Jack Dorsey has lost over $500M as his company, Block, was preyed on by short sellers resulting in the collapse of its stock shares. The short seller, Hindenburg Research, accused his platform of being involved in money laundering and skirting banking laws.
Jack Dorsey gets a rough day as Block gets preyed on by short sellers
The report from Hindenburg Research has made the market go wild, leading to Jack Dorsey’s net-worth slumping 11% in a day. This fall in Dorsey’s net worth came from the sell-off of Square shares, a subsidiary of Block.
Block is the parent company of Square and Cash App. Square has been trading publicly since listing on New York Stock Exchange in 2015. It had been operating smoothly for all that long until it became the target of Hindenburg Research which saw its shares lose value by 15% during the close of Thursday.
NEW FROM US:
Block—How Inflated User Metrics and "Frictionless" Fraud Facilitation Enabled Insiders To Cash Out Over $1 Billionhttps://t.co/pScGE5QMnX$SQ
Square is one of many companies that short-seller Hindenburg Research has targeted. The short seller has followed other big names like Indian Billionaire Gautam Adani and hydrogen-powered car maker Nikola.
Block to use litigation against Hindenburg Research
On Thursday, Dorsey’s Block said it was preparing to take legal action against Hindenburg Research. The company said that reports against it were misleading and false. It added that it would work with the Securities and Exchange Commission to prove its innocence legally.
Conversely, the short seller said that it had been conducting deep investigations for the past two years and discovered that Block artificially inflated the number of its registered customers to facilitate shady deals. It said it had conducted dozens of interviews with former employees, partners, and industry experts, which helped it conclude that Block was operating against US banking laws.
However, till now, Block has not taken any legal action against Hindenburg research. Keep watching Fintech Express for updates on this and other fintech-related stories.
Bank of England Governor Andrew Bailey has asked businesses to stop hiking commodity prices to calm the country’s economic crisis. He said that further price hikes would risk higher bank rates.
Governor Andrew Bailey talks about England’s inflation crisis
The Bank of England has been hiking its rates due to the high inflation affecting the country’s fiat. Bailey made these comments in his speech when announcing that the bank was raising the rates by 0.25 basis points to 4.25, a 14-year record high.
Bailey explained that the country’s inflation is not in a good place, and the bank may need to do more if the inflation doesn’t start cooling too by this summer. His warning comes when the country’s inflation is shown to have risen to 10.4% in February from 10.1% in January. Additionally, the bank aims to bring it down to only 2%.
In his speech, Bailey said:
“I would say to people who are setting prices: please understand if we get inflation embedded, interest rates will have to go up further.”
He added, “When companies set prices, I understand they must reflect the costs they face. But I would say, please, that when we are setting prices in the economy and people are looking forward, we expect inflation to come down sharply this year, and I would just say, please bear that in mind.”
Financial crisis spreads globally
Elsewhere, most countries are bracing hard against bank collapses and ruthless inflation rates. Countries like Argentina, Turkey, Sudan, Venezuela, and Lebanon have rates over 50%.
Additionally, only Japan has an inflation rate of below 5% among G7 countries, which shows how serious the matter is. As a result, high standards of living and a more nervous stock market are being experienced, with global leaders trying to calm the situation by claiming that the finance system is still intact.
However, this is not a sentiment everyone shares, which is evident with the continuous sell-off seen globally.
Deutsche Bank shares have retreated for a third day, losing over a fifth of their value in a month. The share prices fell by over 9% in early trade markets on March 24, 2023.
Germany’s Deutsche Bank in trouble?-Shares plummets by 9%
Germany’s Deutsche Bank seems to be the latest bank engulfed by the ongoing banking meltdown as its shares are receding heavily. The bank’s shares fell by over 9% on Friday following concerns regarding its stability.
Its shares have fallen consistently over the past three days, shedding over a fifth of their value. The reason behind the investors’ cash out of their shares is the bank’s Credit default swaps (insurance for the company’s bondholders against its default) which leaped to 173 basis points on March 23, 2023 night from 142 basis points noted in the previous day.
Such a big step to the negative side must have spurred the bank’s investors, who are already nervous following the meltdown of major banks like Silvergate, Silicon Valley Bank, and Credit Suisse. As such, investors dumped the bank’s shares and its AT1 bonds.
Banks continue seeing massive stock declines
The current global financial crisis has been aggressively exposing weak links in the sector. It was first noted in the sell-off of unregulated assets like crypto but has shown that it’s even prone in the regulated pillars of the economy, banks.
It started with the collapse of the Silicon Valley Bank in Mid-March 2023. The FDIC took control of the bank and bailed customers out. The fall of this US regional bank shook the crypto and stock markets heavily, causing the de-pegging of Circle’s USDC, which was confirmed to have its reserves in the bank.
As a reflex action, Banks’ investors globally started looking into the management of their investments only to notice that many others were having the same balance sheet issues as SVB. Since then, banks have been seeing massive sell-offs, and there doesn’t seem to be an end. Keep watching Fintech Express for updates on the story.
All economies worldwide, including the wealthiest ones like the U.K., US, Germany, Australia, and Spain, are being afflicted by a spiking level of inflation. For instance, the US suffered the highest increase of 9.1 percent in consumer prices in 2022. Germany suffered an annual inflation increase of 7.5 percent, while the U.K. suffered an increase of 8.2 percent in the same year.
Why is inflation spiking?
Covid-19 is among the global issues tied to the surge in inflation. Since 2020, the supply chain systems have experienced disruptions across transportation by ships, flights, trains, and trucks, resulting in a strain on the supply chain. Consequently, the cost of shipping goods has risen sharply. Since many manufacturers rely on a just-in-time mode of production, they have not been able to overcome the shortcomings of the transportation snafus. Thus, shortages occur, and consequential surge in prices.
The pandemic also left lasting effects on the labour markets when many businesses had to close or fire many employees. Even after the restrictions were relaxed, these businesses could not hire their employees back. This led to labour shortages that needed higher capital to acquire and maintain.
As though the pandemic was not enough, the issue of inflation was compounded by Russia’s war on Ukraine. The war began in February 24 and interfered with the supply of grains and fuel globally. Some countries fought against Russian imports because of their involvement in the war, and in retaliation, Russia decided to halt its oil shipment.
This has resulted in the disruption of the market globally. The conflict between the two countries has increased uin food prices. Ukraine is among the largest food exporters due to its possession of fertile soils. However, Russia destroyed Ukrainian crops and undermined the country’s ability to export foodstuffs. This has led to a worldwide increase of agricultural commodities prices.
Top tips for surviving when inflation spikes
The spiking of inflation can cause strains on finances among many people, and there is a need to adopt strategies that will help to align with the prices. Here are some of the strategies to adopt:
1. Avoid taking debts
Although banks decided to maintain low-interest rates during the pandemic, new debts became a liability that needed to be serviced monthly. It reduces people’s financial flexibility because it adds extra to the budget. If taking loans is investable, at least consider shopping around for low-rate or zero percent balance-transfer cards. This will reduce the burden of the repayment and the extra interest rate.
2.Start paying more attention to sales
Inflation time is the time to become a bargain hunter. Paying more attention to sales will guide you where to whop what and when. Some people have resorted in taking advantage of price-matching policies by shopping essentials in bulk and enjoying the discounts that come with it. Others have switched to cheaper brands, which has helped them save a few coins that help them hedge against inflation.
3. Stay within a budget
Inflation makes it difficult for people to stay within a budget because the prices of commodities have gone high and the income is not increasing. It is important to reassess your spending habits and adopt more conservative ones.
This is the time to forego family vacations, changing the car out of luxury, gym subscription, dining out, and other things that can be put on hold. It is the time to check the things that you can temporarily do without to ensure that essentials such as housing, food, transportation and utilities are covered.
4. Save strategically
Some saving strategies such as high-interest savings account (HISA) are subject to earning less interest during inflation because of their variable rates. A smart way of saving during such a time is using methods with a constant rate of earned interests such as the Guaranteed Investment Certificate to ensure that even when the inflation is high, your savings are accruing interest at a constant rate.
5. Hunt for remote part-time positions
During inflation, as many companies are firing their employees, remote positions are their alternative labour markets as they are devoid of the costs that come with running a typical office.
A remote position will also be a smart way to reduce transport costs as one will work from home. It is also a way of earning extra income while still formerly employed to help curb the margin created by the hiked prices of commodities.
Blockchain technology has been a phenomenal sensation in the fintech industry over the past decade following the launch of bitcoin. Bitcoin ushered in an era of digital money and changed how money functions for good. Here is how blockchain technology can be used to improve the finance sector.
Increased transparency: One of the most significant benefits of blockchain technology is that it enables increased transaction transparency. This is because all transactions are recorded in a public ledger accessible to all interested parties. This increased transparency can help increase the credibility and trust of fiscal deals, thereby reducing the liability of fraudulent activities.
Advanced effectiveness: Another crucial benefit of blockchain technology in finance is the improved effectiveness of processes. Transactions can be reused briskly and with lower bureaucracy than traditional financial systems. As such, this technology can help financial institutions save time, enabling them to offer more competitive services to their customers.
Decentralized Operations: Blockchain technology operates on a decentralized system, meaning no central authority controls it. This makes the system more resistant to malicious attacks and reduces the threat of time-out caused by system failures.
Better Data Management: With blockchain technology, financial institutions can store, manage, and track their data more effectively. This can help ease the delicacy and trustability of data and ensure that it’s fluently accessible when demanded.
Increased Security: Blockchain technology uses advanced encryption to secure data, making it more difficult for hackers to steal sensitive information. This increased security can help prevent fraud and other malicious conditioning, giving financial institutions and users peace of mind.
Further Accessible Services: Blockchain technology can make financial services more accessible to a broader range of people. For illustration, people who don’t have access to traditional banking services can use blockchain-grounded fiscal services to store and transfer their finances securely.
Enhanced Compliance: This technology can help ensure financial institutions behave fluently with nonsupervisory conditions. This is because all transactions are recorded in a public tally, making tracking and covering them easier.
Reduced Costs: By reducing the need for interposers, blockchain technology can help financial institutions save on its expenditure. This can help reduce the cost of services for clients, making them more affordable and accessible.
Increased Competition: The use of blockchain technology can increase competition in the financial sector, enabling new entrants to enter the request and offer innovative services. This can help drive invention and facilitate the overall quality of financial services.
Better Tracking of Finances: Blockchain technology can help fiscal institutions track the inflow of finances, enabling them to cover and help counter money laundering and other illegal uses. This can help reconfirm the character of banking institutions and increase public trust in the financial sector.
Conclusion
In conclusion, blockchain technology is implicit in bringing about numerous positive changes in the finance sector. This technology can help financial institutions offer better services to their clients and contend more effectively by perfecting transparency, effectiveness, security, and availability.
Still, it’s important to note that while blockchain technology has numerous benefits, it’s still a relatively new and untested technology, and its full impact on the finance sector remains to be seen.
