Cryptocurrencies are a “con,” the billionaire investor Barry Diller told CNBC on Friday. He voiced his distrust of the asset class that’s been dragged sharply lower this week largely on regulatory concerns.
The chairman of IAC, which runs internet and media brands including Care.com and The Daily Beast, initially balked at the question from “Squawk Box” about his thoughts on digital currency but quickly proceeded to answer.
“Yeah, absolutely,” he said as he confirmed his view that cryptocurrency is a con. “I watch some of the people that you have on and they talk about it – $40,000, $12,000, whatever. I think, ‘This is nutso talk,'” he said.
China’s statement, led by Vice Premier Liu He, threw off course bitcoin’s attempt to recover losses from its slide of more than 35% in a matter of days. A midweek sell-off was sparked after the People’s Bank of China said digital tokens couldn’t be used as a payment form by financial institutions. Other cryptocurrencies, including ether, the token of the ethereum blockchain, were also slammed lower in the wake of China’s regulatory threats.
Bitcoin turned sharply lower Friday following reports that China has reiterated its call to restrict mining and trading activities surrounding the world’s largest cryptocurrency.
Bitcoin tumbled as much as 11%, to $35, 671.04, at 3:44 p.m. in New York after earlier climbing as much as 5%.
It is necessary to “crack down on bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field,” Chinese Vice Premier Liu He and the State Council said in a statement released late Friday local time, according to CNBC.
The statement derailed a recovery in bitcoin after the cryptocurrency suffered a more than 35% sell-off in a matter of days. Its most recent leg down was catalyzed by the People’s Bank of China saying digital tokens can’t be used as a payment form by financial institutions.
China has previously pledged to crack down on mining operations in a bid to reduce carbon emissions. This week, the government in China’s Inner Mongolia Autonomous Region said it had set up a hotline, email, and mail address for the general public to report any outlying crypto-mining operations that are still active in the region.
The country is aiming to reach carbon neutrality before 2060 and reach peak carbon emissions before 2030.
Hedge funds have played an instrumental role in this year’s rout in the US bond market by selling off more than $100 billion in Treasurys, according to a Bloomberg report.
Investors in the Cayman Islands, a major financial center and a known domicile for leveraged accounts, have been the biggest net sellers of US government debt, offloading $62 billion of sovereign bonds in February and dumping $49 billion in January, with Bloomberg citing data from the Treasury Department.
The sell-off began after the early January Senate run-off elections that were won by two Democrats. The victories gave that party a 51-vote majority in the upper house of Congress, including Vice President Kamala Harris, paving the way for a large new round of government fiscal spending. In March, President Joe Biden signed into law a $1.9 trillion stimulus package that passed 51-50 in the Senate.
The rollout of COVID-19 vaccines also contributed to investors deciding to exit bonds. As bonds sold off, rising yields prompted a return of convexity-type hedging flows, Bloomberg reported.
The bond market sell-off this year drove the widely watched 10-year Treasury yield above 1.7% for the first time since early 2020. The yield has since pulled back to around 1.58%.
US futures edged lower on Monday after an extraordinary $30 billion selling-spree by the hedge fund of Tiger Management trader Bill Hwang rattled investors around the world, while the refloating of a giant container ship stuck in the Suez Canal weighed on oil.
Futures on the Dow Jones, S&P 500, and Nasdaq fell between 0.4% and 0.6%, suggesting a lower open for US indices at the start of trading later in the day.
The sell-off appears to have been caused by Archegos Capital, run by the South Korean billionaire Hwang, which uses a long-short equity strategy that reduces exposure to movements in the overall market.
Typically under such a strategy, if long positions decline in value by more than the shorts, this puts them in a risky situation because they won’t have enough money to cover their shorts. The fund’s brokers, including Goldman Sachs and Morgan Stanley, realized this was about to happen, and so initiated margin calls. When Archegos couldn’t make them, the banks then forcibly sold off large holdings in the fund to stop the bleed.
Archegos had large long positions in Chinese and US stocks, including media firm ViacomCBS and Discovery. Both stocks saw their largest-ever daily declines on Friday, with each falling by more than 27%. Traders are now scrambling to figure out whether these fire-sales are over and seeing how much more the hedge fund has to offload.
A number of banking stocks tumbled after Nomura and Credit Suisse warned of large losses following Archegos’ extraordinary fire-sale. Nomura fell 16%, Credit Suisse fell 9.5%, Deutsche Bank fell 5%, and UBS fell 4%.
Wall Street’s VIX Index – popularly known as the ‘fear gauge’ – rose 10% to 20.78 on Monday, signalling a rise in the market’s expectations of volatility in the coming 30 days. The higher the index, the more nervousness is in the market.
Separately in the US, President Joe Biden is due to deliver a speech on Wednesday unveiling his new $3 trillion infrastructure plan that is part of his “Build Back Better” agenda.
Investors are still worried over concerns of rising number of COVID-19 cases in multiple regions in Europe, raising the prospect of further restrictions and curbs on economic activity. The continent is faced with a potential third wave driven by new variants. German Chancellor Angela Merkel said in a Sunday interview she would use federal law to take control of the pandemic response.
Lockdown restrictions in the UK have now eased slightly as groups of up to six people are allowed to meet outdoors. But markets displayed a lack of enthusiasm. “This early reticence may be tied to the Archegos Capital situation,” Connor Campbell, a financial analyst at SpreadEx, said. It remains to be seen which companies might be the next to announce they too have been stung, he said.
Oil prices fell after the Ever Given container ship blocking the Suez Canal was successfully refloated, according to Inchcape Shipping Services. The ship, which has been stuck for almost a week, is currently being secured. Brent crude futures fell 0.6% to $63.99, while West Texas Intermediate dropped 1.2% to $60.27. The vessel, which is said to be longer than the Eiffel Tower, had obstructed the canal – one of the world’s most important shipping passages – since Tuesday.
Asian equity markets rose despite Chinese geopolitical worries and the forced liquidations on Wall Street, perhaps from the boost that the container ship has been refloated. Roughly 12% of total global trade passes through the canal, a large portion of that is from Asia’s big exporters to their customers in Europe. China’s Shanghai Composite rose 0.5%, Japan’s Nikkei rose 0.7%, and Hong Kong’s Hang Seng was about flat.
A selling spree erased $35 billion from the stock values of major Chinese tech and US media companies Friday, and Wall Street is speculating it was in part driven by the forced liquidation of an investment firm’s holdings.
The selloff in the Chinese internet ADRs and US media shares was in part due to the “forced liquidation of positions” held by Archegos Capital Management, CNBC reported, citing a source familiar with the situation.
Archegos describes itself as a family investment office focusing on equity investments primarily in the US, China, Japan, Korea and Europe. Archegos is run by Bill Hwang, the founder of the now defunct Tiger Asia Management. Hwang’s fund is “known for employing leverage,” IPO Edge reported.
The group did not immediately respond to Insider’s request for comment and its website appeared to be offline on Saturday.
Goldman Sachs and Morgan Stanley liquidated large holdings this week, the news site IPO Edge was first to report, adding that the two investment banks have ties to Archegos. The move likely came after Archegos was unable to meet a margin call by an investment bank, CNBC and IPO Edge reported, citing sources familiar with the matter.
Bloomberg reported Saturday that Goldman Sachs liquidated $10.5 billion worth of stocks in block trades, where banks look to find buyers for big stock positions. The block trades included $6.6 billion worth of shares of Baidu, Tencent and Vipshop before the US market opened on Friday morning, Bloomberg reported, citing an email to clients.
Goldman then sold $3.9 billion worth of shares in media giants ViacomCBS and Discovery, as well as luxury fashion retailer Farfetch, and others, according to the report.
Goldman Sachs did not immediately respond to Insider’s request for comment.
Morgan Stanley also led share offerings on behalf of an undisclosed shareholder or shareholders, Bloomberg reported. Some of the trades exceeded $1 billion in individual companies, Bloomberg reported, citing its own data.