Categories
Internet

French police to investigate vandalism behind internet outage

PARIS, April 27 (Reuters) – The Paris prosecutor’s office said it has opened a probe into the causes of a major internet outage which affected France’s telecommunications network on Wednesday following reports of coordinated acts of vandalism.

The French Telecoms Federation said attacks of vandalism had impacted telecoms networks in several regions, including the Ile-de-France region around Paris, eastern France and the Auvergne-Rhone-Alpes and Bourgogne-France-Comte regions.

The investigation will be co-handled by France’s internal intelligence services and the national judicial police, the prosecutor’s office said, citing a potential threat to the fundamental interests of the nation.

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Earlier, Minister for Digital Affairs Cedric O said on Twitter that internet cables had been cut in the Ile-de-France region, which was affecting the landline and mobile network and that the ministry was working with operators to restore service.

A spokesperson for Altice’s French telecoms operator SFR said the group had been the target of acts of vandalism that affected the company’s broadband fiber optic network after 3 am local time (0100 GMT) on Wednesday.

The attacks concerned long-distance cables linking Paris with the cities of Strasbourg and Lyon, the spokesperson said.

These long distance cables link large hubs to the broadband network and the internet, potentially affecting direct customers as well as other operators that rent SFR’s network, such as Free, which also pointed to vandalism in a tweet.

SFR declined to provide further details on the location of the damaged underground cables. It also declined to say when full service would summarize or elaborate on the number of cities and customers potentially affected.

Another long distance fiber network connection, linking Paris to the city of Lille, was also damaged, an industry source said.

French rival Orange (ORAN.PA), which operates a substantial part of the fiber network in the country, said it was not affected by the attacks.

French media reported major internet outages in big cities like Paris, Lyon, Bordeaux, Reims and Grenoble, quoting officials saying that vandalism or sabotage was suspected.

Le Parisien newspaper reported that underground cables had been damaged in France’s Seine-et-Marne and Essone departments, adding that these cables were linking the hubs of Paris and Lyon.

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Reporting by Tassilo Hummel, Geert De Clercq and Mathieu Rosemain; editing by Tomasz Janowski, Elaine Hardcastle

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Categories
Markets

World stocks clamber off 18-month lows, but markets on recession watch

 

  • S&P futures up 1.13%, European stocks gain 0.96%
  • MSCI Asia ex-Japan +1.8%, Nikkei +2.64%
  • Worries over inflation, tightening policy remain
  • Dollar hovers near 20-year highs on safe-haven demand

LONDON/SHANGHAI, May 13 (Reuters) – World stocks rose from the previous day’s 18-month lows and the dollar pulled back from 20-year highs on Friday, though investors remained nervous about high inflation and the impact of rising interest rates.

Markets are becoming anxious about the possibility of recession, with the S&P getting close to a bear market on Thursday, at nearly 20% off its January all-time high.

In an interview late on Thursday, US Federal Reserve Chair Jerome Powell said the battle to control inflation would “include some pain.” Powell repeated his expectation of half-percentage-point interest rate rises at each of the Fed’s next two policy meetings, while pleading that “we’re prepared to do more.” read more

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The war in Ukraine has aggravated supply chain disruptions and inflationary pressures already in place after more than two years of the COVID-19 pandemic, but stocks enjoyed a bounce on Friday.

“There’s an awful lot of negative sentiment out there, we’re looking at a 40% chance of recession,” said Patrick Spencer, vice chairman of equities at Baird Investment Bank.

“A lot of fund managers have cut their equity allocations and raised cash, though we think this is a correction rather than a bear market.”

MSCI’s world equity index (.MIWD00000PUS) rose 0.32% after hitting its lowest since November 2020 on Thursday, though it was heading for a 4% fall on the week, its sixth straight week of losses.

S&P futures bounced 1.13% after the S&P index dropped 0.13% overnight, with the index also eyeing a sixth straight week of declines.

S&P 500 set for a sixth straight week of falls

European stocks (.STOXX) rallied 0.96% and Britain’s FTSE 100 (.FTSE) gained 1.17%.

The US dollar eased 0.22% to 104.54 against a basket of currencies, but remained close to 20-year highs due to safe haven demand.

Russia has bristled over Finland’s plan to apply for NATO membership, with Sweden potentially following suit.

Moscow called Finland’s announcement hostile and threatened retaliation, including unspecified “military-technical” measures. read more

The dollar rose 0.36% to 128.76 yen , while the euro gained 0.3% to $1.0408, recovering from Thursday’s five-year lows.

Cryptocurrency bitcoin also turned higher, cracking through $30,000 after the collapse of TerraUSD, a so-called stablecoin, drove it to a 16-month low of around $25,400 on Thursday. read more

“Some traders may see the sharp fall this month as an opportunity to buy the dip, but given the hugely volatile nature of the coins, the crypto house of cards could tumble further,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown .

The moves higher in equities were mirrored in US Treasuries, with the benchmark US 10-year yield edging up to 2.9221% from a close of 2.817% on Thursday.

The policy-sensitive 2-year yield was at 2.6006%, up from a close of 2.522%.

“Within the shape of the US Treasury curve we are not seeing any particularly fresh recession/slowdown signal, just the same consistent marked slowing earmarked for H2 2023,” Alan Ruskin, macro strategist at Deutsche Bank, said in a note.

German 10-year government bond yields edged up to 0.9250%.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was up almost 2% from Thursday’s 22-month closing low, trimming its losses for the week to less than 3%.

Australian shares (.AXJO) gained 1.93%, while Japan’s Nikkei stock index (.N225) jumped 2.64%.

In China, the blue-chip CSI300 index (.CSI300) was up 0.75% and Hong Kong’s Hang Seng (.HSI) rose 2.71%, encouraged by comments from Shangahi’s deputy mayor that the city may be able to start easing some tough COVID restrictions this month. read more

“We had some pretty big moves yesterday, and when you see those big moves it’s only natural to get some retracement, especially since it’s Friday heading into the weekend. There’s not really a new narrative that’s come through,” said Matt Simpson, senior market analyst at City Index.

Oil prices were higher against the backdrop of a pending European Union ban on Russian oil, but were still set for their first weekly loss in three weeks, hit by concerns about inflation and China’s lockdowns slowing global growth.

US crude rose 0.75% to $106.97 a barrel, and global benchmark Brent crude was up 1.05% at $108.58 per barrel.

Spot gold , which had been driven to a three-month low by the soaring dollar, was up 0.2% at $1,824.61 per ounce.

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Reporting by Andrew Galbraith; Editing by Simon Cameron-Moore, Lincoln Feast and Kim Coghill

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Categories
Artificial intelligence

D-Wave sets up latest quantum computer in California

A D-Wave 2X quantum computer is pictured during a media tour of the Quantum Artificial Intelligence Laboratory (QuAIL) at NASA Ames Research Center in Mountain View, California, December 8, 2015. REUTERS/Stephen Lam

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May 12 (Reuters) – Vancouver-based quantum computing firm D-Wave Systems Inc said on Thursday it has deployed its latest quantum computer to the University of Southern California.

D-Wave’s most powerful machine, called the Advantage system, was launched in September, 2020 and has been operational in Canada and Germany, said Murray Thom, D-Wave’s vice president of product management.

US researchers and companies have been able to access the machine online, but the deployment will put a machine physically in the US and comes as Washington boosts its support for quantum technology, he said.

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“People are paying very close attention to where things are located and who’s working on what,” said Murray.

The Advantage system has over 5000 qubits, or quantum bits, which are an indication of the power of the quantum computer.

Quantum computers are expected one day to be able to operate millions of times faster than today’s advanced supercomputers.

D-Wave, founded in 1999, said in February that it will go public by merging with blank-check company DPCM Capital (XPOA.N) in a deal that values ​​the combined company at nearly $1.6 billion. read more

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Reporting By Jane Lanhee Lee, Oakland, Calif.; editing by Richard Pullin

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Categories
Markets

Nomura offers its first bitcoin derivatives, just as crypto markets tumble

Nomura Securities trading floor is pictured at the company’s Otemachi Head Office in Tokyo, Japan, November 18, 2016. REUTERS/Toru Hanai

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HONG KONG, May 13 (Reuters) – Nomura (8604.T) has begun offering bitcoin over-the-counter derivatives to clients, it said Friday, the latest move by a traditional financial institution into the cryptocurrency industry, even as markets are in tumoil.

The trades, executed on the CME by crypto asset trading firm Cumberland DRW this week, were the Japanese investment bank’s first digital asset trades, said Nomura’s head of markets, Asia ex-Japan, Rig Karkhanis in a statement.

“Working with institutional-grade counterparties will allow us to scale into the increasing demand from our clients,” he said.

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Many global investment banks have been looking to offer clients more crypto related services, responding they say to demand from institutional investors and private clients for access to what had been a fast growing sector.

However, crypto markets have tumbled this week as a meltdown in TerraUSD, one of the world’s largest stablecoins, sent digital tokens, already swept up in a sell-off of riskier assets, into meltdown. read more

Bitcoin hit a 16-month low of around $25,400 on Thursday.

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Reporting by Alun John; Editing by Kim Coghill

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Categories
Business

Bitcoin eyes record losing streak as ‘stablecoin’ collapse crushes crypto

Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 14, 2018. REUTERS/Dado Ruvic/Illustration

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SINGAPORE, May 13 (Reuters) – Cryptocurrencies nursed large losses on Friday, with bitcoin pinned below $30,000 and set for a record losing streak as the collapse of TerraUSD, a so-called stablecoin, rippled through markets.

Crypto assets have also been swept up in broad selling of risky investments on worries about high inflation and rising interest rates. Sentiment is particularly fragile, however, as tokens supposed to be pegged to the dollar have faltered.

Bitcoin, the largest cryptocurrency by total market value, attempted a bounce early in the Asia session and rose 2% to $29,500, something of a recovery from a 16-month low of around $25,400 reached on Thursday.

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It remains a long way below week-ago levels of around $40,000 and, unless there is a rebound in weekend trade, is headed for a record seventh consecutive weekly loss.

“I don’t think the worst is over,” said Scottie Siu, investment director of Axion Global Asset Management, a Hong Kong based firm that runs a crypto index fund.

“I think there is more downside in the coming days. I think what we need to see is the open interest collapse a lot more, so the speculators are really out of it, and that’s when I think the market will stabilize.”

TerraUSD (USDT) broke its 1:1 peg to the dollar this week, as its mechanism for remaining stable, using another digital token, failed under selling pressure. It last traded below 10 cents. read more

Tether, the biggest stablecoin and one whose developers say is backed by dollar assets, has also come under pressure and fell to 95 cents on Thursday, according to CoinMarketCap data. read more

UNSTABLE

Selling has roughly halved the global market value of cryptocurrencies since November, but the drawdown has turned to panic in recent sessions with the squeeze on stablecoins.

These are tokens pegged to the value of traditional assets, often the US dollar, and are the main medium for moving money between cryptocurrencies or to convert balances to fiat cash.

“Over half of all bitcoin and ether traded on exchanges are versus a stablecoin, with USDT or Tether taking the largest share,” analysts at Morgan Stanley said in a research note.

“For these types of stablecoins, the market needs to trust that the issuer holds sufficient liquid assets they would be able to sell in times of market stress.”

Tether has recovered to parity on the dollar and its operating company says it has the necessary assets in Treasuries, cash, corporate bonds and other money-market products.

But it is likely to face further tests if traders keep selling, and analysts are concerned that stress could spill over into money markets if pressure forces more and more liquidation.

Ether , the second-largest cryptocurrency by market capitalization, steadied near $2,000 on Friday after a drop as low as $1,700 on Thursday. Bitcoin and ether are about 60% below record peaks reached in November.

Crypto-related stocks have also copped a pounding, with shares in broker Coinbase (COIN.O) steadying overnight but still down by half in little more than a week.

In Asia, Hong Kong-listed Huobi Technology (1611.HK) and BC Technology Group (0863.HK), which operate trading platforms and other crypto services, eyed weekly drops of more than 15%.

Amid the turmoil, Nomura (8604.T) on Friday said it had begun offering bitcoin derivatives to clients, the latest move by a traditional financial institution into the asset class.

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Reporting by Tom Westbrook and Alun John.

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Categories
Markets

Explainer: What are stablecoins, the asset rocking the cryptocurrency market?

Representations of cryptocurrencies including Bitcoin, Dash, Ethereum, Ripple and Litecoin are seen in this illustration picture taken June 2, 2021. REUTERS/Florence Lo/Illustration

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LONDON, May 12 (Reuters) – Most cryptocurrencies have a major problem with price volatility, but one sub-category of coins is designed to maintain a constant value: stablecoins.

As cryptocurrency prices plummeted this week, with bitcoin losing around a third of its value in just eight days, stablecoins were supposed to be isolated from the chaos.

But an unexpected collapse in the fourth-largest stablecoin TerraUSD, which broke from its 1:1 dollar peg, has brought the asset class under renewed attention. read more

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Here’s what you need to know:

WHAT ARE STABLECOINS?

Stablecoins are cryptocurrencies designed to be protected from the wild volatility that makes it difficult to use digital assets for payments or as a store of value.

They attempt to maintain a constant exchange rate with fiat currencies, for example through a 1:1 US dollar peg.

HOW IMPORTANT ARE THEY?

Stablecoins have a market cap of around $170 billion, making them a relatively small part of the overall cryptocurrency market, which is currently worth around $1.2 trillion, according to CoinMarketCap data.

But they have emerged in popularity in recent years. The largest stablecoin, Tether, has a market cap of around $80 billion, having emerged from just $4.1 billion at the start of 2020.

The No.2 stablecoin, USD Coin, has a market cap of $49 billion, according to CoinMarketCap data.

While data on the specific uses of stablecoins is hard to come by, they play a crucial role for cryptocurrency traders, allowing them to hedge against spikes in bitcoin’s price or to store idle cash without transferring it back into fiat currency. read more

In its biannual financial stability report on Tuesday, the US Federal Reserve warned stablecoins are increasingly used to facilitate leveraged trading in other cryptocurrencies.

From 2018 onwards, stablecoins have increasingly been used in international trade and as a way to avoid capital controls, says Joseph Edwards, head of financial strategy at crypto firm Solrise. The stablecoin Tether in particular is used for trade in and around China and South America, he said.

HOW DO THEY WORK?

There are two main types of stablecoin: those which are backed by reserves comprising assets, such as fiat currency, bonds, commercial paper, or even other crypto tokens, and those which are algorithmic, or “decentralized”.

Major stablecoins such as Tether, USD Coin and Binance USD are reserve-backed: they say that they hold enough dollar-denominated assets to maintain an exchange rate of 1:1.

The companies say that one of their stablecoins can always be exchanged for one dollar.

Asset-backed stablecoins have come under pressure in recent years to be transparent about what is in their reserves and whether they have sufficient dollars to back up all the digital coins in circulation. read more

Meanwhile TerraUSD is an algorithmic stablecoin. This means it does not have reservations. Instead, its value was supposed to be maintained by a complex mechanism involving swapping TerraUSD coins with a free-floating cryptocurrency called Luna to control supply.

WHAT CAN GO WRONG?

TerraUSD’s stability mechanism stopped working this week when investors lost faith in Luna, amid a broader downturn in cryptocurrency markets. TerraUSD’s price crashed to as low as 30 cents.

In theory, asset-backed stablecoins should hold firm despite this.

But Tether also broke away from its dollar peg for the first time since 2020 on Thursday, dropping to as low as 95 cents.

Tether sought to reassure investors, saying on its website that holders were still able to redeem their tokens at the 1:1 rate.

WHAT DO REGULATORS SAY?

While regulators globally are trying to establish rules for the cryptocurrency market, some have highlighted stablecoins as a particular risk to financial stability – for example, if too many people tried to cash out their stablecoins at once.

In its stability report, the Fed warned that stablecoins are vulnerable to investor runs because they are backed by assets that can lose value or become illiquid in times of market stress. A run on the stablecoin could therefore spill over into the traditional financial system by creating stress on these underlying assets, it said.

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Reporting by Elizabeth Howcroft; Editing by Michelle Price and Lisa Shumaker

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Categories
Technology

Google unveils new 10-shade skin tone scale to test AI for bias

A Google employee speaks at the company’s annual I/O developer conference at the Shoreline Amphitheater in Mountain View, California, US, May 11, 2022. Google/Jana Asenbrennerova/Handout via REUTERS

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OAKLAND, Calif., May 11 (Reuters) – Alphabet Inc’s (GOOGL.O) Google on Wednesday unveiled a palette of 10 skin tones that it described as a step forward in making gadgets and apps that better serve people of color.

The company said its new Monk Skin Tone Scale replaces a flawed standard of six colors known as the Fitzpatrick Skin Type, which had become popular in the tech industry to assess whether smartwatch heart-rate sensors, artificial intelligence systems including facial recognition and other offerings show color bias.

Tech researchers acknowledged that Fitzpatrick underrepresented people with darker skin. Reuters exclusively reported last year that Google was developing an alternative. read more

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The company partnered with Harvard University sociologist Ellis Monk, who studies colorism and had felt dehumanized by cameras that failed to detect his face and reflect his skin tone.

Monk said Fitzpatrick is great for classifying differences among lighter skin. But most people are darker, so he wanted a scale that “does better job for the majority of the world,” he said.

Monk through Photoshop and other digital art tools curated 10 tones – a manageable number for people who help train and assess AI systems. He and Google surveyed around 3,000 people across the United States and found that a significant number said a 10-point scale matched their skin as well as a 40-shade palette did.

Tulsee Doshi, head of product for Google’s responsible AI team, called the Monk scale “a good balance between being representative and being tractable.”

Google is already applying it. Beauty-related Google Images searches such as “bridal makeup looks” now allow filtering results based on Monk. Image searches such as “cute babies” now show photos with varying skin tones.

The Monk scale also is being deployed to ensure a range of people are satisfied with filter options in Google Photos and that the company’s face-matching software is not biased.

Still, Doshi said problems could be seen into products if companies do not have enough data on each of the tones, or if the people or tools used to classify others’ skin are biased by lighting differences or personal perceptions.

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Reporting by Paresh Dave; Editing by David Gregorio

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Categories
Business

Siemens to leave Russia due to Ukraine war, take hefty charge

  • Siemens to leave Russia after 170 years
  • Russia makes up around 1% of total revenues
  • Shares fall after earnings miss
  • CEO condemns the war in Ukraine

ZURICH, May 12 (Reuters) – Siemens (SIEGn.DE) will quit the Russian market due to the war in Ukraine, it said on Thursday, taking a 600 million euro ($630 million) hit to its business during the second quarter, with more costs to eat.

The German industrial and technology group became the latest multinational to announce losses linked to its decision to leave Russia following the Feb. 24 invasion, which Moscow calls a “special military operation”.

Several companies, from brewers Anheuser-Busch InBev (ABI.BR) and Carlsberg to sportswear maker Adidas (ADSGn.DE), carmaker Renault and several banks have been counting the cost of suspending operations in or withdrawing from Russia. read more

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Siemens Chief Executive Roland Busch described the conflict as a “turning point in history.”

“We, as a company, have clearly and strongly condemned this war,” Busch told reporters.

“We’re all moved by the war as human beings. And financial figures must take a back seat in the face of the tragedy. Nevertheless, like many other companies, we’re feeling the impact on our business.”

During the second quarter Siemens incurred 600 million euros in impairment and other charges mostly recorded in its train-making mobility business subsequent to sanctions on Russia, Siemens said.

Busch said further impacts were to be expected, mainly from non-cash charges related to the winding-down of legal entities, revaluation of financial assets and restructuring costs.

“From today’s perspective, we foresee further potential risks for net income in the low- to mid-triple-digit million range, although we can’t define an exact timeframe,” he added.

Siemens shares dropped 5% in early trading as the company missed analysts’ expectations for second-quarter profit.

The Munich company employs 3,000 people in Russia, where it has been active for 170 years. It first went to Russia in 1851 to deliver devices for the telegraph line between Moscow and St Petersburg.

The country now contributes about 1% of Siemens’ annual revenue, with most of the present day business concerned with maintenance and service work on high-speed trains.

Its sites in Moscow and St Petersburg are now being ramped down, Busch said.

The costs weighed on Siemens’ second quarter earnings, with net income halved to 1.21 billion euros ($1.27 billion), missing analysts’ forecasts of 1.73 billion.

The company posted industrial profit of 1.78 billion euros, down 13% from a year earlier and also missing forecasts.

But demand stayed robust, with orders 22% higher on a comparable basis and revenue 7% higher.

As a result it confirmed its full-year outlook, with comparable revenue growth of 6% to 8% for the full year, with a downturn in mobility expected to be compensated by faster growth in factory automation and digital buildings.

JP Morgan analyst Andreas Willi described the results as “mixed with strong orders, industry leading growth in automation and strong cash conversion.”

($1=0.9508 euros)

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Reporting by John Revill; Editing by Kim Coghill and Clarence Fernandez

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Categories
Economy

Explainer: Does the cryptocurrency crash pose a threat to the financial system?

Representations of virtual cryptocurrencies are seen in this illustration taken November 28, 2021. REUTERS/Dado Ruvic/Illustration/Files

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WASHINGTON, May 11 (Reuters) – On Tuesday, bitcoin fell briefly below $30,000 for the first time in 10 months, while cryptocurrencies overall have lost nearly $800 billion in market value in the past month, according to data site CoinMarketCap, as investors fret about tightening monetary policy.

Compared with the Fed’s last tightening cycle which began in 2016 crypto is a much bigger market, raising concerns about its interconnectivity with the rest of the financial system.

HOW BIG IS THE CRYPTOCURRENCY MARKET?

In November, the most popular cryptocurrency, bitcoin, hit an all-time high of more than $68,000, pushing the value of the crypto market to $3 trillion, according to CoinGecko. That figure was $1.51 trillion on Wednesday.

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Bitcoin accounts for nearly $600 billion of that value, followed by ethereum, with a $285 billion market cap.

Although cryptocurrencies have enjoyed explosive growth, the market is still relatively small.

The US equity markets, for example, are worth $49 trillion while the Securities Industry and Financial Markets Association has pegged the outstanding value of US fixed income markets at $52.9 trillion as of the end of 2021.

WHO OWNS AND TRADES CRYPTOCURRENCIES?

Cryptocurrency started out as a retail phenomenon, but institutional interest from exchanges, companies, banks, hedge funds and mutual funds is growing fast.

While data on the proportion of retail versus institutional investors in the crypto market is hard to come by, Coinbase, the world’s largest cryptocurrency exchange, said institutional and retail investors each accounted for about 50% of the assets on its platform in the fourth quarter.

Its institutional clients traded $1.14 trillion in crypto in 2021, up from just $120 billion in 2020, Coinbase said.

Most of the bitcoin and ethereum in circulation is held by a select few. An October report from the National Bureau of Economic Research (NBER) found that 10,000 bitcoin investors, both individuals and entities, control about one-third of the bitcoin market, and 1,000 investors own approximately 3 million bitcoin tokens.

Approximately 14% of Americans were invested in digital assets as of 2021, according to University of Chicago research.

COULD A CRYPTO CRASH HURT THE FINANCIAL SYSTEM?

While the overall crypto market is relatively small, the US Federal Reserve, Treasury Department and the international Financial Stability Board have flagged stablecoins – digital tokens pegged to the value of traditional assets – as a potential threat to financial stability.

Stablecoins are mostly used to facilitate trading in other digital assets. They are backed by assets that can lose value or become illiquid in times of market stress, while the rules and disclosures surrounding those assets and investors’ redemption rights are murky.

That could make stablecoins susceptible to a loss of investor confidence, particularly in times of market stress, regulators have said. read more

That happened on Monday, when TerraUSD, a major stablecoin, broke its 1:1 peg to the dollar and fell as low as $0.67, according to CoinGecko. That move partly contributed to bitcoin’s fall. read more

Although TerraUSD maintains its tie to the dollar through an algorithm, investor runs on stablecoins that maintain reserves in assets like cash or commercial paper could spill over into the traditional financial system, causing stress in those underlying asset classes, say regulators. read more

With more companies’ fortunes tied to the performance of crypto assets and traditional financial institutions dabbling more in the asset class, other risks are emerging, say regulators. In March, for example, the Acting Comptroller of the Currency warned that banks could be tripped up by crypto derivatives and unhedged crypto exposures, given they are working with little historical price data.

Still, regulators overall are divided on the size of the threat a crypto crash poses to the financial system and broader economy.

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Reporting by Hannah Lang in Washington; Editing by Michelle Price and Matthew Lewis

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Business

Stocks in a tailspin, dollar soars as hard landing fears grow

A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai, India, February 1, 2020. REUTERS/Francis Mascarenhas

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  • World stocks drop to 1-1/2 yr low, down almost 20% YTD
  • Europe opens down 2% US equity futures struggle
  • Dollar hits 2yr highs on AUD, NZD
  • Bitcoin tumbling, hits new 16-month low
  • Copper buckles to lowest since October

LONDON, May 12 (Reuters) – Shares sank to a 1-1/2 year low on Thursday and the dollar hit its highest in two decades, as fears grew that fast-rising inflation will drive a sharp rise in interest rates that brings the global economy to a standstill.

Those nerves and the still-escalating war in Ukraine took Europe’s main markets down more than 2% in early trade and left MSCI’s top index of world shares (.MIWD00000PUS) at its lowest since late 2020 and down nearly 20% for the year.

The global growth-sensitive Australian and New Zealand dollars fell about 0.8% to almost two-year lows. The Chinese yuan slid to a 19-month trough while the dollar powered to its highest level since late 2002.

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Nearly all the main volatility gauges were signaling danger. Bitcoin was caught in the fire-sale of risky crypto assets as it fell another 8% to $26,570, having been near $40,000 just a week ago and almost $70,000 just last November.

“We have had big moves,” UBS’s UK Chief Investment Officer Caroline Simmons, said referring as well to bond markets and economic expectations. “And when the market falls it does tend to fall quite fast.”

Data on Wednesday had shown US inflation running persistently hot. Headline consumer prices rose 8.3% in April year-on-year, fractionally slower than the 8.5% pace of March, but still above economists’ forecasts for 8.1%. read more

US markets had whipsawed after the news, closing sharply lower, and futures prices were pointing to another round of 0.2%-0.7% falls for the S&P 500, Nasdaq and Dow Jones Industrial later.

“We’re now very much embedded with at least two further (US) hikes of 50 basis points on the agenda,” said Damian Rooney, director of institutional sales at Argonaut in Perth.

“I think we were probably delusional six months ago with the rise of US equities on hopes and prayers and the madness of the meme stocks,” he added.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 2.3% to a 22-month low overnight. Japan’s Nikkei (.N225) fell 1.8%.

Treasuries were bid in both Europe and Asia, especially at the long end, flattening the yield curve as investors braced for near-term hikes to hurt long-run growth – an outcome that would most likely slow or even reverse rate hikes.

The benchmark 10-year Treasury yield had dropped in the US and fell a further 7 bps to 2.8569% on Thursday. The gap between the highly rate-rise sensitive two-year yields and 10-year ones narrowed 4.2 bps .

In Europe, Germany’s 10-year yield, the benchmark for the bloc, fell as much as 12 bps to 0.875%, its lowest in nearly two weeks.

“I think a lot of it is catch up from what happened yesterday, and also there’s still a lot of negative sentiment in the US Treasury curve,” said Lyn Graham-Taylor, senior rates strategist at Rabobank.

SELL IN MAY

The rates outlook is driving up the US dollar and taking the heaviest toll on riskier assets that shot up through two years of stimulus and low-rate lending.

The Nasdaq (.IXIC) is down nearly 8% in May so far and more than 25% this year. Hong Kong’s Hang Seng Tech index (.HSTECH) slid 1.5% on Thursday and is off more than 30% this year.

Cryptocurrency markets are also melting down, with the collapse of the so-called TerraUSD stablecoin highlighting the turmoil as well as the selling in bitcoin and next-biggest-crypto, ether. read more

A weakening growth picture outside the United States is battering investor confidence, too, as war in Ukraine threatens an energy crisis in Europe and lengthening COVID-19 lockdowns in China throw another spanner into supply chain chaos.

Nomura estimated this week that 41 Chinese cities are in full or partial lockdowns, making up 30% of the country’s GDP.

Heavyweight property developer Sunac (1918.HK) said it missed a bond interest payment and will miss more as China’s real estate sector remains in the grip of a credit crunch. read more

The yuan fell to a 19-month low of 6.7631 and has dropped almost 6% in under a month.

The Australian dollar fell 0.8% to a near two-year low of $0.6879. The kiwi slid by a similar margin to $0.6240, though the euro and yen held steady to keep the dollar index just shy of a two-decade peak.

Sterling was at a two-year low of just under $1.22 as well as economic data there caused worries and concerns grew that Britain’s Brexit deal with the EU was in danger of unraveling again due to the same old problem of Northern Ireland’s border. read more

In commodity trade, oil wound back a bit of Wednesday’s surge on growth worries.

Brent crude futures fell 2.3% to $104.93 a barrel, while highly growth-sensitive metals copper and tin slumped over 3.5% and 9% respectively. That marked copper’s lowest level since October.

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Additional reporting by Tom Westbrook in Singapore; Editing by Kim Coghill

Our Standards: The Thomson Reuters Trust Principles.

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