Crypto trading firm Alameda Research might be insolvent
dirtybubblemedia.substack.com
dirtybubblemedia.substack.com
1. The entire Coindesk article lacks meaningful substance. For instance, we have zero idea about what those $7.4 billion of “loans” are. It’s really irresponsible to say that they’re insolvent. If you believe, so, you are applying no more rigor to your understanding of the space than the idiots who say HODL YOLO HFSP. If the liabilities are collateralized by assets on their balance sheet, then the financial risk is not to Alameda but the lender!
2. The entire article paints a dire picture based off of their appraisal of the assets. Again, nobody has any idea of what the liabilities truly are, so to speculate that Alameda is insolvent is making an unfounded leap. But the author of the article tries to lead us to believe that it’s an OK leap to make, because their assets are trash! Wrong. It’s lazy, it’s pandering to a certain crowd, and it’s dishonest.
3. Before reflecting on their extremely, extremely short handed analysis, they take their unfounded conclusions further and spin it through a prior framework that they made for Celsius, which is a totally different type of company with a totally different set of liabilities. Alameda does not lend money to retail. The author pulls a sleight of hand by taking one misleading statement, and transforming it before the reader can apply any skepticism to the original misleading statement.
4. Recently there have cropped up a set of anonymous people (otteroooo on Twitter, this guy) who purport themselves as insiders only to reveal themselves to be complete completely ignorant about the topic at hand. A lot of unsavory people have recognized there’s a cottage industry in endlessly pounding the table saying that the world is falling and that everything is a scam based off of extremely little public information and no access to any private sources. They are ambulance chasers.
5. We have a large contingent of people who just read the headline here, and assume, scam! And apply the pre-existing biases to the entire thing, with nothing insightful to add.
*edited some dictation/autocorrect errors
Can you clarify this? By “they” do you mean this Substack? I didn’t see anything about “otteroo” or Twitter insiders in a quick search of the Substack, but I didn’t exhaustively search the entire backlog.
The formula is this: 1. Create an helpful explainer thread to explain some crisis (ex-post)
2. Start to make vague predictions about relatively easy to predict things (like that Celsius is going to go down, a couple days before it technically goes down).
3. Refer your readers back to your foresightedness
4. Get extremely excited as you receive DMs from people to check out x or y.
5. Lock your eyes on a juicy new company and start to make unfounded claims about said company, referring to a sole rando as a “source” (eg Nexo is insolvent!)
6. Create an expose on your new target, run shoddy analysis based on no actual data, and throw it into a larger conspiratorial framework that starts to implicate other actors.
7. All the while, build a captive audience who doesn’t know the better and eventually use that audience to run ads or to pay for your newsletter.
8. They can run this affinity scam because 1. What they say is not falsifiable, 2. you have an infinite timescale for which to be correct about any one company going bankrupt, 3. there are people out there who are earnestly trying to learn about the market and don’t know who to turn to, and 4. if you’re wrong, you’re not accountable to your actions because there was never any actual money on the line.
There are serious issues in the industry, do not get me wrong. It’s kind of messed up that people who have no connections have to look into the void and decide whether they’re going to trust an internet rando or nobody at all. Disclosures need to be better. But the people writing these sensationalist pieces are part of the problem and not the solution.
I mean, that's the risk you run right?
Either you're a regulated system where you can avoid this kind of thing, or you're an unregulated system where you go 'screw the man', but you don't get the protections that are associated with the traditional financial system.
There's some deep irony about complaining about it; isn't the 'good' thing about crypto?
That's what people keep telling me anyway.
> I mean, that's the risk you run right?
> Either you're a regulated system where you can avoid this kind of thing, or you're an unregulated system where you go 'screw the man', but you don't get the protections that are associated with the traditional financial system.
He does not mean companies operating in the unregulated crypto space. He means the author of articles like this one.
You sound like a Scooby Doo villain. If these companies are not run well, they can be brought down by mere twitter personalities. This is a stress test. Those who are run well, will survive this.
Another analogy: If you build a house out of straw (because you cut corners) should you blame the big bad wolf who can just blow it down?
There you go, some really simple sources of information to counter your misinformation.
It's easily falsifiable by Alameda
Yes, some skepticism is required when considering whether or not Alameda is insolvent (or at risk of becoming insolvent) but the analysis is helpful in highlighting why Alameda might be at risk.
Why do you assume that Alameda isn’t “packed to the gills” with financial gremlins?
If you asked anybody in the space about 3AC or Alameda 12 months ago, you’d have heard the same thing about them: prop trading firms that have been hugely successful investing their own money and thus have billions upon billions of self-generated money to invest. Today, 3AC is gone and we are now discovering Alameda has huge liabilities and (potentially) mostly junk assets.
What’s a bigger leap: Alameda is like 3AC, or that the information we’ve seen so far isn’t representative and actually alameda are doing great?
https://www.alameda-research.com/our-team
Whether that is true or not, I don’t know. But from their tweets and podcasts it does seem they approach things very differently and in a way that makes sense.
The CEO worked at Jane Street for less than 18 months and appears to have had a fairly junior role there. I'm sure they are smart folks but there's a limit to how much you can learn in 18 months, in your first job after college.
Sorry if my prior message was confusing, but why would a top tier company let go one of their best performers after just a half and a year out fresh of college?
Wikipedia states: ...he returned there full-time after graduating [in 2014]. In September 2017, Bankman-Fried quit Jane Street...
Seems closer to 3 years, but it doesn't state whether he started there immediately after graduating or not.
What do you suggest are the reasons for his leaving?
> Caroline Ellison, CEO > Before joining Alameda in 2018, Caroline worked at Jane Street as a trader on the equities desk.
You seem to be talking about SBF.
According to who? Themselves?
Any statement a bout their insolvency is a statement about their liabilities, which is just speculation.
~ P.T. Nakamoto
Ok, this is kind of a fair point, if these loans are collateralized by the assets, then it's the lenders who have a problem. But that does actually mean there's someone out there who is going to get absolutely mugged. It's also a bit of a question who, other than some other SBF entity, would make these loans - who is accepting FTT as collateral? It also means that you need to apply that logic to their assets, meaning their supposed $14.6Bn you probably need to regard around $12Bn minimum to be absolutely worthless.
I would absolutely not say they for sure insolvent, but these numbers do clearly look very worrying.
Right now I think that your response isn't any more credible than these other posts.
Fair point, but why do you seem to think you are defending Alameda? Collateralizing loans from fools with your own brand of worthless bullshit is the very definition of a Ponzi scheme.
The average case scenario is some of it is ponzi mixed in with other non ponzi, and in my book I'll call even a "10% ponzi", a ponzi scheme. Maybe you have a different bar to calling something a ponzi, so knock yourself out.
It's not just a problem for the bank, it's threatening to the crypto ecosystem. Just as it would be if the binance tether thing ever implodes
No, the risk is to both Alameda and the lender. An undercollateralized loan doesn’t just go away. It’s partially secured and partially unsecured debt.
What does that mean? How collateralization changes Alameda risk?
It reduces the lender risk a bit - but it does not touch the borrower risk at all:
https://www.investopedia.com/terms/c/collateral.asp
"In the event that the borrower does default, the lender can seize the collateral and sell it, applying the money it gets to the unpaid portion of the loan. The lender can choose to pursue legal action against the borrower to recoup any balance remaining."
The alternative means that anyone and everyone can hide anything they like behind partial information, then declare any suspicions baseless and groundless based on their own hiding of information.
I speak only to this. Whether the linked article did a good job of their analysis I don't know. I'm just saying, the idea that people are not entitled to come to conclusions based on partial information is not valid. The conclusions come to should be hedged and made with the understanding that information is partial, but there is no obligation to not come to them. Otherwise you're obligating yourself to walk naked into almost any old scam you can imagine. This idea doesn't scale out into the real world where people happily abuse this.
If it walks like a duck and quacks like a duck it’s probably a duck. Or a duck robot, or my kid running around with my phone again imitating a duck while watching duck YouTube videos.
Whatever the conclusion, state facts but don’t state conclusions as facts.
And the right thing to do is to jump to the most likely one based on the information available to you (adjusted for the consequences if you're wrong).
In this case, the most likely conclusion appears to be based on the info presented that it may be insolvent, and further, acting as if it is insolvent means you lose on limited upside if you're wrong, but avoid significant downside if you're right.
If Alameda is not a fan of this conclusion and if it's gaining traction in the community they can refute whatever might be wrong in the analysis and if nothing is wrong, provide the additional missing information that will correct the conclusion.
This is what CEOs and CFOs for public companies do everyday. Present their company's thesis to the public and refute analysts' theses where they think they're either wrong and/or don't have sufficient information. Why do you think they take so much time out of their schedules to do interviews on Bloomberg, CNBC, etc.
Alameda doesn't need to go down that route, but that doesn't mean independent analysis with conclusions based on incomplete information is a faulty process.
It’s possible to get scammed by a person that’s telling you that something is a scam. That’s an affinity scam.
I’m not trying to tell you what to think. I’m saying that there are material flaws in the analysis.
Doesn't take a genius to figure out why a hedge fund needs 7B in loans. They aren't a tech giant expanding in a new direction or acquiring competitors. It's pretty clear why a hedge fund needs a massive cash infusion. Also interesting that they collateralize the loans with Tokens majority owned by Alameda and FTX so it's unlikely were they forced to liquidate to pay off their loans that they could get any where near the quoted value of the tokens.
There are plenty of reasons why a trading firm takes loans (it's also possible the FTT is structured as a long, inflating said number)
1. I want to short X, but don't actually have X. I borrow X and sell it.
2. I want to sell X and buy a derivative paying people who are long the derivative. Goto step 2.
3. I want to trade X but don't know how ahead of time, so i need inventory of X in case I want to sell RIGHT NOW. I don't want to actually have exposure to a ton of X, so I borrow it instead. Very common for a market maker like alameda, although there's no way they actually need billions of collateral for market making purposes.
4. I can borrow X, and put it in a defi yield farm for a better rate than what I borrowed it for.
5. I have a ton of Y, and I don't have any plans to use it soon. I put Y up as collateral to borrow X which I can meaningfully trade. This gets you in a lot of trouble when Y values goes down and X doesn't. Say "Four Bullets Investments" has some BTC, they post BTC as collateral to borrow dollars, and use that to buy more BTC. Then BTC goes down a lot - oops!
Not making value judgements on what risks are and aren't entailed here, just pointing out that there are reasons aside from covering losses. 1-3+5 equally apply in tradfi as well.
The really interesting thing, which you touched upon, is to what extent are they collateralising loans with FTT. COllateralising loans with a coin you hold isn't unusual at all, but what's unusual is that the potential FTT collateral size is monstrous compared to realistic available liquidity minus alameda.
Posting BTC is one thing since there are liquid spot markets trading billions a day, not to mention derivatives. But FTT? Good luck liquidation even 10-20MM without moving markets a lot.
https://fortune.com/crypto/2022/08/25/sam-trabucco-quits-co-...
For those not in the know, Alameda is THE trading firm in crypto that everyone always assumes is causing liquidations. For them to be insolvent would be a huge deal.
It’s crazy to watch greed pollute the minds of crypto trading firms like Three Arrows Capital and Alameda. Zhu Su put it best in his own tweet long ago before the greed set in and he needed more and more gains.
https://twitter.com/zhusu/status/1092305648904065024
“Bad TA (technical analysis) is not just marginally bad--it can mean being net down trading an asset that has gone 1,500x and is still 250x from start date.”
“For much of 2017, Buy and Hold was actually the best performing strategy since Jan1 2013 of ALL TA strategies possible. This can easily become the case again if we go on a bull run at some point.”
Crypto gains are so large that there is no need to go crazy with trading and leverage and the crashes every four years are actually a great boon as long as you realize they will never go away.
People holding stocks may never see ATH either, it’s the risk we take for the mental construct we believe in.
History says they probably will, as long as they hold a diverse portfolio.
Unfortunately crypto has become just a leveraged bet on the stock market and has lost much of its uncorrelated asset status. If the stock market recovers, crypto recovers even harder. Ethereum price is like a higher leverage TQQQ if you check the charts. I liked it better when it was uncorrelated.
Your assumption does not only rely on human greed but also on an upper limit on human creativity.
You are also making a (strong, imo) assumption that humans will not find a new and more creative outlet for their greed (aka pump and dump schemes) that is not crypto. Crypto is already associated in the public minds with many grifts and scams, and it may be much simpler at some point to create a new scheme rather than recycling old ones.
Is there a theorem that says returns never stay uncorrelated, because everyone want to diversify?
First very simple point, to become insolvent you have to actually take a loss somewhere. They may have a lot of junk tokens on their balance sheet, and these tokens may be overmarked, but Alameda's cost basis (most of them were from seed rounds) is still way below their current value.
With Three Arrows it was very obvious where the loss was from, they were hyper-bullish and doubling down on BTC all the way from $69,000 to $18,000 using leverage. By contrast Alameda is notorious for being dollar maxis, constantly taking money off the table, and very rarely having any sort of long-term major beta exposure. (A big reason they have a reputation as mercenaries in the space.)
The second point is that the bulk of their liabilities are in the same tokens on their balance sheet. This is particularly true for the FTT token, almost certainly the FTT on their balance sheet is simply a loan from FTX (which is essentially the same org) to Alameda to make a market on FTT on FTX. Regardless if FTT collapses, it wouldn't matter cause insolvency both the asset and liability side of the balance sheet would go down.
Most likely this is true for much of the rest of their liabilities. Crypto trading firms like Alameda make a huge proportion of their revenue from being "paid market makers" for specific token projects. It's very hard for new tokens to bootstrap liquidity. So the typical arrangement is a token project will "lend" Alameda something like 5% of the supply, which Alameda will use to be a market maker in that token at all of the major venues. Most of the liabilities on their balance sheet are probably these token deals, rather than loans made in hard currency.
>As someone in the industry, it's almost certainly not.
... to be proven wrong.
I also thought that question (Hindsight or Not?) might be interesting to more people than just me.
Alameda hold $5.8B FTT according to the article.
Any market makers able to advise how much is normally held relative to daily volume/mean transaction size?
2. Balance sheet shows they are not classic MM
3. Counterparty is FTX
4. ...
The ftt coin is shady as hell though. A 40% trading rebate for holding $1m is insane; that's nothing. And it's not open to anybody touching the US - a blatant attempt to prevent US regulations, which would catch this stuff.
It's very weird for exchange owners to get rich overnight. That doesn't happen in real markets, and it seems to only happen in crypto when the exchange is using customer deposits as leverage (Celsius) or trading on their own account, which means against their customers (binance, probably ftx)
This has absolutely NOTHING to do with being insolvent.
"Insolvency
In accounting, insolvency is the state of being unable to pay the debts, by a person or company, at maturity; those in a state of insolvency are said to be insolvent. There are two forms: cash-flow insolvency and balance-sheet insolvency. "
Insolvency deals with the inability to repay your debts (insufficient cash flow is the most common).
- is actually financially illiterate
Checks out, sadly.
Market makers do not typically hold $B of anything.
Alameda does not need to borrow so much FTT to make markets.
If you can’t naked short, and if sales settle effectively immediately (cryptocurrency confirmation may well be slow, but you can’t usefully sell something and buy it back using the sale proceeds without confirming or at least generating and signing the transactions), then you need access to the actual token so you can sell it.
In contrast, one can make a market in EUR/USD without actually sitting on a big pile of EUR and USD. In fact, market makers are likely to target an average position of zero in every currency except their home currency unless they are also trying to make some sort of long term bet. Similarly, I doubt you’ll find that most market makers in, say, grain futures have warehouses full of grain. (Grain wants to be eaten, not hoarded for the life of a business. Also, making commodity markets is an entirely different business than growing, storing, transporting, and using commodities.)
(This is not trading or market advice, obviously.)
Alameda being in balance sheet insolvency would depend on their assets taking enough of a hit to wipe out the equity buffer.
To Doug's point the junk tokens are likely at book value on their balance sheet
For financial institutions, particularly those with short-term liabilities, illiquidity is insolvency. The initial liquidity depresses prices which marks down the balance sheet.
If the assets in question are marketable securities (stocks and bonds), traded commodities, or real estate, then that's generally true. If the asset is some shitcoin for which no real market exists, not so much.
The linked article in turn links to coin desk which writes
>> Also, token values may be low. In a footnote, Alameda says “locked tokens conservatively treated at 50% of fair value marked to FTX/USD order book.”
That suggests to me the unlocked coins are on the balance sheet at market value and the locked at a 50% haircut.
In fact you could turn your argument around to critize the article too, as they are based on the assumption that some of the assets should marked to zero, rather than examining empirically whether those assets could be either collateral or be used to pay the debt.
The only way this can happen is if the value of Alice's assets falls below the cost basis in which she purchased those assets (plus some relatively minor short-term secured interested rate). For a trading firm engaged in mark-to-market accounting that condition represents a loss in the income statement. This isn't strange voodoo, this is just simple accounting identities.
Alameda's cost basis on Solana is the seed round at approximately ten cents, and it's currently trading at $30. Similar story for all the Solana protocol tokens. I don't know what Alameda's cost basis is on FTT (if it's even holding a significant amount financed with hard currency), but we can almost certainly say it's close to the seed round price because the founder of Alameda is literally the founder of FTX.
To make this story make sense Alameda at one point must have bought some asset that has fallen significantly from its cost basis. What exactly is this supposed asset? Because Alameda certainly isn't known for going out and taken levered long exposure on BTC, ETH or other post-seed liquid tokens.
Solana is only worth $33 right now at the current spot rate, but at the volume that would need to be liquidated to pay off Alameda's debts, the price would crash to pennies because the amount would represent over half of the daily trading volume in Solana for the past month. (For comparison, in the stock market, selling the equivalent a single-digit % of the daily volume of a stock can tank the stock.)
Similarly, Alameda owns 80% of FTT, which has a 24h trading volume of less than 20% of Alameda's debts, and fewer than 250 active daily traders. It would be literally worthless if Alameda tried to liquidate enough to pay off its debts. And as the linked blog points out, FTT is just a shitcoin exchanged between two related entities on their accounting books, meaning that at least $5.8 billion of the value of FTT, i.e., 80% of the putative value, is purely made-up.
OTOH, as the Voyager debt was collateralized entirely with shitcoins, it's possible that the other $7+ billion in Alameda debt was also collateralized in shitcoins. If that's the case, than Alameda should be solvent because it appears they actually have about $100m in cash assets. But if not, they are legally insolvent.
> This has absolutely NOTHING to do with being insolvent.
This has everything to do with being insolvent.
If you don’t lose money somewhere - interests costing more than what you win being a loss for exemple - you should be able to pay back what you owe in the end.
You could be temporary insolvent because you have issues with payment delays and are strapped for cash but there are ways to deal with that especially at Alameda size.
It's so delightful that the finance people are coming out all salty!
The number is going down. If you organize your life around this number going up, and it goes down, everyone is going to laugh.
You chose this life!
There is sometimes some meaning in finance somewhere. Like some VCs can get some meaning from, a biotech investment makes a great drug that helps people.
But what you chose, there is none. There will be many stages of grief, they do not happen in order or one at a time.
> First very simple point, to become insolvent you have to actually take a loss somewhere.
C'mon dude. Listen to yourself. It's over. This isn't peak cringe but it's getting there.
Do we have evidence of this?
The article says $292mm are FTT-denominated, with the rest unknown. Absent further information, it’s fair to assume some of that is dollar denominated. With less than 2% cash to cover liabilities, even a small amount of normal borrowing could render Alameda insolvent.
Moreover, if the losses are entirely passed through, whose are they? That’s over $7bn of losses sitting on someone’s balance sheets. Are they distributed? Is it FTX’s?
From Voyager's bankruptcy filing we know Alameda owes them $650m in USD, and hasn't repaid them yet, instead SBF is trying to push forward a shady deal that would allow FTX to take over Voyager's asset.
Deal to which state regulators have filed and objection in bankruptcy court by the way.
On Jul 8th Alameda research tweeted: "happy to return the Voyager loan and get our collateral back whenever works for voyager".
Simple question here, how do they return $650m USD, if they only have $134m in liquid assets (cash) and the rest is in illiquid tokens such as FTT, MAPS and other tokens with fancy names and inflated marketcaps?
No... We know that they owe $650m USD to Voyager Digital and they haven't repaid it yet, instead after failing to bail out Voyager, SBF is trying to acquire its assets with a VERY shady scheme through FTX.
We also know that SBF has spent a lot of effort to bail out BlockFi, and I am confident they are one of Alameda's biggest creditor, we know that BlockFi only lends stables, BTC, ETH and a few other bluechip coins, no FTT, MAPS etc...
So everything is indicating that Alameda's liabilities are in USD/BTC/ETH, while their assets are FTT, MAPS, a few SOL and other low liquidity "shitcoins".
Seems like what Alameda was doing is to take out loans to pump some shitcoins and mainly its own (FTT).
https://cointelegraph.com/news/alameda-research-happy-to-ret...
How is that even legal?
Hypothetical scenario: Alice invests $100M in seed rounds for a bunch of tokens. The token values go way up, and the holdings are nominally worth $14B. Alice borrows $7B in real dollars. Alice loses those real dollars on other bets. The nominal value of the tokens is still $14B, but Alice can't actually liquidate them for $7B in real dollars. So Alice is functionally unable to pay back the loans.
So Alice took a loss somewhere (on the other bets) and is effectively insolvent, but you can't assess that just by looking at the cost basis of the tokens that Alice still holds.
(I don't know if this actually describes Alameda; it's entirely possible that Alameda's loans are token-denominated as you're saying, in which case Alameda would be solvent. I'm just pointing out that it's more complicated than just looking at the cost basis.)
https://www.coindesk.com/business/2022/11/10/sam-bankman-fri...
Oof, this aged terribly. Didn't even take 24 hours.
If they are Defi loans for example, they're pretty much automatically no-recourse loans.
lol. Lmao, even.
Should preface all of this by being very, very, clear that we don’t know what the liabilities are so can’t judge too much. It’s fun to assume their liabilities are cash, but if they’ve borrowed 2.5bn of “unspecified crypto” as in the report and still have the same “unspecified crypto” borrow is healthy whether or not the price changes. I this it’s extremely unlikely all their liabilities are cash.
Surprise surprise, who would have guessed that the trading firm running an exchange might have some special relationship?
It’s possible that the FTT is also a liability, loaned from FTX. The book still isn’t great but is much healthier in that case.
It’s also possible that many of the unspecified crypto collateral is directly borrowed, instead of bought with borrowed cash.
It still leaves a few questions:
* Are they taking delta risks with borrowing funds or not? Borrowing to send into defi/basis has a very different risk profile than taking bets on price.
* is tether cash, or “unspecified crypto held”? Is USDC/BUSD crypto held? Is DAI?
* What lender would bother with the whole FTT song-and-dance instead of just admitting they’re giving out effectively uncollateralized loans
* Are lenders in a situation where they know the collateral is no good, but they also know that calling the loans/selling will force the worst case, so they hold on hoping for a way out?
* I doubt any lenders are taking significant maps/oxy/fida collateral. Mega shitcoins from day1
* Is this an arrangement that “made more sense” back in the bull market and now lenders want to call loans and avoid pissing off sbf?
* is sbf so interested in rescuing underwater lenders since he doesn’t want them to potentially liquidate giant ftt holdings?
It’s hard to come to any serious conclusions here without knowing the nature of their liabilities and the assets backing those (if any).
But then again what’s the risk? If you made the coin and basically get to chose the price, why not transmute that into cash? Lending to someone is an implicit OTC bid, and alameda surely gets a better deal in the lending markets than they would selling on exchange. You don’t even get the price impact unless the lenders try to liquidate.
I presume that a lot is also owed to BlockFi, which explains why SBF is trying to bail them out so that he doesn't have to repay them.
But if that trade wasn't real where did the money come from? One possible answer is that the money never was: maybe it was always just marked up balance sheets holding multiple times the circulating market of illiquid and close traded tokens-- all a great big fake it until you make it.
[Apologies for the throwaway account, but I don't want to risk taking more retaliation from crypto scammers]
Wake me up when it's Kraken or something, i.e. a company someone may actually have heard of.
> This purported leak of Alameda’s financials demonstrates that the firm’s largest asset is its holdings of “FTX Token (FTT),” issued by none other than SBF’s FTX Exchange.
As a bystander, it's hard to grasp the likeliness of this happenning, can someone elaborate on what would be able to trigger it?
Assuming FTX is a profitable enterprise (a big question in the current market) then any problems Alameda faces could be addressed by SBF leveraging FTX in some way to bail Alameda out… but it’s also plausible that FTX is dependent upon Alameda and that Alameda’s faltering could take down FTX.
My guess is that an Alameda implosion is unlikely because, as far as I can tell, they’re not engaging in fraudulent behaviour, just crypto hubris… and so, worst case, they have to scale back their activity… but if they are reliant on third-party capital, and the current economic trend continues… it seems plausible that could trigger major problems in the crypto world.
Arguably this has already started happening.
But there are tens of millions of new people (or even more) since the MtGox collapse in 2014 who haven't learned the lesson and ,,chasing yields'' or lending against their crypto tokens / leveraging their positions (the new forms of financializing BTC, aka not holding your own keys).
I personally know somebody who lost all his BTC / ETH by lending against it and buying more when BTC price was over $50k.
Alameda imploding would definitely cause a lot of specific assets to nosedive in the short-term, and a lot of volatility, but I think it'd be impossible for it to destroy crypto (perhaps the Solana blockchain, since they're heavily invested, but even that seems like a stretch).
That volatility would also be a ton of opportunity (for other market makers).
Things that could conceivably destroy crypto are more along the lines of coordinated regulation from an influential, multinational group, like the entirety of the G7
Sounds like a plan.
In any case, apparently these guys are a big deal and I hadn't heard of them. Maybe it's European bias, and I'm not a crypto expert or anything, just interested.
Most laypeople haven't heard of blackrock either
It's as if Jane street failed, a company that an normal BofA user may not be familiar with.
$7.4 billion's worth of fools. What a large market!
IMO the important thing is that unwinding the specifics to answer this, e.g. guessing what liquidation of their collateralized debt would mean, and running the numbers of what dogfooded assets are actually worth on the market (specifically should they as the dog not be certain to be able to support valuation...), etc ad nauseum,
is itself so murky (and typical of "difi") as to make a more important assertion,
this industry continues to a clown show grift and bad faith, and even well-intended good-faith participants have little to no chance of ever knowing where they stand or having any security.
One of the few satisfactions of the looming economic apocalypse is going to watch this particular wing of the house of cards fold instantly.
The real question would be: is there anything that is not a scam in this market?
If you put your money in someone else's bank then they'll loan that money out against your will.
The most well known is probably Maker https://makerdao.com/en/
But there's also Aave, Benqi, and a bunch of others.
This is a bank. Running a bank is not easy.
I personally believe in the large projects, and few niche ones.
My buy and hold coins are BTC, ETH, Monero (XMR), MATIC (ETH L2), and Sol. Monero is the truest "crypto-currency" in my view, and I believe there should be a digital cash equivalent if we're moving to a digital world.
ETH has smart contracts and lots of companies are using ETH L2s like Matic to run smart contracts (Instagram is using Matic for NFTs).
Solana looks like a promising ETH alternative, the risk for Sol is that it's tied up to SBF/Alameda, but their chain is very fast (albeit it goes down too frequently, still in beta though)
Please do not take a stranger's advice and do your own research on projects before investing, and don't invest more than you can afford to lose.
I prefer bear markets for crypto, it acts like a forest fire and clears the grift away.
Laws don't prevent crime and regulation is no guarantee either but it does act as a deterrent to the most blatant scams.
Crypto attracts scammers like flies to crap.
And a big part of the reason is the lack of regulation and transparency.
If that's true (and the article itself lists reasons it isn't true!?), that still leaves 8.8bn in other assets, vs 8.0bn in debts.
The article itself says the same when it says 88% of equity. Equity is assets less debts. So as long as they have any equity left at all, they're not insolvent.
If you assume a fire-sale on everything, then everyone is insolvent all the time...
Ultimately all of this is pretty standard for Hedge/Investment funds. If you want safe, diversified, limited downside investments, get an few index funds. The minute you go to a hedge fund you're asking for risk whether the underlying is questionable crypto or US Treasuries...
1) Alameda Research owns FTX, one of the largest and arguably most important crypto exchanges.
2) FTX offers fee discounts to FTT-stakers and additional discounts if you pay in FTT. [0]
3) Trading volume on FTX thus creates an organic demand cycle for FTT. The large firms will buy, stake, and then continuously refresh their supply.
4) The vast majority of the volume at FTT will be in margined accounts at FTX. I am uncertain if the volume analysis would capture FTT movements in (3).
Now, there's clearly financial alchemy going (giving away real economic value to boost an asset that you can then get leverage on) but that'd be better for Matt Levine or someone to flesh out.
[0] https://help.ftx.com/hc/en-us/articles/360024479432-Fees
I can't find the details about FTT/FTX. How high is the guaranteed* anual interest in dollars*?
* With some mild assumptions, like the coins doesn't crash miserably. Past performance does not guarantee future results. YMMV.
Note: This year with a 7% inflation rate perhaps a 20% is not too unrealistic as in usual years with a 2% inflation.
FTT does not offer any sort of interest like Terra did. The benefits of holding are strictly discounted use of the FTX platform [0]
[0] https://help.ftx.com/hc/en-us/articles/360052410392-FTT-Stak...
I know, having that huge pile of cash and not doing anything with it can lead to huuuuuge temptations, but that's what I'm paying the company to do. If I wanted to invest my funds into something I would move my money to a separate investment account that the institution can play with as they please (with some client-defined risk restrictions) and give me a percentage of profits
This is simply not something that financial institutions are capable of doing themselves.
That’s why there are regulations against playing with customer’s deposits in the traditional banking sector, or else greed will make banking executives do similar things as the crypto companies.