Bitcoin Forum

How did the Archegos case happened? For those who do not know about it, you have a thread here (https://bitcointalk.org/index.php?topic=5327539.msg56683544#msg56683544). In essence, a Hedge fund manager(Bill Hwang) with a not very clean past was able to get x10 leverage on back-bench tech investments such as Baidu. The result is a loss across the banking system of $6 billion.

This would not be a complete surprise if it weren´t for the list of lenders: Nomura, Credit Suisse, Goldman Sachs, Morgan Stanley,...

Why did this happen and why bitcoin price may be affected in the future? Summarising what several outlets (https://www.businessinsider.in/finance/banks/news/the-ripple-effect-of-archegos-capitals-collapse-may-cost-global-banks-6-billion/articleshow/81754362.cms) say, investment banks are not what they used to be. IPOs are no longer in trend and they have been replaced by direct float due to the hefty costs of placements (these sometimes fail, just like IPOs (https://www.ft.com/content/d14549c0-8739-45c7-937c-7be6d81ff979)). SPACs also offer a quick way to reach listed status in significant markets.

On top of that, the banks, due to the 2008 crisis, are limited in what amount of their own capital can they invest. The trading has also become electronic at large so their ability to profit from that is also hindered. There are not that many ways to gain the bucks (https://www.investopedia.com/articles/company-insights/092016/how-investment-banks-make-money-jpm-gs.asp) they used to.

To sum up, now they are forced to deal with hedge funds and highly leveraged instruments. This was what happened with Archegos.

And why may this be a concern for bitcoint hodlers?

- There is an increased interest from institutional investors and companies to take positions in bitcoin.
- There is and increased interest by exchanges to have these type of clients, that are more profitable than retail.
- There is a need by investment banks to play derivatives.

So, if Archegos could get leveraged enough to move the NASDAQ (https://markets.businessinsider.com/news/stocks/archegos-capital-margin-call-20-billion-liquidation-8-stocks-plummeted-2021-3-1030254795)when trying to undo its position, just imagine what could happen with a much narrower market (crypto).