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Comment by seibelj | Hacker News Reader

Further reason why exchanges that are offshore and outside of US jurisdiction continue to dominate. Old rules for an old world, meanwhile the industry has been innovating 1000x faster than the traditional financial system. I get that the US and it’s regulators never want to let go of their power, but every day that passes they get weaker as the future bypasses them.

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Stupid people think margin trading is easy money and will lose that in the blink of an eye.

And stupid companies? They’ll do the same thing but take all their employees and affiliated companies with them.

This was downvoted but it's actually true. Most volume is speculation driven and every speculator prefers the less regulated high leverage derivative venues. Regulations have hurt Coinbase's volume in the exact same way that Japanese regulations almost killed Bitflyer. The biggest exchanges are now mostly Chinese - Huobi and Ok.

Just so you know, margin trading is very accessible in the "old world" haha. It just applies to, you know, assets.

Apparently you can only create a product to do this in the US with the blessing of the CFTC. In foreign countries, you do not need their arbitrary blessing. That is my criticism.

Yep regulation is a wonderful thing. It ensures toxic garbage doesn't gain widespread acceptance. Tries to, anyways. That's why we have these agencies - remember the Great Depression? They didn't call it the because it just a pretty good depression.

I don’t want rules from the 1930s regulating crypto. Luckily foreign countries exist that don’t have to abide by the US laws and regulators. It would be a very sad world if everyone was controlled by a single regulator in the US. There would be no innovation.

The year in which the regulation was brought in is totally irrelevant, the only thing that matters is whether the regulation is useful and meaningful. I guarantee you if Tether had to abide by the Securities Act it would not exist. I for one am thrilled to have the SEC looking out for us, keeping the scammers and frauds at bay - or at least trying.

Good policy is good policy no matter what year we came up with it.

History repeating/rhyming as farce/tragedy etc. etc.

That wasn't caused by trading or its regulation, it was caused by macroeconomic policy.

It's fair to say there were a lot of causes of the Great Depression, to be sure. However.

Much of the "Roaring 20s" that preceded the giant market crash happened because of zero oversight or regulation and saw tons of fraud, and, yep, tons of reckless margin trading. This created huge systemic risk that all came to bear on Black Tuesday, which led to unemployment, homelessness and bankruptcies. This led to the Securities Act of 1933 and 1934.

Further, the Glass-Steagall act, also of 1933 separated investment banks and depository institutions. I'll let you take one guess why this was necessary. I'll also let you take one guess what happened after it was repealed (in 1999).

Also kicked off in 1933 was the FDIC.

All three of these are incredibly relevant to crypto and to this specific conversation.

[1] https://www.history.com/topics/us-government/securities-and-...

In the teens, there was World War I and a pandemic. There is no reason why people should be out of work in 1933, because of a stock market crash that happened 4 years prior. Once the crash happens, you can pick yourself up and get back to work. The slow recovery in 1929-1940 was because of the Hoover and Roosevelt administrations (and Congress).

The link I provided does disagree so I'd love to read any supporting evidence you have!

You can just google it yourself, I'm not interested in listing evidence, because the proper way of looking at questions like this requires operating with a model of reality, not just listing a bunch of facts.

A big part of that was people using stocks as collateral to borrow money to buy more stocks.

And here we are now, a plague and a massive stock rally.

If I were to bet, I'd say people should prepare for history to rhyme.

Or maybe the CFTC doesn’t like competition, and is abusing its power in order to maintain a monopoly in leveraged and derivative product innovation (or lack there of honestly).

It’s about controlling risk. Think of 2007/2008 bank collapse when they played with fire and were leveraged 30 to 1.

My company offers 100 to 1 leverage. But no US customers allowed, of course. We target professional traders.

Professional traders know not to use brokers offering insane leverage because of the risk the broker will be wiped out.

Do you have a way to protect one customer's funds when another customer is ruined?

All major offshore exchanges offer 100 to 1 leveraged crypto futures - it is table stakes for the industry. We have a lot of mechanisms plus an insurance fund to protect the system.

High leverage means less counterparty risk because the max loss is the capital residing on the exchange which is much less than the position size.

As far as mechanisms there's auto deleveraging and insurance fund.

Professional traders all wish to be on exchanges with high leverage because it means more volume is uninformed flow and therefore there is more alpha on the table. The pie is bigger.

It's not an apt analogy, these are standalone institutions without systemic ties to other parts of the economy, and someone who blows up crypto margin trading is only hurting themselves (or the insurance fund which is sunk cost anyway).

Even if I grant the analogy, their original proposition is accurate. Regulations are the main reason why US exchanges are an incredibly small percentage of total crypto volume.

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