[HN Gopher] Binance to acquire FTX
___________________________________________________________________
Binance to acquire FTX
Author : jmsflknr
Score : 727 points
Date : 2022-11-08 16:13 UTC (1 days ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| ramish94 wrote:
| I'm a little ignorant to the whole crypto ecosystem, so can
| someone give me a quick rundown on the chain of events that led
| to this? Seems a little out of left field.
|
| BTX, from the outside looking in, looked to be one of the more
| well run, stable crypto exchanges. $1.02 billion in revenue with
| $388M in net income in 2021. They didn't go on any crazy hiring
| spree when they didn't have to. Liquidity crisis implies that
| people are withdrawing cash they do not have, but if so, where
| did it go?
| JumpCrisscross wrote:
| FTX bet customer funds through the CEO's hedge fund on an FTX
| token [1]. The token price fell when this was revealed [2].
|
| The hedge fund, and thus FTX, had less money than they owed
| lenders and customers. FTX found a bail-out in Binance;
| otherwise everyone would have lost their money.
|
| [1] https://www.coindesk.com/business/2022/11/02/divisions-in-
| sa...
|
| [2] https://www.coindesk.com/markets/2022/11/08/ftt-plummets-
| as-...
| gitfan86 wrote:
| It isn't officially a bailout. They just said they intend to
| acquire FTX. But, once they look at the books they may
| backout out the deal, especially if most customers want to
| take their money out. What is the point of buying an exchange
| that has no customers?
| rhaway84773 wrote:
| The point is the same reason why FTX bought all the smaller
| crypto firms that were about to collapse.
|
| Preventing exposing the entire crypto currency ecosystem as
| fraud.
| JumpCrisscross wrote:
| > _isn 't officially a bailout. They just said they intend
| to acquire FTX_
|
| That's a bailout.
|
| > _once they look at the books they may backout_
|
| It's not a done deal. But the proposal is a bailout,
| through and through.
| anonu wrote:
| I can't help you but all I can say is empires rise and fall
| faster than a house of cards in this space.
| colinmhayes wrote:
| FTX's ceo also runs a prop trading firm which is the real
| source of his wealth. FTX loaned the trading firm billions of
| its own token FTT. FTX also gave binance billions of dollars of
| FTT because binance invested in them. Over the weekend FTX's
| ceo and Binance's ceo got in a fight on twitter and binance
| sold all of their FTT which collapsed the price. FTX's assets
| are tied up in the loans to their trading firm which are
| denominated in the now essentially worthless FTT and so they
| can't convert the FTT to cash which means can't process
| withdrawals.
| shawabawa3 wrote:
| > so they can't convert the FTT to cash which means can't
| process withdrawals.
|
| That implies they embezzled customer funds (customer deposits
| should never be invested or loaned or intermingled with
| company funds)
| hanniabu wrote:
| https://techcrunch.com/2022/11/07/heres-the-rundown-on-the-b...
| [deleted]
| max_ wrote:
| Its funny how a few days back some people on HN were saying FTX
| is unlikely to be illiquid because SBF is a genius from
| JaneStreet.
| asdajksah2123 wrote:
| And people who knew what they were actually talking about were
| pointing out that it's unlikely anyone would have voluntarily
| left Jane Street as early as he did. But they were largely
| ignored.
| eddsh1994 wrote:
| Leaving Jane Street to become a Billionaire seems like a
| weird criticism
| [deleted]
| Bootvis wrote:
| It seems likely that the Kimchi arbitrage (arbitraging
| between exchanges in Korea an the rest of the world) was
| indeed massively profitable. He took a wrong turn later.
| nullc wrote:
| When I saw that he was using that as the claimed origin of
| his wealth I wrote him off as an almost certain fraud.
| Bootvis wrote:
| Why? He must have had some money of his own and some rich
| friends to set it up. So he had the means. Also, the
| difference was there and it was persistent so he had the
| opportunity as well.
| nullc wrote:
| There was _very_ little volume available on those pricing
| discrepancies, making thousands per day without erasing
| the arb would have been a challenge but perhaps not
| impossible. The public is expected to believe he made
| over $10 million dollars per day on average on that
| trade. It 's not credible.
| astrange wrote:
| Maybe he likes Haskell better than OCaml.
| type-r wrote:
| I read he was there for over 4 years, is that abnormally
| short? Seems like a pretty normal period of time to me.
| whymauri wrote:
| Seems like a weird critique to me. Some people join out of
| college and realize that, for a variety of reasons, that
| sector isn't for them (yes, even at Jane Street). Maybe
| they get overly enamored by an internship; maybe they don't
| want to live in NYC. My impression is they are pretty 'open
| door' about rehiring if you leave on good terms or decline
| an offer anyway.
| wmf wrote:
| He sacrificed FTX but kept his real baby Alameda.
| [deleted]
| acgt23 wrote:
| Alameda won't be worth nearly as much without FTX - it was so
| successful because FTX fed it as much market data as it
| wanted and gave it priority market making etc. Also seemed to
| be sending it its own printed FTT tokens to secure loans for
| trading which was the cause of the insolvency rumors.
|
| Neither of those things benefit the owner of FTX unless they
| are also the owner of Alameda
| ww520 wrote:
| Not sure how safe Alameda is. $6 billion out of $14 billion
| of Alameda assets is FTT based. With FTT tanking, its asset
| balance shrunk greatly. It might well has its own liquidity
| problem.
|
| Also with Biannce buying FTX, it can call back the loaned FTT
| from Alameda.
| perlgeek wrote:
| Wasn't there a post hitting the HN front page just yesterday or
| two days ago about how FTX was close to being illiquid, and most
| of the top comments were about how wrong that analysis was?
|
| Or was that another crypto trader?
|
| If anybody could help my sieve-like brain, that would be very
| appreciated :-)
| teuobk wrote:
| Yup, here's the HN thread:
| https://news.ycombinator.com/item?id=33464494
| jaywalk wrote:
| Yep, it was FTX.
| jo6gwb wrote:
| https://dirtybubblemedia.substack.com/p/is-alameda-research-...
| chasebank wrote:
| Wow, usually the HN thread hindsight comes years after. That is
| quite a fascinating read.
| wmf wrote:
| Yes, concerns about Alameda's insolvency infected FTX. In
| retrospect these "concerns" may have been disinfo designed to
| destroy FTX.
| perlgeek wrote:
| ... or might have been a good prediction. An exchange
| shouldn't rely on public opinion for solvency.
| orsenthil wrote:
| So how was FTX sponsoring all those Warriors Basket Ball games
| and players ?
| throwaway4good wrote:
| So wouldn't this trigger and potentially be blocked by CFIUS?
| Given Binance's Chinese roots and the general anti-China
| sentiment in US politics.
|
| Here is an article about the twitter acquisition also with
| Binance/CZ onboard - this would similar or worse, no?:
|
| https://www.brookings.edu/research/the-national-security-gro...
|
| The national security grounds for investigating Musk's Twitter
| acquisition
| ajaimk wrote:
| "Note that http://FTX.us and http://Binance.us - two separate
| companies-are not currently impacted by this."
| redox99 wrote:
| Isn't ftx.com[1] from the bahamas, and binance from the cayman
| islands?
|
| [1] Not ftx.us, which is not getting bought
| throwaway4good wrote:
| This is article says it is only the non-US part of FTX that is
| in play:
|
| https://www.cnbc.com/2022/11/08/binance-offers-to-buy-ftxs-n...
|
| Binance offers to buy FTX's non-U.S. operations to fix
| 'liquidity crunch'
|
| The acquisition impacts only the non-US businesses, FTX.com.
| FTX.us will remain independent of Binance. The deal, according
| to Tweets from both Zhao and Bankman-Fried, rests on a non-
| binding letter of intent, pending full due diligence.
| JumpCrisscross wrote:
| > _it is only the non-US part of FTX that is in play_
|
| The U.S. subsidiary had to follow rules that made FTX's
| shenanigans more difficult.
| drak0n1c wrote:
| CZ has shut down the China branch, and was essentially banned
| since their crypto crackdown. He has been publicly critical of
| the CCP government too. The gov may not have much leverage over
| him.
| eunos wrote:
| Some ASPI analysts believed that one of the feature of MSS is
| their ability to co-opt Liberals to work for them. I'm not
| surprised if NSC would suspect anybody that intersected with
| Chinese govt. Dissidents included.
| thepasswordis wrote:
| I am _extremely_ bullish on crypto, and have been for the last
| decade.
|
| That said: the sooner we can get rid of these weird centralized
| exchanges and weird messiah figures the better.
|
| The next thing I thing will explode is Cardano, which appears to
| function approximately like a cult, with no actual product (as
| far as I can tell).
|
| Ethereum, LINK, and Bitcoin. Everything else is a distraction.
| Frisiavones wrote:
| Monero, the only actual cryptocurrency, is all that matters.
| BTC will go down, as well as ETH, and all their copies.
| rapsey wrote:
| Crypto would be perfect. If only humans were robots.
| boc wrote:
| Not really, quite the opposite in fact. If humans were robots
| they'd trust each other completely, meaning all financial
| transactions could be done instantly with a simple database.
|
| Humans are messy, so the solution we've arrived at is a
| database _enforced by_ a complicated legal system + state
| power /violence (and arguably private power/violence via the
| mob). This works pretty well and powers trillions of dollars
| around the world.
|
| Crypto is a fundamental misunderstanding of what makes modern
| finance hard. It's not about trust, it's about enforcement. I
| don't need to trust my bank, but I need to trust that
| somebody will make things right if my bank takes my money.
| That allows me to trust my bank with my life savings, even
| though I've never met my banker or even know a single
| employee at the bank.
|
| Crypto is missing this point and it's why, despite following
| it since the beginning, I've never thought it has a future.
| It's fundamentally solving the wrong problem.
| MichaelZuo wrote:
| Nice explanation. There was never much focus on the
| enforcement aspect.
|
| Though that raises the interesting question, why were so
| many folks, some of them quite credible, boosting
| cryptocurrencies the idea regardless?
| short_sells_poo wrote:
| That's a very eloquent way of putting it, thank you. It's
| possibly even worse than just a misunderstanding though.
| I'm sure there are people in the Crypto industry who see
| core issue of enforcement, because the second wave (after
| Bitcoin first became mainstream) was all about smart
| contracts. E.g. there was an effort to move the subject of
| enforcement into the framework. After all, if the contracts
| that need enforcement are part of the crypto system, then
| enforcement can also happen in the same system. Right?
|
| Of course, this still falls short because no amount of
| mathematics will bridge that gap. At some point, the
| financial system (whether classical or based on
| blockchains) has to interact with the mind boggling mess of
| the real world. In the real world, 2+2 is not certain or
| deterministic at all. It can be debated, social
| implications weighed and the judge might say it's 4 and a
| bit, or slightly more than a pie.
|
| In some sense it feels like crypto would work perfectly in
| a world that is completely deterministic, measurable and is
| populated wholly by algorithms interacting with each other.
| The second order question then is: would such a world even
| need crypto?
| paulpauper wrote:
| The time to have been bullish was a decade ago. Now it looks
| like the bubble finally burst. No bottom in sight. No adoption
| either. The government has made crypto obsolete or unusable.
| Everything is traced and tracked.
| tomjakubowski wrote:
| I'm cryptoignorant (but trend skeptical). re: traceability,
| how about Monero?
| colinsane wrote:
| > The government has made crypto obsolete or unusable.
|
| i don't think you can really say this until the DNMs
| meaningfully shrink in size.
|
| US govt has had like one major success that i know of in
| shutting down DNMs -- Silk Road -- since then there's always
| been a dozen or so in operation that serve most/all the big
| countries whose govt you would expect to track crypto.
| [deleted]
| GoldenMonkey wrote:
| Predicting this 4D chess move by CZ... ends very badly for CZ...
|
| As CZ becomes massive target for the SEC.
|
| And is sued into oblivion for insider trading, laundering or
| whatever they can make stick.
|
| By whatever jurisdiction CZ/Binance has any ties to... and the
| US/SEC/Fed can strong-arm.
| pjc50 wrote:
| > whatever smidge of trust
|
| Turns out the "trustless" in crypto means "you can't trust
| anyone".
| nimchimpsky wrote:
| dang wrote:
| Let's avoid generic flamewar tangents please, regardless of
| which side one's on.
|
| https://news.ycombinator.com/newsguidelines.html
|
| We detached this subthread from
| https://news.ycombinator.com/item?id=33522825.
| k2enemy wrote:
| Also turns out that "decentralized" in practice means
| "centralized"
| Jommi wrote:
| in which part of this discussion has anyone talked about
| something decentralized? This is about two centralized
| exchanges that hold custody of users cryptoassets
| m00dy wrote:
| Future is decentralized. Even CZ knows this :)
| ahzhou wrote:
| Centralization is more efficient than consensus building.
| acjohnson55 wrote:
| This is true. Don't know why people are down voting you.
| But it calls into question why we need centralized
| exchanges of decentralized assets. The answer, of course,
| is financial speculation and sophisticated shell games that
| make some folks billionaires at the cost of the marks who
| get suckered into believing they're getting in the ground
| floor of the next big thing.
| pshc wrote:
| Only if the central entity can be trusted not to become a
| corrupt rent seeker.
|
| _(Looks meaningfully at TicketMaster)_
| ahzhou wrote:
| I agree with this as well. Efficiency is orthogonal to
| desirable outcomes.
|
| My point is that things tend towards centralization
| because the market rewards efficiency.
| joyfylbanana wrote:
| Nobody forces you to use Binance or FTX. I have been using
| Bitcoin for 10 years and I've always stored more 90% of my
| BTC in my own self-custody wallet, only used exchanges
| briefly.
| xmonkee wrote:
| What have you been "using" Bitcoin for, may I ask?
| commonlife wrote:
| Buying MDMA safely. This isn't a joke. Drug prohibition
| causes harm, crypto provides a much safer way to obtain
| psychedelics. If all your purchases are safe for the
| state to be aware of, good for you.
| notch656a wrote:
| It seems insane to me people would buy/sell drugs in a
| prohibition nation on a public ledger.
| Phlarp wrote:
| For whatever it's worth, the federal authorities have
| very little budget/mandate to prosecute darknet drug
| distribution offenses. They go after the darknet markets
| themselves, money laundering / sanctions avoidance and
| maybe firearms.
|
| Meanwhile the local authorities don't know what most of
| those words mean.
| commonlife wrote:
| Monero
| joemazerino wrote:
| You may not ;)
| joyfylbanana wrote:
| - Long term "Savings account" - a volatile one, of course
| - I buy stuff from online with it, household items (In
| country I live you can basically buy anything with BTC) -
| Travel, I book hotels/flight with it and once I rented a
| boat for a family trip
|
| In addition to that I now and then try to pay with
| Bitcoins at other stores. Last time got excited about
| boltcards (https://github.com/boltcard/boltcard) there
| are few places in my country which accept it, but it is
| quite a new thing.
| nicbou wrote:
| What country is that, if you don't mind sharing? It's the
| first time I hear this
| wruza wrote:
| I suspect one whose own banking system is on par with BTC
| risk-wise. (Apologies to gp if that was clueless, it just
| comes to mind first.)
| joemazerino wrote:
| Dexes like uniswap have been doing just fine
| m00dy wrote:
| So few people understand this. But, don't worry. Great
| inventions need some time to be realized.
| Eisenstein wrote:
| Can you name off the top of your head 5 great inventions
| that weren't immediately realized?
| MacsHeadroom wrote:
| Notably, the internet was widely thought to be a fad for
| the first ~20 years.
| hotpotamus wrote:
| I suppose it depends on how you're defining the first
| year of the internet, but I don't remember many people
| thinking it was a fad. I'd say it's the one invention in
| my life that has actually lived up to the hype.
| Eisenstein wrote:
| Notably, according to crypto evangelists. No one thought
| the internet was a fad. It had a time when it was novel
| and therefore people who didn't know how to use it would
| make fun of it, but absolutely no one who used it thought
| it was a 'fad'. As soon as the first web browser became
| accessible to consumers the dot com era exploded. There
| is a difference between 'didn't hit mass adoption due to
| massive infrastructure needing to be built in real time'
| and 'we don't know what this is useful for'.
| MacsHeadroom wrote:
| > No one thought the internet was a fad.
|
| Wrong.
|
| [0] 1995 Wired Magazine "Most things that succeed don't
| require retraining 250 million people."
|
| [1] 1995 NewsWeek "The Internet is a fad"
| https://www.peterlundell.com/the-internet-is-a-fad/
|
| [2] 2000 Daily Mail "Internet may be just a passing fad
| as millions give up on it." https://regia-
| marinho.medium.com/internet-may-be-just-a-pass...
|
| etc. etc.
|
| Anyone who was a nerd in the 80s and early 90s knows that
| we spent the better part of two decades being told that
| the internet was no more revolutionary than fax machines
| and that most people would never use it.
| [deleted]
| Eisenstein wrote:
| Some op-ed pieces and getting mocked by people for being
| a nerd do not demonstrate to me a fundamental
| disagreement about the usefulness of the internet amongst
| people who understood what it was. Ignorance is annoying,
| but it is easily remedied by exposure and knowledge.
|
| Contrast this with a cryptocurrency technologies, which
| are completely understood at this point and still lack
| legit real-world use at scale beyond speculation and yet
| it is constantly claimed that 'it just takes time for
| brilliant technology to find a use case'.
|
| As far as I can recall, this has never been the case in
| the modern world -- every paradigm changing technology
| has had an immediate and obvious application where it
| greatly surpassed anything before it, regardless of if it
| took years or decades to build infrastructure and educate
| people on how to use it.
| boomerango wrote:
| I'm not saying whatever that is is a great invention but
|
| Alternating current... Computers... Smartphones... The
| internet...
| Eisenstein wrote:
| I think you are mistaking 'waiting for
| technology/infrastructure to mature enough to make them
| accessible to everyone' with 'technology that people
| don't know how to do something useful with'.
| astrange wrote:
| Does anyone both use these and correctly report their
| taxes? The accounting seems like a pain.
| bhawks wrote:
| Cointracker and Koinly both support tax reporting on
| swaps and liquidity providing on uniswap and many other
| dexes.
| joemazerino wrote:
| Oh absolutely. I would never not let the government take
| a slice of my hard earned money.
| astrange wrote:
| You mean "let the government prevent inflation".
|
| (If everyone pays income taxes, noone's relative
| purchasing power is reduced by paying them, because you
| have the same % of the money supply. More or less.)
| themihai wrote:
| Except they are unusuable most of the time due the hogh
| transaction fees.
| hulahoof wrote:
| This is true for Eth, but there are many chains where
| DeFi exchange transaction fees are a rounding error
| anonporridge wrote:
| ...yeah. That's literally the most popular slogan from the
| start.
|
| "Don't trust. Verify."
| m00dy wrote:
| reducesuffering wrote:
| SBF tweets for more clarification:
| https://twitter.com/SBF_FTX/status/1590012124864348160
|
| Apparently this is for the international exchange business,
| FTX.com, but not FTX.us or Alameda quant trading firm.
| [deleted]
| gringoDan wrote:
| Some level-headed commentary on the developing situation via Cas
| Piancey and Bennett Tomlin:
| https://www.youtube.com/watch?v=B2UFswUMQqI
| paulpauper wrote:
| And total market meltdown continues. Not good enough.
| adam_arthur wrote:
| The ultimate shell game...
| thedangler wrote:
| I don't know if this is posed yet but FTX.com is different than
| FTX.us which GameStop Partnered with. I've seen lots of confusion
| and FUD arround this.
| zaps wrote:
| The umps get new jackets!
| UGIForAll wrote:
| I'm sorry for your loss.
| alexb_ wrote:
| This comment was generated by AI. Does HN allow for AI comments
| on submissions?
| yorwba wrote:
| The guidelines don't specifically call out that case, and I
| don't think they need to. If someone can automate the process
| of generating good HN comments I don't see a problem.
| https://xkcd.com/810/
|
| But clearly this particular attempt isn't doing so well.
| pvg wrote:
| https://hn.algolia.com/?dateRange=all&page=0&prefix=true&qu
| e...
| bob234 wrote:
| I'm sorry for your loss.
| dougmwne wrote:
| One low effort comment for AI, one giant leap for AI?
| blueblisters wrote:
| This is probably going to have ripple effects in unrelated
| industries - FTX Foundation, presumably funded by
| FTX/Alameda/SBF's personal wealth, has been been the biggest
| funder of AGI projects and labs this year. They were the biggest
| funder (in a $500M fundraise) for Anthropic, which is (atm) a
| non-profit AI alignment lab. They also funded a bunch of esoteric
| EA projects which likely rely on them for continued funding -
| https://ftxfuturefund.org/our-grants/
| oldgradstudent wrote:
| > AGI projects
|
| > AI alignment lab
|
| > EA projects
|
| So what you're saying is that nothing of value was lost?
| dabeeeenster wrote:
| It's a pyramid all the way down. So surely when there's only 1
| exchange left standing, who is going to catch it when it falls?
| 2OEH8eoCRo0 wrote:
| Don't catch a falling knife.
| kevmo314 wrote:
| Build new exchanges faster than they fall. It's the only way to
| keep the ponzi going.
| Analemma_ wrote:
| Easy to do in a world of 0% interest rates, not so much now.
| I think the entire crypto ecosystem is about to crash and
| burn hard as the Fed just keeps the rate hikes coming.
| three_seagrass wrote:
| Yeah the music stops when the naive outsiders stop having
| the extra cash into the system.
| Scoundreller wrote:
| Pretty sure the last remaining counterparty will be the
| mysterious and shadowy # # # #, # # of Elbonia.
| boppo1 wrote:
| Gemini is doing fine last I checked.
| ushakov wrote:
| How much?
| [deleted]
| b0sk wrote:
| [deleted]
| [deleted]
| whatifs wrote:
| smells like a crypto pump and dump to me, we shall see
| Sysctl232 wrote:
| More like a dump and pump
| LatteLazy wrote:
| Might be the first hostile takeover via crypto...
| polygamous_bat wrote:
| On an unrelated note, I really hope to never see this clown's
| (SBF) face or name in any of the Effective Altruism
| docs/post/communications. Really irks me to see some new age
| robber baron to be the face of twenty-first century altruism,
| notwithstanding my other issues with EA.
| sasattack wrote:
| it's perfect since it's a total sham to distract from the
| wedding wealth gap
| mjr00 wrote:
| So after SBF came out yesterday and said FTX was totally fine..
| it turns out they _were_ insolvent and needed to get bailed out
| to cover withdrawals?
|
| Never a dull moment in the world of crypto.
| pranshum wrote:
| "Every banker knows that if he has to prove he is worthy of
| credit, in fact his credit is gone." - Bagehot
| oldgradstudent wrote:
| They claim to be an exchange, not a bank, not investing user
| assets.
|
| https://twitter.com/SBF_FTX/status/1589598285798707202
|
| The Bagehot quote is not SUPPOSED to apply.
| matheusmoreira wrote:
| > They claim to be an exchange, not a bank
|
| They're liars. They are literally banks with all of the
| drawbacks and none of the benefits. They do fractional
| reserve banking with user deposits.
| oldgradstudent wrote:
| I'm not sure why you are ruling out a Ponzi scheme so
| quickly.
| matheusmoreira wrote:
| I don't think a Ponzi scheme adequately explains the
| problems with centralized cryptocurrency exchanges.
| They're just banks. There are plenty of scammers in this
| space, I just don't think Binance is one of them.
|
| The problem is they leverage user deposits as gambling
| money. These corporations can't bear to watch a pile of
| money sitting around doing nothing while in their
| custody. They just need to loan it out.
| colinmhayes wrote:
| Did anyone actually believe they weren't loaning out user
| funds? How were they funding their massive leverage
| programs? How were they loaning all that money to SBF's
| trading firm?
| matheusmoreira wrote:
| Crypto? This is nothing but a good old bank run.
| JumpCrisscross wrote:
| > _nothing but a good old bank run_
|
| Exchanges aren't subject to bank runs. If an exchange (or
| even broker) cries run, they were taking novel risks.
| matheusmoreira wrote:
| They aren't brokerages, they're banks pretending to be
| exchanges. They do fractional reserve banking with user
| deposits.
| arcticbull wrote:
| Fractional reserve in the context of banking is
| completely different because the FDIC backstops runs and
| the Fed backstops the FDIC.
|
| Nobody backstops FTX or any other crypto exchange so its
| better described here as 'the yolo lifestyle'.
|
| A modern day bank run in traditional finance is
| functionally impossible* (up to the FDIC insurance
| limits, and often higher in practice - there were no
| imposed limits at WaMu for instance).
| matheusmoreira wrote:
| > modern day bank run in traditional finance is
| functionally impossible
|
| Not at all. Bank runs still happen, the backstops just
| soften the blow with liquidity injections. Every time you
| see a withdrawal limit, there is no doubt a bank run is
| occurring.
| JumpCrisscross wrote:
| > _you see a withdrawal limit, there is no doubt a bank
| run is occurring_
|
| This is not accurate. Withdrawal limits are there to
| control fraud.
| matheusmoreira wrote:
| Signs on the ATMs of a failing bank explaining that you
| can only withdraw $500 a day weren't put there due to
| concerns about fraud.
| astrange wrote:
| A failing bank in the US will be taken over by another
| healthy bank over the weekend (or overnight) with help
| from the FDIC. You're not really at risk, at least if
| you're the kind of person who can take their whole
| account out in cash. The reason they'd put those signs up
| is that the government doesn't feel like loosening fraud
| regulations just because there's a bank run on.
| guepe wrote:
| Matt Leving from Money Stuff discussed it today (!). If
| exchanges provide leverage products to customers, they
| become banks (providing leverage, through funding
| typically by other customer's deposit). So bank runs are
| possible.
| arcticbull wrote:
| Ah will take a listen! Thanks!
| JumpCrisscross wrote:
| > _exchanges provide leverage products to customers_
|
| Levine spoke about brokerages. When brokerages extend
| credit, they can be subject to run dynamics. Not
| exchanges.
| lordnacho wrote:
| What happens if an exchange extends credit?
|
| There's a reason the perp exchanges have a fund, it's the
| capital that protects them from losing money on
| overleveraged customers. Or rather it's the rainy day
| fund that they lose out of when the delev happens.
|
| Not sure this is related though, mechanics of today are
| not clear to me from what I've been able to find.
| MrMan wrote:
| crypto "exchanges" are almost all structurally identical
| to brokerages
| epa wrote:
| It seems that Citadel may have short squeezed FTX's token and
| created this.
| snapcaster wrote:
| Please don't tell me you own GME stock and blame Ken Griffin
| for everything bad that has ever happened. Can't you people
| just stay in your subreddits?
| epa wrote:
| Hello, your comment does not follow guidline "Comments
| should get more thoughtful and substantive, not less, as a
| topic gets more divisive." per
| https://news.ycombinator.com/newsguidelines.html. Please be
| more constructive.
| snapcaster wrote:
| I understand that. I think you are likely missing some
| context and what is motivating comments like the one I
| responded to. Long story short a cult developed around
| gamestock bag holders that didn't manage to sell the top
| and now they're shitting up every discussion on the
| internet related to finance or investing. It's starting
| to really annoy me now that it's escaped reddit
| cheeze wrote:
| Proof?
| isthisthingon99 wrote:
| you're getting downvoted by people who didn't get the joke.
| Yizahi wrote:
| majani wrote:
| I'm glad a big government supporter such as SBF is out of crypto
| leadership. Crypto is an anarchist experiment and it should
| remain that way
| mrtksn wrote:
| Rest assured that the regulations are coming because the crypto
| simply did a speed-run of unregulated securities market and
| repeated every fraud or scam that the traditional markets went
| through over the history.
|
| In the process, huge fortunes were created and libertarians
| were empowered(but not enough to be the main political power).
| Congrats to them but there's nothing anarchist left in crypto,
| they even end up consolidated and centralised. No interesting
| business models or financing came out of it except for
| ransomware.
|
| The silver linings might be that the crypto regulations can be
| made with the current technology and globalisation in mind,
| hopefully.
| thr0wawayf00 wrote:
| Exactly, it's bizarre to read about the wildcat banking era
| in the US and why the Fed was created while simultaneously
| looking around at the rate of mainstream crypto scams and
| institutional failures nowadays.
|
| The Fed sure isn't without its issues, but it was created to
| solve the exact problems that we're now seeing proliferate
| via the crypto space.
| IG_Semmelweiss wrote:
| I don't think this is correct.
|
| The FED was created in 1913 for a very specific reason - to
| counter the Panic of 1907 by creating a banker of last
| resort.
|
| It did nothing to curb the banker speculation that led to
| the panic of 1907
|
| Witness LTCM, Web bubble, Subprime crisis, all fueled by
| banks willing to lend and overextend themselves beyond
| margin. The 1913 ACT did not change that one bit except
| make the speculators never "lose"
|
| The FED did nothing to resolve speculation, if anything,
| bubbles are worse and now they are worldwide thanks to them
| and their low rates.
| thr0wawayf00 wrote:
| > Witness LTCM, Web bubble, Subprime crisis, all fueled
| by banks willing to lend and overextend themselves beyond
| margin.
|
| This was addressed under Glass Steagall by creating the
| FDIC and ushering in the fractional banking system, which
| kept commercial and investment banking separate and
| imposing liquidity requirements and a review system on
| banks. This legislation was later repealed during the
| Clinton administration and was largely seen as one of the
| key mistakes that led to the 2008 crisis.
|
| That doesn't mean that the Fed is failure now and should
| be completely done away with. The runs we're seeing on
| crypto exchanges are very similar to what the Fed was
| created to avoid.
| eunos wrote:
| > This legislation was later repealed during the Clinton
| administration
|
| Repealed by congress which was controlled by GOP at that
| time.
| MrMan wrote:
| in my town in the 19th and early 20th centuries there
| were numerous bak runs where local people were wiped out.
| we collectively decided to take steps to make that much
| much less likely to happen
| TeMPOraL wrote:
| > _the crypto simply did a speed-run of unregulated
| securities market and repeated every fraud or scam that the
| traditional markets went through over the history._
|
| I think the whole endeavor may end up _strengthening_ the
| traditional economy - crypto space repeating centuries of
| fraud in a decade is effectively a booster shot - suddenly it
| 's obvious _why_ all those laws ended up in the books in the
| first place.
|
| > _and libertarians were empowered(but not enough to be the
| main political power)_
|
| In a sense, they've discovered a novel way of attempting to
| gain power - I don't think many people expected someone could
| wish a parallel economy into being and leverage that to for
| political gain.
| caeril wrote:
| Regulations are coming? On a fully public ledger?
|
| You understand that BTC, ETH, and every derivative non-
| privacy-coin is exactly what the regulators have been
| salivating for, right? Why regulate a non-repudiable chain-
| of-custody that mathematically proves your serfs'/slaves'
| assets that you can seize at will?
|
| > libertarians were empowered(but not enough to be the main
| political power).
|
| You should re-examine the GOP, particularly the tickets on
| today's ballots. This ain't your grandfather's GOP.
| mrtksn wrote:
| It's always amusing to see crypto people claiming that
| mathematics can't be regulated. Just like they can't
| regulate chemistry, right?
|
| Well, actually it's always the peoples behavior that is
| regulated. Obviously no one can stop you mixing chemicals
| in private but they can totally tell you what you can and
| can't do in public with it. The same thing goes for crypto,
| you can calculate block hash all you want but they can
| intervene if you engage in a business deal with someone
| else.
|
| Oh and regulation doesn't mean ban, necessarily. It means
| rules on how you deal with it so that the risk of unwanted
| consequences is reduced. You can expect to have rules on
| how you keep the money if you run a stablecoin for example.
| TedDoesntTalk wrote:
| Didn't the US regulate use of a Bitcoin mixer this year?
| There are more reporting requirements for US citizens and
| entities.
| threeseed wrote:
| Regulations aren't exclusive to the US.
|
| Many parts of the world e.g. Australia are heavily
| regulated in the financial sector and will not be looking
| to water them down just because its 'crypto'.
| woodruffw wrote:
| > Crypto is an anarchist experiment and it should remain that
| way
|
| What exactly _makes_ it remain that way?
|
| I don't say this as a cheap "gotcha": what's the governance
| structure that _makes_ it an anarchist experiment,
| specifically, and not just a free-for-all?
| logicx24 wrote:
| Nothing. And that is the problem with anarchism. For some,
| the lack of a centralized power structure is the goal. For
| others, it's an opportunity.
| secretsatan wrote:
| Ha! One massive feudal lord just crushed another and all the
| serfs lost their money. This isn't anarchy, it's a monopoly
| World177 wrote:
| I wouldn't be so sure. The monopolist had a $100,000,000
| theft last month, [1] after a $1 billion dollar loss from
| LUNA in the summer. [2]
|
| [1] https://www.nytimes.com/2022/10/07/business/binance-
| hack.htm...
|
| [2] https://decrypt.co/100530/binance-ceo-says-exchange-
| never-so...
| secretsatan wrote:
| But still, they've consolidated themselves in the monopoly
| money system, so the monopoly money they lost doesn't
| matter if they control the board
| nullc wrote:
| > a big government supporter such as SBF
|
| A supporter or another crook LARPing as pro-regulation because
| it makes some people ignore red-flags?
|
| Constantly braying about the "the law" is part of the the main
| act of the highest profile scammer claiming to have created
| Bitcoin.
|
| Fact is that saying a lot of vague "pro regulation" things
| doesn't likely subject you to any additional regulatory
| scrutiny, it's a free move even when you are waste deep in the
| cookie jar. But some people are going to notice it and consider
| it evidence that you're all above board.
| Eduard wrote:
| > Constantly braying about the "the law" is part of the the
| main act of the highest profile scammer claiming to have
| created Bitcoin.
|
| Whom are you alluding to?
| nullc wrote:
| Craig Wright. It's refreshing to encounter someone who
| hasn't seen that scammers circus.
|
| In the latest season we find Wright trying to steal
| literally billions of dollars worth of Bitcoin while
| constantly yelling that everyone who doesn't support him is
| a criminal. If he weren't financially ruining people with
| vexatious litigation it would all be pretty funny.
| matheusmoreira wrote:
| That experiment already failed to be honest.
|
| Cryptocurrencies were prophesized to get rid of banks. Instead
| exchanges reinvented banks with all the drawbacks and none of
| the benefits.
|
| Cryptocurrencies were supposed to be in wide circulation just
| like USD, eliminating the need for fiat on/off ramps. Instead
| we got these centralized corporations and endless KYC/AML
| surveillance with none of the regulation and government
| backing.
|
| _Real_ cryptocurrency is what you have in your wallet. How
| many of us hold our own coins? Pretty much everyone keeps
| "their" coins at the exchange...
| psychlops wrote:
| The coins have failed because the exchanges failed and people
| use them incorrectly. Got it.
| matheusmoreira wrote:
| The coins failed because exchanges shouldn't even have been
| created in the first place. Bitcoin should have been as
| easy to use and ubiquitous as the US dollar. As we all
| know, cryptocurrency turned into stocks instead.
| psychlops wrote:
| If not exchanges, what entity would you suggest as a way
| to change crypto into fiat?
|
| Using the most successful fiat currency the world has
| ever known as a goal seems a bit lofty. In your view, how
| much time should it have taken to surpass the dollar?
| matheusmoreira wrote:
| That's my point. There should never have been any need to
| exchange crypto into fiat. Bitcoin should have been as
| ubiquitous as USD. Everyone using it, pricing things in
| it, transacting with it, holding at least some amount of
| it. Exchanging for fiat should have been as easy as
| getting change from a store.
| sytelus wrote:
| The coins have failed at the moment because prices have
| crashed. No one was complaining about coins failing when
| prices were soaring.
| Eisenstein wrote:
| No one who was holding coins was paying attention to
| anyone who was telling them that the coins had failed. Do
| you remember 'have fun staying poor'? It was used to shut
| up anyone who said anything critical.
| psychlops wrote:
| I guess I needed a /sarc tag. The coins aren't failing.
| And I'd disagree with the notion that the success or
| failure of a cryptocurrencies is directly correlated with
| "price".
| nyolfen wrote:
| "too soon to say"
| Geee wrote:
| Only about 10% (2M) of bitcoin are on exchanges:
| https://www.coinglass.com/Balance
| acjohnson55 wrote:
| No need to keep bitcoin on exchange when you can speculate
| on futures with far more liquidity and leverage on
| BitMex...er, FTX....er, Binance.
| aeyes wrote:
| You also have to take the ~4M estimated coins with lost
| keys into account.
|
| If these stats are correct we closer to 15%. Which is a
| lot. I would have expected 0.1%.
| Geee wrote:
| It could be less, but it's not that much. People say
| often that "most" coins are held on exchanges, which is
| far from true.
| Melting_Harps wrote:
| > If these stats are correct we closer to 15%. Which is a
| lot. I would have expected 0.1%.
|
| That was never going to happen, too much institutional
| money and index funds have been super focused on trading
| rather than the tech, and their are ETFs that have paper
| BTC that can move the price at will, just as much as if a
| whale decides to do so--it wouldn't even take
| MicroStrategy's stash, it could just be Laszlo wanting to
| get some stuff out of cold storage and clear a couple
| days because the tx fee is low.
|
| Also most of those HFT bots need to have liquidity on
| hand so this is part of the system, what is noteable is
| how little it takes to move the market these days: less
| than a 500 coin sell off on an exchange like Bitfinex
| gave us >$1000 swings. Which if you trade is what you
| want as volatility is where the money is made.
|
| MTGOX taught us very early to never trust exchanges and
| this was after the capital controls in Cypus that made us
| all on edge at the time, and yet it took multiple
| GOXXINGS to learn (the last one still hasn't been
| resolved and the Japanese govt has been dragging it's
| feet for nearly a decade now). People who buy and keep
| them on exchanges are going to have to learn why self-
| ownership is a critical part of this ecosystem.
|
| People may have lost untold millions/billions having
| sloppy OPSEC when handling BTC, but so did Turing [0] and
| he did it for the same reasons we have just so it's clear
| and goes to show how it's not a fringe idea to have self-
| sovereignty over one's finances, especially in uncertain
| times like war (and in his case peace time as they
| castrated for being gay despite his efforts in breaking
| the U-boat cryptography) and I doubt you will question
| his genius in cryptography and just think of him as a
| crypto bro: proving it's just as common for a super
| genius as it is from the layman to get it wrong.
|
| We just need to make it better, and in that regard I
| think we have com efar but it's still too difficult and a
| trusted 3rd party is required: Dorsey is working on
| something along those lines.
|
| This is why we have always encouraged doing small sums
| until you can replicate the process and then transfer the
| whole amount with several contingencies in place should
| anything happen. It's not easy or perfect, but neither is
| physics and we can still have re-usable first stage
| rockets when it was thought to be impossible.
|
| 0: https://www.iflscience.com/alan-turing-buried-his-
| life-savin...
| caeril wrote:
| No, there's still Monero and ZCash. And most holders do have
| their own non-custodial wallets. Or at least wallet seeds
| from intermediaries like MetaMask.
|
| The speculative frenzy with FedCoins like BTC and ETH will
| obviously fall to baseline, but the true use case for
| cryptocurrency still exists.
| andirk wrote:
| Why not both? Centralized where people trust, decentralized
| where people don't trust. In my interpretation, the Bitcoin
| white paper states that BTC is an answer to _the lack of
| regulation_ that allowed the fat cats to abuse the money
| supplies. It's kind of ironic, but to see crypto as purely
| anarchistic is to ignore that it is essentially _democratized_
| money. Both: I use exchanges as well as cold storage.
| TremendousJudge wrote:
| I never understood. Where's the democracy here, exactly? A
| regular user cannot afford to participate in the decision
| making of the system in any meaningful way. In fact, today,
| most users don't even directly use it, instead relying on
| processors such as Coinbase. The "not your keys, not your
| coins" meme exists due to this. The original paper described
| a democratic system where people voted with their processors,
| but failed to take into account that people with more
| processors get more votes. I find it hard to argue that the
| system as it currently exists is more democratic than the
| currency emitted by the central bank of your country.
| m00dy wrote:
| well, honestly speaking, Bitcoin community looks to be
| committed to preserve 21million as max supply. That's a big
| promise and I love it.
| Nursie wrote:
| > I find it hard to argue that the system as it currently
| exists is more democratic than the currency emitted by the
| central bank of your country.
|
| Significantly less, as the central bank is usually at least
| accountable to the democratically elected government of the
| country.
| [deleted]
| ballofrubber wrote:
| Arguably a lot of discussion is open to anyone (Bitcoin
| mailing list, Core github repo), where anyone is free to
| post their opinion on topics themselves.
|
| It is not democratic as in "you have a vote to force others
| to comply to the majority", but more a democratic in "you
| can try to convince enough people that the major chain
| becomes how you like it, while the others run a minority
| fork".
|
| People think "where the money goes, is where the miners
| go", but the blocksize wars showed that "where the users
| go, is where the miners go". Miners themselves don't decide
| on bitcoin rules, users do.
|
| So I personally think that bitcoin is not necessarily
| democratic, but still highly people/community vs money
| driven.
| UncleMeat wrote:
| I can send Putin an email. If I'm sufficiently convincing
| he might decide to call off his illegal invasion of
| Ukraine. That doesn't change the nature of his autocracy.
| ballofrubber wrote:
| I don't know if this is comparable.
|
| Even if UN would finally vote to deem the invasion
| illegal (note: it apparently is not by the democratic
| votes of the UN), it probably wouldn't be stopped either.
|
| I think comparing real world war scenarios with how
| consensus is found in decentralized open source protocols
| is a bit intellectually dishonest
| jrumbut wrote:
| This is a terrifying definition of democracy, "you don't
| get a vote but there is an informal and non-binding
| channel to lodge complaints."
|
| That's not democratic at all!
| webXL wrote:
| > "you have a vote to force others to comply to the
| majority"
|
| is _less_ terrifying to you?
| cmeacham98 wrote:
| What you're arguing for is "you have a vote (well you
| don't, but people much richer than you do) to force
| others to comply to a very small minority", how is that
| better than majority rule?
| ballofrubber wrote:
| Well there are no votes, so you can't force anyone to run
| anything. You run what you like and hope others do as
| well. As I said miners follow users, not companies.
| nyolfen wrote:
| i urge you to compare this to any presently-existing
| monetary system or software project
| ballofrubber wrote:
| It might not be "democratic", to me personally it seems
| fair as you are not forced to run the rules that are
| imposed by others. It might not be the wise decision, but
| the market will decide on the "better" rules.
| Eisenstein wrote:
| Do you think the 'market' can decide anything if people
| aren't playing by the 'rules' in the first place? The
| free market model does not account for widespread fraud.
| andirk wrote:
| Democracy can be defined as a popularity contest;
| democracy does not = good. When I and others say
| "democratized money", it's not to say it is identical to
| the definition of democracy as it pertains to a populous
| voting 1 person 1 vote. More like "money that is not
| controlled by a single source but rather as large a group
| as cares to participate who also have access to and
| knowledge of the tech".
| throwawaylinux wrote:
| When people say democratized anything, it comes across as
| meaningless marketing speak. I don't mean the traditional
| non-political use of the word (i.e., simply making
| something easily accessible to a lot of people).
|
| It's basically trying to claim some good, without having
| to quantify or justify that in any way.
|
| The US dollar is ultimately controlled by democratic
| institutions even if you don't count individuals using it
| as having any control. Therefore it is democratized money
| by the same vague handwaving.
| ballofrubber wrote:
| Additionaly it's also different as in "the majority does
| not change my rules", they can be wrong in the long run
| and my rules become majority again.
| TeMPOraL wrote:
| > _" you can try to convince enough people that the major
| chain becomes how you like it, while the others run a
| minority fork"._
|
| FWIW, that is also true for fiat. You can become an
| economist, or a journalist, or a politician, or a pundit,
| and try to convince your country to do economics
| differently. It's a tall order, but it's been known to
| succeed. If this seems harder than the equivalent for
| blockchains, it's only because cryptocurrencies have
| _much fewer users_ , so your voice seems more powerful.
| ballofrubber wrote:
| Good point. I think the subtle difference is that the
| traditional political democracy coerces the minority to
| use the system how they like it (ofc. not everywhere,
| maybe more on the money/legal tender side of things),
| whereas with Bitcoin there is no coercion by the
| majority. The majority would accept one set of currency,
| while others might use another, however markets will
| probably always decide on a winner when it comes to
| currency, which could feel as if you are "forced".
| Definitely a nuanced topic.
| UncleMeat wrote:
| An anarchist experiment that plays into capitalism's worst
| instincts and rapidly encountered "please give the money back
| to the rich people" when the first big ETH theft was pulled
| off.
|
| Anarchism should be about dismantling hierarchies. Crypto has
| further entrenched owners against the rest.
| lern_too_spel wrote:
| > Crypto is an anarchist experiment
|
| And, like every anarchist experiment before it, it failed. It
| continues to draw in new suckers every day, and that is a
| problem for society.
|
| It doesn't matter if you didn't cause the problem. Because you
| live in that society, you still have to pay the cost to fix it
| or continue to take the losses from the problem existing.
|
| It's the same with slavery, not educating blacks, and then not
| employing blacks in America. I had nothing to do with it. My
| family had nothing to do with it. But because I live in
| America, I have to either pay the cost to fix the problem or
| pay the ongoing cost of crime that the problem produces. Taking
| on the cost of problems others created is the cost of living in
| society, just as benefiting from the value that others create
| is the benefit of living in society.
|
| The time to regulate crypto and cut our future losses was
| yesterday.
| codehalo wrote:
| >But because I live in America, I have to either pay the cost
| to fix the problem or pay the ongoing cost of crime that the
| problem produces.
|
| The "crime" the problem produces allow a lot of white men to
| put their kids through college, fooling themselves into
| thinking they are stopping "bad guys".
|
| If you dont keep them busy, they would create far more crime
| than you think black folk do. They might even start storming
| the White House.
| int_19h wrote:
| Last I checked, the Zapatistas are still around.
| lern_too_spel wrote:
| The FLDS cult is still around too and for about twice as
| long. Its mere existence doesn't make it a successful
| experiment.
| int_19h wrote:
| Then you should clearly define "success". So far as I can
| tell, the Zapatistas did succeed in building the society
| that they wanted and kept it going for several decades
| now. Are you claiming that they aren't meaningfully
| anarchist?
| ohgodplsno wrote:
| To be fair to anarchists, it extremely often failed because
| of outside forces being violent towards them. Nothing in
| anarchy is inherently doomed to failure, and is a better
| demonstration of democracy than anything we have currently.
| (Because if there's anything an anarchist loves more than
| voting, it's one more voting round).
|
| Calling cryptocurrencies "anarchist" is walking on the corpse
| of actual anarchists and taking a big, steaming shit on them.
| Anarcho-capitalists have nothing to do with anarchy and are
| just kids whose bedtime reading was, regrettably, Ayn Rand.
| rightbyte wrote:
| I guess people think Mad Max rather than "everything is run
| by tiny councils" when they think about anarchists.
| lern_too_spel wrote:
| Anarchy is defined as absence of government and
| authority, with unlimited personal freedom as a
| consequence. This is fine if you're living alone, but in
| groups, you have unbounded externalities. Tiny councils
| are tiny governments.
| ohgodplsno wrote:
| If you let your own ignorance define anarchy, sure.
|
| Anarchists simply want every single thing to be voted on
| by the people, whether through referendum or randomly
| picked representatives. Anarchists agree that there
| should be governing bodies (merely that they shouldn't be
| the ones we have right now, and that they should be more
| representative and prevent the formation of a political
| class) and that authority should also be granted by these
| governing bodies _and_ revokable by the same. Hence,
| there is nothing an anarchist loves more than voting. It
| does not prevent living in groups, just that there are no
| leaders in that group.
|
| By saying it is defined as an absence of government and
| authority, you're either thinking of ancaps (which are a
| bad right wing joke made up of said Ayn Rand readers), or
| dogshit propaganda fed to you. Read a bit.
| jrm4 wrote:
| Every anarchist experiment failed?
|
| The Internet's still around, buddy.
| lern_too_spel wrote:
| The Internet whose addresses are handed out by IANA? That
| Internet? Or are you talking about Web3 scamware?
| svachalek wrote:
| The Internet was created by DARPA and while it got a little
| wild in the 90s, neither its origins or current form in any
| way resemble anarchy.
| Eduard wrote:
| Just because "The Internet"'s _mainstream_ may not
| resemble anarchy, this doesn't prohibit other parts to
| resemble anarchy. In fact there are a lot of examples
| active and thriving "on the Internet" fulfilling various
| definitions of anarchy.
| namaria wrote:
| Or it's infrastructure, or design, or all the corporate
| committees involved in managing it. Care to give counter
| examples?
| jrm4 wrote:
| It's a protocol that's literally not centrally
| controlled. It's the definition of anarchy. Not "cosmetic
| anarchy."
| namaria wrote:
| The thing created by a US Government agency at the height
| of the Cold War is your example of anarchist success story?
| jrm4 wrote:
| Yes, because I'm not talking about "how it came into
| existence," I'm using the actual textbook definition of
| the word.
| namaria wrote:
| There is a LOT of -archy overhead to the Internet.
| secretsatan wrote:
| Who knows, i'm just going to rant that I never got into it, i
| heard about it right at the start, started looking into it, like
| maybe do it like i used to let idle time on seti. Maybe now i'd
| be a billionaire. It would seem like an odd way to be one.
|
| But i got put off it right away by libertarian conspiracy
| believing types, always knew way more than me about the secret
| machinations of the world that are forever kept free from us, and
| of course, they knew something i didn't, this secret knowledge
| was given away for free if you knew the right people.
|
| In a way, i credit them with a renewed interest in programming,
| as this guy told me about writing a twitter bot to pump gold
| whenever they're idol told them too, i did actually think to
| myself, this guy thinks they're a programmer when they repurposed
| a script while i can actually write useful apps, so i'll give
| them that.
| kristjansson wrote:
| Why is it apparently so difficult to run a solvent crypto
| exchange? On the face, it shouldn't be too hard, just take
| deposits, stick them in a wallet, and swap client balances in a
| database.
|
| Is the temptation to maintain a reserve ratio < 1 just too great?
| Do operators try to earn small, low-risk return on client funds
| only to find there are no low-risk, positive-return assets in
| crypto? Are the extending margin to clients or explicitly
| stepping in as counterparty, and get exposed to losses as prices
| move?
| tim333 wrote:
| The majority of crypto exchanges failing has been due to them
| being hacked or assets stolen. It seems to be an ongoing
| problem. It's kind of inherent to crypto transfers not being
| reversible. In a regular stock exchange if a crook tries to
| transfer the assets somewhere you can freeze or reverse the
| transaction. Crypto not so much.
|
| The FTX issues seem to be something else - it's a bit unclear
| what exactly at the moment.
|
| I've got some assets with FTX so I'm curious. As well as
| holding crypto they do futures trading on it and I wouldn't be
| surprised if Alameda Research, their privately held prop
| trading fund is a counterparty to some of those and may have
| gone bust.
| octodog wrote:
| FTX offers leveraged products so they are borrowing assets from
| _somewhere_ to fund these trades.
| mianos wrote:
| This is only true for covered leverage with physical
| delivery. If you match a buyer and a seller, they can agree
| to settle in fiat.
| jl2718 wrote:
| Faking the liquidity.
| [deleted]
| fshbbdssbbgdd wrote:
| Running a reserve ratio < 1 is a convenient way of funding
| advertising to get more people to use your exchange.
|
| So the question you should be asking is: if there is a solvent
| crypto exchange, how would I ever find out about it?
| kristjansson wrote:
| Presumably transaction fees, market data fees, etc. would
| provide enough revenue to fund advertisements?
| fshbbdssbbgdd wrote:
| Advertising is a market, you see ads for whoever is willing
| to bid the highest. It seems like Coinbase had to raise
| money to get big. FTX arrived to the scene later. It would
| be hard to compete by bootstrapping from organic growth.
| kristjansson wrote:
| Taking outside money doesn't preclude solvency
| espadrine wrote:
| Storing money costs money: at least the bank fees, if not the
| negative interest rates.
|
| Processing money costs even more money: operations must be
| scrutinized, international movements require validation and
| communication, and various AML/CFT/Fraud procedures must
| perform investigations etc. You have accounts in various
| currencies, perform conversions to maintain liquidity...
|
| So I can see why they would start dipping their toes into
| investments. Once they start, they probably don't consider
| enforcing Basel III to their procedures, and things just
| unfold.
| theptip wrote:
| > Why is it apparently so difficult to run a solvent crypto
| exchange?
|
| Running a stock exchange is a hard business too; you are the
| market maker, you set the spread, and the most sophisticated
| investors in the world are trying to arbitrage you. Any mistake
| can potentially ruin you. If you do you job right you take a
| tiny sliver of profit from each transaction.
|
| Now consider crypto, where your ability to pause the market or
| unwind clearly-erroneous transactions is reduced or removed.
|
| Sounds excruciatingly hard to me.
| Bootvis wrote:
| That's why you get outsiders on your exchange to make markets
| and you just charge commissions and access fees.
| JumpCrisscross wrote:
| > _Running a stock exchange is a hard business too; you are
| the market maker, you set the spread, and the most
| sophisticated investors in the world are trying to arbitrage
| you_
|
| Normal markets aren't as centralised as crypto. The exchange
| and market maker are separate.
| pcthrowaway wrote:
| It's pretty uncommon for exchanges to do all their market
| making directly, and many of the ones that do still rely on
| outside market making.
|
| FTX was almost the exception since Alameda spun out of it
| IIRC
| JumpCrisscross wrote:
| > _pretty uncommon for exchanges to do all their market
| making directly_
|
| Point is, in real finance, it's pretty uncommon for
| exchanges to do _any_ of their market making. Largely to
| ensure they can project confidence in crises. Market
| makers blow up. Exchanges shouldn 't.
| Ferrotin wrote:
| Do exchanges in real finance even have long term customer
| deposits?
| JumpCrisscross wrote:
| > _Do exchanges in real finance even have long term
| customer deposits?_
|
| Not really. They used to! (A hundred+ years ago.) But we
| learned that an exchange blowing up is a hell of a lot
| worse than a bank or broker. So most systems segregate
| the functions. (It's also not great to have an exchange
| making markets and thereby having a vested directional
| interest.)
| qeternity wrote:
| Alameda was founded first.
| SXX wrote:
| This is just not the case. At least on Binance there are
| number of market makers other than Binance itself and there
| is a lot of tech built around this. I guess every major
| crypto exchange after MtGox is as complex as normal
| markets.
| joyfylbanana wrote:
| > Now consider crypto, where your ability to pause the market
| or unwind clearly-erroneous transactions is reduced or
| removed.
|
| These should be quite possible, no? Exchanges have
| mainteinance pauses now and then, however if they had them
| regularly that would drive customers away. Unwinding
| transactions inside crypto exchanges is also not unheard of I
| think.
| chis wrote:
| Probably the insolvent exchanges are able to offer lower costs
| and better promotions to users. For instance Coinbase has
| always charged way higher fees than FTX for simple buying and
| selling of coins.
| from wrote:
| Sometimes they offer to cover withdrawal fees too. Still it
| seems like they should be making money hand over fist.
| favflam wrote:
| Asset heavy. The computer systems to run one are expensive.
| Compliance is expensive. Your return on assets are probably
| lower than 5% in a regulated market.
|
| If you don't take extra risks to spruce up returns, you lose
| money.
| skippyboxedhero wrote:
| From Twitch, interview with Wintermute CEO (another big crypto
| MM) - https://www.twitch.tv/videos/1647004406?t=1h39m38s - had no
| idea this coming either (who got hacked for $100m recently).
|
| Later in the video Martin Shkreli tells Do Kwon that prison isn't
| so bad.
|
| Interesting interview.
| [deleted]
| [deleted]
| acyou wrote:
| The name Sam Bankman-Fried came up quite a lot in Twitter v.
| Musk. I wonder if he ended up with a stake in the acquisition
| deal. If SBF was a sizable backer of the Twitter buyout, this
| more than anything could take Twitter out at the knees.
| spelunker wrote:
| I thought Binance essentially caused all of this by dumping (and
| advertising dumping) FTT tokens? And now that FTX is in distress
| they're going to swoop in and buy a competitor? Kind of reminds
| me of Luxottica buying out Oakley...
| SevenNation wrote:
| The slashdot piece just links to the real article:
|
| https://techcrunch.com/2022/11/08/binance-signs-letter-of-in...
|
| > Zhao (pictured above) said Binance reached the decision after
| FTX asked the crypto behemoth for help. "To protect users, we
| signed a non-binding LOI, intending to fully acquire FTX and help
| cover the liquidity crunch. We will be conducting a full DD in
| the coming days," he said in a tweet.
|
| This appears to be an admission of running a fractional reserve.
| Otherwise where could a "liquidity crunch" come from.
|
| Hilariously, this is the origin story of Bitcoin. Can't trust
| banks. Create electronic cash. Users are clueless about what to
| do with the cryptographic material needed to secure electronic
| cash. Users park funds at exchange. Exchange operator is a
| criminal who embezzles the money away, or an incompetent boob who
| just loses it. Exchange freezes withdrawals, temporarily at
| first, while continuing to accept deposits. Mayhem ensues. Rinse
| and repeat.
|
| The entire FTX team belongs behind bars. The VC team that backed
| this hair-brained venture deserves everything coming to them.
| lordnacho wrote:
| What's the background of the liquidity crisis at FTX?
| edf13 wrote:
| CZ said it's dumping all their tokens from Binance...
|
| FTX starts to fail...
|
| CZ snaps it up for a song
| lordnacho wrote:
| I heard that as well, but how did FTX put themselves in a
| position where that can happen? Leveraging up in your own
| token?
| spaceman_2020 wrote:
| apparently they were playing VC with user deposits.
|
| This is why regulations exist.
| v8xi wrote:
| There was a report that came out a few days ago claiming
| that Alameda Research (SBFs company) was insolvent / did
| not have enough cash to cover their FTT liabilities[1]. CZ
| begins dumping their FTX token to de-risk and that led to
| them actually being insolvent.
|
| [1] https://dirtybubblemedia.substack.com/p/is-alameda-
| research-...
| drummer wrote:
| Kids, this is why you never leave your crypto on an exchange.
| robswc wrote:
| absolutely wild how "fast" this happened.
| bogomipz wrote:
| Interesting just 6 weeks ago the news was that FTX was buying
| Voyager Digital's assets for 1.4 billion dollar after winning a
| bankruptcy auction. In July the news was that FTX provided
| BlockFi with a $400 million line of credit and an option to buy
| the company for 240 million.[1][2] Now the crypto bailout savior
| is being bailed out?
|
| [1] https://www.cnbc.com/2022/09/27/bankrupt-crypto-lender-
| voyag...
|
| [2] https://techcrunch.com/2022/07/01/ftx-us-deal-with-
| troubled-...
| flanfly wrote:
| Impressive. I wonder how much of this was planned by CZ.
| [deleted]
| 55555 wrote:
| Anyone here remember when SBF was offering Elon Musk a billion
| dollars to help him buy Twitter? What the hell was he thinking?
| colinmhayes wrote:
| He was probably thinking the offer would leak and give him
| publicity, which it did.
| polygamous_bat wrote:
| To be completely frank, it worked too (at least on me). If
| you asked me two weeks ago which company would go bankrupt
| first between FTX and Coinbase, I would be hard pressed to
| answer, even though we all have access to the financial
| documents of Coinbase and all we have from FTX is SBF glamor
| and hot air.
| Scoundreller wrote:
| Are you sure they didn't make the deal?
| reducesuffering wrote:
| Yes, SBF didn't get a stake: https://danluu.com/elon-twitter-
| texts/#equity-financing-comm...
| jbverschoor wrote:
| Yup.. The transcripts say he wanted to partner yup. Binance did
| finance, so maybe it's a way to get involved in Elon's inner
| circle.
| dQw4w9WgXcQ wrote:
| Will be interesting to see how this assertive prediction from
| "someone in the industry" a few days ago plays out:
|
| >> Regardless if FTT collapses, it wouldn't matter cause
| insolvency both the asset and liability side of the balance sheet
| would go down. [1]
|
| We got our FTT collapse today, let's see if the "experts" are
| correct.
|
| [1] https://news.ycombinator.com/item?id=33467429
| guelo wrote:
| Lol wouldn't be surprised if dcolkitt is SBF or someone near
| him
| DEDLINE wrote:
| Was just thinking about this comment
| [deleted]
| firekvz wrote:
| What really amazes me about the whole thing is that after celcius
| and now ftx, tether manages to have peoples' trust and manages to
| have a bunch of apologists, to the point that in this whole
| threat there is 0 mention about usdt or tether, while it should
| at least be mentioned or discussed in here, even tho it has no
| direct relation, they are the org with most obscure and shady
| things about them, even the whole business of binance was built
| around their USDT pairs
|
| it's also quite funny how Binance now acts as a total legit org
| that has not wrongdoings when they have shown no proof of their
| BUSD backings and they built their empire on top of tether
| dibt wrote:
| >...What really amazes me about the whole thing is that after
| celcius and now ftx, tether manages to have peoples' trust...
|
| I've never held/used Tether, and that won't change. There's no
| reason to use it. However, it's worth pointing out that Tether
| DID go through what FTX is going through right now. They
| handled it surprisingly well.
|
| This article says they had $10 billion redemptions in May:
| https://www.cnbc.com/2022/05/17/tether-usdt-redemptions-fuel...
|
| This article says they had $1.6 billion redemptions in June:
| https://www.coindesk.com/markets/2022/06/15/tether-sees-new-...
|
| There are rumors that FTX was/is missing as much as $5 billion
| of customer deposits. That's what lead to their withdrawal
| issues.
|
| >while it should at least be mentioned or discussed in here,
| even tho it has no direct relation
|
| It's a stable coin, not a centralized exchange. No comparison.
| Though, both should be able to honor 100% of withdraws at any
| moment.
|
| You are likely to label me as an apologist. Again, I don't
| trust it. I couldn't care less if it stops existing tomorrow. I
| just haven't seen any concrete evidence it can't honor
| redemptions. The opposite was proven in May and June.
| qeternity wrote:
| > This article says they had $10 billion redemptions in May
|
| This is only impressive if they _actually_ had $10B of cash
| and equivalents to return /liquidate in that period.
|
| Of course the accusation is that Tether is largely unbacked,
| and so redeeming $10B of nothing is a lot less impressive.
| whoknew1122 wrote:
| Wait, am I to understand that decentralized finance is becoming
| more... centralized? That doesn't seem right... /s
| chucknthem wrote:
| It's one centralized entity acquiring another centralized
| entity, so it's more like the centralized brokers of crypto
| just became more centralized.
| jo6gwb wrote:
| SBF yesterday:
|
| "FTX is fine. Assets are fine."
|
| Can't trust a word out of this guy's mouth.
| xur17 wrote:
| If I've learned anything, the moment you start seeing posts
| like "funds are safe", "withdrawals are flowing" from an
| exchange, it's game over, and time to gtfo if it's not already
| too late.
| kwere wrote:
| Funds are Safu -Bizonacci
| pranshum wrote:
| "Every banker knows that if he has to prove he is worthy of
| credit, in fact his credit is gone." - Bagehot
| AlexMoffat wrote:
| +1 That's a great book.
| BLanen wrote:
| "Exchanges"(Exchanges and brokerages in one) are not supposed
| to be banks. Everything can be withdrawn from brokerages
| without them being insolvent.
| pranshum wrote:
| If the brokerage provides leverage to its customers, it can
| be subject to the same sort of bank runs that a normal bank
| can.
| edouard-harris wrote:
| Indeed. And in this case, it was from one day to the next.
| ploppyploppy wrote:
| I'm really glad this shyster is having light shed on his
| behaviour. It's always been odd to me how FTX made it so big so
| quickly.
| ww520 wrote:
| The assets are fine. Just the value of the assets is not sure.
| v8xi wrote:
| Assuming due diligence goes through. I'm sure Binance won't know
| precisely where to locate any deal-tanking skeletons.
| dang wrote:
| Url changed from
| https://slashdot.org/story/22/11/08/1612256/binance-to-acqui...,
| which points to this.
|
| Submitters: " _Please submit the original source. If a post
| reports on something found on another site, submit the latter._ "
|
| https://news.ycombinator.com/newsguidelines.html
|
| Edit: we changed the URL again--this time from
| https://techcrunch.com/2022/11/08/binance-signs-letter-of-in...
| to a different one that seems to give more background and more
| explanation. (via https://news.ycombinator.com/item?id=33523192,
| but no comments there)
| sergimas15 wrote:
| awesome
| ilrwbwrkhv wrote:
| All of these folks need to be in prison along with Andreeson
| Horowitz. All bloody crooks the lot of them. The largest ponzi
| scheme in the history of humanity and they wonder why the world
| is not getting better.
| beambot wrote:
| _Largest_ might be a stretch. I suggest spending some time
| reading about John Law, the South Sea Bubble, and the
| Mississippi Company. When you realize that all of these ponzi
| schemes ultimately resulted in modern central banking, you
| might reasonably contend that the largest ponzi scheme is still
| sitting right here in plain sight -- with crypto illuminating
| (mocking?) the essence of fiat-denominated "wealth" and
| "money".
| rottencupcakes wrote:
| Is it really a ponzi scheme if it's enforced via threat of
| violence?
| beambot wrote:
| Perhaps -- in the same way that the difference between a
| religion & a cult is really just a matter of scale and mass
| acceptance.
|
| To be clear: I'm not advocating against the model of money
| as we know it today... All models are wrong, but some are
| useful.
| boppo1 wrote:
| Can you give us a TL;DR on how those schemes resulted in
| modern central banking? It's challenging to find solid info
| on the introduction/acceptance of central banking as the
| status quo. Lots of it veers hard into conspiracy theory and
| information that I can tell is wrong from a handful of
| college finance courses.
|
| I know this is the second (or third) central banking paradigm
| that has existed in the US. The last one got shut down by ol'
| AJ, but I don't really understand how that all went down and
| how it's different (or similar) to what we have now.
| beambot wrote:
| The ~1 hour YouTube series _The History of Paper Money_ by
| _Extra Credit_ is a good, factual starting point presented
| in an entertaining fashion:
| https://www.youtube.com/watch?v=-nZkP2b-4vo
| dibt wrote:
| Did AH take money from retail investors? I suppose you can
| claim they pumped these products. I'm not convinced it's any
| different than what happens with an IPO that started with VC
| money. I'm not saying it's good, just that it's as bad as
| anything that's regulated.
| wolski wrote:
| https://www.youtube.com/watch?v=kSXQgCP3WQw&t=1620s A good
| explanation on how these schemes usually work out.
| shuckles wrote:
| Would you consider cashing out pre-ICO tokens for bogus
| projects to "accredited investors" (ie retails) as "taking
| money"?
| dibt wrote:
| I have no doubt that anybody that had access to pre-release
| allocations were well aware of the risks. Net worth was
| likely checked. They don't need to be treated like a child.
|
| Probably a civil matter anyway - no expectation of jail,
| which was what the parent commenter referenced.
| shuckles wrote:
| I was referring to insiders selling at ICO to retails.
| I'm sure insiders were savvy and made plenty of money.
| havefunbesafe wrote:
| There was a looming liquidity crunch because the people running
| exchanges are... well... lying about reserves.
| ploppyploppy wrote:
| Kraken aren't: https://www.kraken.com/en-gb/proof-of-reserves
| xch wrote:
| just listen to torrent protocol designer already and end these
| shitshows chia.net
| insane_dreamer wrote:
| DeFi --> CeFi
| danrocks wrote:
| --> Fi
| locallost wrote:
| As Matt Levine just pointed out in his newsletter, FTX was doing
| the same to bail out other failing crypto companies in the
| summer. Now it needs a bail out itself.
|
| What will happen to Binance in a few months if the system is now
| unwinding? That's the question right, if it's a system problem or
| FTX was greedy and over leveraged. For me it smells like a system
| issue because it's all based on funny money.
| JumpCrisscross wrote:
| Ha, in exchange for extending a non-binding LOI, Binance got a
| competitor to admit they're illiquid.
| polygamous_bat wrote:
| Which seems like a huge L for FTX... until you start thinking
| about what the alternative must have been if this is what they
| chose.
| JumpCrisscross wrote:
| > _what the alternative must have been_
|
| It's clear it would have involved everyone losing their money
| and Bankman Fried being on the run a la Do Kwon.
| polygamous_bat wrote:
| I mean, that could still happen. I am not ready to give up
| hope yet.
| misil wrote:
| Can we perhaps take this opportunity to pour one out for Matt
| Levine? I can't think of any writer/journalist who can bring an
| often esoteric topic like present day financial shenanigans to
| life with such clear, intuitive and bitingly funny writing. His
| coverage of the whole Elon/Twitter saga alone is second to none.
| wslh wrote:
| How is Solana positioned in this context? Breakpoint Solana was a
| big event these days [1]
|
| [1] https://solana.com/breakpoint
| listenallyall wrote:
| Not surprised at all. They went all-in on a disastrous Super Bowl
| commercial -- certainly not the only reason for their downfall
| but representative of leadership more concerned with image than
| product.
|
| https://news.ycombinator.com/item?id=30424299
| SilverBirch wrote:
| So this is presumably going to stop the bleeding for customer
| deposits at FTX. I wonder how this all shakes out with Alameda -
| because it looked extremely likely that Alameda and FTX were
| doing a fair amount of business between each other, and now
| Alameda likely will be forced to unwind a load of illiquid
| shitcoin positions, CZ isn't going to want those loans
| outstanding (or maybe he will - pull the same move again and hold
| a gun to Alameda's head ready to force liquidition whenever he
| likes)
| dibt wrote:
| I think Alameda only held those positions in service to their
| market making operations, not FTX operations.
|
| The line between where FTX starts and Alameda ends always
| confused me.
| ww520 wrote:
| Bitcoin balance on FTX Exchange have gone negative [1]. The
| withdrawals have been disabled on FTX. It's probably the AltCoins
| bought with the BTC by FTX have gone down in value and the BTC
| are gone for good. When people withdraw against BTC, there aren't
| enough.
|
| [1] https://cryptoslate.com/bitcoin-balance-on-ftx-exchange-
| goes...
| drumhead wrote:
| Nicest thing about the Crypto bust is that HN isnt flooded with
| articles about the latest coin of Blockchain tech.
| steveBK123 wrote:
| This is great, he was lecturing how stock exchanges should work &
| on the cover of Fortune as the next Warren Buffet all of what.. 8
| weeks ago?
|
| SV fintech keeps reinventing all the mistakes of 19th century
| banking.
|
| BNPL is the next explosion btw.
| steveBK123 wrote:
| Found it:
|
| Speaking with the Financial Times on July 14, Bankman-Fried
| stated that if FTX can become the top crypto exchange and
| supplant rivals such as Coinbase and Binance, the idea of
| purchasing giants such as Goldman Sachs and CME group is not
| off the table:
|
| "If we are the biggest exchange, [buying Goldman Sachs and CME]
| is not out of the question at all."
|
| https://cointelegraph.com/news/billionaire-sbf-says-ftx-may-...
| 22SAS wrote:
| >"If we are the biggest exchange, [buying Goldman Sachs and
| CME] is not out of the question at all."
|
| JFC, what an arrogant twat!
| tfsh wrote:
| Any crypto exchange posturing buying out the likes of Goldman
| or CME are obviously doomed to fail. There's a fundemental
| difference between having courage and being down right
| lunatic, SBF definitely falls in the latter...
| steveBK123 wrote:
| The other laugh is that he was saying this summer that some
| crypto exchanges were already secretly insolvent. Huge, if
| true.
| mamonster wrote:
| BNPL has already exploded though, but good call. Klarna is down
| about 90% in the private markets, Affirm about the same from
| all time high.
|
| Another good candidate is "AI-powered" insurance i.e Lemonade.
| skippyboxedhero wrote:
| Insurance is already "AI-powered"...insurance companies
| employ statisticians to build prices, and they have been
| using low-cost distribution since the 90s.
|
| Speaking generally, insurance was one of the first industries
| to deploy technology effectively in their core business. They
| are still doing that.
|
| The issue with companies like Lemonade is that they are
| rebranding the same product as "AI" (afaik, Lemonade is just
| taking share by offering cheaper prices...doesn't sound quite
| as appealing as "AI").
| rhaway84773 wrote:
| This. I'm not sure what Lemonade does differently from
| other insurers than providing a nicer UI.
|
| They likely also have lower costs due to eliminating the
| middle men whose job is to translate text on the screen
| into words spoken to a customer.
|
| So their lower costs could actually be legitimate.
| skippyboxedhero wrote:
| Obviously this does vary because retail insurance is
| usually sold locally but the middle men were eliminated
| years ago.
|
| First, it was phones. This happened in the early 90s.
| Then it was internet which was largely finished by the
| early 2010s. The only exception for this is that online
| price-comparison websites have added back some
| distribution costs...but you still need to spend on
| marketing if you are online (generally speaking, online
| ads aren't cheap, I know insurers in my market that have
| moved away from price-comparison/online advertising
| because of the cost).
| weswilson wrote:
| There are still plenty of middle men in insurance. There
| are Carriers, MGA's, Agency Networks/Aggregators, and
| Brokers.
|
| Large insurance carriers (think Geico, etc) with enough
| market share (and captive agents) have the vertical
| integration that eliminates the middle men, but there is
| a whole world of insurance that most people don't realize
| each taking their cut.
| skippyboxedhero wrote:
| Which is why I said it depends on local situation. None
| of those exist where I am.
| FormerBandmate wrote:
| Their stock value is down, but they still are financially
| solvent. Lehman didn't explode when it fell from $60 to $6,
| it exploded when it went bankrupt. They're a lot closer to it
| now then a year ago, however
| twelve40 wrote:
| they are losing like what, $700 mil a year? with the
| current cost of capital, probably not solvent for very
| long.
| FormerBandmate wrote:
| Yeah, they're fucked. They're just not dead (yet)
| boppo1 wrote:
| How do you keep track of private markets? Are you involved in
| the business?
| mamonster wrote:
| Well the place where I work at has a PE/VC arm that
| unfortunately decided to invest in Klarna sometime in
| 2021(not my call and not my loss), so naturally this year
| when it took a huge markdown, I became aware of it.
|
| To track private markets you either need to basically know
| someone in VC/PE and just ask for a specific company you
| are interested in, or use something like Pitchbook. The
| first option is much better, as you can get an estimate of
| prices even when deals aren't getting done(i.e a VC/PE
| person can tell you how much they would pay for X company
| even when X company isn't raising).
| steveBK123 wrote:
| ZIRP is a hell of a drug. There's not a lot of innovation to
| be had on lending that is actually going to be considered
| legal. Unless they obfuscate it with AI, they are going to
| run afoul of some sort of anti-discriminatory laws.
|
| Credit score&history, income, capital.. go.
|
| Most of what BNPL actually turned out to be was just dumb
| money.
| mamonster wrote:
| Its also the fact that in a bear market / recessions
| usually most correlations go to 1(on the way down) and
| whatever risk metric you used previously justify having low
| default provisions suddenly doesn't work anymore.
|
| Wonder whether we will ever see the actual datasets that
| BNPL founders saw that made them decide it is a safe
| business. Probably like you said ZIRP,bullmarket
| delinquency percentages.
| astrange wrote:
| Part of the supposed appeal of BNPL is that if the market
| gets risky, you have much more choice about how much new
| credit you can offer, since you're free to offer it per-
| purchase not per-customer.
|
| It makes more sense for a large retailer to run it
| themselves, though; there's not necessarily any value in
| a dedicated company selling it straight to customers.
| steveBK123 wrote:
| Yes, though they were already taking on serious credit
| losses before any normal creditors were.
| dibt wrote:
| That says more about media outlets like Fortune, than "SV
| fintech." It seems like you're using that as a way to describe
| a single entity. Many people in crypto saw him as a snake.
| janmo wrote:
| Title is incorrect, they signed a non-binding LOI. They will
| first do a lot of Due Diligence and might back out of the deal
| anytime.
| alphabetting wrote:
| Yeah. Binance seems to have all the leverage.
|
| https://twitter.com/ClarityToast/status/1590016720923930628?...
| wmf wrote:
| FTX needs cash right now and either Binance will provide it
| right now or they won't.
| janmo wrote:
| It seems withdrawals are halted, and there is no clarity of
| weather or not they have resumed after the announcement.
|
| Without withdrawals FTX will loose in importance and value
| every single hour.
|
| It is hard to build trust as a crypto exchange, but it is
| very easy and can be quick to lose it.
| Scoundreller wrote:
| > It is hard to build trust as a crypto exchange
|
| Iunno, it seems a lot easier than I ever expected
|
| (I don't run one, just observing others)
| TravelTechGuy wrote:
| Some more background: the companies were engaged in fighting over
| regulations, and on a personal basis between the 2 CEOs. It went
| down to really childish levels at some point.
|
| But one thing is undeniable: SBF (FTX CEO) was trying to
| weaponize US regulation against his biggest rival CZ (Binance
| CEO). CZ retaliated by selling the FTT token, exposed the fact
| FTX was over-leveraged, and took over.
|
| This is, as the kids on Twitter say, the embodiment of the old
| "F#$k around, find out".
|
| Along the way every FTX client who couldn't withdraw, and every
| crypto user losing value got screwed - but why should these 2
| characters care? The space just became more centralized, and
| whatever smidge of trust was left after the Celsius debacle has
| evaporated.
| appleflaxen wrote:
| And over-leveraged, for a brokerage, is a major problem. A
| brokerage is not a bank, and account-holders are not earning
| interest. Therefore if you are taking their funds and doing
| something else with them (a pre-requisite for insolvency,
| unless you are hacked) is a major red flag for illegality.
| jonas21 wrote:
| For those not up to date on crypto people, SBF is Sam Bankman-
| Fried [1] and CZ is Changpeng Zhao [2]. I don't know why they
| insist on being called by their initials like they're some sort
| of ticker symbol.
|
| [1] https://en.wikipedia.org/wiki/Sam_Bankman-Fried
|
| [2] https://en.wikipedia.org/wiki/Changpeng_Zhao
| Analemma_ wrote:
| Because they think the people they're most similar to are
| respected old-school hackers (rms, jwz, etc.) instead of
| carnival hucksters like P. T. Barnum.
| alliao wrote:
| i can just imagine jwz squirming at the idea of this and it
| is way too funny...
| [deleted]
| eru wrote:
| P. T. Barnum doesn't deserve the bad reputation. See eg
| https://news.ycombinator.com/item?id=310056
| jefftk wrote:
| If they were imitating the older style they would use
| lowercase
| RC_ITR wrote:
| You see the same thing with Middle East Leaders - MBS, MBZ,
| etc.
|
| When the names are even semi-complex and the reach is global,
| people default to acronyms.
| anonporridge wrote:
| Also AOC, MLK, FDR, and JFK!
| a4isms wrote:
| Pedantic nit:
|
| Those are initialisms. An initialism is when the individual
| letters are individually pronounced, like "emm-bee-ess."
|
| An acronym is when the initial letters are pronounced as a
| word, e.g. SOAR ("Situation Options Act Review-and-
| Reassess")
| Jasper_ wrote:
| If there's one thing I really dislike about HN culture,
| it's the consistent derailing of a thread to "um,
| actually" someone on a semantics distinction that
| literally nobody has ever been confused by, or to
| shoehorn in new terminology that doesn't improve
| communication in any way.
| 3np wrote:
| > literally nobody has ever been confused by
|
| um, actually...
| xapata wrote:
| I enjoyed reading the diversion. I don't think it
| derailed anything, except perhaps for your reply.
| user_named wrote:
| Agreed
| a4isms wrote:
| Some of the most interesting things I've read have been
| digressions from the main point. Your observation is a
| case in point: We're now talking about HN culture instead
| of wild times in the crypto economy. Is this a
| derailment? Or a digression?
|
| It all depends upon whether people perceive it to be
| something that "gratifies one's intellectual curiosity,"
| a line right from the guidelines. In your case, the
| difference between initialisms and acronyms (if any, see
| another reply) does not, and I accept that. Sorry!
| RC_ITR wrote:
| The broader sense of acronym--the meaning of which
| includes terms pronounced as letters--is sometimes
| criticized, but it is the term's original meaning[1] and
| is in common use.Dictionary and style-guide editors are
| not in universal agreement on the naming for such
| abbreviations, and it is a matter of some dispute whether
| the term acronym can be legitimately applied to
| abbreviations which are not pronounced "as words", nor do
| these language authorities agree on the correct use of
| spacing, casing, and punctuation.
|
| [1] https://www.oed.com/viewdictionaryentry/Entry/1844;js
| essioni...).
| [deleted]
| pottertheotter wrote:
| With the exception that people like MBS, MBZ, AOC, etc. are
| objectively much more well known.
| CamelCaseName wrote:
| They go by acronyms on social media, namely twitter, the main
| place people interact with them
|
| https://twitter.com/cz_binance
|
| https://twitter.com/SBF_FTX
| rvba wrote:
| CZ is Czechia though
| bhawks wrote:
| It will get it's acronym back shortly.
| H8crilA wrote:
| Unless it turns out that Changpeng is of the Habsburgs.
| Then we will have a serious clash in Europe again.
| [deleted]
| aliqot wrote:
| pretty much everyone is a descendant of franz joseph
| HashBasher wrote:
| The acronyms are very twitter friendly.
| conductr wrote:
| DPR fans?
| SilasX wrote:
| Because Bankman-Fried is a mouthful/typeful to say every
| time, and Changpeng is a big, non-western name, and Zhao too
| common by itself.
|
| Source: me referring to one of them in conversation a lot
| with no incentive to kowtow to his preferred branding.
| sneak wrote:
| It's common in many internet circles to refer to prominent
| people by their initials. Hackerdom has a long tradition of
| this: rms gls esr jwz et al. It also tends to happen in US
| federal politics for some reason (jfk rfk gwb fdr et al) but
| not to everyone.
| throwaway81523 wrote:
| FDR went by FDR because those were his initials and ehh,
| people do that sometimes. Have enough presidents and sooner
| or later you'll get a president who does it. JFK and LBJ
| did it as conscious homages to FDR. There is a book "In The
| Shadow of FDR" about post-WW2 US politics that mentions
| this.
| [deleted]
| woodruffw wrote:
| There's a little bit of cargo-culting with the practice: I
| thought CZ was short for the Czech Republic. The only
| reason I know "SBF" is because the New Yorker obliged him
| in that William MacAskill piece.
| bombcar wrote:
| At least the political ones (some) came about for
| clarification (JFK and RFK are both Kennedies, GWB is to
| distinguish from "Bush"). Others come from their names
| being long or hard to remember/pronounce/spell (I suspect
| this is what happened with AOC).
| pitt1980 wrote:
| The Robert Caro books about Lyndon B Johnson detail his
| effort to force meme "LBJ" as a reference to him.
|
| (Mostly in terms of insisting various communications
| employees use it in press releases and what not).
|
| It seems he liked the iconography of it, especially in
| putting himself in similar company to FDR.
|
| Both his daughters have the LBJ initials, his wife is
| mostly known as Lady Bird Johnson (a nickname that
| predates their relationship, but is not her given name)
| cossatot wrote:
| OT: Are those books worth reading? I loved the Power
| Broker but the LBJ books are a whole lot to get through.
| sbierwagen wrote:
| Maybe.
|
| The books are designed to be standalone-ish, so later
| volumes spend a fair bit of time repeating things from
| earlier books. Caro goes deep, deep into various shady
| acts and new scandals which were probably shocking and
| relevant in 1982 but less so four decades later.
|
| Caro also touches on a lot of the same topics as The
| Power Broker, and the picture he paints of LBJ ends up
| sounding quite a lot like Robert Moses. Is it because all
| powerful men inevitably end up as bullying psychopaths,
| or does Caro have something of an axe to grind? 50/50,
| maybe.
| pitt1980 wrote:
| Short answer, yes.
|
| Longer answer - from my prospective - I enjoyed the first
| book Path to Power the most, which revolves around LBJs
| early life up to becoming a US Representative. I thought
| it was very on par with the Power Broker. That an the
| Power Broker would probably be my first recommendation to
| an ambitious college kid who wants to know the real
| Politik of how the world works.
|
| The next book Means of Assent was my least favorite of
| Caro's books, but still highly enjoyable.
|
| Master of the Senate and Passage of Power are both great.
| But sort of specific to LBJs spot in life. Great, but I'm
| not sure they sparked my thinking quite the way the Power
| Broker and Path to Power did.
| Taek wrote:
| Can't forget pg and sama
| rswail wrote:
| Who are "et" and "al"? /s
| wbl wrote:
| Fun crossover: IKE, internet key exchange had a proposed
| successor JFK
| dpflan wrote:
| Maybe: Crypto is full of acronyms, token tickers are a great
| example and apropos here --> their names have been
| "tokenized"...?
| rich_sasha wrote:
| Ownership of personhood as documented by holding an NFT.
| dboreham wrote:
| You've been reading the DID spec.
| TeMPOraL wrote:
| Which is basically an energy-wasting form of the Blue
| Checkmark?
| dboreham wrote:
| Not even that, because that'd be a web of trust, like PGP
| or Keybase.
| RileyJames wrote:
| With the proof of stake release for Eth, is this point
| still valid?
|
| Bitcoin is still energy intensive, but that has nothing
| to do with NFTs.
| walrus01 wrote:
| > It went down to really childish levels at some point.
|
| Childish bullshit in the cryptocurrency market?!??! I am
| absolutely shocked and surprised, such a thing is completely
| unprecedented...
| dang wrote:
| No flamewar please.
|
| https://news.ycombinator.com/newsguidelines.html
| mekster wrote:
| Why are people trying to make up their own stories without the
| reason of how CZ was trying to sell FTT?
|
| Alameda's balance sheet was already looking wrong in the first
| place.
|
| https://www.coindesk.com/business/2022/11/02/divisions-in-sa...
| Bubble_Pop_22 wrote:
| Lots of stuff changed since the Middle Ages, antibiotics took the
| place of leeches, we know that the Earth revolves around the Sun,
| we can take pictures of Black Holes...
|
| What hasn't changed is that given the opportunity everybody wants
| to be a banker, invest other people's money and pocket the
| difference.
| neonate wrote:
| https://archive.ph/I7ZRD
| sherlock_h wrote:
| Wow. What an outcome to the whole saga. I wonder what happened
| behind the scenes
| datalopers wrote:
| CZ triggered it, destroyed FTX, and now gets to be the hero.
| JumpCrisscross wrote:
| > _CZ triggered it_
|
| Binance called attention to the weakness. The underlying
| issues were all caused by FTX.
| returnInfinity wrote:
| This exactly, blame FTX
| shapefrog wrote:
| I cant believe that horrible charity triggered the collapse
| of Bernie Maddoff by asking for their money back.
| SilverBirch wrote:
| You know what this makes me kind of wonder... back earlier in the
| year SBF made a big show of coming in and investing in a bunch of
| the companies that were collapsing due to the LUNA/3AC/Celsius
| problems. He stepped in and to some extent halted the unwinding
| of some of these issues. It turns out now that it's likely FTX is
| underwater, and Binance is basically doing the same thing -
| coming in, picking them up cheap and preventing them from really
| having to unwind.
|
| So It's perfectly possible this action does the exact same thing
| as last time - simply stalls the unwinding of this catastrophe,
| which in the end could possibly even prove Binance insolvent. At
| the end of the day we just end up in a situation where Binance
| itself has pricing power over tonnes of coins, and if the market
| comes back they'll be fine, but if the market continues to slide
| at some point they won't be able to support the market any more.
| fdgsdfogijq wrote:
| In retrospect, something very shady about those deals they
| made. There may have been more contagion than let on. Or FTX
| themselves was financially tied to those assets, and was the
| true actor swindling people through ponzi yield farming
| schemes.
| shapefrog wrote:
| Pure speculation - but I am going to go ahead and speculate
| that they lost most of the money when everything collapsed a
| few months ago in the defi blow up.
|
| They doubled down and bought up distressed assets for cents on
| the dollar, hoping to make it back. A few months on, these bets
| are worth $0 and there is a $5bn hold in the balance sheet.
|
| If binance havent been f'ing around on the side gambling on the
| price, and just collect their brokerage on their exchange they
| will have plenty of cash to make FTX customers whole, restore
| some faith in the system and dominate the market place.
| fdgsdfogijq wrote:
| Yup, I think this is what happened. And they claimed "it was
| for the good of the crypto ecosystem", which in part is true.
| But the reality if SBF aquired because he had to.
| xur17 wrote:
| Taking that a step further, is Binance doing the same
| thing?
| shapefrog wrote:
| Without wanting to overdo the "speedrunning 100 years of
| trad finance" crypto has just replayed 2008.
|
| FTX is playin the role of Bear Sterns and Binance playing
| JP Morgan. Defi are subbing in for Mortgage bonds, CDOs
| and synthetic CDOs squared. Margott Robbie can play
| herself again the the explanation
| https://www.youtube.com/watch?v=wlHrSZ7BVFI
|
| As with 2008, it is entirely possible that _an exchange_
| does what it is meant to do and just happily generates
| piles of profit for zero risk - taking a percentage of
| every transaction a bit like ebay. Is that Banance? Or
| maybe Gemini of Winklevoss fame?
|
| No idea, CZ of binance tweets like he gets this, but who
| know. SBF tweeted saying they had everyones money but i
| guess the character limit means he couldnt say the whole
| statement which really was "we have everyones money ...
| except for 5-6billion of it"
| xur17 wrote:
| > No idea, CZ of binance tweets like he gets this, but
| who know.
|
| Agreed. CZ has also posted that he intends to start
| publishing merkle-tree proof-of-reserves [0] for Binance.
| Definitely could be posturing, but if he follows through
| it would definitely raise the confidence in Binance.
|
| [0]
| https://twitter.com/cz_binance/status/1590055819416330240
| FormerBandmate wrote:
| Binance has serious legal issues (governmental investigations)
| and isn't based out of any jurisdiction. A Binance failure
| would have consequences that are very hard to predict
| from wrote:
| Binance reminds me of https://en.wikipedia.org/wiki/Bank_of_C
| redit_and_Commerce_In... but I don't think they're stealing
| customer money. It is amazing that they have evaded American
| regulators so long. I think one day they are going to disable
| trading in dollars.
| FormerBandmate wrote:
| Honestly, I think FTX is biting off way more than they can
| chew. They're really well-connected for the crypto
| industry, knifing them will definitely get the attention of
| regulators and that could blow up the entire thing. Their
| only real asset is being perceived as too big to fail but
| they're not exactly acting in ways that endears them to the
| federal government
| pjc50 wrote:
| Unless Mr CZ is on the moon, he very much is based out of
| some jurisdiction. It just might not be extraditable to the
| US.
| ackbar03 wrote:
| Maybe that's why he's been so supportive of musk in his
| Twitter buyout
| FormerBandmate wrote:
| He keeps moving around. I think he's based out of Dubai
| now, but there's been seven countries or so over the past 5
| years
| idiotsecant wrote:
| I'm not sure that binance has a reason to exist in the
| current world where defi is a thing.
|
| Things like Coinbase etc are your place to go if you want a
| fiat to crypto on-ramp or off-ramp or if you want a
| reasonably safe place to park crypto if you don't want to own
| it yourself.
|
| There are innumerable decentralized exchanges where a person
| can be absolutely (for some definition of the word) sure that
| the exchange won't be shutting down and taking your money
| before you're done doing your transaction. There are L2 DEX
| even that are approximately the same cost and same level of
| inconvenience as something like Binance.
|
| Why does it matter if Binance goes away? I'm not sure if it
| does!
| [deleted]
| acjohnson55 wrote:
| And yet, here they are, processing a huge amount of volume.
| Their customers obviously do think they have a reason for
| existing.
| searchableguy wrote:
| Binance is the biggest exchange by a _huge margin_. It
| dwarfs coinbase and FTX.
|
| They are also huge investors in crypto and any winding up
| will have an impact on a significant number of companies.
|
| They control a significant portion of stablecoin, defi, and
| chain market too.
|
| Their impact would be felt outside the crypto space if they
| ever go down.
| rhaway84773 wrote:
| All the more reason for them to go down sooner rather
| than later because they're eventually gonna go down, so
| better now where they will have less impact outside the
| crypto world than they would a few months or years later.
| TomSwirly wrote:
| If it's going to happen, better sooner than later.
| eftychis wrote:
| I mean we are wishing here for an economic catastrophe.
| What am I missing?
| pasttense01 wrote:
| It's not an economic catastrophe: currently the real
| economy is not strongly affected by what happens in the
| crypto-economy--and we need to keep it that way!
| senttoschool wrote:
| To protect people from getting scam and to put money in
| more efficient and productive industries.
| rideontime wrote:
| So, report back here for the same thread in a few months?
| Who'll it be next?
| warinukraine wrote:
| Yes, because the entire space is predicated on some magic beans
| having intrinsic value, which they don't. And then people
| realize that magic bean number N is also worthless, everyone
| exposed to magic bean number N goes bankrupt.
| rhaway84773 wrote:
| This is the crypto ponzi falling apart. First the smaller
| ponzis fall apart so the larger ponzis need to step in so the
| fact that the entire thing is one big Ponzi doesn't get fully
| exposed.
|
| The Ponzi falling and subsequent cover up by the bigger Ponzi
| keeps going up the chain until those at the top of the Ponzi
| food chains collapse.
|
| Right now it looks like that might be Binance.
| paxys wrote:
| I'm perfectly happy with that outcome as long as the taxpayer
| isn't left holding the bag at the end.
| eftychis wrote:
| I think the title is incorrect (someone else noted too!). It
| should be "Binance sends non-binding Letter of Intent [to buy] to
| FTX."
|
| Less sexy, more accurate.
|
| Also, extremely likely they are trying to consolidate power and
| they orchestrated this situation I'd say. This "smells" hostile
| takeover, but in a currency setting. a) They sold FTT in a
| "dumpy"/reevaluate its price way b) they were asked for a loan or
| partial buy to add influx c) they sent a "we will just buy
| you."d) They sent messages that would erode the trust to the eyes
| of the world.
|
| Rings a bell? (Spoiler: see Twitter.)
| WhiteOwlEd wrote:
| There is an interesting irony to this in that SBF had contributed
| $38 million to PACs as part of this election cycle.
| partiallypro wrote:
| What if Binance looks under the hood (this is not a binding
| acquisition yet) and just says it's not worth it? What happens to
| everyone's deposit?
|
| I find it ironic that the "decentralized" nature of crypto is
| becoming more and more centralized. If FTX dies, beit via
| acquisition or just utter collapse, Binance would be a near
| monopoly.
| alphabetting wrote:
| September's cover of Fortune was quite the jinx
|
| https://content.fortune.com/wp-content/uploads/2022/07/COV.W...
| no_butterscotch wrote:
| Looks like it was the "Or crash and burn" from the cover. Bad
| move on his part.
|
| I was wondering why he was throwing rescue tubes to silly
| projects. It seemed like he had too much money.
| anonu wrote:
| I think SBF realized marketing is everything. Being the face of
| crypto, sponsoring sports stadiums, being on the cover of a
| widely distributed magazine, all part of the same playbook.
| skippyboxedhero wrote:
| The Superbowl ad curse.
| rhaway84773 wrote:
| Lots of crypto cokpanies that did not advertise in the
| Super Bowl or whose founders were not profiled by Forbes or
| Fortune have also collapsed.
| actionablefiber wrote:
| But it turns out that wasn't true. It turns out "being able
| to cover customer withdrawals" is everything.
| sytelus wrote:
| In general, when I see someone on the cover of Fortune, I
| expect their business's half-life to be about a year. This has
| been very consistent because of the process of getting on the
| cover of Fortune and kind of people who push to get on it
| Elizabeh wrote:
| Ptchd wrote:
| Wasn't FTX a company bailing out other crypto companies?
| moneycantbuy wrote:
| I hope MLB umpires continue to wear the FTX logo plastered all
| over their uniforms for the coming years.
| davydog187 wrote:
| Short explainer on the backstory
| https://www.milkroad.com/p/binance-vs-ftx-heres-happened-wee...
| seaucre wrote:
| Would love to see Sorkin's version of the negotiation between SBF
| and Binance.
| skee8383 wrote:
| returnInfinity wrote:
| its related to tech and the valley
| skee8383 wrote:
| It's a slippery slope. i've ran a few IRC and matrix
| channels. once the crypto people show up it all gets turned
| into a crypto circus. they will take over this site if it's
| allowed to continue. this site will literally be
| indistinguishble from coindesk.
| willio58 wrote:
| Digital currency is the future even if 99% of the current
| ones out there are scams or scam-adjacent. To ban all talk
| about digital currency from a website all about the tech
| industry is just silly.
| caldarons wrote:
| This piece on Alameda Research (also owner by SBF) was on HN a
| few days ago. It might end up being quite insightful...
|
| https://dirtybubblemedia.substack.com/p/is-alameda-research-...
| adrr wrote:
| Question in the article is who holds the debt? My bet is that
| it is FTX.
| 1995moz wrote:
| Could it be that it is SBF who is playing CZ by potentially
| involving US regulatory apparatus (CIFUS) and resulting scrutiny
| into Binance? In the weirdo-world-of-crypto(TM), anything is
| possible?
| Bubble_Pop_22 wrote:
| Such an amazing theatrical play.
|
| So FTX is AIG and Binance gets to play the Fed.
|
| What happens in the second act when Binance transitions to its
| next role of Lehman but there is nobody to play the Fed?
| eternalban wrote:
| A friend visiting from Iran and I were discussing the current
| wave of boycotts in Iran against companies that are controlled by
| the regime. He related that consensus in Iran is that after a
| certain size (or if in important sector) all companies are part
| owned if not controlled by Sepah (IRGC - a terrorist
| organization).
|
| So while 'Nobitex' doesn't mention anything about who is running
| it on their website, you can be certain that it is a very
| important company as far as IRGC is concerned.
|
| Which brings us to the legal question (IANAL) of how much legal
| exposure is Binance facing here, given that the Iranian-American
| community is gearing up to legally excise ("wipe from pages of
| history") all elements of IR from access to US government,
| commerce, academia, lobbies, communications, and of course
| finance, and those who support the Islamic Republic here in USA,
| and their terrorist IRGC will face legal consequences.
|
| From Reuters:
|
| "Crypto giant Binance has processed Iranian transactions with a
| value of $8 billion since 2018 despite U.S. sanctions intended to
| cut Iran off from the global financial system, blockchain data
| show.
|
| "Almost all the funds, some $7.8 billion, flowed between Binance
| and Iran's largest crypto exchange, Nobitex, according to a
| review of data from leading U.S. blockchain researcher
| Chainalysis. Nobitex offers guidance on its website on how to
| skirt sanctions."
|
| https://www.reuters.com/business/finance/exclusive-crypto-ex...
| radicaldreamer wrote:
| It's not even binding, so Binance could take a look under the
| hood and say no thanks. No idea whether FTX can cover withdrawals
| at this point or what the collateral damage will be.
| csomar wrote:
| > If you are a crypto exchange and you have a liquidity crunch
| and you cannot process withdrawals, and you don't get a bailout,
| then your future equity value is basically zero. If you tweet to
| all your customers "sorry we're out of money for a bit so no more
| trading and we're going to hang on to your money, but things will
| get better," they will not get better.
|
| This is incorrect and coming from Levine, it's surprising.
| Especially, that the crypto ecosystem had an exchange that had
| just that (Bitfinex) and convinced users to take up the loss and
| carry operations (I was one of them). The exchange is still
| operating and one of the major exchanges in crypto.
|
| > You don't have a ton of time to negotiate, and they don't have
| a ton of time to do due diligence. How does the buyer know that
| there are no huge disasters lurking on your balance sheet? They
| don't, and they don't have much time to find out, and your
| liquidity crunch is not an encouraging sign. You are having a
| disaster now!
|
| They probably have a good idea. Crypto balances, at least the two
| largest, are public. And Binance is a large (largest?) exchange,
| so they probably can make a good guess of their balance sheets.
|
| > A lot of FTX's business is in perpetual futures, a leveraged
| product, sometimes levered 20 to 1. If you are an exchange and
| you are in this sort of business, you will need to come up with
| the extra $100 to lend to your customer. Presumably that doesn't
| come from your equity: You are doing some sort of borrowing,
| perhaps from other customers, 2 perhaps from outside financing
| sources, perhaps from your affiliated hedge fund, etc.
|
| This is also incorrect. There is no borrowing in derivative
| futures. The writer didn't really do his research.
|
| This is a case of cascading margin calls, but for very big guys.
| FTX tried to bail out some smaller guys but ended up getting
| margin called itself. Now Binance is picking the trade which
| carries itself a risk for getting margin called (ie: A liquidity
| crisis inside Binance).
|
| This will be the most optimistic scenario for Crypto, as it'll
| wipe out the largest exchange that it is enabling this scam
| industry and also changing the crypto culture (no-KYC,
| Decentralized, Trust-less, Permission-less etc...)
| dibt wrote:
| https://twitter.com/SBF_FTX/status/1590012133307478016
|
| >Note that http://FTX.us and http://Binance.us - two separate
| companies-are not currently impacted by this. http://FTX.us
| withdrawals are and have been live, is fully backed 1:1, and
| operating normally.
|
| I wonder if this means SBF will continue operating FTX.us as a
| competitor to other US-based exchanges.
| qeternity wrote:
| Asset custodians operate on trust. FTX has torched its trust. I
| don't believe the US entity will be viable going forward.
| xxpor wrote:
| Really seems like vindication for the US's regulatory scheme
| that in that it keeps US customers out of these shenanigans.
| [deleted]
| blobbers wrote:
| Seems like a non-binding agreement. DD has not yet been done,
| deal could fall through.
|
| SBF just got Jack Ma'ed by CZ.
| JumpCrisscross wrote:
| Do we have a price/valuation?
| locallost wrote:
| Likely zero if FTX is not liquid enough to process withdrawals.
| [deleted]
| sytelus wrote:
| Crypto had been interesting experiment. My take away is that
| there cannot be decentralized currency or finance. Dectralization
| does not prevent bad actors. _Someone_ with an army and authority
| must be there to punish bad actors and keep them in check or
| otherwise they are out to con you. The argument that people just
| need to be smart to not get dupped does not work.
| wslh wrote:
| My takeaway is that cryptocurrencies will continue to exist
| like the BitTorrent protocol remains used even when Netflix,
| and all exist.
| cm2012 wrote:
| Does ETH/ConsenSys win here?
| pbreit wrote:
| The current headline "Binance Acquires FTX" is wrong. There's
| only a "non-binding Letter of Intent" in place.
| squokko wrote:
| This entire market sector creates nothing of value: the way to
| parse this is something like "Daniel Negreanu wins $15 billion
| pot against Phil Ivey in non-televised hand."
| hericium wrote:
| BTW, what ever happened to Catherine Coley, CEO of Binance US?
| kuratkull wrote:
| Binance was threatening to dump a huge amount of FTT tokens on
| the market. FTX has a big+vulnerable position in FTT. FTX asked
| Binance to sell them the tokens for a fixed price, so as not to
| crash the FTT token price. Binance declined - this was
| yesterday/today. Of course the price of FTT crashed today. And
| now Binance buys FTX to help them out... smells like Binance
| played 4D chess all along.
|
| https://decrypt.co/113674/binance-moves-to-liquidate-its-ent...
|
| https://decrypt.co/113788/binance-ceo-declines-alamedas-bid-...
|
| https://decrypt.co/113866/battle-crypto-titans-ends-binance-...
| danrocks wrote:
| > FTX asked Binance to sell them the tokens for a fixed price,
| so as not to crash the FTT token price.
|
| Why would Binance decline this opportunity? If FTX, Binance,
| and the market knew FTT would just crash, it sounds like a
| given that Binance should take advantage of the fixed price
| instead of losing hundreds of millions of dollars "letting the
| market decide".
| colinmhayes wrote:
| Because they wanted to create a liquidity crisis in FTX that
| would force FTX to sell itself for a discount?
| mikekoscinski wrote:
| Presumably, it is more appealing to Binance to kill their
| largest competitor than it is to realize a return on a
| minority investment.
| oldgradstudent wrote:
| It depends on the fixed price offered by FTX.
|
| If FTX could pay the current market price, then they could
| have absorbed whatever Binance sold on the open market.
|
| They probably offered a deep discount.
| kgwgk wrote:
| Or maybe they offered to buy it later (when?) at a price
| fixed today - discounted or not. If they don't have
| liquidity (why?) they cannot buy it on the market.
| oldgradstudent wrote:
| Illiquid means you can't sell your position without
| lowering the price significantly.
|
| It could be that you need time to sell, or it could be
| that no one is stupid enough to buy it.
|
| The former can be fixed with a temporary loan, the latter
| in bankruptcy court.
| kgwgk wrote:
| As discussed extensively elsewhere an "exchange"
| shouldn't be in the business of having illiquid positions
| in the first place.
|
| But here we are, and I'm not sure if FTX was offering to
| buy with some favorable terms regarding the time of
| settlement in addition to a discount. They could have
| bought on the open market at the discounted price but
| they apparently didn't...
| [deleted]
| pbreit wrote:
| That sounds like 1D chess.
| [deleted]
| gowings97 wrote:
| colinmhayes wrote:
| FTT is not a stablecoin
| yieldcrv wrote:
| Okay, random non sequitur
|
| This isnt a thread about stablecoins
| andirk wrote:
| I earned $1,200 from Gemini's stablecoin GUSD's interest last
| year. Withdrew the extra and bought some nice pendant lights
| for my new kitchen.
| rchaud wrote:
| I understand many did well with Bitconnect too...
| andirk wrote:
| Not a stablecoin. Bitconnect is my favorite crypto scam
| so far! It was so obviously a scam, and the bros
| promoting it were even dumber than that shitcoin.
|
| A lot of crypto projects can appear scammy because a
| handful of people are working on something and their
| token goes through the roof then crashes with no
| wrongdoing on the part of the project. Invest in
| projects, not coins!
| [deleted]
| microtherion wrote:
| > Binance was threatening to dump a huge amount of FTT tokens
| on the market. FTX has a big+vulnerable position in FTT. FTX
| asked Binance to sell them the tokens for a fixed price, so as
| not to crash the FTT token price. Binance declined
|
| This makes absolutely no sense and is not how markets work. If
| FTX was actually willing to buy unlimited FTT at a given price,
| Binance could not have "crashed the price" by selling below
| that price -- somebody would simply have bought at the Binance
| price and sold to FTT at their price.
|
| What seems more likely is that FTX extended that offer only to
| a small portion of the tokens that Binance wanted to sell (to
| maintain the fiction of their price).
| boomerango wrote:
| Alternatively FTX was confident they could make the purchase
| given time, but did not have the funds on hand.
| boomerango wrote:
| Moreover, you are assuming no one else decides to sell
| based... one could argue publicizing their plans was meant
| to encourage just that...
| norswap wrote:
| Another problem is the bank run that this narrative created.
| nimchimpsky wrote:
| headsoup wrote:
| I think maybe FTX just doesn't have the money and their bluff
| was called
| cj wrote:
| My assumption when reading the quote was that it would be an
| off-market transaction.
|
| Similar to how stocks can be traded in Dark Pools outside of
| the regular stock market.
| SantalBlush wrote:
| It's describing an arbitrage opportunity. If person A wants
| to buy something for $5.00, and person B will only sell for
| $1.00, I stand to make $4.00 per unit by simply being a
| middleman for the transaction. Private or public markets,
| the arbitrage opportunity remains the same.
| hailwren wrote:
| Their point is that if you have the money to buy $1.1B of
| something off market, you should also have the money to buy
| $1.1B of something on market. Any time someone posts an ask
| at or below $22, you simply fill the order.
| rtpg wrote:
| beyond the fact that the dynamics of saying "we'll take
| everything at a certain price up to $1.1B" will likely
| lead to much more than that showing up on the market and
| leading to a price crash anyways... I imagine that an off
| market transaction can involve things like not sending
| $1.1B in cash to the other person the same day.
| eru wrote:
| If you have enough assets, everything can show up, and
| you just buy them out.
| csomar wrote:
| I think what happened is that the probably wanted to buy it
| with their balance sheet rather than $$ which explains why
| this is a liquidity crisis. Say they have a $2bn in value
| (crypto, company assets, etc...); they can't place market
| orders to buy the FTT on the open-market; but they can make
| an off-market deal with Binance to swap these assets.
| MrMan wrote:
| FTX was not actually willing to buy, they are suffering from
| reduced capital position so they were bluffing
| oldgradstudent wrote:
| > reduced capital position
|
| Sounds like a euphemism to me.
| hammock wrote:
| This is my view as to what possibly happened in last 24 hours.
| Mind you I have no idea if its real but i am making an educated
| guess based on my 10+ yrs seeing such events play out several
| times.
|
| 1) Alameda used FTX money and balance sheet along with using
| $FTT to take out billions of loans and "investments" including
| possibly customer funds to "invest" "efficiently" into risky
| investments
|
| 2) He then also used a lot of it to prop the entire market up
| in the 1250-1350 range over months to decouple the market
| possibly and keep $FTT above the $22 mark which was possibly a
| margin level for his collateral.
|
| 3) Market rallied and everything was fine. He is up a lot but
| lost few between making potentially risky investments (maybe
| shorting?), maybe options market making as that was his
| original expertise... who knows. But he clearly lost some money
| in there.
|
| 4) Rumors spread of balance sheet shortfall. Now mind you ..
| Alameda is a separate entity than FTX. So using FTX resources
| for trading on Alameda is a big no no.
|
| 5) CZ finds out about this. Decides to market sell his billions
| of $FTT position. Caroline gives up her hands and says they
| will buy at $22 which on the chart you can see has been the
| support line time and time again so clearly that line has been
| supported constantly..
|
| 6) The market selling pushes price below $22. Entire market and
| large players smell blood.. the moment the price goes below $22
| the lenders market sell coins ($FTT and $SOL) for margin. This
| results in a loop after it breaks below $22 and goes into
| freefall with no support anymore
|
| 7) With no options to get more money from lenders and having no
| other assets to get more loans from lenders as they are already
| selling his assets, SBF goes to CZ and asks to bail out FTX as
| there is a big hole that cannot be filled anymore. CZ probably
| decided to take over FTX and said to SBF you have to either
| stop gap some of the fills from selling your assets since you
| did things wit the balance sheet and customer money you weren't
| supposed to. He probably said he will bail out FTX but NOT
| Alameda. Sam then either market sold everything he had...OR the
| lenders... Sam went to the lenders and said I am defaulting on
| my loans...So the lenders just market sold all the collateral.
| I think its most likely Sam said he is going to default on the
| loans and they market sold.
|
| IF the lenders recouped 70-80% then i think its fine.
|
| IF the lenders WERE NOT able to recoup and will have to take a
| write off on the loans.. we have issues. That part I am unsure
| about. IF a large lender goes under... then there is further
| contagion. The market selling off coins so quickly triggered
| probably more liquidations.
|
| WHERE DO WE GO FROM HERE? We have seen bigger black swan events
| like in crypto past. All new concepts have days weeks like
| this. Stocks had it, banks had it and crypto has had it few
| times. There will always be new smart people to push growth and
| take over.
|
| When 3AC went bust, we got to $800 on $ETH. We rebounded to 2k
| in time. That was close to 17-18bn. This is smaller. in time...
| we will be back. Not sure when.. but eventually it all comes
| back. Market is cyclical end of the day.
| jl2718 wrote:
| One missing piece: $1B BTC being auctioned by the IRS soon.
| This is such a big number that it will almost certainly be
| bought at a discount by an arbitrageur and liquidated on the
| market, so this was the impetus for the broad-market crash
| that killed their leveraged positions.
| chrischattin wrote:
| The 24hr BTC volume on Coinbase alone was $126B. The feds
| selling $1B won't make much of a dent.
| naveen99 wrote:
| Not on coinbase alone. Coin market cap shows same volume
| globally
| chrischattin wrote:
| Ah yes. You are correct.
| ww520 wrote:
| Isn't FTT like FTX's own issuing tokens? It's like printing
| one's own money. But when the backing firm fails, the printed
| money is worthless, just like what LUNA issued by Terra had
| become.
| kuratkull wrote:
| Yeah. I can't be bothered to verify, but i remember that
| Binance has a huge double-digit percentage of all FTT tokens
| in circulation. Dumping all of them would crash the tokens
| value. And since this is FTX's own token, they would hurt a
| lot, maybe even terminally.
| miohtama wrote:
| It only matters if FTX was using FTT as a collateral for
| accounting purposes for a valuation that is not realistic
| considering the liquidity of a position size.
| potatototoo99 wrote:
| And of course they were, what else would they keep it
| pumped up for.
| [deleted]
| [deleted]
| ww520 wrote:
| Just went over the issues on the balance sheet of Alameda
| Research, which is SBF's trading company.
|
| Of the $14.6 billion assets Alameda manages, almost $6
| billion is FTT based. Alameda has heavy investment in Solana,
| Serum, and other alt-coins. It looks like the drop in their
| value has lowered Alameda's asset balance. Alameda borrowed
| FTT tokens from FTX to put them as assets in the balance
| sheet to shore it up. The size of the asset balance is
| probably used to obtain loans and liquidity.
|
| FTX issues FTT tokens (print money) => lends to Alameda to
| put under the asset balance => Alameda borrows money from
| outside against its assets or uses the asset/coins to invest
| in others => win with thin air!
|
| The crashing of the FTT token not only tanked FTX, it's going
| to tank Alameda Research as well since its asset balance
| suddenly shrunk and might have liquidity problem.
|
| The tanking of Alameda is going to another Three Arrow
| Capital event since Alameda invests in lots of other cryptos.
| It might be forced to liquidated those investments. Expect
| another bloodbath in the crypto space.
| johnvanommen wrote:
| > FTX issues FTT tokens (print money) => lends to Alameda
| to put under the asset balance => Alameda borrows money
| from outside against its assets or uses the asset/coins to
| invest in others => win with thin air!
|
| The Federal Reserve issues US dollars (print money) => US
| Treasury borrows money from The Federal Reserve, Japan,
| China and the UK against its assets or uses the asset/coins
| to invest in others => win with thin air!
| ackbar03 wrote:
| This is actually... extremely apt. It is commonly
| referred to technically as the dollars exhorbitant
| privilege. It would seem FTX managed to exploit this
| phenomenon on a micro scale. Until it didn't of course
| lol
| presentation wrote:
| Yeah but the US can destroy you diplomatically,
| militarily, and economically if you try anything funny.
| johnvanommen wrote:
| Of course! That's why it's so important for the US to
| encourage the use of the USD on a global basis, and also
| spend billions on the US Navy.
| phatfish wrote:
| > The Federal Reserve issues US dollars (print money) =>
| US Treasury borrows money from The Federal Reserve,
| Japan, China and the UK against its assets or uses the
| asset/coins to invest in others => win with thin air!
|
| Win with the largest military in the world and all
| tangible assets and influence the US has.
| [deleted]
| snowwrestler wrote:
| Ultimately the fiscal operations of the U.S. government
| are backed by the total assets of the U.S. (public and
| private), which are far larger.
| WheelNoHamster wrote:
| > Of the $14.6 billion assets Alameda manages, almost $6
| billion is FTT based.
|
| When that info was seemingly accidentally revealed, the
| spicy little nugget in there that made people sit up &
| notice was that the entire market cap of FTT tokens was
| well below the reported asset value of the tokens on the
| balance sheet.
| SilasX wrote:
| > The size of the asset balance is probably used to obtain
| loans and liquidity.
|
| 1) Lenders don't care about the liability side?
|
| 2) How does "liquidity" differ from "loans" here? That is,
| when would they do this to achieve one but not the other?
| ww520 wrote:
| 1. We don't know what the lending basis for FTT from FTX
| vs the claimed value of FTT on Alameda's book. FTX lent
| FTT at $10 to Alameda and then FTT inflated to $50 would
| mean Alameda has $50 asset vs $10 liability.
|
| It's reported that Alameda Research has $14.6 billion in
| assets and $8 billion in liabilities. Some claim that
| Alameda's assets are "entirely illiquid." Nobody knows
| how bad things are. The only thing is that FTX has
| stopped the withdraws.
|
| 2. Loans for long term and liquidity for short term? Like
| overnight lending.
|
| Edit: add more info.
| SilasX wrote:
| 1) What is that replying to? I was asking why the
| borrowed FTT would make them more capable of getting
| loans if it came with a corresponding liability. That
| would only make sense if lenders didn't care about the
| liability balance sheet, which is ... non standard.
|
| Edit: That is, you said the "size of the asset balance"
| is used to obtain loans. That makes it sound like merely
| increasing assets -- even if they come with liabilities,
| makes them more capable of getting loans.
| [deleted]
| nl wrote:
| There are DeFi protocols where you can lock-up crypto
| assets (eg FTT) and use those locked assets as collateral
| to borrow another crypto asset (eg ETH). That all happens
| "on chain" and there is no way for the protocol to know
| if there are corresponding balance sheet liabilities.
|
| I don't know what the OP was referring to, and I don't
| know if this is what they were doing, but something like
| this could happen.
| SilasX wrote:
| Right, but those are generally going to be on worse terms
| than you can get in a negotiated loan from someone who
| knows your entire business. So it doesn't make much sense
| to negotiate an FTT loan and then use that as collateral
| for a less-informed loan from a smart contract.
|
| It would be like getting a personal loan from a bank,
| buying jewelry with it, and then using the jewelry to get
| a pawn loan -- a dubious strategy, since the terms on the
| first loan are going to be much better.
| jimcavel888 wrote:
| eru wrote:
| Do keep in mind that there's a difference between liquidity
| and insolvency.
| gz5 wrote:
| Seems more like a classic run on the bank. Made worse because:
|
| + the bank (FTX) was likely massively over leveraged
|
| + the bank's primary assets were likely not very liquid
|
| Both of above are speculation. However, why else be forced to
| sell (1) to Binance?
|
| (1) Matt Levine makes his usual solid argument as to why the
| price was likely zero, other than cashing out FTX debt:
| https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthe...
| purple_ferret wrote:
| Binance continues to amaze.
|
| Does anyone even know where it operates out of these days?
| danrocks wrote:
| They have a lot of positions open at their Singapore and Hong
| Kong... offices?
| FormerBandmate wrote:
| They said they'd announce it shortly in July
| (https://decrypt.co/105376/where-is-binance-hq-ceo-cz-says-
| co...). Since then, nothing
|
| They got regulatory approval to operate in Dubai and have
| offices there, so maybe there
| (https://www.coindesk.com/policy/2022/09/20/binance-
| secures-l...)
| tommek4077 wrote:
| The fabric of the internet.
| yieldcrv wrote:
| There is a pool of capital that pays people working for them
| onchain. They can also do fiat via local subsidiaries, and
| local contracts for compliance and litigation.
|
| It's almost like it doesn't matter.
|
| For accountability, it barely matters. For financial products
| they offer, it also barely matters. Most jurisdictions are
| too small to say anything and all their customers can
| circumvent any geo-restriction. They have distinct
| subsidiaries in major markets like USA.
| ForHackernews wrote:
| > smells like Binance played 4D chess all along
|
| It's not really "4D chess" to screw over your competitor to
| corner the market.
|
| That's like, business 101.
| rchaud wrote:
| Business 101 is buy low, sell high.
|
| Winning an evenly matched game of prisoner's dilemma with
| billions at stake is about as close to 4D chess there is.
| Nomentatus wrote:
| Buy low esteem, sell high esteem - the concept comes from
| Hetty Green (long ago billionaire.)
| wesapien wrote:
| I'm not too familiar but can you elaborate on how the
| screwing happened.
| ForHackernews wrote:
| CZ tweeted "Oh shit, FTX is basically insolvent, we're
| gonna have to dump all our FTT magic beans!" or words to
| that effect.
|
| Then, when FTX predictably tanked, he stepped in and
| generously offered to buy out FTX.
| lupire wrote:
| Same thing Soros did to the Bank of England's fake pound.
| gpderetta wrote:
| Market manipulation is not exactly business 101.
| eru wrote:
| I'm not sure this is market manipulation?
| gpderetta wrote:
| Depends on the intention I guess. They might have been
| genuinely worried that the token was going to crash and
| also didn't trust the counterparty to be able to pay for
| it. In this case it would have been a genuinely
| legitimate transaction.
|
| But if dumping the whole stock was done with the
| intention, even partial, to crash the price, then it
| seems to me that it would be manipulation. Of course
| crypto is unregulated, so it wouldn't be illegal.
| astrange wrote:
| Typically you don't expect Bank of America and Chase to do
| this to each other.
| hprotagonist wrote:
| ...anymore.
| lupire wrote:
| Porsche and Volkswagen did.
| acchow wrote:
| This doesn't sound like very complicated chess. Sounds like
| those Hong Kong TV shows I watched when I was 13
| danrocks wrote:
| Having lived in Hong Kong and watched some of these old
| shows, I concur.
| kranke155 wrote:
| Please share!
| kranke155 wrote:
| Please share these TV shows so we can all watch them and
| learn.
| acchow wrote:
| I don't even know where to begin looking for this. I have
| zero ability to read chinese, although I can understand it
| verbally :P
| spacehunt wrote:
| The seminal HK show about the stock market would be The
| Greed of Man (Da Shi Dai ) [1]. It's 30 years old, but
| classic scenes in it are still used in memes even today.
|
| Edit: I totally forgot to mention the "Ting Hai Effect"!
| [2] Wikipedia has a great summary which I'll just quote
| here:
|
| > The Ting Hai effect, also known as the Adam Cheng effect,
| is a stock market phenomenon in which there is a sudden and
| unexplained drop in the stock market whenever a film or a
| television series starring Hong Kong actor Adam Cheng is
| released. It still remains as a popular topic among stock
| brokers, years after the television drama The Greed of Man
| was broadcast in Hong Kong in late 1992. The effect is
| named after Ting Hai, the primary antagonist in the drama,
| who was portrayed by Cheng.
|
| [1] https://www.imdb.com/title/tt0843185/
|
| [2] https://en.wikipedia.org/wiki/Ting_Hai_effect
| mekster wrote:
| Conspiracy theory was expected but Alameda was spotted to have
| smoke up a week earlier.
|
| https://www.coindesk.com/business/2022/11/02/divisions-in-sa...
|
| CZ sounds smart to withdraw quickly not to be the one in a
| sinking boat and it did sink quickly.
| sytelus wrote:
| FTX should never been in this position. They are an _exchange_.
| Nobody should be able to obliterate them by playing around with
| their crypto.
| neural_thing wrote:
| Hard agree. While Binance prompted the downfall, FTX created
| all the conditions for it by playing fast and loose with its
| clients' money.
| [deleted]
| ww520 wrote:
| They are an exchange that allows future trading and margin
| trading which require borrowing money/assets/coins. The FTT
| tokens were probably put up as collateral for loans. The drop
| of the FTT value probably triggers calls on those loans. Thus
| the liquidity crisis.
| ww520 wrote:
| Ok. To settle once for all whether FTX is an exchange or
| not. Below are the services they offer.
|
| Futures: ... with margins of up to 101x.
|
| Leveraged Tokens: ... up to three times the leverage. ...
| the leveraged coins offered by FTX _don't require any
| margin_.
|
| Options: (standardish).
|
| MOVE: ... wager on the price movement ... a play on
| volatility.
|
| Spot Markets: ... more than 100 different spot trading
| pairs.
| wklm wrote:
| It's fine for a trading venue to list all these
| derivatives, the problem in this case is that the venue
| and issuer are the same entity. In the trad finance world
| this is strictly separated.
| STRML wrote:
| It shouldn't work this way. Customer funds should be
| segregated from whatever prop trading the rest of the
| business is doing.
|
| The only way this happens is if the prop trading business
| is over-leveraged somehow and the exchange bailed it out
| with FTT.
|
| Customer deposits should meet liabilities 1:1. If they
| don't, somebody is lying.
| barry-cotter wrote:
| > Customer deposits should meet liabilities 1:1. If they
| don't, somebody is lying.
|
| That's not how banking works. You hold illiquid assets.
| Sometimes they move in price. If they move enough in
| price you're insolvent. Limiting bank runs is a genuinely
| hard problem.
| zeven7 wrote:
| Exchanges aren't banks, and crypto exchanges especially
| shouldn't be banks. Crypto _is_ liquid and can be
| redeemed in its own denomination instantly if you hold it
| in a simple wallet. That 's what exchanges _should_ be
| doing. They shouldn 't be doing fractional reserve
| banking, and a run shouldn't be possible. Preventing runs
| on a crypto exchange is exceedingly easy if the operators
| aren't taking risks with client funds.
| eru wrote:
| Well, it seems the word 'exchange' in this case is used
| with a different meaning when applied to FTX than the
| meaning you have in mind.
| stale2002 wrote:
| Which is exactly the problem.
|
| This should be illegal, and people who do this should go
| to jail.
|
| Customer funds should be 1 to 1 backed with assets.
| eru wrote:
| As long as noone is being lied to, I don't see any
| problems.
|
| Case A, tell your customers that their funds have asset
| backing, and have asset backing: fine.
|
| Case B: tell your customers that their funds have no
| asset backing, and have no asset backing: fine. (Those
| customers deserve what they get.)
|
| Case C: tell your customers nothing, and do whatever you
| feel like: fine. (Those customers deserve what they get.)
|
| Case D: tell your customers that their funds have asset
| back, and have no asset backing: bad.
| stripedfish7 wrote:
| Except none of these 4 cases happened with FTX.
|
| SBF claimed that assets WERE backed, while it appears
| that they were not.
| eru wrote:
| That would be case D, wouldn't it be?
| HelloNurse wrote:
| Assets backed with lies and cryptobullshit. At least
| someone has had a learning opportunity.
| stale2002 wrote:
| > As long as noone is being lied to
|
| That is exactly what is happening. There is lots of lies
| being told, with no transparency, and then people's money
| disappears.
|
| Instead of that, if people money disappears, we should
| arrest the people who made it disappear.
| eru wrote:
| No argument from me there. I was just narrowly addressing
| the point in stale2002's comment.
|
| Though to be honest, it is well known that the long term
| fate of any crypto exchange is to go bust. So no one
| could really claim that they didn't know it was coming.
|
| Crypto is glorified gambling. (At least so far. In
| principle, crypto can mature over time into something
| more serious.)
| headsoup wrote:
| I don't think it can, because all those serious things
| already exist and require the kinds of governance that
| the crypto promise rails against.
| lupire wrote:
| In _theory_ the eventual steady state of crypto is a
| fully debugged and tested perfect software system that is
| not exploitable.
| [deleted]
| zeven7 wrote:
| Case D is what we are seeing over and over again,
| including this circumstance
| eru wrote:
| No argument from me there. I was just narrowly addressing
| the point in stale2002's comment.
| majormajor wrote:
| B and C are perfectly fair game for a government to
| attempt to prevent, regulate, and prosecute in my book.
|
| I don't think anyone has an inherent right to take
| advantage of people's ignorance solely for their own
| profit even if those people "deserve what they get." We
| make plenty of other ways of abusing people illegal, why
| allow that one?
| nradov wrote:
| As a taxpayer I don't want to see any government
| resources wasted on protecting greedy, stupid
| cryptocurrency "investors" from their own bad decisions.
| They deserve what they get and their losses will serve as
| a useful example to others.
| eru wrote:
| I agree that if voters want to outlaw B and C, that's
| their prerogative. I don't see any moral imperative for
| that action, though.
|
| My formulation of 'deserve what they get' was perhaps a
| bit snarky.
|
| There are good reasons for people to invest in risky
| ventures. Eg when you invest in a startup, you might be
| able to get your money back, if you ask nicely, but
| there's no guarantee, and there's not necessarily any
| liquid assets backing your funds.
|
| I think investing in risky assets should be legal.
|
| I also think that it should be legal for people to invest
| in assets that have no official classification into
| whether they are risky or not. Ie when the company taking
| your funds makes no claims (as in C), in practice the
| customers should assume the worst.
|
| If you want to forbid C, alas, that leads to a lot of
| bureaucracy. Because you have to define what an adequate
| level of disclosure looks like. And then there will be
| lots of paperwork.
| [deleted]
| c-baby wrote:
| That's called picking up pennies in front of a steam
| roller.
| vkou wrote:
| Your margin account should be immediately liquidated and
| your positions closed if the value of your collateral drops
| below your outstanding obligations.
| swyx wrote:
| that makes FTX a "shadow bank", not merely an exchange.
| ironick09 wrote:
| It makes them a brokerage, doesn't it? Not a shadow bank.
| sytelus wrote:
| It's worse than "shadow bank". It's bank who is allowed
| to print money at its whims and create any arbitrary
| leverage it wants.
| eru wrote:
| Well, that's what the 'shadow' in 'shadow bank' means:
| less/different regulation than a normal bank.
|
| That's not necessarily a bad thing, btw.
| refulgentis wrote:
| Where's the "bank" in this "shadow bank"? You're
| describing a casino with a money printer.
| eru wrote:
| "Shadow banks" aren't necessarily "banks". See
| https://en.wikipedia.org/wiki/Shadow_banking_system
|
| > The shadow banking system is a term for the collection
| of non-bank financial intermediaries (NBFIs) that provide
| services similar to traditional commercial banks but
| outside normal banking regulations.[1] Examples of NBFIs
| include insurance firms, pawn shops, cashier's check
| issuers, check cashing locations, payday lending,
| currency exchanges, and microloan organizations.[2][3]
| The phrase "shadow banking" is regarded by some as
| pejorative, and the term "market-based finance" has been
| proposed as an alternative.[4]
| headsoup wrote:
| You're moving the goalposts a bit there
| lupire wrote:
| What would you say a non shadow bank is? "Money printing"
| is "just" a reserve ratio near or less than 0.
| vishnugupta wrote:
| You are referring to liquidity providers and market maker;
| they provide the liquidity (in the form of loans for margin
| trading, among other things), take risk in exchange for
| market making fee.
|
| An exchange on the other hand is facilitating trades by
| matching buyers with sellers. At least that's how it works
| in stock markets. Even if NASDAQ were to become a market
| maker they would have to spin a separate entity, bring
| their own funds to provide liquidity. Even then I don't
| know if it's allowed by regulation.
| HolyLampshade wrote:
| > Even then I don't know if it's allowed by regulation
|
| It isn't, precisely for this reason. The US Equity and
| Equity Derivative markets have tried a few times to get
| approval for initiatives using their already existing BDs
| (to facilitate inter-market order routing), and in every
| case it's been blocked by the regulators as too risky to
| the underlying business.
|
| The issue here has more to do with the lack of a
| centralized C&S clearing house in crypto, and is one of
| the reasons counterparty risk remains such a massive
| issue there. Having to maintain an account at each
| exchange, much like you would a BD, and praying things
| don't suddenly go pear shaped, strikes me as insane (and
| is one of the primary reasons I've avoided getting
| involved in the crypto space)
| mbesto wrote:
| But the free market dictated that they do because that's
| exactly the downside of their use of a crypto coin.
|
| How many exchanges will need to go under for the market to
| decide that isn't a great way to operate one? How much
| educating of users/customers will it take?
| vishnugupta wrote:
| I was having this exact conversation with my friends y'day.
| An exchange marketplace shouldn't be in this position
| _unless_ they are also participating in the market directly
| or indirectly through funds, their own and the customers '
| funds.
|
| Customers' assets (either crypto or fiat/USD) should be
| backed 1:1. The only reason for FTX to pause withdrawals and
| then assure investors that their money is safe is a sign that
| they are using customers' assets/funds to participate in the
| market.
|
| How long before SEC/regulators wake up and regulate these
| shadow-banks disguised as exchanges as other exchanges?
| MrPatan wrote:
| > How long before SEC/regulators wake up and regulate these
| shadow-banks disguised as exchanges as other exchanges?
|
| Very long in this case, as SBF was the biggest donor to the
| Biden campaign.
|
| Last few weeks he was even trying to involve himself in
| writing the regulations he wanted, trying to kill DeFi and
| make it comfy for himself against other CEXes, no doubt.
|
| Some people say that's what triggered CZ to act.
|
| And now the whole of FTX and $8 buys you a mosquito net,
| what a world.
| kasey_junk wrote:
| Do you have a source for the Biden funding remark? Open
| secrets suggests about 11M in donations came from SBF
| controlled entities but that's pretty far down the list.
| The top contributions were from Bloomberg at 93M.
|
| Those are for company controlled pacs as well, so not
| just SBF.
|
| For individuals the best info I could find doesn't list
| SBF as a major donor.
|
| https://www.opensecrets.org/2020-presidential-race/joe-
| biden...
| JumpCrisscross wrote:
| > _having this exact conversation with my friends y 'day_
|
| There is a strong, vested interest in portraying FTX's
| collapse as a one off. Binance doing them dirty doesn't
| cast a pall across the industry. Fundamental problems,
| likely replicated systemically, does.
| seanhunter wrote:
| > An exchange marketplace shouldn't be in this position
| unless they are also participating in the market directly
| or indirectly through funds, their own and the customers'
| funds.
|
| Yes, although the limitation with this line of thinking is
| that in most market-related activities (including running
| an exchange) it's hard not to be structurally long the
| market in various important ways. For example as an
| exchange your commissions are going to be highly correlated
| with market activity and may also be per unit in some cases
| and so would be directly correlated with market prices in
| that case.
|
| As a second-order effect, customers' trading limits are
| going to be affected as prices fluctuate even if you don't
| directly offer margin yourself, because not only does the
| value of the thing they've deposited with you change and
| therefore affect how much other stuff they can sell this
| for but also they may have made that deposit by pledging
| collateral elsewhere and borrowing against that to create
| margin so that margin loan will be affected.
|
| You can definitely try harder to avoid the problem than FTX
| though which seems to have been pretty much all-in on it's
| own illiquid token (FTT) and Alameda using leverage on FTT
| as their main source of funding. One of the things I
| learned at Goldman during the crisis is that you can't rely
| on a mark for anything illiquid - you have to have a real
| liquid market price.
| ugh123 wrote:
| Sounds like a crypto ponzi scheme
| helsinkiandrew wrote:
| They're more a brokerage than an exchange - you can buy
| Bitcoin and Eth leaveraged at 20-1 through their perpetual
| futures. Whilst these are presumably hedged - FTX are still
| taking on risk.
|
| https://ftx.com/markets/futures
|
| https://help.ftx.com/hc/en-
| us/articles/360024780511-Futures-...
| ucha wrote:
| SBF said "We don't invest client assets (even in treasuries)".
| [0]
|
| He then says the purpose of the transaction with Binance is to
| "clear out the liquidity crunches". [1]
|
| How could there be a liquidity crunch if assets are not invested?
| You can't do a bank run on an entity that doesn't function as a
| bank and doesn't invest clients assets... Something is shifty.
|
| [0] https://twitter.com/sbf_ftx/status/1589598285798707202
|
| [1] https://twitter.com/sbf_ftx/status/1590012126701441025
| nl wrote:
| The linked article addresses this:
|
| > Why was there a liquidity crunch in the first place? A crypto
| exchange is a weird sort of business, in many ways more like a
| brokerage than a traditional exchange.
|
| > A lot of FTX's business is in perpetual futures, a leveraged
| product, sometimes levered 20 to 1. If you are an exchange and
| you are in this sort of business, you will need to come up with
| the extra $100 to lend to your customer. Presumably that
| doesn't come from your equity: You are doing some sort of
| borrowing, perhaps from other customers, [2] perhaps from
| outside financing sources, perhaps from your affiliated hedge
| fund, etc. You will have some customers who owe you money, and
| others whom you owe money. You will be like a bank. If everyone
| to whom you owe money demands their money back at once, you
| will need to get the money back from the ones who owe you
| money, which might be hard. (You might not have a contractual
| right to demand the money back right away, or it might be rude
| and bad for business, or you might have to liquidate them to
| get the money back and that would blow up the value of your
| collateral.) In broad strokes this is a reasonable description
| of what happened to Bear Stearns, a brokerage that financed its
| customers' positions.
|
| [2] (footnote in original article): Effectively a perpetual
| future involves you borrowing from and lending to your customer
| in offsetting ways: If the price goes up, you owe money to the
| long and the short owes money to you. If the short doesn't pay
| you, then you still owe money to the long.
| dbreunig wrote:
| You mean the guy who said he named his other co "Alameda
| Research" so it wouldn't sound like a bank, even though it
| basically is, might be shifty?
| carnitine wrote:
| How is a prop crypto firm a bank? Laughable
| ramish94 wrote:
| Welcome to the world of unregulated finance.
|
| There's a reason the FDIC exists and all banks must be insured.
| miohtama wrote:
| Note that FTX.us is regulated under some US licenses and is
| unaffected. What was blown up was FTX.com operation that is
| licensed and regulated in Bahamas.
|
| [insert coconut meme.gif here]
| hi5eyes wrote:
| w1nst0nsm1th wrote:
| I did not comment but I have some insight on regular
| finance and took a Udemy course on building your own
| crypto...
|
| And I came to the conclusion that SBF is a crook and the
| whole crypto space is build on thin air.
| hi5eyes wrote:
| congrats on needing to take an entire course to come to
| that conclusion?
| w1nst0nsm1th wrote:
| Well, at least, I knew concretly what it was about (i
| mean the code is more expressive than a random tl;dr of a
| white paper).
|
| Beside, It's more the remembering of the unfolding of the
| Subprime crisis and the financial books I read back then
| that raised the red flag.
| [deleted]
| hanniabu wrote:
| This has nothing to do with defi. This is purely centralized
| entity shenanigans.
| ChainNet wrote:
| There's nothing decentralized about FTX or Binance. They
| operate in an opaque manner like any traditional business,
| transparency comes from forced audits & regulation.
|
| Decentralized finance is built on chain where all assets are
| publicly auditable at all times.
|
| EDIT: parent comment talked about decentralized finance, then
| edited to remove mentions of defi
| three_seagrass wrote:
| Even without the edit, your response feels like a no-true-
| scotsman
|
| i.e. an attempt to remove bad actors who deal in
| decentralized cryptocurrencies from the purity that is
| defi.
|
| What are some large, successful defi organizations today?
| null0pointer wrote:
| I don't see at all how you can say calling out literally
| centralized companies as "not-decentralized" is no-true-
| scotsman. It's just an obvious fact.
|
| > What are some large, successful defi organizations
| today?
|
| In my opinion, if there is an organization behind it then
| it is, by definition, not decentralized. Yes, even the
| ones that operate fully on-chain.
| three_seagrass wrote:
| >literally centralized companies as "not-decentralized"
|
| So defi is only 100% decentralized _everything_ , even if
| the financial tools are decentralized? That feels like an
| appeal to purity if ever there were one.
| null0pointer wrote:
| Ok, my previous comment is a bit unclear about what I
| mean. In my opinion if there is a group of people, other
| than the participants themselves, who can control the
| operation of the financial service then it is not
| decentralized. There can absolutely be an organization
| that builds the service, but participants should not be
| forced to adopt updates and should be free to transfer
| their entire balance to any other service at any time.
|
| I realize I'm on the fringe a bit with this but I think
| it's not because I have an extreme idea of what defi is,
| it's that there have been so many grifters in the last 5
| or so years that have used the buzzword "defi" to sell
| their shitty reincarnation of long-outlawed shady
| centralized financial schemes as something revolutionary
| that it's shifted the public perception of the term. I'd
| even agree with you that it's an appeal to purity.
| potatototoo99 wrote:
| Tornado Cash is pretty successful.
| colinmhayes wrote:
| not sure about this one.
| sperm wrote:
| Uniswap. Large in terms of volume, not org size.
| ChainNet wrote:
| Uniswap, Curve DAO, AAVE, Compound, Lido, MakerDAO...
| kolbe wrote:
| The FDIC is just a ruse to let "useful idiots" think that
| everything is okay. In reality, the FDIC charges banks 90%
| less than the actuarial value of the risk they take on, and
| banks make wildly risky loans/bets all the time, knowing it's
| "heads I win, tails the taxpayer loses."
|
| Insofar as you can call US Finance any better than crypto,
| it's because of socialized losses. IMO, bank failures are a
| much more appropriate solution.
| lottin wrote:
| What is the 'actuarial value' of the risk a bank takes on?
| kolbe wrote:
| I can tell you a bank like say JP Morgan Chase, who is
| charged 5bp a year (i.e. 5 cents for every $100 dollars),
| has a much higher chance of catastrophic failure than 1
| in 2000. Many banks just like them fail every few
| decades, and it was generous of me to only say they're
| undercharged by 90% (i.e. 1 in 200 odds), when the
| reality is probably more within a range like 1 in 20 to 1
| in 100.
| lottin wrote:
| So you're making this numbers up? If banks are being
| undercharged, the insurer will be incurring losses. It's
| as simple as that.
| areyousure wrote:
| In case anyone is curious, here is what some of my
| research has found:
|
| The empirical rate of bank failure in the last couple
| decades has been slightly over 1 in 250 banks per year
| (that is, ~0.4%/bank/year, or "40 basis points"). This is
| from these two sources:
| https://www.fdic.gov/bank/historical/bank/ says that on
| average 27.3 banks per year have failed, while https://ba
| nks.data.fdic.gov/explore/historical?displayFields...
| says that there have been ~6500 banks covered. (I think
| that the probability of a massive bank failure is in fact
| higher than the empirical rate, due to the tail risk of
| catastrophic failures.)
|
| I have not been able to find what rates JP Morgan Chase
| pays for their deposit insurance, but I think this page
| https://www.fdic.gov/deposit/insurance/historical.html
| suggests that the rate is between 1.5 and 40 basis points
| per year. Some other sources I've found do suggest that
| the average rate is around 5 bps/year.
|
| Already we see that the empirical failure rate is higher
| than the assessment rate. (Although note that the
| probability was not weighted by dollars, whereas the rate
| is.) This is perhaps surprising, because the FDIC claims
| that "The FDIC receives no Congressional appropriations -
| it is funded by premiums that banks and savings
| associations pay for deposit insurance coverage."
| https://www.fdic.gov/about/what-we-do/index.html Perhaps
| this is part of the point of this comment I am replying
| to.
|
| But indeed, we find that historically the FDIC's Deposit
| Insurance Fund has gone negative multiple times:
| https://www.aba.com/news-research/research-analysis/fdic-
| cap... https://www.fdic.gov/deposit/insurance/assuringcon
| fidence.pd... Historically, in such a situation, the FDIC
| is able to borrow from the federal government. It has
| done so in 1990, while in 2008 it did other maneuvers
| that similarly show that the rate is insufficient.
|
| As a result, it's plausible to predict: (a) the deposit
| insurance fund might go negative again (ie, the insurance
| rate is incorrect), (b) the deposit insurance fund will
| definitely go negative in a situation like the S&L crisis
| or the 2008 financial crisis (thus requiring tricks like
| the borrowing mentioned above), and (c) in the event of a
| more catastrophic failure, the insurance fund will go so
| far negative that it might be explicitly bailed out by
| the broader federal government.
| kolbe wrote:
| The insurer is the United States government. They take
| losses on things all the time. It's called "socialized
| losses." I referred to it before, and it sounds like you
| don't even understand these finance 101 (or even basic
| high school civics) topics, so why are you insulting
| anyone?
| lottin wrote:
| The insurer is a corporation with its own financial
| statements, so it's pretty easy to see if it's operating
| at a loss (and thus subsidising the banking industry) or
| at a profit (not subsidising it). I guess you didn't know
| that either.
| Sholmesy wrote:
| > who is charged 5bp a year (i.e. 5 cents for every $100
| dollars)
|
| Am I crazy or would 5 basis points be 0.05 cents (1/100th
| of a percent)
| shapefrog wrote:
| 12:38 PM * Nov 7, 2022 2) FTX has enough to cover all client
| holdings. [0]
|
| 4:03 PM * Nov 8, 2022 2) Our teams are working on clearing out
| the withdrawal backlog as is. This will clear out liquidity
| crunches; all assets will be covered 1:1. This is one of the
| main reasons we've asked Binance to come in. [1]
|
| has enough to cover all client holdings ---> not enough to
| cover all client holding in 24 hours. Either they _lost_ a
| billion or so dollars of client segregated funds in a day down
| the back of the sofa or it was a lie the whole time.
| xs83 wrote:
| >>Our teams are working on clearing out the withdrawal
| backlog as is
|
| The "as is" worries me here
| eftychis wrote:
| As other people said, usually a lot of assets are illiquid in
| 24 hours. You can say I have money to buy this house, but if
| I ask you for the money the next 24 hours, most people will
| say they need more time to liquidate.
|
| It is actually irresponsible to the users (risk management
| wise) to be keeping all that cash in hand 24/7. The easiest
| bad case example: are you keeping all your savings under your
| mattress?
|
| Edit/to commenters below: I understand there are emotions,
| but that's simply how things work. As other fellow commenters
| noted, banks do not keep or even promise they do keep your
| money($) under their "mattress."
|
| Say you deposited in EUR. The exchange and everyone borrows
| in USD, so your EUR become USD -- no way out of it. EUR goes
| down, and then there is a bank run. Even if as the bank were
| irresponsible and kept 100% liquid, they can not serve
| everyone 1:1 in 24h. Nobody can give you that guarantee,
| besides your local grocery store. We are thinking these
| things at the wrong scale.
|
| We are not trying to shift blame away from FTX -- already the
| whole relationship was sketchy. But claims about keeping 100%
| USD with a 24h cashout in a worldwide scale is not something
| on the table right now. I get worried when people feel
| comfortable believing those statements.
| shapefrog wrote:
| > risk management wise
|
| Short dated government bonds would be the safest. But tweet
| 0 he litterally says they dont do that, they keep the cash
| under the mattress and you can have it if you stop by.
| People stopped by and there was no cash under the
| mattress...
| eftychis wrote:
| I agree. And it is sketchy when people give a guarantee
| we know they can't keep.
| Bubble_Pop_22 wrote:
| > It is actually irresponsible to the users (risk
| management wise) to be keeping all that cash in hand 24/7.
| The easiest bad case example: are you keeping all your
| savings under your mattress?
|
| "We never block withdrawls" is the new "We don't crash
| ever" as seen in the Facebook movie.
|
| If you are in the crypto exchange business you gotta do
| both actually. Don't crash the website and don't suspend
| withdrawls ever.
| rhaway84773 wrote:
| If you take other people's money by promising you will be
| keeping their money under your mattress, yes, you should
| keep all that money under the mattress or you'll be behind
| bars for fraud.
| candiddevmike wrote:
| I'm not a business masquerading as a bank, lol.
| beambot wrote:
| Banks don't have cash on hand equal to assets either...
| [deleted]
| oldgradstudent wrote:
| Real banks have access to a lender of last resort.
|
| Shadow banks don't.
| [deleted]
| shapefrog wrote:
| The CEO of a band has never say they have everyones money
| sitting in the safe waiting for them to pick it up
| whenever they wanted it.
|
| FTX CEO litterally said that in his tweet.
| beambot wrote:
| My read of the situation: SBF's comments were about
| assets (balance sheet) rather than FTX's liquidity. I
| believe SBF was saying (paraphrasing) "Our balance sheet
| is fine; FTX doesn't invest customer assets; we're
| processing withdrawals as fast as possible." That's
| different than saying "we have 100% liquidity."
|
| Banks make similar statements all the time -- they
| require regular audits of assets (stress tests) and
| maintain some minimum levels of liquidity.
| treis wrote:
| Banks say that they don't invest deposits?
| beambot wrote:
| In the Glass-Steagall sense, they probably shouldn't.
| Mixing commercial banking and investment banking was
| illegal from 1933-1999, and it is (arguably) one of the
| underlying factors in the 2008 financial crisis.
|
| Note: There's a difference between being a custodian of
| customers' investments (brokerage / commercial banking)
| versus proactively investing customer deposits
| (investment banking).
| cmeacham98 wrote:
| Going to need a _huge_ source on that claim. Investing
| customer funds is the primary way banks make their money,
| and has been that way essentially since the invention of
| banking.
|
| From https://en.wikipedia.org/wiki/Fractional-
| reserve_banking:
|
| "Fractional-reserve banking predates the existence of
| governmental monetary authorities"
| oldgradstudent wrote:
| Banks lend deposits. That's how they make their money.
| They have to keep some part of the deposits as a reserve.
|
| Real regulated banks have access to the Fed to borrow in
| a case of a bank run.
| mrep wrote:
| And FDIC to de-risk customers from feeling they need to
| do a bank run.
| oldgradstudent wrote:
| To a large extent, but not completely.
|
| Anyone who has more than the insured amount, or anyone
| who needs their money in the near future will still
| engage in a run.
|
| There were several runs during the 2008 crisis, the most
| famous is the run on IndyMac Bank.
|
| https://en.wikipedia.org/wiki/IndyMac
| m3kw9 wrote:
| It's pretty clear now it a last ditch Hail Mary effort to
| save them from a bank run that would ruin them
| yucky wrote:
| If everybody walked into their bank right now to withdrawal,
| they couldn't cover either.
|
| Right?
| lmm wrote:
| They'd cover it. They might need to call up the fed, but
| they'd cover it.
| pcai wrote:
| But their point was: FTX doesn't purport to be a bank
| kikokikokiko wrote:
| It doesn't purport to be a HUGE PONZI either, but... Just
| another normal day in crypto land.
| astrange wrote:
| I mean, the CEO does literally tell people he's running a
| Ponzi.
|
| https://www.bloomberg.com/news/articles/2022-04-25/sam-
| bankm...
| kasey_junk wrote:
| https://www.fdic.gov/news/press-releases/2022/ftx-
| harrison-l...
|
| Well...
| rhaway84773 wrote:
| And that's why banks are heavily regulated and get
| protections.
|
| If FTX wanted protections against a bank run they could
| also choose to be regulated as a bank.
|
| Cryptocons want us to both treat crypto scams as banks and
| not banks depending on what suits them in the moment, just
| like they want us to treat cryptocurrencies as assets or
| currencies based on what suits their argument in the
| moment.
|
| All to hide the fact that it's a mediocre technology which
| has been surpassed by many other technologies for most of
| its possible uses and is nothing more than a Ponzi scheme
| designed to enrich its original backers.
| rchaud wrote:
| You may as well say "if everybody jumped off a bridge at
| the same time...."
|
| How many bank runs have there been in 2022 in the developed
| world?
|
| The reason people don't try to pull their money out all at
| once is because their deposits are insured, because their
| bank pays into an insurance pool.
| yucky wrote:
| The reason people don't try to pull their money out all
| at once is because their deposits are insured, because
| their bank pays into an insurance pool.
|
| Only up to $250k.
| smcl wrote:
| https://fortune.com/2022/05/23/record-number-american-
| househ...
|
| That wouldn't be a problem for the majority of Americans
| astrange wrote:
| If you go over $250k, you can just open accounts at other
| banks to keep being insured. Or get your own insurance I
| suppose.
| smcl wrote:
| My point was that if many would struggle to put together
| $400 in cash, they're likely unaffected by a $250k upper
| limit on insured deposits
| xmprt wrote:
| How many people do you think have more than $250k in the
| bank? How many people do you think have more than $250k
| in FTX? It sounds like you're saying it's not good enough
| because 0.1% of people won't get the full benefit.
| ramish94 wrote:
| He mentions that they have everyone's money, and then the
| very next tweet says "we'll clear out liquidity crunches".
|
| Literally a contradiction.
| crystaln wrote:
| It's not a contradiction. It's easy to have illiquid funds.
| For example cold storage or locked funds.
| zeven7 wrote:
| But cold storage and locked funds lead to you taking out
| a loan or just saying "sorry, it's going to be a while,
| our funds are locked". You know what you don't do if your
| funds are illiquid? Sell to your competitor over night.
| drexlspivey wrote:
| There is a time delta between the statements, assets worth
| $10B on one day could be worth $5b the next
| shapefrog wrote:
| "we'll clear out liquidity crunches" - they have everyone's
| money if they get more money from someone else.
| mistercheph wrote:
| Giving them the benefit of doubt, this is not a
| contradiction. The statement means that they have enough
| illiquid assets to cover the withdrawal that they are
| working on converting into liquidity.
| lottin wrote:
| What do you mean illiquid? Worthless?
| piva00 wrote:
| Illiquid just means that you can't cash it in quickly.
|
| Cash is 100% liquid while a house is illiquid you might
| have millions US$ parked there but only if you manage to
| sell it, then you convert it into liquid cash.
|
| Liquidity is a measure of how easy it'd be to trade a
| thing for another thing you want.
| lottin wrote:
| Agreed, but in this case these tokens have suddenly
| become 'illiquid' because they have just become
| worthless. It seems that here the term 'illiquid' is
| being used as a euphemism.
| oldgradstudent wrote:
| > Liquidity is a measure of how easy it'd be to trade a
| thing for another thing you want.
|
| It is also very hard to trade worthless things for
| expensive things you want.
|
| Insolvent institutions like to claim they are illiquid
| when in reality they are insolvent.
|
| We've seen this happen over and over during the 2008
| crisis.
| appleflaxen wrote:
| IMO this would contradict what the GP comment asserts:
| that SBF said "We don't invest client assets (even in
| treasuries)".
| sroussey wrote:
| I thought FTX Alemeda (the trading side) invested into
| their own token, which is tanking thus causing problems.
|
| Alemeda has like $14b assets and $8b in liabilities. But
| of that $14b, $5b are in their own token (FTT) which is
| kinda?? worth nothing at this very moment. So now the
| assets and liabilities are more equally matched, but less
| margin for shifting values of tokens.
|
| I don't know, but the derivative of their assets looks
| scary the last 24hr.
|
| Disclaimer: not a crypto person
| viscanti wrote:
| But they're meant to store the customer assets in a cold
| wallet. They're not meant to invest them in illiquid
| assets that would need to be liquidated to give people
| their money. If it's not a contradiction, it's an
| intentionally misleading statement to avoid admitting
| they let Alameda Research invest the money when the
| entities are supposed to be completely separated.
| shawabawa3 wrote:
| The extremely charitable read is that
|
| 1. They have all the funds
|
| 2. Many are in cold storage or otherwise inaccessible in
| short term
|
| 3. Their cold storage restore process is so slow they
| need emergency help to provide liquidity in the meantime
|
| Seems more like that they've either embezzled client
| funds or been hacked/lost some cold storage keys
| astrange wrote:
| The normal way to handle this would be insurance or a
| line of credit, not selling your company to your
| competitor overnight.
| viscanti wrote:
| In that scenario they could point to some of the wallets
| to help calm the fears the money isn't available. Or they
| could approach a number of different lenders who would be
| comfortable lending at high interest rates if the money
| is there but slow to access. They only sell if we're in
| the non-charitable case.
| wmf wrote:
| They're _totally_ solvent but no one is willing to lend
| them money?
| lokar wrote:
| "Every banker knows that if he has to prove that he is
| worthy of credit, however good may be his arguments, in
| fact his credit is gone."
| miohtama wrote:
| FTX/Alameda holds tons of illiquid FTT tokens that they
| cannot sell and which Binance was dumping. Thus, they
| might have not technically lied. But they were still
| wrong from the accounting perspective - they surely
| understood that FTT token cannot be used to cover gaps in
| large scale.
|
| It was the question that matters "how fast you can
| process user withdrawals and with what risk"
|
| Sam owns 8% of Robin Hood that is worth around ~$1B - he
| could sell that and cover some of the gap. But what we do
| not know yet is the size of the gap in time and space.
| FTX had $6B withdrawals pending on Tuesday.
| lancesells wrote:
| > Sam owns 8% of Robin Hood that is worth around ~$1B -
| he could sell that and cover some of the gap.
|
| Not knowing too much about this space have you ever seen
| anything like this happen? A CEO using their personal
| wealth to cover their customers funds seems unlikely.
| eftychis wrote:
| That can't happen directly (I think). Mingling breaks the
| limited liability mantle.
|
| He will have to buy equity or other product from FTX to
| infuse with cash. And if it is going bankrupt he has to
| stop running it to preserve the liability "shield" --
| details of course depend on the country/state of
| organization/incorporation. I know nothing about the
| Bahamas.
|
| Example: Elon for instance infused his own cash into
| Tesla, when it was going bankrupt. But he practically
| bought equity to my understanding.
|
| Covering customer accounts is different, in a financial
| firm. I do not know what tools the Bahamas give to FTX.
| This is all uncharted territory. (Also there is legal
| exposure to other countries.)
| tanseydavid wrote:
| Free Jon Corzine!
| dmitrygr wrote:
| > have you ever seen anything like this happen? A CEO
| using their personal wealth to cover their customers
| funds
|
| No, but I would love to see it happen, enforced by a
| court, and backed by a promise of jail time if the CEO
| fails to comply in a timely fashion.
| FormerBandmate wrote:
| This isn't a thing, limited liability (which is the
| fundamental principle that distinguishes corporations
| from partnerships) prevents this. The only way would be
| if SBF was charged with defrauding FTX
| fantasyman1 wrote:
| > A CEO using their personal wealth to cover their
| customers funds seems unlikely.
|
| It's in the category of "desperately wants to be true" of
| crypto crash denial.
|
| I've been lampooning people defending FTX in Hacker News
| all day. This is what I come here for!
| spuz wrote:
| Remember that blockchain transactions are slow and FTX has
| over 1m users. Even in the most positive of scenarios, I
| would not be surprised if it took days to clear the backlog
| of withdrawal requests.
| rhaway84773 wrote:
| "How to destroy the entire basis for blockchain technology
| in 1 sentence".
| zoklet-enjoyer wrote:
| Slow blockchain transactions and it would be shocking if
| they didn't stake user assets. Most (all?) proof of stake
| chains have lock up periods. Atom and other Cosmos chains
| are usually 21 days.
| EVa5I7bHFq9mnYK wrote:
| Indeed, all Bitcoin blocks today are full. There is no
| physical possibility to withdraw all those funds. That's
| why Binance must implement Lightning deposits/withdrawals,
| like Kraken did.
| smoldesu wrote:
| Adding L2 chains to this equation dumps the frying pan
| into the fire. We don't need more points-of-failure, it's
| bad enough as-is.
| EVa5I7bHFq9mnYK wrote:
| Inability to process more than 5 tx a second for entire
| world is a major point-of-failure that L2 chain cures.
| kinakomochidayo wrote:
| Should've just increased the blocksize, instead of
| implementing some crap L2 solution.
| jdprgm wrote:
| Not sure what people are talking about here, bitcoin
| mempool doesn't even have a notably large backlog at the
| moment and fees are currently low/normal:
| https://mempool.space/
|
| Exchange withdrawals are one to many for btc helping keep
| size down and most other chains shouldn't have any issues.
| Don't see how FTX or really any exchange should be
| bottlenecked by blockchains here.
| aaronharnly wrote:
| It seems to my layperson's eye that that would be a reason
| to get a loan for a week or a month, not to sell the
| company.
| somuchfordonor wrote:
| You forgot 8 hours ago: Hacker News commenters are in total
| denial:
|
| https://news.ycombinator.com/item?id=33518961
| kranke155 wrote:
| This is yet another episode in the continuing saga "HN
| consensus is bad at predicting tech".
| chx wrote:
| > it was a lie the whole time.
|
| how many of these y'all need before you learn: _all crypto is
| a scam_. It never was anything else, it never will be
| anything else because it _can not be_ anything else.
|
| There's an awful lot of fancy piled on the simple fact that
| all crypto"currencies" are _negative sum games_. The only
| disagreement is whether this is an entirely new type of scam
| , a "Nakamoto Scheme" or the difference between these and
| the classic Ponzi are irrelevant like the difference between
| a CRT and a HDTV and then we are looking at a Ponzi.
| trevorkoob wrote:
| Distributed ledgers are not a scam, and our true best hope
| for anti-corruption.
|
| I would like every elected official to have all their
| income and spending listed on a public ledger.
|
| True accountability of representatives to those they
| purport to represent will solve so many problems, both in
| terms of the types of people incentivized to become public
| servants, and also in terms of public understanding of
| spending and waste.
|
| All this "crypto" is intellectual warm-up for what is to
| come, I'd highly suggest looking at rollups (what I would
| describe as ledgers within ledgers) which are delving into
| the true possibilities of next-to-zero cost of immutable
| transaction records.
| automatic6131 wrote:
| >Distributed ledgers are not a scam, and our true best
| hope for anti-corruption.
|
| They are not a scam, but they are _almost completely_
| useless
|
| >I would like every elected official to have all their
| income and spending listed on a public ledger.
|
| A public ledger is not necessarily a decentralised
| ledger. This could be accomplished by any bank account
| controlled by a US politician to send the payments made
| to a US goverment controlled webapp that's then publicly
| accessible (by FOI request, if necessary). No blockchain,
| no decentralised woo needed. What you have stated is a
| POLTICIAL problem, and those require POLITICAL solutions.
| No new or speculative technology, of any sort, is needed
| to accomplish the problem statement.
| LudwigNagasena wrote:
| Ok, why is this statement not true then:
|
| > There's an awful lot of fancy piled on the simple fact
| that all "currencies" are negative sum games.
|
| ?
| chx wrote:
| Because it is currency itself that you measure everything
| else against. What my sentence meant is that without
| transaction fees it would be a zero sum game -- ie if you
| undid all crypto-money transactions then nothing is left
| -- but with transaction fees their sum is a negative
| number. But you need to measure this in _something_.
|
| Note how stocks are decidedly not like this because if
| you undid all stock-money transactions the sum would be
| positive because of buybacks and dividends.
| LudwigNagasena wrote:
| > Because it is currency itself that you measure
| everything else against.
|
| So what? I cannot see the significance of that. There are
| many possible measures of value.
|
| > if you undid all transactions then nothing is left --
| but with transaction fees their sum is a negative number.
| But you need to measure this in something.
|
| Yes? So what's the important difference between
| cryptocurrencies and traditional currencies?
| chx wrote:
| The thing is you can buy anything in this world for
| money. That's what money is for. Thus, we measure these
| things in money.
| jiveturkey wrote:
| Could be technically true?
|
| They don't "invest" client assets, not even in treasuries, ie
| actual investments.
|
| They "speculate" client assets, in tokens.
| PaywallBuster wrote:
| https://www.investopedia.com/terms/c/cashandcashequivalents....
|
| > Cash and cash equivalents refers to the line item on the
| balance sheet that reports the value of a company's assets that
| are cash or can be converted into cash immediately.
|
| > Cash equivalents include bank accounts and marketable
| securities such as commercial paper and short-term government
| bonds.
|
| > Cash equivalents should have maturities of three months or
| less.
|
| Don't know specifics on FTX/Alameda but this is probably normal
| to a degree for banks/brokers or just any regular business?
| max_ wrote:
| Now it is clear that he was lying.
|
| They stopped processing withdrawals according to on chain
| data.[0]
|
| [0]: https://www.theblock.co/post/184176/ftx-appears-to-have-
| stop...
| skippyboxedhero wrote:
| They have one BTC. Form an orderly queue to receive your
| portion.
|
| https://www.coindesk.com/business/2022/11/08/ftxs-bitcoin-
| ba...
| jefftk wrote:
| _> They stopped processing withdrawals_
|
| If you look at the comments on
| https://news.ycombinator.com/item?id=33518961 that article
| missed that FTX uses multiple addresses for withdrawals.
| max_ wrote:
| He admits they were illiquid and needed Binance to cover
| withdrawals 1:1.
|
| >Our teams are working on clearing out the withdrawal
| backlog as is. This will clear out liquidity crunches; all
| assets will be covered 1:1. This is one of the main reasons
| we've asked Binance to come in. It may take a bit to settle
| etc.
|
| [0]: https://twitter.com/SBF_FTX/status/1590012124864348160
| jefftk wrote:
| Sorry, edited my comment to quote the section of yours I
| was trying to reply to
| chaosbolt wrote:
| Are you seriously asking? He lied like every other exchange
| does. The man's middle name is Bankman for god's sake.
| Aaronstotle wrote:
| I don't understand how his middle name relates to anything
| about this situation.
| prottog wrote:
| Perhaps a quip on the untrustworthy nature of bankers.
| chaosbolt wrote:
| It's an obvious joke a 3 year old kid would understand, if
| that kid didn't value signal by implying someone was an
| antisemite because of an unrelated joke that is.
| 55555 wrote:
| For sure. I don't even think Bankman is jewish -- that's
| the Fried half.
| kgwgk wrote:
| And he's Fried now.
| [deleted]
| shapefrog wrote:
| This a.m. before securing an emergency lifeline from rival
| Binance, FTX was canvassing deep pockets in Silicon Valley and
| Wall St -- think billionaires, not institutions -- ppl familiar
| told me & @lmatsakis @SaacksAttack. Two of the ppl he was
| seeking more than $1bn.
|
| https://twitter.com/lizrhoffman/status/1590021299295768578
|
| He / his people didnt call me, but I would have passed anyway
| toomuchtodo wrote:
| > One person briefed on the fundraising blitz said what
| started as a $1bn ask was looking more like $5bn-$6bn by
| midday.
| matheusmoreira wrote:
| They lied to everyone of course. Never trust these
| corporations. They're sitting on huge piles of consumer
| deposits, of course they're gonna leverage that money. They
| cannot resist the temptation.
| ForHackernews wrote:
| It's all lies. Just like everything else involving
| cryptocurrency.
| purpleblue wrote:
| Well, if the customers are holding FTT and they're trying to
| get rid of their FTT, that could cause the liquidity crisis.
| The crisis isn't with the customer assets, it's with their FTT
| side of the business.
| cguess wrote:
| Can't have a run if you can't withdrawl!
| JumpCrisscross wrote:
| > _SBF said "We don't invest client assets (even in
| treasuries)"_
|
| We know that was false when it was said, given the Alameda
| balance sheet. (FTX invested in Alameda which made risky loans
| to crypto folks and bought FTT, which FTX minted [1].)
|
| [1] https://www.coindesk.com/business/2022/11/02/divisions-in-
| sa...
| ucha wrote:
| Nowhere does it say that FTX invested in Alameda.
|
| Alameda invested in FTT which is minted by FTX which is not
| the same thing.
| JumpCrisscross wrote:
| > _Alameda invested in FTT which is minted by FTX_
|
| FTX issued FTT to Alameda. We have no idea what Alameda
| gave them as collateral, but it's clear it wasn't cash.
| Lending is a form of investing. (I don't get what unlocked
| versus collateral FTX on Alameda's balance sheet means.)
| ucha wrote:
| How can you say it's clear it wasn't cash? What's the
| source?
|
| Also, FTX minted FTT out of nothing - effective cost zero
| - so no matter what they received in exchange, even if
| they had received _nothing_ that is not an investment
| unless they received Alameda equity. I agree that lending
| is a form of investment but nothing says that they
| received a loan in exchange.
|
| You could still be right, but it's all speculation :)
| JumpCrisscross wrote:
| > _How can you say it 's clear it wasn't cash?_
|
| FTT spiraled and FTX went insolvent.
| lmm wrote:
| Doesn't mean they never received any cash. Maybe the CEO
| spent it all on crack and hookers.
| tootie wrote:
| I know the SEC is struggling to stay on top of the crypto
| market, but it certainly seems like SBF should be in an
| absolutely huge amount of legal jeopardy right now. And if he
| isn't, then the crypto market is beyond saving and deserves
| to die.
| JumpCrisscross wrote:
| > _SEC...it certainly seems like SBF should be in an
| absolutely huge amount of legal jeopardy right now_
|
| FTX U.S. is fine. To the degree Americans are hurt, it's
| investors in the international entity. If anyone deserves
| regulatory scrutiny, it's the institutional investors
| betting fiduciary assets on crypto.
| [deleted]
| quantumwannabe wrote:
| I wonder if SBF became one of the largest political donors
| in the country, not for altruistic reasons like he claims,
| but for protection from the SEC.
| jbverschoor wrote:
| I dunno man.. Binance financed the twitter acquisition. Samuel
| Friedman from FTX wanted to partner with Elon.
|
| Sounds like a way to structure power within twitter TBH.
| Bluecobra wrote:
| Remember this is a NON-BINDING letter of intent. I wouldn't be
| surprised at all if this doesn't actually happen and just a bunch
| of ballyhoo. Unlike Twitter, FTX won't be able to drag CZ down to
| Delaware's Chancery Court to force him to acquire it.
| matheusmoreira wrote:
| Indeed. Didn't stop the market from melting down though and it
| looks like FTT is going to zero. Wonder what happens if they
| decide not to buy it after all.
| popcalc wrote:
| I think that's what the OP meant...
| orsenthil wrote:
| What is CZ?
| [deleted]
| aaur0 wrote:
| CEO of Binance - https://twitter.com/cz_binance
| spaceman_2020 wrote:
| All of SBF coins are going to crash like anything. All those
| tokens will be liquidated to pay lenders.
| SevenNation wrote:
| > One question that might be too early to answer is: Why was
| there a liquidity crunch in the first place? ... The simplest way
| to run the business is to take deposits from customers, buy
| crypto for the customers, keep everything segregated, and make
| money on commissions. ...
|
| This is the only question, because it feeds into all of the other
| questions.
|
| My prediction is that this deal isn't going anywhere. Where
| there's smoke, there's fire. And Binance is in no position to
| know how many skeletons are in the closets. The last thing any
| company wants in the current financial environment is big
| liabilities coming out of nowhere. And judging from the childish
| way in which FTX was run, there's skeletons o' plenty.
|
| Binance wants nothing to do with the piece of hot garbage because
| it too is in the same position as FTX. The last thing Binance
| needs is an FTX landmine spooking customers and triggering
| Binance's own bank run.
|
| The deal is going nowhere and FTX, along with its numbskull
| depositors, are dead meat.
| [deleted]
| boeingUH60 wrote:
| "We're going to look back at a generation of successful founders
| and VCs with the realization that all of their talent was in
| creating a company during the bull market." - random tweet I came
| across that's very relevant here.
| billjings wrote:
| Dare Obasanjo:
| https://twitter.com/Carnage4Life/status/1589867071693017088
| 3001 wrote:
| Total unrelated but son of
| https://en.wikipedia.org/wiki/Olusegun_Obasanjo. Numero uno
| looter of Africa
| MaxHoppersGhost wrote:
| Wow. I like how his son's Twitter profile talks about
| inclusivity. Very brave.
| melvinmelih wrote:
| He very cleverly took his name out of his dad's wikipedia
| entry. It's still there in older versions: https://en.wikip
| edia.org/w/index.php?title=Olusegun_Obasanjo...
| niyikiza wrote:
| Wow! That's next level Ad Hominem & Genetic fallacies
| bolasanibk wrote:
| Not to be confused with the talented soccer player Sam
| Obisanya. https://ted-
| lasso.fandom.com/wiki/Sam_Obisanya#Dubai_Air_and...
| googlryas wrote:
| Why even reference it then? We have understood that sins of
| the father are not the sins of the child since at least the
| book of exodus(~500BC).
|
| If that tweeter has done something wrong in his life, then
| talk about it. But he didn't really have a choice on who
| birthed him.
|
| From the wiki page:
|
| > Some of his children were resentful that he gave them no
| special privileges and treated their mothers poorly.
| Kbelicius wrote:
| We have also understood that sins of the father are sins
| of the child since at least the book of genesis(~500BC).
| [deleted]
| billjings wrote:
| I went to Georgia Tech with Dare. It's a great school,
| but it's not exactly the kind of place you send your
| scions of privilege.
| 3001 wrote:
| Thats funny, sure going to Gtech for an American as an
| undergrad doesn't scream privilege but seeing that today
| the total cost of going to such school will run you
| around 400k as an international student, while millions
| of people graduate high school in Nigeria and have to go
| through the hunger games of Jamb for extremely limited
| spots due to the lack of investment in education lead by
| his dad and cohorts tells a different tale.
|
| Someone like him not born to such father in Nigeria, will
| likely be an high school teacher getting paid $100 every
| 4 months.
| googlryas wrote:
| Are you just assuming his dad paid for his school? Do you
| know if he received any scholarships? Do you know the
| finances of his mother/mother's side of the family?
| stefan_ wrote:
| A scholarship? People from Nigeria can't even get a visa
| into the US.
| Sebguer wrote:
| This is absolutely bullshit.
| prottog wrote:
| That's not even true in September 2022[0], let alone
| throughout the whole immigration history from Nigeria to
| the US.
|
| There are a quarter of a million immigrants from Nigeria
| in the US.
|
| [0]: https://travel.state.gov/content/dam/visas/Statistic
| s/Immigr...
| billjings wrote:
| It's not because of the price point that you wouldn't
| send your overpriveleged kid there. It's because they'd
| run a decent chance of flunking out.
| swyx wrote:
| what exactly does Dare do? he always seems to have a take
| on every little thing in tech. is he a fulltime
| commentator?
| wslh wrote:
| "We're going to look back at a generation of successful
| founders and VCs with the realization that all of their talent
| was in creating a company during the bull market.". I would
| add: "and tweeting all day".
| jsemrau wrote:
| This is literally the definition of "beta" in equities trading.
| There is nothing bad with riding a good bull run. Ponzenomics
| is the issue here (imho) where we have to come to realize that
| there is no liquidity in many crypto currencies because there
| is not need to actually trade them. And projects that provide
| real yield (i.e., use an existing currency as their main
| currency of operations) fail to get traction because they don't
| provide the Ponzenomics scheme to their users.
| httpz wrote:
| Majority of early startups still don't make it past the valley
| of death even during a bull market.
|
| This is like saying every great sailor happened to sail when
| the wind was blowing in the right direction.
| chubot wrote:
| There was an entire book about this that became famous during
| the 2008 financial crisis:
|
| _Fooled by Randomness_ by Nassim Taleb
|
| https://www.amazon.com/Fooled-Randomness-Hidden-Markets-Ince...
|
| It's literally about how options traders and the like can be
| lucky for 10 or 20 years, but they are actually idiots who
| destroy the economy.
|
| They think they are skilled, and others think they are skilled,
| but it's luck. You can also call it "anti-luck" because their
| short-term actions can cause the long-term crisis.
|
| This book was a #1 best seller, as were most of Taleb's books,
| but for some reason whenever I mention it to anybody, I get
| blank stares.
|
| I think it's just really hard for people to understand
| phenomena that occur at time scales of say more than a decade.
|
| (BTW Another good book about recurring economic cycles is
| Dalio's 2022 _The Changing World Order_. All of this stuff has
| happened before. This is separate from crypto, and relates to
| the global economic environment.)
| lordnacho wrote:
| > whenever I mention it to anybody, I get blank stares.
|
| Maybe it's the circles you move in. In finance nobody hasn't
| heard of it.
|
| Well deserved reputation too, it really changed how I saw
| things. It's weird because even as someone who studied
| probability and stats, I hadn't thought it would change my
| entire worldview.
| dibt wrote:
| >It's literally about how options traders and the like can be
| lucky for 10 or 20 years
|
| I don't see how doing anything successfully (in this case,
| gaining profit?) for 20 years can be described as "luck."
| Surviving/being successful that long trading isn't a fluke.
|
| I haven't read the book, but I know that Talib talks about
| 'tail risk' a lot and 'risk of ruin'. Which are very
| different than what you describe. If my bet size is only
| limited to 2%, I would be happy to be "lucky" for 20 years!
| catothedev wrote:
| Example: sell attractively priced insurance against a
| 100-year-flood. You make money for 20 years, but then a
| crazy big flood bankrupts your insurance company. Who would
| have thought that would happen?! Options (and other things)
| can be structured to create 'catastrophic insurance like'
| outcomes.
| tanseydavid wrote:
| This book was my introduction to Taleb and I loved it. I
| recommend it frequently.
| niyikiza wrote:
| Great book. It was my introduction to Taleb as well It
| profoundly shaped how I interpret markets and approach my own
| investments.
| Patrol8394 wrote:
| > and said FTX was totally fine
|
| I want to think that by now people have learned that "totally
| fine" in crypto means that they are not.
|
| Also, wasn't FTX gonna buy Voyager?
| Aaronstotle wrote:
| Every exchange needs to show proof of reserves, I don't have much
| faith that Binance is in much better shape than FTX.
| Bubble_Pop_22 wrote:
| Exchanges big wallet are public info on the blockchain IIRC.
| The huge problem is that you'll never know if they add up
| because you'd need confirmation from every user of the exchange
| who'd have to self-declare their crypto-wealth in some sort of
| Slack or Telegram group so that you then can compare the 2
| totals and see if x=y.
|
| Will never happen. They are black boxes. Only them know if 1:1
| ploppyploppy wrote:
| Kraken do: https://www.kraken.com/en-gb/proof-of-reserves
| patrickbuckley wrote:
| CZ has pledged to have binance do proof of reserves going
| forward. This is a positive development in what is overall a
| shitty situation.
|
| https://twitter.com/cz_binance/status/1590055819416330240?t=...
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