3rd May 2024 > > BNP & BTFP.

tl;dr

Naysayers kickstart a crypto rally. Institutions are nibbling at the ETFs. Vast amounts of liquidity is heading the way of US banks.

Market Snap

Market Wrap

Following the 10% sell-off two days ago (a flesh wound, if that, for seasoned crypto investors) we had Schiff calling the end of BTC, which immediately put a floor under crypto prices.

Treasury Secretary Janet Yellen (a member of Warren’s anti-crypto army) then went on record saying BTC is not suitable for pension funds, giving a little fillip to the price and smiles all round.

Every time a high-profile naysayer repeats their prejudice to the world, BTC gets stronger. Come on FT, WSJ, Cramer, EU, Trudeau, FCA, Sunak, World Bank – we want you to decry the crypto revolution. Do it again, and do it today.

If we get that perfect scenario, then it will be time for my biggest and baddest buying boots.

Curious Cryptos’ Commentary – It starts as a trickle …

… then it becomes a flood.

https://www.nasdaq.com/articles/second-largest-european-bank-is-buying-bitcoin-etf:-13f-sec-fillings

Curious Cryptos’ Commentary – The flood

Regular readers will recall that BTFP (Bank Term Funding Program) ended on March 11th.

BTFP was created to prevent a whole swathe of small- and mid-sized regional banks from having to declare themselves insolvent. The reason for their insolvency is simple – forced by government mandated regulation to have much of their capital base in US Treasuries, declared by the government as risk-free, unrealised mark-to-market losses caused by rates jumping 400bps, prevented banks from calling on these reserves to satisfy cash requirements. BTFP solved this problem by lending cash against treasuries valued at par, not their actual market price.

These loans last for one year. On March 11th 2024, if nothing changes, much of the US banking system will once again be insolvent.

Just last week, Republic First Bank went bust. Rather than letting depositors who had uninsured deposits take a hit, the government paid Fulton bank $667mm to take on those uninsured liabilities.

Why does this matter? According to Arthur Hayes (https://cryptohayes.medium.com/mayday-dca30bab9de0) there is $6.7 TRILLION of uninsured deposits in the US, almost entirely within that sector of banks bailed out by BTFP.

Even for a government as wildly profligate as the US is with taxpayers’ money, adding another near $7 TRILLION of debt to the balance sheet is not going to pass muster in Congress. The only way out is for another massive injection of liquidity to the banking sector accompanied by a dramatic reduction in long-term interest rates. How can that be achieved? Come on, you know the answer. Quantitative easing.

Build your hard asset base, for the devaluation of fiat has yet to begin in earnest.