ASHGABAT, Turkmenistan — ASHGABAT, Turkmenistan (AP) — Turkmenistan, one of the world’s most isolated nations, officially legalized mining and exchanging cryptocurrency on Thursday in a major shift for the country’s tightly controlled, gas-dependent economy.
Signed by President Serdar Berdimuhamedov, the legislation regulating virtual assets brings cryptocurrencies under civil law and establishes a licensing scheme for cryptocurrency exchanges overseen by the country’s central bank.
However, digital currencies will still not be recognized as a means of payment, currency, or security. Turkmenistan’s internet also remains tightly regulated and controlled by the government.
Turkmenistan, a former Soviet country in Central Asia, relies heavily on the export of its vast natural gas reserves to support its economy. China is the country’s main importer of gas, and Turkmenistan is currently working on a pipeline to supply gas to Afghanistan, Pakistan, and India.
Turkmenistan also adopted a law introducing electronic visas in April last year, aimed at simplifying entry for foreigners. After gaining independence in 1991, the autocratic nation typically placed strict entry requirements on would-be visitors, with many visa applications turned down for unclear reasons.
HONG KONG — State-backed property developer China Vanke, once the country’s largest homebuilder by sales, narrowly avoided defaulting on a 2 billion yuan ($284 million) bond last week as the painfully slow recovery in China’s property market drags on.
The Chinese developer also was seeking to delay repayment of another 3.7 billion yuan ($530 million) of onshore debt due on Dec. 28, with bondholders agreeing to extend the deadline to February.
Years after the downturn in the housing market began, Chinese developers are still struggling to regain their footing, despite a slew of government policies meant to revive the industry. Weak investment and housing prices have shaken investor confidence, spilling into the broader economy since millions of homeowners are stuck with apartments worth far less than what they paid for them.
Instead of the huge driver of prosperity that it once was, the property market is weighing on the economy.
Although Vanke’s bondholders have approved extensions for repayments of its debt, the risk of a default remains.
About a third-owned by Shenzhen Metro, a state-owned railway, publicly listed Vanke’s finances are a mess. Its revenue fell 27% from a year earlier in the latest July-September quarter, and several of its onshore bonds were suspended from trading after prices plunged.
The developer owes more than $50 billion, less than the more than $300 billion in debt racked up by China Evergrande, one of the first property dominos to fall when it defaulted in 2021 after the government cracked down on excessive borrowing in the industry.
Analysts say Vanke, founded in the 1980s in the southern boomtown of Shenzhen, may be testing the limits of state support for property developers in reviving the industry, which once accounted for more than a quarter of total economic activities in China.
More than four years after the downturn began, China’s property sector has yet to recover. The situation varies from city to city, but overall home prices have fallen by 20% or more from their peak in 2021.
The decline has continued, with new home sales falling 11.2% by value year-on-year in the first 11 months of 2025, according to official statistics. Property investments fell nearly 16% from a year earlier.
The slump has caused massive layoffs, hurting overall consumer confidence and spending.
“The continued slide in the property market remains one of the most significant risks to China’s efforts to shift to a domestically demand-driven growth model,” wrote Lynn Song, chief economist for Greater China at ING Bank, in a recent commentary.
China Evergrande, once deemed “too big to fail” as one of the country’s largest developers, ran into trouble in 2021 and eventually was forced into liquidation. Many other Chinese developers also defaulted and in some cases were restructured. Tough measures to fight Covid-19 during the pandemic took a toll as construction projects were suspended.
Restoring confidence in the property sector may take years, economists at Morgan Stanley say, and Vanke’s woes will only further weigh on its real estate market outlook. Economists at Morningstar say home prices are unlikely to rebound until 2027 due to excess supply, despite repeated pledges by regulators to stabilize the real estate market.
While Vanke’s debt is way smaller than Evergrande’s was, a default would sting: It had been considered one of the financially sounder real estate developers in China.
Shenzhen Metro Group, which is controlled by the Shenzhen government, has provided more than 29 billion yuan ($4 billion) in shareholder loans to Vanke so far this year to help with its debt repayments, according to S&P Global.
That’s not enough to repay its full obligations. Vanke reported 60 billion yuan ($8 billion) of cash by the end of September 2025, against short-term debts of about 151 billion yuan ($21 billion), Fitch Ratings said.
“This is one of the most significant, quasi state-backed developers that may be defaulting (on) their repayment,” said Foreky Wong, a founding partner at Fortune Ark Restructuring.
S&P Global, one of the world’s main rating agencies, recently downgraded Vanke to “selective default,” saying it viewed the extension of its bond repayment period as a distressed debt restructuring “tantamount to a default.” Fitch Ratings also downgraded Vanke’s rating to “restricted default”.
Vanke — which employed more than 120,000 people as of last year — still faces hundreds of millions of dollars more of debt repayments in 2026. S&P said it faces more than 9.4 billion yuan of bonds maturing over the next six months.
A default by Vanke could spill over into the wider real estate sector, making it more difficult for non-state owned developers to get help, said Jeff Zhang, an analyst at Morningstar.
“Without a strong commitment by the Shenzhen government on the bailout, we think Vanke’s liquidity profile should remain fragile,” Zhang said.
KUALA LUMPUR, Malaysia — China signed an expanded version of a free trade agreement Tuesday with the Association of Southeast Asian Nations, with Chinese Premier Li Qiang pitching expanded economic ties with his country as an alternative to the protectionist policies of U.S. President Donald Trump.
Li Qiang told an ASEAN-China summit meeting after the signing that closer cooperation could help overcome global economic uncertainties. He said “pursuing confrontation instead of solidarity brings no benefit” in the face of economic coercion and bullying, in a swipe at the U.S.
“Unity is strength,” he said, citing remarks by President Xi Jinping made during a Southeast Asia visit earlier this year.
His remarks were met with skepticism by Philippine President Ferdinand Marcos Jr., whose country has clashed with China over competing claims in the South China Sea, as have other ASEAN nations.
Marcos welcomed the expanded trade pact, but stressed that “this cooperation cannot exist alongside coercion.”
The signing of the ASEAN-China Free Trade Area 3.0 came on the final day of the annual ASEAN summit and related meetings and was witnessed by Li Qiang and Malaysian Prime Minister Anwar Ibrahim, who is serving as ASEAN chair this year.
It’s the third revision of the long-standing agreement, which was first signed in 2002 and came into force in 2010. The free trade area covers a combined market of more than 2 billion people and lowers tariffs on goods and boosting flows of services and investment.
Two-way trade has surged from $235.5 billion in 2010 to nearly $1 trillion last year. ASEAN and China are each other’s top trading partners.
Li stressed “mutual reliance” between China and ASEAN members Brunei, Cambodia, East Timor, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, calling them “good neighbors and good brothers that are close in geography, culture and sentiment.”
“Unilateralism and protectionism have seriously impacted the global economic and trade order, while external forces are increasing their interference in the region — many countries have been unreasonably subjected to high tariffs,” he said.
“By relying on each other and coordinating our actions, we can safeguard our legitimate rights and interests.”
Southeast Asian political analyst Bridget Welsh said the upgraded pact would benefit both sides, especially in the areas of supply chains and sustainability.
“It also speaks to a global reality that non-U.S. countries are coming together to strengthen trade relationships for their prosperity as a recoupling with the U.S. is ongoing,” she said,
Trump at the ASEAN summit on Sunday announced new economic details with Cambodia, Malaysia, Thailand and Vietnam, though all countries are still subject to new tariffs he has brought in.
Anwar stressed at the ASEAN meeting with China that the bloc seeks friendly relations with all countries.
“The day before we were with President Donald Trump of the United States of America, and today we are back with China,” he said. “And that reflects ASEAN centrality … This is what we consider steady engagement that fosters trust that enables us to work through challenges together.”
There were signs that tensions between the U.S. and China were cooling ahead of a planned meeting between Trump and Xi, which is expected to take place in South Korea on Thursday. Top negotiators from each country said a trade deal was coming together, which could prevent a potentially damaging confrontation between the world’s two largest economies.
Officials said the ASEAN-China Free Trade Area 3.0 is expected to broaden integration across the region by covering new areas such as digital trade, the green economy, sustainability and support for small and medium-sized enterprises, which make up the majority of ASEAN businesses. The agreement is designed to make trade benefits more accessible, improve market entry for smaller players, streamline non-tariff procedures and lower regulatory barriers.
Marcos said the pact could help modernize trade practices and enable both sides to better respond to emerging economic challenges, but urged China to “commit to cooperation and meaningful engagement, especially in the South China Sea.”
Marcos said it was “regrettable” that Philippine vessels and aircraft continue to face “dangerous actions and harassment” in the South China Sea. He reiterated Manila’s objections to Beijing’s plan to establish a “nature reserve” over a hotly disputed shoal in the area.
“Actions like these cannot hide under the veneer of marine environmental protection because they have no legal basis or effect, blatantly disregard international law, and infringe on the Philippines’ sovereignty,” he said. Still, Marcos added that Manila would continue to engage constructively with China to manage differences.
ASEAN members Vietnam, the Philippines, Malaysia, and Brunei — along with Taiwan — have overlapping claims with China, which asserts sovereignty over nearly the entire South China Sea. Chinese and Philippine vessels have repeatedly clashed in the vital sea trade route.
Marcos has vowed to accelerate the conclusion of a Code of Conduct to govern behavior in the disputed waters when the Philippines assumes the ASEAN chairmanship next year.
In Beijing, Chinese Foreign Ministry spokesperson Guo Jiaku on Monday accused the Philippines of “deliberate infringements and provocations at sea,” blaming Manila for escalating tensions.
Welsh, the analyst, said regional officials treat the South China Sea dispute as a separate track from security ties and don’t expect it to impact economic ties with China.
Argentina’s stocks, bonds and currency surged Monday after the country’s midterm elections delivered a surprising mandate for President Javier Milei to press ahead with his free-market economic overhauls.
The Argentine peso rose around 9% against the U.S. dollar in midmorning trading, the most in more than two decades. A U.S. dollar-denominated government bond maturing in 2046 rose by 11 cents to trade at 66 cents on the dollar, according to Tradeweb data. Argentina’s benchmark stock index, the Merval, was up 17% as bank stocks soared.
(CNN) — President Donald Trump’s threat to impose an additional 100% tariff on imports from China sparked a massive cryptocurrency sell-off late Friday that exposed risky leverage in the space.
Digital currencies bitcoin, ether and solana were among the most affected cryptocurrencies, bringing total liquidations to $18.28 billion as of 3:47 p.m. ET, according to data analysis platform CoinGlass. The losses for cryptocurrencies come amid a broad sell-off, as the Nasdaq and S&P 500 on Friday saw their steepest declines in six months.
In the past 24 hours, roughly $5 billion of bitcoin has been liquidated, along with about $4 billion of ether and about $2 billion of solana, according to CoinGlass.
It’s the “largest liquidation event in crypto history,” CoinGlass said in a post on X.
Bitcoin is down almost 10% in the last five days and was trading at $111.616.20 as of 3:45 p.m. ET, a jump from when it dropped to $103,000 at 5:15 p.m. ET on Friday.
On Friday, ether was priced at $4,365.63 and then sunk to $3,742.88 — a 14.2% decline.
Solana was priced at $223.10 on Friday and has fallen to $178.72, as of 3:45 p.m. ET — a nearly 20% plunge.
Crypto has made major gains since Trump took office this year, in large part because of the president’s turnaround from dismissing bitcoin as “based on thin air” to addressing crypto fans at conventions, launching his own meme coin and promising a strategic crypto reserve.
And Trump recently issued an executive order allowing digital assets like crypto to be included in 401(k) plans, causing bitcoin to soar to a record high of $124,000 last week.
Despite ongoing trade talks between Washington and Beijing, trade tensions re-escalated Thursday after China ramped up export restrictions on critical rare earth minerals.
The going price for New York spot gold hit a record $3,858.45 per troy ounce — the standard for measuring precious metals — as of market close Tuesday, ahead of the shutdown beginning overnight. And futures continued to climb on Wednesday, dancing with the $3,900 mark as of midday trading.
Gold sales can rise sharply when anxious investors seek “safe havens” for parking their money. Before Wednesday, the asset — and other metals, like silver — have seen wider gains over the last year, particularly with President Donald Trump ‘s barrage of tariffs plunging much of the world into economic uncertainty.
If trends persist, analysts have predicted that prices could continue to soar. Still, gold can be volatile and the future is never promised. Here’s what we know.
Gold futures more than 45% since the start of 2025, trading at just over $3,895 by around 12:30 p.m. ET on Wednesday.
Other precious metals have also raked in gains — with silver seeing an even bigger percentage jump year to date. Silver futures are up more than 59%, trading at nearly $48 per ounce as of midday Wednesday.
Much of the recent economic turmoil has spanned from Trump’s trade wars. Since the start of 2025, steep new tariffs the president has imposed on goods coming into the U.S. from around the world have strained businesses and consumers alike — pushing costs higher and weakening the job market. As a result, hiring has plunged while inflation continues to inch back up. And more and more consumers are expressing pessimism about the road ahead.
The current U.S. government shutdown could add to those anxieties. A key jobs report from the Labor Department, scheduled for Friday, is likely to be delayed, for example. And the shutdown itself threatens to bring its own economic fallout nationwide. Roughly 750,000 federal workers were expected to be furloughed, with some potentially fired by Trump’s Republican administration. Many offices will also be shuttered, perhaps permanently, as Trump vows to “do things that are irreversible” to punish Democrats for voting down GOP legislation.
The scope of impact could come down to how long the impasse lasts. Wall Street, meanwhile, has largely been unmoved by the shutdown so far — but Treasury yields dropped after discouraging hiring data from ADP Research Wednesday.
Investments in gold have also been driven by other factors over time. Analysts have previously pointed to strong gold demand from central banks around the world — including amid rising geopolitical tensions, such as the ongoing wars in Gaza and Ukraine.
Advocates of investing in gold call it a “safe haven” — arguing the commodity can serve to diversify and balance your investment portfolio, as well as mitigate possible risks down the road. Some also take comfort in buying something tangible that has the potential to increase in value over time.
Still, experts caution against putting all your eggs in one basket. And not everyone agrees gold is a good investment. Critics say gold isn’t always the inflation hedge many say it is — and that there are more efficient ways to protect against potential loss of capital, such as derivative-based investments.
The Commodity Futures Trade Commission has also previously warned people to be wary of investing in gold. Precious metals can be highly volatile, the commission said, and prices rise as demand goes up — meaning “when economic anxiety or instability is high, the people who typically profit from precious metals are the sellers.”
And even gold’s current rally has seen some volatility. While still up significantly overall since the start of the year, there’s been a handful of short stretches with losses. Gold prices fell for several days following Trump’s sweeping “Liberation Day” announcement on April 2, for example.
If you do choose to invest in gold, the commission adds, it’s important to educate yourself on safe trading practices and be cautious of potential scams and counterfeits on the market.
TOKYO — Japanese automaker Nissan is developing new self-driving technology as it works to turn around its struggling auto business.
In a recent demonstration of the technology, set to be available in 2027, a Nissan Ariya sedan outfitted with 11 cameras, five radars and a next-generation sensor called LiDAR maneuvered its way through downtown Tokyo, braking for red lights as well as pedestrians and other cars at intersections.
Previous Nissan self-driving technology was designed for freeway driving, where the lanes are clearly marked and easier to decipher. The new technology is designed for congested, unpredictable city streets.
It’s an already-crowded field. The self-driving car market is estimated to reach $2 trillion by 2030, according to market researcher IndustryARC, riding on the back of advances in AI, sensor technologies and data processing capabilities.
Japan’s top automaker, Toyota Motor Corp., has a partnership deal with Waymo, another self-driving technology developed by Google. Waymo has also arrived in Japan, in partnership with a cab company, but it’s still in the testing stage.
Other automakers are also working on autonomous driving technology, including Honda Motor Co., General Motors and Mercedes-Benz, as well as companies outside the auto industry like Amazon and its subsidiary Zoox.
Nissan’s push comes at a time when the overall Japanese auto market is facing serious challenges because of President Donald Trump’s tariffs. Nissan especially is struggling. It has slashed jobs and appointed a new chief executive, Ivan Espinosa, to attempt a turnaround. The maker of the March subcompact, Leaf electric cars and Infiniti luxury brand posted losses for the April-June period, following a fiscal year of red ink.
NEW YORK — Klarna priced its long awaited initial public offering at $40 a share late Tuesday, valuing the Swedish buy now, pay later company at more than $15 billion.
The valuation easily makes Klarna one of the biggest IPOs so far in 2025, which has been one of the busier years for companies going public. The $40 share price came in above market expectations, which called for Klarna to price its shares between $35 and $37 each.
Founded in 2005 as a payments company, Klarna entered the U.S. buy now, pay market in 2015 in partnership with department store operator Macy’s. Since then, Klarna has expanded to hundreds of thousands of merchants and has embedded itself in internet browsers and digital wallets as an alternative to credit cards. The company recently announced a partnership with Walmart.
Klarna’s most popular product is what’s known as a “pay-in-4” plan, where a customer can split a purchase into four payments spread over six weeks. The company also offers a longer-term payment plan where it charges interest.
The business model has caught on globally. The company said 111 million consumers worldwide have used Klarna for a purchase.
Ahead of going public, Klarna reported in August that it had second-quarter revenues of $823 million and had an adjusted profit of $29 million.
The company will start trading Wednesday under the symbol “KLAR” on the New York Stock Exchange. While based in Sweden and a popular payment service in Europe, its decision to go public on U.S. markets is a sign that the company executives see American shoppers as its future growth market.
Klarna will now be the second-largest buy now, pay later company on U.S. public markets, behind Affirm. Shares of Affirm have surged more than 40% so far this year, valuing the company at around $28 billion, helped by a belief among investors that buy now, pay later companies may take away market share from traditional banks and credit cards.
Klarna was backed by JPMorgan Chase and Goldman Sachs as their investment banks.
Other popular IPOs so far this year include the design software company Figma and Circle Internet Group, which issues the USDC stablecoin. Investors are also looking forward to the expected market debuts of the ticket exchange StubHub and the cryptocurrency exchange Gemini, which is majority owned by the Winklevoss twins.
LAGOS, Nigeria — Nigeria’s government has banned the export of raw shea nuts, an essential raw material in many cosmetic products, in a bid to grow the country into a global supplier of refined shea butter and other skincare ingredients.
The immediate ban on the crop will be in place for six months and then reviewed, Vice President Kashim Shettima said.
Nigeria follows a growing list of other West African countries, including Burkina Faso, Mali, Togo, Ivory Coast and Ghana, that have banned or restricted export of the crop in the past two years.
“The ban will transform Nigeria from an exporter of raw shea nut to a global supplier of refined shea butter, oil, and other derivatives,” Shettima said Tuesday.
He added that the decision was not “an anti-trade policy but a pro-value addition policy designed to secure raw materials for our processing factories” and boost income and jobs for rural workers.
Raw shea nut is pulverized and processed to produce shea butter, a key ingredient for manufacturing products like lotion, shampoos, conditioners and moisturizers.
“It is one of the most important bases for skincare, especially now that a lot of people are tilting toward nontoxic skincare,” said Zainab Bashir, an Abuja-based dermatologist.
While Nigeria accounts for 40% of the world’s supply of the crop, it contributes to just 1% of the $6.5-billion global market share in shea products, according to the vice president.
The measure came weeks after the northern Niger state opened a shea butter processing plant that officials described as one of Africa’s largest.
Authorities said that if the export ban remains in force, it is expected to generate $300 million in the short term and $3 billion by 2027.
Experts have argued that such efforts must come with more investment to grow domestic industries.
“The ban seems to suggest that the government has identified a supply-gap issue, but an export ban does little actually to lock in current in-country production solely for Nigerian processors,” Ikemesit Effiong, a partner at SBM Intelligence, a Lagos-based risk advisory firm, told The Associated Press.
The move appeared to contradict the long-standing trade policy of Nigeria’s President Bola Tinubu, who has positioned the country as a free-market economy by removing a series of subsidies on essential commodities such as fuel and electricity. Tinubu has also floated the country’s currency and reversed a ban on the import of dozens of items by the former government.
Markets on Wall Street and in Asia are stabilizing Tuesday following a mini-panic caused by an assortment of factors that stretched from late last week through Monday.
The S&P 500 and Nasdaq each rose 1.3% in morning trading and were on track to break a brutal three-day losing streak. The S&P 500 had tumbled more than 6% after several weaker-than-expected reports raised concerns that the Federal Reserve had pumped the brakes too much on the U.S. economy through high interest rates.
The Dow Jones Industrial Average was up 0.7%.
Elsewhere, Japan’s Nikkei 225 jumped 10.2% Tuesday, following its 12.4% sell-off the day before, which was its worst since 1987. Stocks in Tokyo rebounded as the value of the Japanese yen stabilized a bit against the U.S. dollar following several days of sharp gains.
A rate hike last week by the Bank of Japan contributed to the turmoil by upending trades where investors had borrowed Japanese yen at low cost and invested it elsewhere around the world. The resulting exits from those investments may have helped accelerate the declines in global markets.
Starting Thursday, investors grew worried about a slowing U.S. economy. They pointed fingers at the Fed for waiting too long to cut rates and sold shares of technology companies that had ridden a frenzy around artificial intelligence to lofty stock market valuations.
Calmer voices that claimed the sell-off was a good thing because stock prices had risen too high seemed to prevail Tuesday. Some of Tuesday’s gainers were those same technology companies investors had fled from. Chipmaker Nvidia was up 3.8% Tuesday morning, following a drop of 6.4% on Monday.
For individual investors, experts say it’s not time for rash decisions, but a moment to make sure their investments are properly diversified.
Here’s a look at the reasons for the turbulence in markets:
Inflation and central banks
Starting in 2022, the Fed rapidly raised interest rates to combat a spike in inflation. It’s maintained its key rate at 5.4% for about a year. As part of its inflation fight, the Fed also aimed to cool down a red-hot labor market.
Investors thought the Fed and other central banks were on track, even though inflation remained somewhat above their targets — in the Fed’s case, 2%. The European Central Bank and the Bank of England cut rates once and the Fed signaled it was prepared to start cutting rates in September.
Anxiety over the U.S. economy
Despite some signs of cooling, the U.S. economy kept chugging along even with higher rates, outpacing Europe and Asia. Then came last week’s economic reports.
Weak readings on the job market, manufacturing and construction sparked worries about a U.S. economic slowdown and criticism that the Federal Reserve waited too long to cut rates.
Traders in the U.S. are now betting the Federal Reserve will lower rates by half a percentage point in September instead of the usual quarter point. Some were calling for an emergency rate cut.
Big Tech
A handful of Big Tech stocks drove the market’s double-digit gains into July. But their momentum turned last month on worries investors had taken their prices too high and expectations for their profit gains had grown too difficult to meet — a notion that gained credence when the group’s latest earnings reports were mostly underwhelming.
Apple fell more than 5% Monday after Warren Buffett’s Berkshire Hathaway disclosed that it had slashed its ownership stake in the iPhone maker. Nvidia lost more than $420 billion in market value Thursday through Monday. Overall, the tech sector of the S&P 500 was the biggest drag on the market Monday.
Japan’s rollercoaster
The Nikkei suffered its worst two-day decline ever, dropping 18.2% on Friday and Monday combined. One catalyst for the outsized move has been an interest rate hike by the Bank of Japan last week.
The BoJ’s rate increase affected what are known as carry trades. That’s when investors borrow money from a country with low interest rates and a relatively weak currency, like Japan, and invest those funds in places that will yield a high return. The higher interest rates caused the Japanese yen to strengthen, likely forcing investors to sell stocks to repay those loans.
Stocks in Tokyo rebounded as the value of the Japanese yen stabilized against the U.S. dollar.
What should investors do?
The prevailing wisdom is: Hold steady.
Experts and analysts encourage taking a long view, especially for investors concerned about retirement savings,.
“More often than not, panic selling on a red day is generally a great way to lose more money than you save,” said Jacob Channel, senior economist for LendingTree, who reminds investors that markets have recovered from worse sell-offs than the current one.
Bitcoin claws back some losses
Bitcoin was back up to $56,490 Monday morning after the price of the world’s largest cryptocurrency fell to just above $54,000 during Monday’s rout. That’s still down from nearly $68,000 one week ago, per data from CoinMarketCap.
While bitcoin did serve as a safe haven of sorts during the worst of the pandemic, it mostly acts like any another risky asset that investors steer clear from during market downturns.
Sell-offs are normal
Greg McBride, financial analyst for Bankrate, points out that a 10% pullback in markets happens on average once every 12 months.
Quincy Krosby, chief global strategist for LPL Financial, says investors should try to wait out the current wave of turbulence.
“Pockets of volatility are expected to continue as August and September give way to a calmer seasonal period; however, it’s important to remember pockets of opportunity are always on the other side of the storm,” she said.
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Cora Lewis and Wyatte Grantham-Philips in New York contributed to this report.
BANGKOK — The mayhem that swept across world markets this week was partly caused by a market strategy known as the “carry trade.”
Japan’s benchmark Nikkei 225 plunged 12.4% on Monday and markets in Europe and North America suffered outsized losses as traders sold stocks to help cover rising risks from investments made using cheaply financed funds borrowed mostly in Japanese yen.
They were jolted by a combination of factors, including dread of a possible recession in the United States, the world’s largest economy, and worries that technology shares have shot way too high this year.
But the scale of the declines was exaggerated by the rush to sell U.S. dollars due to carry trade deals that had helped drive markets to record levels.
Carry trades involve borrowing at low cost in one currency to achieve higher returns from investments in another currency. One of the most recent examples has been to borrow Japanese yen, expecting the currency to remain cheap against the U.S. dollar and for Japanese interest rates to remain low. The borrowed funds would then be invested in U.S. stocks and Treasury bonds in anticipation of a higher return.
The key factor behind a carry trade is a difference in interest rates. The Bank of Japan has kept interest rates at or near zero for years, trying to encourage more spending and spur economic growth. Last week, it raised its main interest rate from nearly zero. Higher interest rates tend to boost the value of a nation’s currency, and the Japanese yen surged against the U.S. dollar. Traders scrambled to sell higher risk, dollar-denominated assets to cover suddenly higher borrowing costs, plus losses from foreign exchange rate changes and losses in asset values as share prices plunged. Also, hedge funds that conduct carry trades use computer models to help maximize their returns versus their risks. They needed to sell shares to maintain acceptable risk profiles.
Carry trades tend to make the most sense when foreign exchange rates are relatively stable and investors can tap into higher yielding market opportunities, like the recent runups of stock prices in places like the United States. The recent market upheavals obliged traders to cover their debts by buying yen and other carry trade currencies and selling relatively more of the higher risk assets they bought under more favorable conditions. Also, carry trades are very lucrative when stocks or other investments are rising, but losses can snowball when thousands of traders are pressured to sell stocks or other assets all at once. “A massive global carry trade unwind was the spark that lit the fuse for this market Armageddon,” Stephen Innes of SPI Asset Management said. “One defining characteristic of these self-perpetuating market melts is the vicious cycle where a sell-off increases realized volatility.”
The gap between the main interest rate in Japan, now at 0.25%, and the Federal Reserve’s benchmark rate of 5%-5.25% is still wide but is likely to narrow as the Fed cuts rates and Japan raises its rates. Financial markets appeared to have calmed Tuesday, with Japan’s Nikkei 225 index gaining 10.2% and other markets mostly higher. Analysts are divided over whether this bout of volatility in the markets has passed or if there is more to come. Regardless, carry trades have been used for decades. They contributed to a meltdown in Iceland’s financial sector in 2007-2008 where investors borrowed in yen or Swiss francs to take advantage of high Icelandic interest rates. During this latest market upset, Mexico, another focus of the yen carry trade, has seen its peso fall more than 6%. The popular but potentially complicated trading strategy is likely to remain a wild card for investors, especially in times of high market volatility.
Sheets of newly-designed Japanese 10,000 yen banknotes move through a machine at the National Printing Bureau Tokyo plant in Tokyo, Japan, on Wednesday, June 19, 2024. Persistent weakness in the yen is raising concerns about the potential for a resurgence in cost-push inflation, likely weighing on private consumption.
Bloomberg | Bloomberg | Getty Images
The Japanese yen hit a near-38 year low against the U.S. dollar late Wednesday, raising expectations that authorities could intervene in currency markets again.
The yen weakened to 160.82 against the greenback according to FactSet data, breaching the previous record of 160.03 on April 29 and reaching its weakest level since 1986.
The last time the yen crossed the 160 level, the currency subsequently strengthened sharply during the trading session, prompting analysts to speculate about an intervention.
Japan’s Ministry of Finance later confirmed the intervention in May, saying that it had spent 9.7885 trillion yen ($62.25 billion) on currency intervention between April 26 and May 29, according to a Google-translated statement.
That was the first time that the Japanese government has undertaken such a market measure since October 2022, according to ministry records.
Carol Kong, economist and currency strategist at the Commonwealth Bank of Australia, is of the view that “we may be closer to another FX intervention.”
She also said that the U.S. May personal consumption expenditures data — set to be released on Friday — might provide a catalyst for Japan to intervene if it is stronger than expected and pushes the USD/JPY pair sharply higher.
Reuters reported that Kanda said Japanese authorities were “seriously concerned and on high alert” about the yen’s rapid decline.
“It is generally accepted that the current weakness in the yen is not necessarily justified, therefore believed to be driven by speculators,” Kanda told reporters on Wednesday. He added that authorities “have been preparing to act against excessive volatility.”
— CNBC’s Ruxandra Iordache and Sam Meredith contributed to this report.
A press preview held for the ‘The Future of Money’ exhibition at the Bank of England Museum in London, United Kingdom on February 27, 2024.
Rasid Necati Aslim | Anadolu | Getty Images
LONOND — Banknotes featuring a portrait of King Charles III entered circulation on Wednesday for the first time, the Bank of England said in a statement.
Charles will be pictured on the front of the £5, £10, £20, and £50 banknotes, and will be seen through the notes’ see-through security window.
Otherwise the notes will remain unchanged in their design. As well as monarchs, banknotes in the U.K. feature historical characters including Winston Churchill, Jane Austen, JMW Turner and Alan Turing.
Images of the notes depicting Charles were first released in December 2022 after Queen Elizabeth II passed away in September of the same year.
New bank notes that bear a portrait of King Charles III, and which will enter circulation on June 5, 2024, are displayed for a photograph after having been presented to Britain’s King Charles III by Bank of England Governor Andrew Bailey and Bank of England Chief Cashier Sarah John, at Buckingham Palace in London on April 9, 2024.
Yui Mok | Afp | Getty Images
Notes featuring Queen Elizabeth II will remain legal tender and will be in circulation alongside those showing Charles, the Bank of England said. The two monarchs are the only ones to be depicted on banknotes, as this tradition only began in 1960.
“The new banknotes will only be printed to replace those that are worn, and to meet any overall increase in demand for banknotes,” the Bank of England said. “This means the public will begin to see the new King Charles III notes very gradually.”
“This is a historic moment, as it’s the first time we’ve changed the sovereign on our notes,” Bank of England Governor Andrew Bailey said.
People would, however, be able to exchange notes they already have for the new ones featuring Charles. A series of auctions of low-serial numbered notes will be held in the coming months, with proceeds going to charity, the Bank of England said.
Coins showing a portrait of the British king have already entered into circulation. They show him facing the left, in line with a tradition that says the direction of the profile switches for each successive monarch.
While there may be similarities to the U.S. market when buying a home overseas, there are also unique challenges on the financial side of the purchase.
Oftentimes, Americans buying properties abroad end up financing the transaction with cash outright, experts say. If you do want to finance your home purchase, assess the options to consider how often you may be exposed to interest rate changes.
That’s because mortgage structures in foreign countries are more likely to have variable rates, or short terms if they are fixed-rate loans. It is rare to encounter financing options similar to the 30-year fixed rate mortgage, which is a “very American phenomenon,” said Boudreaux, a member of the CNBC Financial Advisor Council.
You also have to be mindful of the exchange rate on the foreign currency you will be transacting with, as well as the cost to trade your U.S. dollars. Fluctuations in rates, and the differences in banks’ rates and fees, can make a significant difference in how far your dollars go.
A bank wire is often the “least expensive way” to exchange currency, and with a large enough bank, they’ll have facilities that can reduce the cost of the foreign transfer like a favorable exchange rate, said Boudreaux.
But in most cases, the U.S. buyer will need to open a bank account in the country they’re buying real estate. And that process is not always straightforward.
For one, many banks will refuse to work with U.S. citizens because the Bank Secrecy Act of the U.S. requires foreign entities to report assets, he explained.
In addition, smaller, regional banks might not be equipped to handle that reporting, so U.S. citizens will generally need to seek larger institutions, Boudreaux said.
Before you acquire a property outside of the U.S., it’s also important to make sure you have a clear picture of what you will use it for; your tax responsibilities to the foreign country and the U.S. may change depending on that answer.
Here are three steps experts recommend you take before you become a homeowner overseas:
1. ‘Do a lot of due diligence’
When you visit the city or town where you want to buy, make sure to walk around a lot, said Bojan Mujcin, a real estate associate of Sotheby’s International Realty in Barcelona and the nearby region of Costa Brava.
“Get familiar with the city, get familiar with the streets … do a lot of due diligence,” Mujcin said.
Rent in that area for a significant time to get a sense of the place before you “buy something on a dream,” said Boudreaux. Doing so can give you a better sense of what it’s like to live in a place.
You also may want to consider the country’s political environment, as it can be important for the long-term investment value of your property, said Erin Boisson Aries, a global luxury real estate advisor of Douglas Elliman.
“Less spontaneity and more study is important,” she said. “It’s wonderful to go on vacation and have a wonderful time, but the long-term geopolitical stability is very important.”
Boudreaux agreed: “There is political risk … and we have to be prepared for what that might entail for our investments.”
2. ‘Understand what your needs are’
It will be important for you to “understand what your needs are,” Boisson Aries said.
“Is this an investment? Are you planning to retire there? Are you planning to visit and rent it out?…You have to really understand the environment you’re purchasing into,” she said.
For example, if you plan to rent out the property for long- or short-term stays, “zoning very much factors into that,” Boisson Aries said.
Rules that determine what areas are eligible for short-term rentals can change over time, Boudreaux said.
“Buying these direct properties for that purpose is something that comes with far more risks than people realize,” he said.
And if you do decide to use the property for rental or commercial use, you may have additional tax burdens in that country, Boudreaux added.
3. Contact local experts and expat communities
“Make sure you have local experts and professionals advising you” when shopping in housing markets outside of the U.S., said Boisson Aries. “There are so many variables that affect each purchase.”
Such factors can include ownership rights, zoning implications and investment opportunities, she said.
“You might go over and fall in love with the property, but without really understanding the overall market, all of the other implications to purchasing and ownership, you’re flying a little blindly,” she said. “Just as we’re experts and advisors on the ground in Manhattan … you really do need that level of expertise on the ground.”
Speak with a legal advisor in the foreign country who can help navigate tax issues and other questions you may have, Sotheby’s Mujcin said.
“You definitely always need to have some legal support from some type of lawyer in the transaction,” he said.
It’s also important to find out if there’s an expat community in the country you’re eyeing, Boudreaux said.
Usually it will consist of other Americans who have gone through a similar process who can provide recommendations and resources, he added.
FTX, once among the largest cryptocurrency exchanges in the world, said this week that nearly all of its customers will receive the money back that they are owed, two years after its monumental collapse.
FTX said in a court filing late Tuesday that it owes about $11.2 billion to its creditors. The exchange estimates that it has between $14.5 billion and $16.3 billion to distribute to them.
Here is a timeline of what led up to this week’s announcement after an implosion at FTX kicked off what many had expected to become a “crypto winter.”
2022
Nov. 2: Coindesk reports Alameda Reseach, Bankman-Fried’s cryptocurrency trading firm, holds a large amount of FTT, a token issued by FTX, suggesting the finances of the two are intertwined and Alameda faces a cash crunch. The report spooks participants in the crypto market.
Nov. 6: Rival cryptocurrency exchange Binance announces that the firm plans to sell all its holdings in FTT. The price of FTT tanks.
Nov. 8: Binance founder and CEO Changpeng Zhao said his company had signed a letter of intent to buy FTX because the smaller exchange was experiencing a “significant liquidity crunch.” That deal would be contingent, however, on a look at the books at FTX. The price for bitcoin tumbles 13%.
Nov. 9: Cryptocurrency prices plunge and after getting a closer look at the finances of FTX, Binance retreated and said there would be no acquisition. “In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” Binance said in a statement. Bitcoin prices drop another 14%.
Nov. 10: Cryptocurrency lender BlockFi announced it is “not able to do business as usual” and was pausing client withdrawals as a result of FTX’s implosion.
Nov. 11: FTX files for Chapter 11 and Bankman-Fried resigns. John Ray III, a long-time bankruptcy litigator who is best known for having to clean up the mess made after the collapse of Enron, is named the new CEO.
In its bankruptcy filing, FTX listed more than 130 affiliated companies around the globe. The company valued its assets between $10 billion to $50 billion, with a similar estimate for its liabilities. Bitcoin falls 10%.
Nov. 17: Ray gives a damning description of FTX’s operations under Bankman-Fried, from a lack of security controls to business funds being used to buy employees homes and luxuries.
Nov. 30: As part of a media blitz, Bankman-Fried tells New York Time’s Andrew Ross-Sorkin, “Look, I screwed up,” and didn’t knowingly misuse clients’ funds.
Dec. 12: Bankman-Fried is arrested in the Bahamas, where FTX is headquartered.
Dec. 13: The U.S. government charges Bankman-Fried with a host of financial crimes, alleging he intentionally deceived customers and investors to enrich himself and others, while playing a central role in the company’s multibillion-dollar collapse.
Federal prosecutors said Bankman-Fried devised “a scheme and artifice to defraud” FTX’s customers and investors beginning the year it was founded. He illegally diverted their money to cover expenses, debts and risky trades at Alameda Research, and to make lavish real estate purchases and large political donations, prosecutors said in a 13-page indictment.
Dec. 22: Bankman-Fried’s parents agreed to sign a $250 million bond and keep him at their California home while he awaits trial.
2023
August 11: Judge revoked Bankman-Fried’s bail and sent him to jail after concluding he had repeatedly tried to influence witnesses against him.
Oct. 3: Jury selection began for the trial.
Oct. 27: Bankman-Fried took the stand in his trial. He again acknowledged failures but denied defrauding anyone.
Nov. 3: Bankman-Fried is convicted of fraud for stealing at least $10 billion from customers and investors.
2024
March 28: Bankman-Fried is sentenced to 25 years in prison. Bitcoin has roared back from a massive sell-off during the scandal. Prices are up nearly 70%.
April 30: Changpeng Zhao, the founder of Binance, is sentenced to four months in prison for looking the other way as criminals used the platform to move money connected to child sex abuse, drug trafficking and terrorism.
May 8: FTX says that nearly all of its customers will receive the money back that they are owed, two years after the cryptocurrency exchange imploded, and some will get more than that.
FTX says that nearly all of its customers will receive the money back that they are owed, two years after the cryptocurrency exchange imploded, and some will get more than that.
FTX said in a court filing late Tuesday that it owes about $11.2 billion to its creditors. The exchange estimates that it has between $14.5 billion and $16.3 billion to distribute to them.
The filing said that after paying claims in full, the plan provides for supplemental interest payments to creditors, to the extent that funds still remain. The interest rate for most creditors is 9%.
That may be a diminished consolation for investors who were trading cryptocurrency on the exchange when it collapsed. When FTX sought bankruptcy protection in November 2022, bitcoin was going for $16,080. But crypto prices have soared as the economy recovered while the assets at FTX were sorted out over the past two years. A single bitcoin on Tuesday was selling for close to $62,675. That comes out to a 290% loss, a bit less than that if accrued interest is counted, if those investors had held onto those coins.
Customers and creditors that claim $50,000 or less will get about 118% of their claim, according to the plan, which was filed with the U.S. Bankruptcy Court for the District of Delaware. This covers about 98% of FTX customers.
FTX said that it was able to recover funds by monetizing a collection of assets that mostly consisted of proprietary investments held by the Alameda or FTX Ventures businesses, or litigation claims.
FTX was the third-largest cryptocurrency exchange in the world when it filed for bankruptcy protection in November 2022 after it experienced the crypto equivalent of a bank run.
CEO and founder Sam Bankman-Fried resigned when the exchange collapsed. In March he was sentenced to 25 years in prison for the massive fraud that occurred at FTX.
Bankman-Fried was convicted in November of fraud and conspiracy — a dramatic fall from a crest of success that included a Super Bowl advertisement, testimony before Congress and celebrity endorsements from stars like quarterback Tom Brady, basketball point guard Stephen Curry and comedian Larry David.
The company appointed as its new CEO John Ray III, a long-time bankruptcy litigator who is best known for having to clean up the mess made after the collapse of Enron.
“We are pleased to be in a position to propose a chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors,” Ray said in a prepared statement.
FTX, technically, remains a company but its future is unclear. In early 2023, Ray said that he had formed a task force to explore reviving FTX.com, the crypto exchange.
The sordid details of a company run amuck that emerged after its assets were seized would hamstring almost any business attempting a comeback, but there may also be different parameters for cryptocurrency exchanges.
The rival crypto exchange Binance briefly explored acquiring FTX before it collapsed in late 2022. Its founder and former CEO Changpeng Zhao, was sentenced last week to four months in prison for looking the other way as criminals used the platform to move money connected to child sex abuse, drug trafficking and terrorism.
Binance is still the largest crypto exchange in the world.
The bankruptcy court is set to hold a hearing on the dispersion of FTX assets on June 25.
Wall Street pointed higher early Wednesday as investors pore over more corporate earnings data ahead of an important inflation update later in the week.
Futures for the S&P 500 were up 0.2% before the bell and futures for the Dow Jones Industrial Average were virtually unchanged. Futures for the tech-heavy Nasdaq were up nearly 0.7%.
Tesla jumped 11.6% in off-hours trading, recovering some of its recent losses after the electric car maker said it would accelerate production of new, more affordable vehicles. Investors were looking for some sign that Tesla will take steps to stem its stock’s slide this year.
Boeing shares were boosted 3.1% even as the aircraft manufacturer said Wednesday that it lost $355 million on falling revenue in the first quarter. Boeing has faced increasing scrutiny over the safety of its planes and accusations of shoddy work from whistleblowers.
Boeing’s CEO said the company is in “a tough moment,” and its focus is on fixing its manufacturing issues, not the financial results.
Automaker Ford and Facebook owner Meta report their most recent quarterly financial results after the bell Wednesday.
In Europe at midday, Germany’s DAX was up 0.3% and the CAC 40 in Paris rose 0.4%. In London, the FTSE 100 rose 0.6%.
In Asian trading, Japan’s benchmark Nikkei 225 gained more than 900 points, or 2.4%, to close at 38,460.08.
Shares in computer chip company Renesas Electronics Corp. jumped 10.5%, while rival Tokyo Electronic surged 7.1%.
Investors are watching to see how Japan’s central bank and its Finance Ministry react to prolonged weakness in the yen, which has been trading at its lowest level in 34 years, at a policy meeting that begins Thursday.
The U.S. dollar rose to 154.99 Japanese yen on Wednesday from 154.82 yen late Tuesday. The euro fell to $1.0688 from $1.0699.
“Market participants will be closely monitoring updates for any indications of how the Bank of Japan might address foreign exchange pressures during this week’s policy meeting,” Anderson Alves of ActivTrades said in a commentary.
Shares in Greater China also rallied.
The Hang Seng in Hong Kong added 2.1% to 17,176.31, while the Hang Seng Tech Index gained 3.4%. Chinese artificial intelligence company Sensetime Group’s shares surged 31.2% after it released the latest version of its SenseNova generative AI model on Tuesday.
The Shanghai Composite index climbed 0.8% to 3,044.82.
Taiwan’s Taiex gained 2.7%.
In South Korea, the Kospi added 2% to 2,675.75, led by a 4% gain in heavyweight Samsung Electronics.
Australia’s S&P/ASX 200 index was unchanged at 7,683.00 following the release of a fifth consecutive quarter of decelerating inflation, with the consumer price index in the first quarter easing to 3.6% from previous 4.1%.
On Friday, the government releases its monthly consumer spending report, which contains a measure of inflation that’s closely watched by the Federal Reserve.
Top officials at the Fed warned last week they may need to keep interest rates high for a while in order to ensure inflation is heading down to their 2% target. That was a big letdown for financial markets, dousing hopes that had built after the U.S. central bank signaled earlier that three interest-rate cuts may come this year.
Lower rates had appeared to be on the horizon after inflation cooled sharply last year. But a string of reports this year showing inflation has remained hotter than expected has raised worries about stalled progress.
In energy markets, U.S. benchmark crude lost 35 cents to $83.01 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, gave up 25 cents to $87.14 per barrel.
On Tuesday, the S&P 500 climbed 1.2% to 5,070.55, pulling further out of the hole created by a six-day losing streak. The Dow Jones Industrial Average rose 0.7% to 38,503.69, and the Nasdaq composite jumped 1.6% to 15,696.64.
A Japanese 1,000 yen banknote sits on a pile of South Korean won banknotes for an arranged photograph at a Woori Bank Co. branch in Seoul, South Korea.
SeongJoon Cho | Bloomberg via Getty Images
Bank of America is bearish on a slew of Asian currencies and neutral at best on others, as the investment bank says it is the start of a “chaotic era.”
“We are not bullish on any currency in Asia,” Bank of America said in a recent report, with many currencies impacted by a delayed Federal Reserve easing cycle and sustained strength in the U.S. dollar.
BofA forecasts the Chinese yuan to trade at 7.35 against the dollar this quarter and weaken to 7.45 in the third and fourth quarters.
The bank expects yuan depreciation pressures to sustain into the second half of the year, due to: the delayed Fed easing, China’s disinflationary behavior aggravating yield gap with the U.S. and a weak financial account as a result of a deterioration in foreign direct investment.
The outlook for the Korean won “significantly turned” after the Fed pushed back on the timing of the rate cuts and Middle East geopolitical risks became a major headwind, said BofA.
“Year-to-date, we have seen impressive inflows into Korean equities, but these inflows are beginning to reverse as global equities are turning from the two aforementioned risk,” BofA’s economists wrote.
The South Korean won recently slipped to an 18-month low of 1,389.5 against the dollar. The Bank of Korea chief called the won volatility “excessive” and said the central bank would intervene if needed.
The won was last trading at 1,347.3 against the U.S. dollar. BofA’s economists said the won is currently overvalued compared with fair value of 1,417.
BofA also remains negative on the Taiwan dollar given strong equity outflows and life insurance companies’ additional unwinding of non-deliverable forward hedges. An NDF is a currency derivatives contract that establishes a settlement between the prevailing spot rate and a contracted rate.
The Taiwan dollar is currently trading at 32.6 per U.S. dollar.
The Vietnamese dong is trading at 25,450 per dollar, weakening almost 5% so far this year.
Compounding the impact of delayed Fed cuts are Vietnam’s political instability following the second presidential resignation in two years as well as difficulty in its property sector, said BofA. Those headwinds fuel domestic demand for the U.S. dollar and gold, the bank said.
“We revise our forecasts in anticipation of further modest VND depreciation pressure to 25,600 by end-2Q and ultimately USD/VND at 25,700 by year-end,” the note said.
The Thai baht similarly remains vulnerable to geopolitical tensions via higher oil prices and freight costs, BofA said. It revised its forecast for the currency to 37 against the greenback by the end of the year.
The investment bank did not mention the Japanese yen, which has hovered around 34-year lows against the U.S. dollar. The currency has struggled, slipping past 150, since the Bank of Japan raised rates in March.
AUSTIN — There is a sort of clubhouse for Austin’s bitcoin believers on the second floor of the Littlefield Building at the corner of Congress Avenue and Sixth Street. The hideaway is at the crossroads of two worlds — the majestic thoroughfare that leads to the Texas State Capitol and the iconic, albeit notorious, stretch of bars, restaurants, and live music that define the capital’s party vibes. It’s an apt metaphor for the space itself.
The Bitcoin Commons is, at once, many things.
By day, it functions as an open plan, fluorescent-lit co-working space for the more corporate-minded bitcoin operators, but at night, it moonlights as a safe space for underground meet-ups of the industry’s rogue actors. Periodically, it plays host to conferences that draw in a mix of attendees ranging from venture capitalists to armed preppers living entirely off the grid. And on some afternoons, once happy hour hits, the kitchen at the back is retrofit with a stowaway bar.
“We also fund developers, and we help them advance their projects,” said Parker Lewis, one of the stewards of the Commons, as well as the author of a new book on bitcoin called “Gradually, Then Suddenly.”
“We help advance bitcoin through education and actually developing the monetary network, the code base, and the applications,” said Lewis, who is widely considered to be one of Texas’ de facto bitcoin ambassadors.
Francisco Chavarria was born in Mexico City and spent time in Salt Lake City, but three years ago, he made the move to Austin to be a part of a community of like-minded thinkers. His company, Yopaki, which is a neobank for bitcoin focused on the Latin American market, just won first place in a hackathon put on at the Commons.
“If you talk to other builders in the competition, a lot happens here,” said Chavarria. “There definitely is a sense of, ‘I don’t need for others to lose for me to win.’ There really is a relationship and a collaboration for bitcoin to succeed.”
“Right now it feels like we’re all winning because of the price, but those of us who have been building in the bear market, we know,” Chavarria added.
Austin’s “Bitcoin Commons” hosts regular meetups and conferences for the city’s bitcoiners.
CNBC
Bear or bull market, bitcoiners have flocked to Austin because of a combination of pro-crypto policies, abundant, renewable energy, and an ever-growing network of some of the brightest developers and miners on the planet. And even in the price doldrums, they typically bring the same level of enthusiasm to the conversation — though bitcoin’s recent stretch of record-breaking price moves has gone a long way toward boosting morale.
In March, bitcoin hit multiple, fresh all-time highs, as trader enthusiasm for the digital asset sector soared. A lot of that price run-up has to do with the record flows into the newly-launched spot bitcoin exchange-traded funds in the U.S., led by the world’s largest asset manager Blackrock and its $15.5 billion iShares Bitcoin Trust, which have helped to solidify bitcoin’s place as an asset class that’s here to stay.
Collectively, these spot ETFs have brought in around $60 billion, and in some cases, they have been breaking records for ETF flows altogether.
“The biggest driver is certainly the ETF flows, which have surpassed the expectations of all but the most bullish pundits,” said Castle Island Venture’s Nic Carter of bitcoin’s record price moves this month. “And these blockbuster flows have materialized before the major wirehouses, asset managers, and RIAs have actually approved the ETF for their clients.”
Carter added that there is also new liquidity coming into bitcoin from Asian markets via two main pathways: bitcoin’s version of non-fungible tokens known as ordinals, as well as bitcoin-issued coins called BRC20 tokens.
In the last 20 years, Austin has matured into one of the country’s leading tech centers, a trend accelerated by the Covid pandemic, which saw industry leaders migrate en masse from California.
“Bitcoin was founded in 2009. A lot has happened post-financial crisis. Austin was already emerging as a tech center, and you know, enter bitcoin, and it just became the logical home,” said Lewis, who runs business development at Zaprite, a bitcoin-native financial services firm.
It helps that Texas is a libertarian-friendly state that actively supports free market policies. It has proven to be a big draw for a group of people who think of bitcoin as a way of life — that is, a monetary network that is decentralized, borderless, and doesn’t answer to central banks or governments.
Austin’s “Bitcoin Commons” draws in an eclectic mix of people, including venture capitalists, bitcoin miners, and coders.
CNBC
Many hardcore bitcoiners ironically embrace the term maximalist or maxi as a way to self describe. In Texas, though maxis exist along a professional spectrum from venture capitalists, to miners, coders, company executives, and generalist techies, the eclectic tribe have a few things in common. Many are family-oriented, patriotic carnivores with an aversion to the overreach of government and a strong belief in the right to bear arms, among multiple other personal, individual liberties.
Bitcoin’s eponymous Austin lair, which is adorned with the Texas state flag and bitcoin memorabilia, has adopted Chatham House rules for many of its events to protect the identities of those conversing within its walls. One such meetup is the monthly BitDevs (short for bitcoin developers) gathering, where bitcoin builders, investors, and the bitcoin curious are all welcomed, so long as no pictures or videos are taken.
At these meetings, topics run the gamut, from detailed discussions about code to concerns that the Microsoft-maintained GitHub may pose a greater existential threat to the bitcoin network since much of the development work and conversations among coders happen on that platform. At one such gathering, the moderator of the two-hour session asked the room who ran a bitcoin node. More than half of the people in attendance raised their hands.
After attending multiple Austin BitDev meetups over the last three years, a few common conversation themes have emerged, including the focus on identifying threat vectors to the network and brainstorming workarounds. Beyond software, there are also concerns over hardware vulnerabilities, given that the ASIC chip used in bitcoin mining rigs are manufactured out of China, a country which has proven hostile to the crypto sector in recent years.
The “Bitcoin Commons” functions as a sort of clubhouse for the city’s bitcoin believers. It puts on a mix of programming, including conferences and hackathons, as well as hosts a co-working space by day.
The Commons hosted a hackathon, BitDevs, and a one-day conference dubbed the Bitcoin Takeover on the sidelines of the annual South by Southwest tech festival, which put on virtually no crypto programming this year.
Across those multiple gatherings, there was a newfound interest in talking about the burgeoning ecosystem of projects building on top of bitcoin’s blockchain, which began to heat up with the introduction of ordinals in Jan. 2023 — bitcoin’s version of non-fungible tokens.
One underrated driver of bitcoin’s recent rally is new programming innovations that may allow it to reach technological parity with ethereum. These advancements involve beefing up the bitcoin ecosystem with tools like smart contracts, which are programmable pieces of code that help to eliminate middlemen like banks and lawyers from transactions. That makes it easier for developers to create products and applications for consumers.
BitVM, for example, has a promising plan to do just that. It is ultimately trying to bring smart contracts to the bitcoin network, which has helped spur this renaissance of interest in layer two technology — that is, the startups being built on top of bitcoin’s base chain.
“I’ve never seen deal pacing move this aggressively in the bitcoin space in my entire career,” Carter tells CNBC.
Indeed, the VC appetite for these layer two bitcoin projects has been picking up in the last few months.
PitchBook says that the fourth quarter of 2023 was the first time in almost two years that deal value in the crypto sector had increased, reaching $1.9 billion — up 2.5% from the previous quarter. While still well off the 2021 high of $31 billion, funds are building back interest, and trust, in the space.
Grant Gilliam spent 15 years working in private equity in New York before pivoting to run a bitcoin VC fund called Ten31. This investment platform, which is focused exclusively on bitcoin, has invested $125 million of equity in aggregate since launching five years ago. More than $100 million was deployed in the last two years during the bear market.
“We invest across the bitcoin ecosystem across every major theme,” Gilliam told CNBC. “Anything that is relevant to bitcoin infrastructure, we like to say the picks and shovels of companies building products and services for holders of bitcoin.”
Gilliam, who spent a few years commuting from New York to Austin every month for the BitDevs meetup, said that some of the layer two bitcoin investments are more hype than substance, but he’s still bullish overall on the deal space.
“There’s been a lot of L2 hype lately, mainly driven by the ordinals, and inscriptions, developments or innovations, if you want to call it that,” Gilliam said. “There’s a lot of activity in that right now, but we haven’t been as focused on that. It’s our firm view that the ordinals will prove to be a passing fad.”
Gilliam says that Ten31 is focused on basic building blocks of the ecosystem, such as companies that are providing financial services, which could be custody trading and lending, or projects that are working to scale the lightning network.
Lightning, with is the layer two payment technology meant to realize bitcoin’s original vision of being peer-to-peer cash continues to struggle with the issue of reaching scale. Developers tell CNBC that a lot of engineering work remains to close that gap.
The Boys Club put on its own Austin summit on the sidelines of SXSW with programming on the new internet, crypto, and digital culture.
“Number go up” is a big mantra among bitcoiners, but as the community evolves, so too does the thinking about the price of the coin.
“Price is really an output of many inputs of human beings, building tools to make bitcoin both more secure and a greater utility,” Lewis said. “Price is the best indicator of more people coming to the conclusion that bitcoin is money, and it’s a better store of value, so it is very relevant.”
Every four years, bitcoin undergoes a market making event known as the halving. It cuts the production of new bitcoin in half, and it has typically come before a major run-up in the price of bitcoin.
Miners from around the world flocked to Texas when China banned the practice in 2021, attracted by the abundant renewable energy and a grid that’s friendly to flexible buyers of power — both ideal conditions for miners.
In April, however, the profits for these bitcoin miners will be cut in half.
For some, it may prove an Armageddon-level event. Others have braced for impact by swapping out their fleet of machines for more efficient rigs. The price run-up in bitcoin has also helped to give some of these companies a buffer in their profit margins.
West Texas miner Jamie McAvity has 60 megawatts at his mining site. It runs on a part of the grid that is 90% powered by a mix of solar and wind power.
“If you’ve been in for more than one cycle, you have situated yourself in a place where you can resist the halving to the best of your ability,” McAvity told CNBC at Austin’s Bitcoin Commons.
McAvity, who previously worked for ten years as a trader on the floor of the New York Mercantile Exchange, added that ETF flows have helped to change the pricing dynamics for the world’s largest coin.
“The spot ETF inflows are so massive that reducing the available supply of newly mined bitcoins from 900 to 450, is probably going to be immaterial relative to that,” he said.
“But who knows, the ETFs could cool off for a while, and it’s hard for someone to credibly say that a reduction in supply is not going to change the market price equilibrium, because that’s a fundamental principle of market economics,” he added.
A ten minute walk west from the Bitcoin Commons is the Austin Proper Hotel, a five-star establishment where the lighting is intentionally dim to strike a certain mood. Here, the Boys Club, a popular and buzzy, female-led organization which self-describes as a “social collective bringing new voices to the new internet” put on its own crypto conference on the sidelines of South by Southwest.
The Boys Club caters to a more blockchain agnostic crowd, where the focus is less on exclusivity to one coin or chain — and more about borrowing the best features from across the ecosystem to solve problems in the real world.
CNBC caught up with Micha Benoliel at the one-day summit. Benoliel built Nodle, a decentralized wireless network that’s now getting into the business of using the blockchain to battle AI-powered deepfakes.
“Blockchain is the only way to make a record that is immutable, and is going to prove the time at which this photo has been taken, or video, and also to help you prove the location and other elements that are going to reinforce that proof, so it creates a real immutable proof of authenticity,” he said.
The Boys Club put on its own Austin summit on the sidelines of SXSW with programming on the new internet, crypto, and digital culture.
CNBC
The one-day popup event gathered together more of a web3 crowd to talk about everything from the latest trends in tokenization to the resurgence of on-chain meme culture.
Similar to other bull runs in the price of bitcoin, some altcoins have seen a meteoric rise alongside blue chip names in crypto, because they’re seen as a comparatively cheaper buy.
Dogecoin, a meme-coin that was started as a joke, now has a market cap of nearly $25 billion, placing it in the top ten most valuable cryptocurrencies on the planet. Boden, a coin named after President Joe Biden, saw a run-up of more than 800% in a six-hour window after Super Tuesday, and the newly popular DogWifHat is collectively worth more than $2 billion.
Typically, this is the bellwether of a peak bubble moment, but analysts say that despite frothy conditions, this bull run is different to past cycles.
The price of bitcoin is cyclical, and it sees price run-ups roughly every four years. Each time, the price floor is higher. What’s also a departure this time around is the fact that institutional money is here in a way that it hasn’t been during past bull runs.
Fundamentals in the crypto market are playing a big role, as well.
In a note from JPMorgan on Mar. 15, analysts credit ether, the world’s second-biggest crypto token by market cap, for being a significant driver of crypto’s recent gains, including Coinbase‘s stock price rise. Ether has rallied nearly 50% so far this year, recently breaching the $4,000 price level and outpacing bitcoin’s returns, before paring back some gains.
“While the focus of the cryptocurrency marketplace has been the net new money going into U.S. spot Bitcoin ETFs and the positive impact on Bitcoin token prices (here, the spot Bitcoin ETF and its ultimate launch in January has driven the cryptoecosystem over the past several months), we see impact of ETH appreciation also as particularly meaningful,” JPMorgan wrote.
Regulators in the U.S. remain a universal concern for the crypto sector, especially amid reports of the Securities and Exchange Commission probing crypto companies building on the ethereum network.
Still, many in the space, including coders and investors remain optimistic.
Ethereum, the blockchain that underpins ether, underwent a major upgrade on Mar. 13 dubbed Dencun. Developers told CNBC it was expected to slash transaction fees by up to 90%. That is game-changing not just for the end-users, but also for the coders building apps on top of ethereum.
Base, crypto exchange Coinbase’s self-built layer two network, is ethereum-based and allows developers to more easily build decentralized apps. Coinbase’s Base lead, Jesse Pollak, anticipates this will open the door to applications in both the gaming and decentralized social media arena now that it is no longer nearly as cost prohibitive to build these types of programs.
“The thing that is happening with Dencun is we’re going to create a whole new kind of storage on ethereum that’s purpose built for Layer 2s like Base,” Pollak told CNBC.
“That means that right now we pay a ton to ethereum, and we’re going to pay a lot less, which is going to lower the fees for everyone. Because ethereum is basically going to build a product purpose built for us,” continued Pollak.
Chris Dixon, crypto chief at venture firm a16z, echoed that sentiment, noting that part of their portfolio is focused on these startups.
“The core idea is that if you build a social network, or a game or a financial service, on top of the blockchain, it has all sorts of benefits where the money and control flow out to the users and the creators that access the network, as opposed to the companies that control it,” said Dixon. “In the same way that steel was a better way to build bridges and buildings than wood was in the Industrial Revolution, blockchains are a building material.”
