Binance to acquire FTX
bloomberg.com
bloomberg.com
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-...
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.
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?
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.
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.
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.
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.
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.
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.
Does anyone even know where it operates out of these days?
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...)
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.
It's not really "4D chess" to screw over your competitor to corner the market.
That's like, business 101.
Winning an evenly matched game of prisoner's dilemma with billions at stake is about as close to 4D chess there is.
Then, when FTX predictably tanked, he stepped in and generously offered to buy out FTX.
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.
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.
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".
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.
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.
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…
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).
Similar to how stocks can be traded in Dark Pools outside of the regular stock market.
Sounds like a euphemism to me.
That's not necessarily a bad thing, btw.
> 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]
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.
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.
This should be illegal, and people who do this should go to jail.
Customer funds should be 1 to 1 backed with assets.
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.
SBF claimed that assets WERE backed, while it appears that they were not.
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.
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.)
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?
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.
Educated rumor is suggesting FTX may be insolvent, not only the victim of a bank run type scenario.
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.
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)
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.
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?
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?
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.
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.
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.
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...
https://ftx.com/markets/futures
https://help.ftx.com/hc/en-us/articles/360024780511-Futures-...
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 $ETH. We rebounded to 2k in time. That was close to 17-18bn. This is smaller. in time... we will be back. Not sure when.. but eventually it all comes back. Market is cyclical end of the day.
+ the bank (FTX) was likely massively over leveraged
+ the bank's primary assets were likely not very liquid
Both of above are speculation. However, why else be forced to sell (1) to Binance?
(1) Matt Levine makes his usual solid argument as to why the price was likely zero, other than cashing out FTX debt: https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthe...
https://www.coindesk.com/business/2022/11/02/divisions-in-sa...
CZ sounds smart to withdraw quickly not to be the one in a sinking boat and it did sink quickly.
But one thing is undeniable: SBF (FTX CEO) was trying to weaponize US regulation against his biggest rival CZ (Binance CEO). CZ retaliated by selling the FTT token, exposed the fact FTX was over-leveraged, and took over.
This is, as the kids on Twitter say, the embodiment of the old "F#$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.
(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)
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.
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.
Source: me referring to one of them in conversation a lot with no incentive to kowtow to his preferred branding.
Bitcoin is still energy intensive, but that has nothing to do with NFTs.
When the names are even semi-complex and the reach is global, people default to acronyms.
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")
[1] https://www.oed.com/viewdictionaryentry/Entry/1844;jsessioni...).
um, actually...
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!
Childish bullshit in the cryptocurrency market?!??! I am absolutely shocked and surprised, such a thing is completely unprecedented...
Alameda's balance sheet was already looking wrong in the first place.
https://www.coindesk.com/business/2022/11/02/divisions-in-sa...
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.
There’s a reason the FDIC exists and all banks must be insured.
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
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?
> 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.
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.
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.
[insert coconut meme.gif here]
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.
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://banks.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/assuringconfidence.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.
Am I crazy or would 5 basis points be 0.05 cents (1/100th of a percent)
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.
Literally a contradiction.
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
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.
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.
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.
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!
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.)
Alemeda has like $14b assets and $8b in liabilities. But of that $14b, $5b are in their own token (FTT) which is kinda?? worth nothing at this very moment. So now the assets and liabilities are more equally matched, but less margin for shifting values of tokens.
I don’t know, but the derivative of their assets looks scary the last 24hr.
Disclaimer: not a crypto person
Cash is 100% liquid while a house is illiquid you might have millions US$ 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.
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.
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.
Right?
https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
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.
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.
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.
That wouldn't be a problem for the majority of Americans
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.
FTX CEO litterally said that in his tweet.
Banks make similar statements all the time -- they require regular audits of assets (stress tests) and maintain some minimum levels of liquidity.
Note: There's a difference between being a custodian of customers' investments (brokerage / commercial banking) versus proactively investing customer deposits (investment banking).
From https://en.wikipedia.org/wiki/Fractional-reserve_banking:
"Fractional-reserve banking predates the existence of governmental monetary authorities"
Real regulated banks have access to the Fed to borrow in a case of a bank run.
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.
Shadow banks don't.
"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.
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...
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.
> There's an awful lot of fancy piled on the simple fact that all "currencies" are negative sum games.
?
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.
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?
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.
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.
The "as is" worries me here
They stopped processing withdrawals according to on chain data.[0]
[0]: https://www.theblock.co/post/184176/ftx-appears-to-have-stop...
If you look at the comments on https://news.ycombinator.com/item?id=33518961 that article missed that FTX uses multiple addresses for withdrawals.
>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.
https://www.coindesk.com/business/2022/11/08/ftxs-bitcoin-ba...
https://twitter.com/lizrhoffman/status/1590021299295768578
He / his people didnt call me, but I would have passed anyway
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...
Alameda invested in FTT which is minted by FTX which is not the same thing.
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.)
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 :)
FTT spiraled and FTX went insolvent.
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.
> 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?
They don't "invest" client assets, not even in treasuries, ie actual investments.
They "speculate" client assets, in tokens.
> 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.
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.
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!
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.
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.
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.
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"
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
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.
Someone like him not born to such father in Nigeria, will likely be an high school teacher getting paid $100 every 4 months.
There are a quarter of a million immigrants from Nigeria in the US.
[0]: https://travel.state.gov/content/dam/visas/Statistics/Immigr...
This is like saying every great sailor happened to sail when the wind was blowing in the right direction.
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.)
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.
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!
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?
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.
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.
Normal markets aren’t as centralised as crypto. The exchange and market maker are separate.
FTX was almost the exception since Alameda spun out of it IIRC
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.
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.)
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.
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.
So the question you should be asking is: if there is a solvent crypto exchange, how would I ever find out about it?
If you don't take extra risks to spruce up returns, you lose money.
Never a dull moment in the world of crypto.
https://twitter.com/SBF_FTX/status/1589598285798707202
The Bagehot quote is not SUPPOSED to apply.
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.
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.
Exchanges aren't subject to bank runs. If an exchange (or even broker) cries run, they were taking novel risks.
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).
Levine spoke about brokerages. When brokerages extend credit, they can be subject to run dynamics. Not exchanges.
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.
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.
This is not accurate. Withdrawal limits are there to control fraud.
SV fintech keeps reinventing all the mistakes of 19th century banking.
BNPL is the next explosion btw.
Another good candidate is "AI-powered" insurance i.e Lemonade.
Credit score&history, income, capital.. go.
Most of what BNPL actually turned out to be was just dumb money.
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.
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.
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").
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.
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).
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.
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).
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-...
JFC, what an arrogant twat!
Neither of those things benefit the owner of FTX unless they are also the owner of Alameda
Also with Biannce buying FTX, it can call back the loaned FTT from Alameda.
https://content.fortune.com/wp-content/uploads/2022/07/COV.W...
I was wondering why he was throwing rescue tubes to silly projects. It seemed like he had too much money.
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
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.
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.
https://twitter.com/ClarityToast/status/1590016720923930628?...
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.
Iunno, it seems a lot easier than I ever expected
(I don’t run one, just observing others)
It's clear it would have involved everyone losing their money and Bankman Fried being on the run à la Do Kwon.
Or was that another crypto trader?
If anybody could help my sieve-like brain, that would be very appreciated :-)
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.
That's not democratic at all!
is less terrifying to you?
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.
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.
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
Significantly less, as the central bank is usually at least accountable to the democratically elected government of the country.
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.
The Internet's still around, buddy.
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.
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.
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.
Reading a bit:
1 a : absence of government
2 a : absence or denial of any authority or established order
Merriam Webster
Redefining anarchy to mean democratic government is a new one.
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.
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.
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.
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.
Repealed by congress which was controlled by GOP at that time.
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.
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.
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'.
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.
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...
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...
The speculative frenzy with FedCoins like BTC and ETH will obviously fall to baseline, but the true use case for cryptocurrency still exists.
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?
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?
[1] https://www.nytimes.com/2022/10/07/business/binance-hack.htm...
[2] https://decrypt.co/100530/binance-ceo-says-exchange-never-so...
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.
Whom are you alluding to?
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.
Anarchism should be about dismantling hierarchies. Crypto has further entrenched owners against the rest.
https://dirtybubblemedia.substack.com/p/is-alameda-research-...
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?
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-...
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.
Preventing exposing the entire crypto currency ecosystem as fraud.
That implies they embezzled customer funds (customer deposits should never be invested or loaned or intermingled with company funds)
> AI alignment lab
> EA projects
So what you're saying is that nothing of value was lost?
[1] https://www.cnbc.com/2022/09/27/bankrupt-crypto-lender-voyag...
[2] https://techcrunch.com/2022/07/01/ftx-us-deal-with-troubled-...
"FTX is fine. Assets are fine."
Can't trust a word out of this guy's mouth.
The line between where FTX starts and Alameda ends always confused me.
[1] https://cryptoslate.com/bitcoin-balance-on-ftx-exchange-goes...
Apparently this is for the international exchange business, FTX.com, but not FTX.us or Alameda quant trading firm.
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
[1] Not ftx.us, which is not getting bought
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.
The U.S. subsidiary had to follow rules that made FTX’s shenanigans more difficult.
What hasn't changed is that given the opportunity everybody wants to be a banker, invest other people's money and pocket the difference.
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.
Later in the video Martin Shkreli tells Do Kwon that prison isn't so bad.
Interesting interview.
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.
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.
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?
Though that raises the interesting question, why were so many folks, some of them quite credible, boosting cryptocurrencies the idea regardless?
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.
>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.
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.)
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?
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...
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)
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.
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...)
>> 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.
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.
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.
Binance called attention to the weakness. The underlying issues were all caused by FTX.
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?
Sounds like a way to structure power within twitter TBH.
Will never happen. They are black boxes. Only them know if 1:1
SBF just got Jack Ma'ed by CZ.
https://twitter.com/cz_binance/status/1590055819416330240?t=...
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.
FTX starts to fail…
CZ snaps it up for a song
[1] https://dirtybubblemedia.substack.com/p/is-alameda-research-...
This is why regulations exist.
Probably a civil matter anyway - no expectation of jail, which was what the parent commenter referenced.
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.
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.
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.
Turns out the "trustless" in crypto means "you can't trust anyone".
(Looks meaningfully at TicketMaster)
My point is that things tend towards centralization because the market rewards efficiency.
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.
Meanwhile the local authorities don't know what most of those words mean.
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.
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.
Alternating current… Computers… Smartphones… The internet…
(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.)
"Don't trust. Verify."
https://news.ycombinator.com/newsguidelines.html
We detached this subthread from https://news.ycombinator.com/item?id=33522825.