doing some of these things too. They were trading in and out and doing some things and theres going to be a lot of stuff thats going to come out of these things between luna celsius tether. You know when all the dust settles and when people start digging into their books and when you have a company just for people watching like tether, that will not allow an audit of their books, an audit of their assets and they wont produce. You know and show real proof of the assets that they say is backing the money of yours that theyre holding theres a problem. You know, if you got nothing to hide, you show your books, yeah and the problem is theyre laundering, money, theyre, printing, tether and theyre.
Using it to buy assets and sell you know, so i mean that thats whats, going on and thats why they wont show proof because they cant, because if they do, you know they might disappear yeah well. The other thing i think is important about this is: is everybodys hopeful that this is the end. I would think this is just the beginning, or if youre going to use a baseball analogy, we might be in the second inning uh. I think theres a lot of crypto washout coming luna was maybe the first, it wont be the last now we have celsius theres more to come, theres a lot of people swimming naked in the crypto space. It works in traditional markets too, its not exclusive to crypto its more rampant than crypto, because its unregulated and theres a lot of crazy stuff going on, but stock markets. You know thats how bernie madoff got exposed right. So you know when the market started crashing. He couldnt cover redemptions and thats what happens and by the way, theres a lot of money laundering that goes on in the traditional markets. Uh with you know, stocks with bonds with cash. You know its just as rampant there, not as bad um, because it is, you know, more regulated and you do have to produce audits and things like that, but people still get away with it like we saw with that new jersey deli that oh yeah remember that Yeah, how much is that thing in the beginning yeah, it was a couple hundred million bucks for delhi.
It was like there, you dont, think theres fraud there somewhere folks come on thats, so its not just crypto but crypto is more wide open, but guess what so? This is going to be great for the space because its good these types of events are going to clear out all the junk. Exactly you know, regulation is going to come in theyre going to jump in you know the founder of luna do quan hes being the sec is on him, hes being called hes going to have to come and show you know, whats going on and theyre going to Get him and catch him if hes done anything wrong. I dont know that he has same thing with tether. These are assumptions of whats. Whats happened with tether and you know and theyre going to get called the carpet, and you know if these things prove true, then theyre going to get put out of business, and you know the space will get cleaned up and yeah. You know itll operate as good as it can within regulatory guidelines, and you know theres still, corruption out there, even even with regulated yeah. This is j. I mean again. We ive been warning people that this theyre going to have a dot com moment right, where all these companies, like pets.com webvam, were all worth billions of dollars and then went poof to zero its happening its its uh. I do agree with you that at some point the crypto market will actually be stronger and better for it, but theres billions of dollars to be lost.
It is and its unfortunate because i know a lot of people watching this potentially you know – have lost a lot of money. Bitcoin alone is down 67 right now from the all time high, and i get i hear from people all the time that bought back in those highs, because you know theres a lot of influencers in the space telling people that you know it only goes up and Its going to be worth a million dollars – and you know huddle and you know dollar cost average and buy the dip, and you know they listen to all these people that um a lot of them are teenagers. You know like the on chain, analyst and analysis. You know a lot of them are teenagers that uh have never. They dont have any training number one number two theyve never been through. You know a bear market, a global macroeconomic bear market like were in right now, or even a crisis and uh. You know they dont know anything but number goes up because thats the environment they were in, but by the dip by the dinner. Everything goes up, yeah and you know and thats traditional finance as well thats the narrative on wall street in a bull market by the dip, because the feds there and you had the fed put and all that and you – and i have been talking since november december. Its over its over and look at where we are now and the fed hasnt still hasnt, really done anything.
Well, i guess were going to get in that in the next video yeah exactly um the bottom line. Is you got to be careful who you listen to? You need to make sure youre following people that have been through, you know a couple of bear markets, or at least one you know stuff doesnt just always go up forever. It corrects, and sometimes you get you know in crypto its you know – drawn down 80 bitcoins drawn down 80 on average. You know every time it draws down. All coins draw down 95. Some of them go away, so you got to be careful. You got to make sure that youre following people that give you a balanced uh, you know viewpoint of things that you know yeah. You know things can go to all time highs in the right market conditions, but they can also go where they came from. You know at all time lows and go away, so you have to take those things into consideration. You cant just dollar cost average and buy the diplomacy and people out there. You know its going down but im still buying. You know you dont know that its going to come back, you dont know when its going to come back. You dont know where its going to come back to it has in the past. It probably will, but we dont know where it will land without the fed. Without quantitative easing without the free money, zero interest policy and without all the junk thats going to get cleared out of the space thats pumping the prices, because those have been artificial, manipulated pumps, like i said by tether and celsius, and companies like that that are just Flooding printed liquidity into the space to jack the prices up and uh.
You know a lot of people have been burned, left the space, so its got to go through that whole cycle to get new people in new money in and the institutions arent going to jump in and start buying at scale and propping prices up at these levels. Theyre going to jump in and drive prices down, so they can get a better entry because they know whats going to happen next, so yeah its going to be an interesting cycle to see and watch, but there will be opportunities. This is not a bearish. You know pessimistic conversation. This is opportunistic. You just need to understand that you know theres a lot more potential downside and then things will settle out and bottom out and therell be a good chance to get in and you might get a 10 or a 20 x. Out of you know, bitcoin ethereum and some of the other top coins that might make it through this yeah. The one thing i do want to ask you about is michael saylor. Obviously the ceo of microstrategies im, sure you know who he is looks like microstrategies after bitcoins loss today is now has a 500 million loss from their uh bitcoin purchases. Im just wondering right. I i worked as an executive in public companies and we have fiduciary duties and all of these other things when does the board of micro strategies because, as i understand it, theyre still public basically come out and fire michael saylor for borrowing money to buy this thing.
Thats upside down, i its got to be at least talked about. The board of directors would not be doing their duty to protect shareholders. If that conversations not at least happening, i would think yeah its taken. The stock of the company down uh as well – and you know the cfo – came out and said that you know hey. We dont, you know, were not going to face liquidations until price gets to, i think its either 20 or 21 000, which you know right this minute as were watching this yeah um. I think bitcoin is at 22 6. and its still dropping so um. You know theyre approaching liquidation point or a margin call and then what they the cfo said is. You know we have plenty of bitcoin that we can just pledge. The problem is, is that now they have to pledge twice as much, because the price is down half as much and theyre going to want 50. On top of that, so theyre gon na have to pledge anywhere from two to four hundred percent, more of their assets and or bitcoin or just liquidate. So at some point they are going to face a forced liquidation. If prices drop below 20k down in the you know, 10 15k, they just dont, have the cash or the assets to um. You know fulfill those obligations because you know that commercial, so they borrowed money. Number one theyve been using cash from the company which, to your point you know thats, just not well, the board agreed to it so, whatever its their deal, they allowed it to happen.
Uh theyre on board with it so anyways. You know treasury is being used to buy bitcoin. Then they borrowed money. They issued commercial debt and theres covenants in that debt, thats thats going to say when you know the price drops below a certain level. Youre gon na have to pay this down or youre gon na have to pledge more collateral, so that im sure theyre having those conversations right now and then theres the uh most recent thing that theyve done um, which is they used uh. You know one of the crypto lending platforms like a celsius and they actually pledged their bitcoin – oh really yeah, so they staked their. They pledged their bitcoin staked it with this group. You know, in exchange, for money to go, buy more bitcoin, so thats the big one. Thats, the one thats going to be a 4x penalty at these prices, where theyre going to have to you, know kind of make that up. So those are the types of conversations that you know are going on and then you see michael saylor post on twitter have faith. You know so yeah very likely. Did he say, like borrow against your house, i mean hes, he is going to be sued, hes told people to borrow, you know, sell their house borrow against, but he hasnt done what hes been telling people to do. What hes done is hes taken non recourse debt from his company, his shareholders, and you know pledging those assets to lever up, and you know, roll the dice multiple times so its not him personally, hes not guaranteeing anything hes using everybody, elses money and everybody elses assets, Which hey smart yeah? If you get away with it right, you know why not they were giving it to him.
So, at the end of the day, when the when that house of cards collapses, you know if it does, the only people to blame are the board because they allowed it uh. You know the lenders that lent the money. You know the commercial paper. You know the companies that issued the commercial paper yeah all that kind of stuff yeah um. You know sailor was just you know, taking advantage of the environment Music, yeah dude. I got to tell you that the board of directors has to be meeting this week has to be well. The thing thats going to come out of this is this is why banks cant hold these assets, because they have to have so many exponential reserves to cover when these types of things happen. So youre going to see you know that conversation about banks that were talking about holding crypto assets for people thats going to go away um. This is going to be a big issue with the sec. Can you use corporate treasuries to buy these types of assets uh? In countries you know like el salvador, you know they went out and they used taxpayer money their comp, their. You know: sovereign treasury to buy bitcoin and now theyre way down and theyre getting ready to. You know potentially default on debt, so yeah. These are the things that happen in bear markets. You know when things are good and bull market. You know nobody thinks about these things, but you know because theyre, the narrative is its never going down.
I mean i, i cant tell you how many times i heard it will never go below 50.. This is your last chance to buy below 50., then its 40.. This is your last chance to buy below 40 and then 30 and now 20. and really what it is, is this is your last chance to buy. You know, above its the other way around. You know when youre, when youre coming down the hill, you know im always thinking when somebody says your last chance to buy below 40 im like no no, its your last chance to buy above 40, because you know its going to correct and you know and its Its cycles again, this isnt, just you know pessimistic or fun or whatever its the reality of the market and the situation, because, where we are from a global macroeconomic standpoint, thats the difference that a lot of these you know, kids in the space and teenagers and even Traditional markets that have never seen an environment opposite of where weve been the last 10 years, its different and it matters, and you cant, stop it. You cant just fed pivot. In an environment when youve got you know real inflation in double digits, theyre, saying 8.6, oh its. I did the math just correcting for rent its 11.7 yeah. I mean you know and that whole you know. Inflation is peak narrative and all that i mean its just nonsense, so yeah yeah. This is a very different macro environment, but you know there are opportunities.
It is a positive. You know thing that you know a lot of the stuff gets flushed out. Things will correct. Companies are going to be forced to operate efficiently profitably. You know things like that, so you know theres a lot of good things that are going to come out of this, but i know theres people that are hurting that are down yeah uh. You know its a expensive learning lesson. If this is your first time yeah and you know its the stuff that you and ive been talking about people say exactly im, just like hey whatever just experience and yeah, you got to learn one way or the other. You can either listen to somebody or you can go through it yeah that youre right weve had weve been weve. We we were saying about four months ago that winter is coming. I think about a month ago we were starting to say winter is here and that now were in it sorry um. I i do want to kind of close on a positive note as everything we do and talk to all my experts. The were gon na have a lot of scary headlines for the next year or so across the board, not only in crypto uh, but just economic wise, and we will be better for it right. We will come out stronger. We will come out with real value, real projects will take off, you know, protections will be put in place and i think we will build from a much more solid foundation, but also a smaller foundation, because a lot of this stuff is just pure garbage and needs To go to zero yeah yeah and you know, ive made my biggest and best moves.
My first move at the bottom 2009 never invested in stocks, and that was my first jump in right at the bottom because you know i understand these things and you know again in march 2020, so im waiting for that third correction now to get to the bottom. In financial markets in crypto were not there yet and uh. I posted a tweet yesterday that you know were not. This is not the bottom yesterday, before this leg down that we just had, and you know a couple of replies. What do you know you cant? You know yeah whatever you can, you can either like in every conversation, in every interaction in every situation. Every event you go to book, you read conversation, you listen to theres, always something you can take away. Yes – and you always want to look at both sides and say: okay, you know, and the greatest investors of all time will tell you you always want to think. How am i wrong? You always want to hear both sides of that equation. So you know somebody thats been through. Multiple cycles says this aint the bottom. Then question is okay. Well, how can that be right? How can i be wrong versus just going? Ah, you know what i was talking about. You know which i dont i dont know for sure you know. All i know is ive seen this before ive been down this road before and were nowhere near where we need to be from the standpoint of where were at with economic policy, monetary policy, qe, uh or qt.
You know interest rate, all of that were still correcting. Were not at the bottom of a you know, unwind from all of the you know, trillions of dollars, thats been pumped into the system and jacked it up over the last 10 years, yeah a lot of fun greg. Where can people find you tell us about your youtube channel as well? Yeah greg dickerson.com go check out my youtube channel. I got thousands of videos on there as well and uh. You know im keeping everybody up to date with crypto and the markets and all that, because this is you know there is good news thats going to come out of this. I just want everybody to be understand: risk reward. You got to look at whats, the downside, whats the potential upside, and we know where the downside is based on the last couple of you know: events that happened march of 2020. You know where the downside of the markets and where crypto is the problem is theres. No fed to jump in this time thats the problem amen.