At the start of the week, I had lots of conversations with people worried about Evergrande defaulting and the possibility of contagion. By the end of the week, those talks had mainly died down (likely in large part because th
Good thought Andrew. But here is another though with bubbles and them popping.. it has been well researched that before many such events in the past, it has been seen to be true that it happens even when there are people openly talking about the chance of that happening much before the pop happens. Basically them being on the mind of folks does not eliminate them from either developing or popping. Robert Shiller for example documents and presents this case very well in Irrational Exuberance both in the case of 1929 crash as well as the dotcom crash.
A short squeeze set off by an unexpected catalyst that eats into the capital of a major market maker(s). There is a gap down on popular long positions as firms liquidate to meet capital calls, and a gap up on popular short positions as forced short covering occurs.
The probability of this happening is underestimated, and the catastrophic financial contagion which will follow not fully appreciated. A house of cards collapsing is not a black swan.
Crypto imploding IMO has trouble being a tail risk simply because so many market participants already expect it (or at least acknowledge it as a possibility). And as you rightly say, the risk is for now fairly well siloed out of the rest of the market.
Two tail events that IMO are not fully being considered by the market are China-Taiwan conflict and transformative AI. Both are considered highly plausible (and to some extent a question of when not if) by experts, and to be possibly defining events in 21st century (not just for markets though obviously either would cause massive changes).
I don’t understand the point of playing what if games without a real hypothesis of an underlying cause. Maybe your point was Evergrande was a major risk to Tether but not sure I follow how that affects other crypto assets? IMO this article screamed, “What if an asteroid hit the earth?” vibes.
Demand for semiconductors would drop, might end up helping fix some supply chain issues there.
Good thought Andrew. But here is another though with bubbles and them popping.. it has been well researched that before many such events in the past, it has been seen to be true that it happens even when there are people openly talking about the chance of that happening much before the pop happens. Basically them being on the mind of folks does not eliminate them from either developing or popping. Robert Shiller for example documents and presents this case very well in Irrational Exuberance both in the case of 1929 crash as well as the dotcom crash.
There are 17 doomsday bitcoin articles each week…the bigger risk is something happening to a sacred FANG stock
A short squeeze set off by an unexpected catalyst that eats into the capital of a major market maker(s). There is a gap down on popular long positions as firms liquidate to meet capital calls, and a gap up on popular short positions as forced short covering occurs.
The probability of this happening is underestimated, and the catastrophic financial contagion which will follow not fully appreciated. A house of cards collapsing is not a black swan.
Rohan Grey has some interesting things to say about the potential for crypto contagion.
https://overcast.fm/+bbjlfcU5M
Crypto imploding IMO has trouble being a tail risk simply because so many market participants already expect it (or at least acknowledge it as a possibility). And as you rightly say, the risk is for now fairly well siloed out of the rest of the market.
Two tail events that IMO are not fully being considered by the market are China-Taiwan conflict and transformative AI. Both are considered highly plausible (and to some extent a question of when not if) by experts, and to be possibly defining events in 21st century (not just for markets though obviously either would cause massive changes).
I don’t understand the point of playing what if games without a real hypothesis of an underlying cause. Maybe your point was Evergrande was a major risk to Tether but not sure I follow how that affects other crypto assets? IMO this article screamed, “What if an asteroid hit the earth?” vibes.