FTX’s financial black hole leaves Binance balking at rescue plan
bloomberg.com
bloomberg.com
We will not pursue the potential acquisition of FTX - https://news.ycombinator.com/item?id=33537821 - Nov 2022 (15 comments)
Next stop for FTX is bankruptcy.
Does FTX.us have any exposure to FTX.intl? They're not supposed to. But do they? The SEC and CFTC are now investigating to find out.[1] Bloomberg: "US financial regulators are investigating whether beleaguered crypto-exchange FTX.com properly handled customer funds, as well as its relationship with other parts of Sam Bankman-Fried’s crypto empire..." In other crypto collapses, we've seen "assets" that were actually loans to affiliated parties. Loans that became worthless.
At FTX's web site, "https://ftx.com/intl", there is no mention of any problems. Typical.
[1] https://www.bloomberg.com/news/articles/2022-11-09/us-probes...
Edit: Fair enough, thanks for the input repliers! I thought DD was a much slower event to prepare this information and get legal stuff set up with NDAs etc..
"Sure, we have a notional $1 billion in a combination of junk bonds that have already crashed to a market value of $25 million and other cryptocurrencies worth another nominally $15 million as long as we never try to actually sell them, and we have $1.4 billion in concrete dollar liabilities."
Numbers completely made up, just to be clear.
You can investigate that until you're blue in your face and apply all the nuance in the world to it, that's never going to make any sense.
Also, I'd say Binance is well aware of the message the speed is sending. I don't think that's a mistake. This sort of signalling in "the metadata" of a message happens all the time. You can decide whether or not you believe it.
Honestly, with all the market info. that Binance has on their hands, I'm sure they already knew where to look at, LOL. They were just having fun with SBF.
They're also now the only big player standing in the game, they're having fun already.
It would take minutes to hours to figure out the state of things at FTX.
CZ: “Can I see your balance sheet? Oh, it says here you have $10B in assets and $16B in liabilities. Welp, good luck finding a buyer, I withdraw my LOI to purchase FTX”
They were insolvent way before the crash.
At least 80% of the (lets charitably call it a) market is now concentrated in one place.
A rising tide lifts all boats, but a very public sinking ship makes people reconsider boat ownership.
I'd guess the geniuses at Alameda made sure to accomplish that already.
---
1: https://twitter.com/cz_binance/status/1590055819416330240?s=...
But even if they do produce that, it can only show the asset side if the balance sheet.
Quite a lot of financial failures are a result of off-balance-sheet liabilities.
Complex sounding technical mumbo-jumbo delivered with supreme confidence and seeming internal consistency is how you convince the plebs to invest their life savings in various forms of crypto.
0.1% understand the original underlying technology 0.9% understands the applications possible to be built on top of it 99% are following the 1% and writing governmental and financial policy, and voting with their wallets.
I wish I could say we will look back and shake our heads at it like we do today at Tulip Mania, but I suspect we're watching the birth and childhood of a new religion. Crypto isn't going anywhere for the rest of our lives, and just as we have to keep vigilantly fighting against Scientology permeating tax policy, or religion in general always attempting to undermine secular society, Crypto will continue to be a thorn in society for a long time.
Take away the hyperbole and technical mumbo jumbo interlaced with the financial mumbo jumbo, and cryptocurrencies and blockchain are less interesting than the latest PostgreSQL update.
But it's that mumbo jumbo that separates ordinary people from their dollars.
Good luck to you all!
But 2021 was a time when the casino was giving away money for free. NOT gambling was the wrong move. Sitting on a high horse did nothing for anyone, except maybe bask in the schadenfreude when the thing invariably collapses.
Meanwhile lots of people, including me, made life changing money.
Also how much time did you spend on it? Sounds like you went deep down the rabbit hole.
The trouble is that these centralized entities came about when the tech itself was too nascent and there were no decentralized alternatives. So they had too much power and money. And now that they're crashing and burning, the decentralized alternatives can have their moment in the sun.
For instance, there's a dApp for leverage trading called GMX.io. Since it's decentralized, all of its assets and liabilities and treasury balances can be transparently seen by anyone. It offers most things that any large brokerage would offer, and has been functioning without a hiccup throughout the entire clownshow.
When I started out in November 2020, the decentralized economy was tiny and there were few dApps. Since then, there's been an explosion in the number of dApps powering everything from payments to digital asset market places to in-game asset trading. Paying for a digital subscription with a web3 wallet is a better experience than anything in traditional finance.
Of course there's a lot of fluff - that was inevitable given the wild excesses we saw in 2021 - but the pieces are in place to form the foundation of the entire digital economy.
I will be very, very surprised if you're still using your credit card to pay for things online in 2027.
Millions of others did as well. OpenSea has over 2M accounts, all of which only work with a decentralized crypto wallet. Axie Infinity
Anyhow, waste of time talking crypto on this site.
All I'll ask you to think about is if the world will still use credit cards to access digital content in the year 2030.
This is so backward. Meanwhile lots of people, not including you, lost a lot of money.
I am sure you're aware that your $$ come from somewhere. Net positive for them? Not so much.
Ethereum is valued at $x,xxx per token because of the belief that more and more dApps will launch on it and everyone who uses them will have to buy Ethereum.
Uniswap's UNI is valued at $x per token because of the belief that once there is regulatory clarity, UNI holders will get a % of the revenue generated by Uniswap (currently over $100M/year).
These are basically startups with tokens. Some of them will go bust. Some of them will take years to monetize. Some will be profitable within a year.
As far as I can see there's no real equivalent for cryptocurrency - some crypto orgs notionally have revenues, but they always come from speculators or other crypto orgs (and, sure, maybe some drug dealers or capital control evaders, but that's a tiny fraction of the funding). Money goes into the crypto system and nothing of value comes out.
In fact, the reason Madoff got so large was b/c he was one of the few who convinced most early investors not to cash out.
Implying that smart money is 'being early to the Ponzi Scheme' is certainly an outlook on life, IDK if it's a particularly good one though.
Would you call Peloton's VC backers "ponzi schemers"?
What does Ethereum contribute to GDP?
And that's why it's worse than MLMs, at least those pretend to be retailers.
Crypto currencies are like stock tickers. The price does not have to have any bearing on the actual value generated by the stock or the company it represents.
There is a speculative element to all markets, including the stock market. And I think you know that as well.
No it's not. When an asset prices in cash, that price is dependent on it's ability to generate future cash (Goods/Services price based on the utility from consuming that thing). If you think that model is wrong, then you are wrong.
>As far as GDP, Ethereum spawned an entire new industry with tons of companies paying actual salaries to people (in fiat, if I might add), all of whom bought lattes and cars and houses, and some, I'm sure, also bought Peloton bikes.
Oh no no no. You are not buying any of that when you buy Ethereum. We are not talking about whether or not Coinbase/Binance/etc. are Ponzi schemes. They offer services in exchange for fees. That is GDP full stop.
Again, I can argue they are bad businesses because their fees are dependent on a Ponzi Scheme, but they are not the Ponzi Schemes.
>Crypto currencies are like stock tickers. The price does not have to have any bearing on the actual value generated by the stock or the company it represents.
This is a very weird argument. When an acquirer wants to buy a company, they need to pay the stock (usually plus a premium) price to own that company. Stock prices reflect the theoretical takeout price of a company (and this is put into practice every day).
Cryptocurrencies are marketed to you as similar to stock tickers, but they are currencies (it's sort of in the name) and currencies are valued by the demand for goods/services/assets you can buy with them (i.e. this is why export economies, all else equal, have strong currencies).
I would agree that cryptocurrencies would go up in value if you could buy an increasingly large amount of things with them (and only them), but heuristics imply the exact opposite is true.
>There is a speculative element to all markets, including the stock market. And I think you know that as well.
You're really not getting that there's 'overestimate future cashflow' speculation (bad but not so bad) and 'funamental misunderstanding of the asset' speculation.
But, it's your pocketbook so good luck.
But that's precisely why people were valuing Ethereum at x,xxx per token - the belief that Ethereum will one day have the network effect to generate future revenues. And honestly, a lot of projects built on Ethereum did generate an absurd amount of revenue in a very short span of time.
OpenSea and Uniswap are probably the most prominent examples. Both generated a combined total of over $1B in revenue and used Ethereum as the fee token. The speculative price of Ethereum - or any other cryptocurrency, for that matter - relies on the belief that the number of apps like Uniswap and OpenSea will likely increase over the years.
> I would agree that cryptocurrencies would go up in value if you could buy an increasingly large amount of things with them (and only them)
That's precisely what's happening with Ethereum. There are more and more dApps that all use Ethereum to process transactions. There are even SaaS tools that you can pay for in Ethereum, with a single tap from your Ethereum wallet.
I feel like you're attacking me without fully understanding how this ecosystem works, nor have you actually ever used a dApp.
Ok so let's go first principles here (ignoring the word soup that is "have the network effect to generate future revenues.")
For something to create value it has to do something that people are willing to pay for (in currency, goods, services, etc.). That's the GDP point.
Currencies just exist, they don't do anything themselves. People do things with them but the GDP value comes from what those people do, not the currency itself.
OK, you tell me, "but Ethereum facilitates transactions and people pay for those transactions with fees!"
But those fees go to stakers (who do provide a service, albeit a dumb one).
Ok so now you tell me "But yes, stakers need coins, and I'm buying coins now because I think there will be increasing demand for coins vs. a fixed supply!"
Which great, now we are back to "Currencies are valued by the demand for goods/services/assets you can buy with them (i.e. this is why export economies, all else equal, have strong currencies)."
In this case, what ETH buys is 'the right to earn transaction fees on the ETH network'
Great, again I love this. Feels like we are on to something.
But here's the rub: Are people actually buying anything Ethereum?
Are people buying goods with ETH? No, Ethereum is a very bad tool to buy goods/services with and in fact it's illegal to in most of the world (I'm serious, look it up).
Are people buying services with ETH? See above.
Are people buying assets with ETH? No.
What are they buying? Mostly other currencies.
And now we circle back to why it is a Ponzi scheme: nearly all of the transactions that "generate value" today are just people baying the currency because they think demand will be higher in the future. There is almost no outside value being brought in via "the only way I can buy this good/service/asset is via crypto, so I'll buy crypto because I want that good/service/asset"
If we get to a world where people are actually, ya know, using crypto to buy things, I'll buy into it, but surprise centralized databases are actually intrinsically way better at that than crypto is, but again, that's just my opinion that I've spent years thinking about, so good luck on your bet.
>I feel like you're attacking me without fully understanding how this ecosystem works, nor have you actually ever used a dApp.
I just hope you've though as much about the intrinsic nature of impermanent loss as I have, given all your confidence. I'll give you a hint, it's not impermanent and it's screwing you over 100% of the time.
EDIT: I'm going to head you off here, because I know the 'have you ever used a dApp?" is coming.
You can put as many layers on the above as you want, but if consumable goods and services aren't being purchased with your currency, then it's worthless, regardless of how many Liquidity providers there are on Uniswap.
That service is the point of the whole thing. The fees go to stakers who *execute your computation for you and ensure the integrity of the results*. ETH is analogous to credits on AWS. It's simply an execution environment with different properties from AWS.
If people were buying goods and services with crypto then I would agree with you but they are not.
Right now it’s circular and moving in the wrong direction. People buy coins with fiat to pay stakers to buy other currency. That’s the only use case. And a big part of that is because what ETH does is actually one of the theoretically worst ways to buy goods/services imaginable.
That is why it’s a ponzi scheme no matter how similar it seems to non ponzi businesses.
Let’s put it this way, Lu Lu roe (or whatever that mlm scam was called) looks a lot like lululemon, except in one people bought the leggings because they liked them and in the other they bought the leggings to get rich.
Only one of those two was a ponzi, even if they both sold leggings.
To paraphrase Homer Simpson, "Gold can be exchanged for goods and services"
So yeah, if you are an 'the economy is fake' guy then rock on, but otherwise you're wrong.
This is like the Broken Window Fallacy.
All that money that was spent building Ethereum could have been spent on activities that were far more useful to society.
Like all the billions that went into building...Facebook?
Again, I don't understand how you can get into the morality of it all when literally tens of billions of venture funding goes into everything from juicers (remember Juicero) to companies that literally help instigate ethnic cleansings [0]
0: https://www.amnesty.org/en/latest/news/2022/09/myanmar-faceb...
Paying developers goes in the cost column, not the benefit column. (If you hire a bunch of developers and pay them to sit around twiddling their thumbs all day, you're not growing the economy but rather damaging it - they could've done something more productive instead). The question is what value the ecosystem produces that people are paying in for. And there's certainly a subjective element to that, but the market price should be a sanity check.
Peloton sells exercise bikes and delivers virtual spin classes etc.. And while you can certainly argue they're overvalued (and I'd agree with you, FWIW), it's easy to see how they're actually doing something valuable in the real world - something that, in a small marginal way, improves peoples lives. We can have a sensible conversation about whether a weekly Peleton class is worth $45/month, but people are paying that much for it, not as a speculative "investment" but as a simple exchange of money for goods and services. Real people are better off - in that they were able to take the class and get fitter or whatever. There's certainly a speculative element on top of that, but at the foundational level there's real value being produced.
Where's the product or service for Ethereum? They've had long enough to come up with one. People used to talk about doing cross-border currency transfers (genuinely useful) or that cat breeding game (potentially genuinely fun), but nowadays fees are too high for either of those to be worthwhile and people don't really talk about them. It's not just excessive speculation on top of a fundamentally sound business; there's simply no there there.
The best thing for crypto as a currency is for Etherium to be worth in 10-20 years exactly what it is now factoring in inflation. The fact that this is horrible for "Crypto" because this means eth won't be giving the 10-100x returns, is exactly what's wrong with the whole thing.
Have you guys ever even used any dApps?
But that's precisely what currencies are largely valued on - the value of transactions conducted in that currency, and the speculative direction of those transactions.
Why do you think the US dollar is a stronger currency than, say, the Pakistani rupee? The US dollar is used to pay for more transactions AND speculators make a directional bet that the Pakistani economy won't be as robust as the US economy or that the US dollar's hegemony won't be threatened in the short-term.
If you have a speculative belief that Ethereum will power the digital economy, it is reasonable to value it at XX price.
If I have a speculative belief that Venmo will rise above Cash.App, PayPal and crypto and end up powering the digital economy, even to the point that a major Blue Shield insurance company would send me reimbursements on it, should I be putting my savings into its balance? What should I value my money on Venmo? What utility would there be for holding ETH in that balance vs USD, besides sheer speculation that ETH would rise in value?
How is that different from dApp?
We're about to see this process unfold for FTX. How exciting!
Airbnb has no hotels
If these companies don't generate profits, then what assets are shareholders holding onto? The app? The algorithm? The design?
Then that's just IP. And if the asset is just the IP, how is that different from any blockchain dApp, which is just code?
I don't think you're making the point you think you're making. An unprofitable SaaS startup has no assets besides its code either.
If you've got a non-voting non-dividend stock .. you might want to ask what you've actually got there.
Some tokens share revenue with token holders. GMX, for instance, distributes all of the nearly $2M daily fees it generates to holders of the GMX token. Goldfinch, which loans to real-world microfinance companies, also gives back its fees to Goldfinch token holders.
Some tokens are necessary for paying for transactions or any on-chain asset (most core blockchain tokens).
It's not as much hot air as it appears
Cryptocoins, not being part of a circular economy, must, by definition, keep attracting new money to pay for earlier investors. Sounds much like a pyramid.
A more apt analogy would be a public company that does not do any real economic activity and simply issues more shares to cover expenses. Cryptocoins cannot exist without the network running and the only way to cover those expenses is to attract new money without any product. While stock speculation is a zero sum game, cryptocoins are negative sum game. Quite a major difference in my book.
If you look at the revenues generated by OpenSea or Uniswap or Compound, it's not exactly an outlandish idea.
First, stock buybacks are not tax exempt. If a firm earns $100 in profits and buys back $50 of shares, it still pays the corporate taxes on $100, not on $50. Unlike paying interest, corporations don't get to write off money spent on stock buybacks. So it doesn't affect their tax situation.
Second, for the investors in the company, the total aggregate amount of taxes is paid whether the investors are holding 10 stocks and get $1 per stock in dividends, or if they are holding 5 stocks and get $2 per stock in dividends. The number of shares outstanding does not raise or lower the ultimate value of the dividend stream, nor the tax obligation applied to the dividend stream.
What if a company never pays any dividends and just buys back stock? Then it's value is just the terminal liquidation value, and each time investors sell stock back to the company, that is a taxable event for them, probably taxed at the long term rate which is the same as the dividend tax rate, up until the company winds down, in which case the rest is taxed at the long term rate. The set of taxable events is the same as if the company had paid dividends, but the difference is that investors self-select as to who realizes the gain and who doesn't.
Really this is the difference when companies buy back stock -- some shareholders don't want to take any gains, while others do. The total gains are the same, and the total paid to the government is the same, and the time it's paid to the government is the same, but investors can sort themselves into those who want to to take the gain and those who don't. You get to decide when you want to take the gain, and this optionality has value for you. It's as if you could signal to the management -- don't pay out a dividend, re-invest the money that you would have paid out this quarter so that I'll get more later. That's basically what is going on for the individual investor, but for the government, they still get their quarterly taxes paid just in terms of capital gains by those who sell their shares.
But I agree that many do prefer buybacks, for the reasons I outlined -- it gives investors a choice as to when to realize the gain. Some investors may not want to receive the gain each quarter. And this can be a tax benefit, not because the rate is different, but because the timing may be more convenient.
> I managed to cash out
> I avoided all centralized exchanges
> Almost all my trades were on decentralized exchanges
Only the entry and the exit trades were on centralized exchanges then right?
Are there any examples of safe and legal decentralized fiat on/off-ramps? I've heard of "Bitcoin ATMs" (I suppose that would count as centralized though), and I've read stories of people getting into trouble for using P2P services like "Local Bitcoin". It all seems a bit sketchy.
I'd rather die dirt poor in a ditch than spend a minute in a room with libertarians.
Wow, that was unexpected. Taking criticism for boasting about gaining money in a gamble (you said luck was involved) and then weaseling out....
This is the sad part IMHO. A guy who should be regarded as enemy of the people is instead regarded highly just because they happened to win a lottery.
Turns out FTX wasn't making billions. It was losing billions while pretending to be making billions.
Uh, go visit El Salvador. Every MacDonalds, every Starbucks, and tons of local businesses accept "the largest one." That's because bitcoin stands apart, in terms of its real decentralization, and therefore its independence and utility. Give it time, and it will become far more useful than it already is. The dollar may eventually refer not to a specific weight of gold (that's what the term 'dollar' originally meant), but to a specific number of satoshis.
So likes 33% more expensive?
Or is there some system that el salvador developed that acts as a clearinghouse?
2) A lot of people learned about this stuff because it is a very meme-able concept: mathematicians will upend the entire global system of power with... math. The kids who got their lunch money stolen in elementary school really gravitated to it
Feels like the origin story of BNB chain to me
USDT: https://app.aave.com/reserve-overview/?underlyingAsset=0xdac...
USDC: https://app.aave.com/reserve-overview/?underlyingAsset=0xa0b...
Earns goodwill and users while the size of the bill is smaller.
Not sure how it would work from a legal standpoint but unfortunately 6 billion is too much (and I had a majority of my net worth in FTX as a trader)
As a trader myself, this lesson is part of your risk management. I have multiple accounts with amounts that I wouldn't cry if they went to zero. I trade them together, and if AMP decides they hate me because I am too tall, it doesn't change my ability to trade until that issue is resolved.
Edit: flagged??? huh...
I truly underestimated human greed where making 7 figures of profit A DAY is not enough and you still gamble with user funds.
Luckily I’m still young enough and don’t have a family and I am confident I can rebuild but man, it definitely stings.
Good luck.
This is the mind boggling part to me and many others like you. How do you mess up this bad when you were on top of the world and a billionare before age 30? Was it really not enough?
Not sure which exchanges are sane anymore these days, you can rule out pretty much anything with it's own token as being too high risk, including Binance. Coinbase went too big too fast and we saw extreme greed with them going public. Kraken seem cautious overall, taking fewer risks and doing things the right way?
Hard to say for sure.
- Double Tops btc in november 2021.
- Interest rates at record lows worldwide.
- Early signs of inflation > Rumors of fed raising interest rates & rumors of quantitative tightening.
- End of covid checks and government bailouts.
I also suggest you reading Financial Times and especially its comment section which is often more insightfull than articles themself... WSJ optional, but its comments section is trash (politicaly and economically very biased). > google bypass firewall.
I also suggest you to disconnect completelly from "assets" built and backed by hashed numbers (once you read "History of Financial Speculation", it will become clear).
Cryptocurrencies were meant to be used in a decentralized manner. These centralized pseudobanks are everything that's wrong with this space and I hope they do get regulated.
For a really quick summary, Thorchain provides Uniswap style liquidity pools such as BTC/RUNE that allow people to do one shot trades that can be routed across major blockchains, and liquidity providers collect fees on every trade. Typically liquidity providers are also exposed to RUNE due to the nature of how XYK liquidity works. These new vaults are special because they lack RUNE exposure, but they are also only allowed to make up something like 10% of the liquidity pool, so deposits are limited.
I've been incredibly vocal about how anything promising >10% yields is a scam. It's the reason I built ponzi.finance (which never got popular, but was fun while it lasted). Yields greater than 10% are always either temporary, or straight up fraud. I'd still tend to agree with Erik though that your claim that you can't earn yield on BTC was incorrect, though the counter-party risk at the time was not ideal. Counter-party risk is, of course completely unavoidable in legacy finance systems, and the overhead costs to properly mitigate it are (IMO) unsustainable in a world with easily accessible DeFi tooling.
Obviously Erik did not mean via centralized exchanges. You can lend your Bitcoin on countless decentralized protocols for those yields- even risklessly with flash loans via a dApp like Aave. With non-risk-free lending you can assess and knowingly accept your desired level of risk via fully auditable open ledgers.
If you withdraw more than your interest and in some other crypto than your collateral then your loan now has leverage. During that particular withdraw transaction you will have signed some logic which can automatically liquidate your lent crypto if the amount you withdrew (minus interest) becomes worth less than your collateral.
Until that pre-signed liquidation transaction executes you are fully in control of the balance and keys.
Normal exchanges don't go bust all the time, it's not rocket science.
Crypto entities haven't earned that privilege yet, and are quite commonly openly antagonistic to any regulation at all.
Unless Binance does this as a unilateral act of goodwill, it would be difficult for them to acquire FTX in a way that pays out to customers while stiffing lenders and shareholders.
gift humans credits on new exchange.
if binance assumes $6b in liabilities for no gain they'll be acting against their shareholders best interest and be on the way to bankruptcy anyways.
No one here can say what the upside of assuming all those liabilities is. Aside from 'goodwill' and 'the entire crypto market will crash', what actual reason is there for binance to buy an insolvent exchange?
There is a reason why no one is acquiring ponzi schemes.
I am concerned about their near new monopoly. But alleging that Binance is involved in these money printing shenanigans is simply baseless.
I’d be concerned if the “last man standing”[0] wasn’t the most responsible one.
You’d think we, collectively as a society, learned our lesson from the Wild Cat banking days but, nope, apparently not.
[0] I do find it funny you have to use quotes around a common saying because someone will say “how do you know they identify as male?”
Can I ask why you are concerned? That they start charging more fees? Isn't crypto decentralized where you don't need to use anyone and it doesn't matter where you live? I don't know a lot about how all this works but isn't the point of crypto that you are divorced from any sort of authority?
My guess is that binance just wants to take down a competitor. They publicly started the FTX bank run by announcing they were going to dump FTT, after all.
Binance has its own dollar based stablecoin, BUSD.
They may be exterritorial to the US. So was Silk Road.
The reason partial deposit insurance works in commercial banks is that the ground rules are set from the start.
you can sort the landing page here by 24H volume for a quick glance, or you can check the exchanges tab for more detail: https://www.coingecko.com/
DYOR or "don't trust, verify" are common mantras in the industry for a reason, and similarly are the reason that I hold custody of my own assets rather than relying on centralized entities like FTX.
https://assets.ctfassets.net/vyse88cgwfbl/2xJyKdUKicdRUWpC9b...
Not one of the first four auditing companies i'd call or trust.
And note that this was true in May - global markets are WAY down since then.
Moreover, it was only a spot verification - they could have moved money into treasuries for a day and then moved it back again. The auditors explicitly avoided commenting on this.
I'm not claiming to be an omniscient source of truth, but USDT is supposed to be backed 1:1, is audited regularly, and has survived extreme volatility events and bank runs for the better part of a decade.
Maybe it will collapse some day. I personally have more trust in USDC and Circle, so I use that if I need a stablecoin.
https://blockworks.co/tether-pushes-back-timeline-on-audit-r...
https://assets.ctfassets.net/vyse88cgwfbl/2xJyKdUKicdRUWpC9b...
>The company does release quarterly attestations, separate from a thorough audit, as required by a 2021 legal settlement with the New York Attorney General’s Office. Following the hiring of its new accounting firm, BDO Italia, earlier this month, Tether said it intends to release them on a monthly basis, beginning early next year.
But imagined value that, if you play your cards right, you might be able to convert into real dollars. Leaving someone else with the imagined value instead.
This is not entirely accurate. The "crypto" industry is not a monolithic piece of technology or implementation. Some tokens provide governance, which is a proxy for legal ownership. Some tokens provide ownership directly or contain trustless, immutable access to assets.
I personally find decentralized programmable networks like ethereum- where it's sort of choose your own adventure in regard to utility, ownership, implementation, et cetera- to be more interesting than bitcoin.
Do people speculate on it more than they probably should? Sure. But at the heart of the stock market is a system of "I just sold a physical thing for $1000, and since you own the stock you get $0.00001 of that". At the heart of crypto is "my computer did some math, so... money".
Just like in the equities market, speculation and gambling dominates market values of these things to varying degrees (to a comical extent in growth tech recently, for example).
But where's the value being delivered by that "decentralized banking infrastructure and currency"? Actual usefulness of crypto for genuinely decentralised (i.e. L1) transactions has been going down not up (fees are higher than ever, fewer and fewer stores allow direct payment with cryptocurrency...).
It happens every day....
If you say, "Selling cryptocoins to others", that isn't actually a product or service.
Oracle (READ: aggregated/decentralized APIs feed) services and other infrastructure that supports decentralized protocols (network graph, etc.)
Decentralized lending, borrowing, trading.
SaaS products in on-chain analytics, portfolio management, commerce aggreggation.
Gaming
Fine Art (a tiny minority of the art scene in crypto is pretty interesting, ex. distributed multiplayer run-time art, something that can't really exist outside of the medium)
Digital Collectibles as an end consumer product or in service of the construction of lifestyle brand / gaming / etc startups. (A lot of the most boring use cases land here, imo)
Advertising
Content creation/consumption
There's a tiny sliver of cases where crypto brings real value by enabling something that you couldn't do without it (e.g. cryptokitties was genuinely novel and interesting). But it's just such a vanishingly small proportion of the ecosystem.
When I take a loan from a bank, I may use it for education, a vacation, medical emergency, a car or invest in a business which will generate revenue and employment.
What do people do with tokens they borrow in "DeFi"? Given that the tokens can't be used for paying college tuition or a hospital bills or rent or buying a machine?
Ownership of bitcoins doesn’t give you ownership over these entities the same as ownership over some shares of Apple.
It’s like saying that you having dollars in your pocket gives you ownership over the White House.
Regarding ownership, however, you can explicitly own things- or parts of things- on the basis of token ownership, but you’re right that this isn’t the way that bitcoin and many other technologies are structured.
And only bad ones from crypto.
Companies like Coinbase are selling turtles all the way down, then.
Even if a company is loss making and doesn't pay dividend, there will be someone who would be interested in acquiring the company to actually run it and not just just to flip it to a bigger buyer at a later date. That is why Musk paid $44B for Twitter. Because after all is said and done, it is still the most influential social network amongst the people who matter. Owning it has a value for someone like Musk. That value comes from the activity that Twitter conducts and not the demand for its shares.
In crypto value comes only from the demand. In stock, demand comes from the value being generated by the company.
We all know that this can happen to centralized exchanges and using a DEX will protect your assets (the ones that don't go to $0 on their own like LUNA and FTT).
In the past, trading was always much more expensive due to the blockchain overhead compared to trading on a CEX, not to mention liquidity problems with smaller alts and DEXs.
Is this still the case? Do folks day trade using DEXs for small amounts or are they still limited to longer-term trading due to the overhead?
DEX volume seems to be around 10-20% of CEX volume. But CEX is easier to overstate as it's cheap, sometimes commission-less. While DEX volume always carries a cost.
For some trading pair likes ETH/USD it is actually cheaper to trade on DEXes (Uniswap v3) where you get 0.05% fee as opposite to Coinbase that charges you 0.6%.
The events like FTX should prod the markets more towards DEXes. Also now there are futures DEXes available like dYdX, Perp.fi and others making it possible for more professinal trades to utilise DEXes.
I think the only synthetic, or fractionally backed stables left are Ohm and Frax. They do not have any significant market share.
Most volume is in
- USDT/USDC pairs
- ETH pairs
- BNB pairs
I run a website that tracks this stuff:
I'd like an answer to this too.
I've been dollar cost averaging into BTC and ETH since the prices are low. But at the same time every exchange I see has fees that eat a large percentage. I know Coinbase allows you lower fees if you're trading big money each month, but I'm not doing that.
it also occurs on Ethereum Layer2's and other EVMs
Interesting, I would have thought that Centralized exchanges would be cheaper and faster.
Cheaper because there are no block chain transaction fees. So assuming a DEX and CEX can charge the same fee structure, then CEX's should win as there is no exchange fee added to each transaction.
On chains like ETH that matters alot if you trade alot.
And same for speed. On a CEX a trade is a database update, on a DEX its a blockchain update. Hard to see how the later can be as fast as the former.
>...then CEX's should win as there is no exchange fee added to each transaction.
The other way around, the DEX should win as there is no fee at all. If you could make a decentral Ebay there would be no Ebay to take a part of your profit.
The problem with transaction fees in many blochchains is that they actually replaced the middlemen with a decentralized middlemen(s) (the miners/stakes/node operators etc.) Now you have a system operated by people who want high fees and user who want low fees. They operators cant really collude because they compete but they know low fees would hurt them all so they basically form an oligopoly without even talking with each other.
Ideal the system should be operated by the user so they would all want fees to be low. I dont know if any such system exists but I know the XRPL solved the problem by burning the fees so node operator have no incentive for high fees. This results in a typical Tx cost of less than $0.0001 USD. Any offer on the DEX is just a special transaction and does not cost anything extra. The fee is only a negative incentive so people dont spam transaction.
>And same for speed. On a CEX a trade is a database update, on a DEX its a blockchain update. Hard to see how the later can be as fast as the former.
This is true a CEX will definitely be faster with current tech and I dont know if that will ever change but for manual trading this is not really a problem. XRPL DEX executes orders about every 3-4 seconds and the consensus mechanism does not allow front-running.
Trustless distributed consensus is expensive - running chain validation isn't free, and there's a tradeoff where the cheaper you make it the easier it becomes to attack. That's why this stuff ends up costing more than a traditional middleman who can use a cheaper datastore and consenus mechanism.
Consensus is actually very very cheap if its not done with PoW or similar consensus "tech". Distribution isn't cheap because obviously 2 identical servers cost twice as much as one. But this comparison isn't actually applicable to real world use. A centralized system that wants to have high uptime and reliability does need multiple server too. Most centralized system do not reach the kind of reliability "blockchains" can have because from a cost-benefit point of view it just does not make sense. 99.999% uptime or about 5.5 minutes downtime per year is very expensive and very few public system come anywhere close to this.
>...there's a tradeoff where the cheaper you make it the easier it becomes to attack
That is actually a pseudo-math-security coming form the early days of Bitcoin. Yes, if you double the number of nodes the system is arguably more secure (if the nodes are actually operated by different entities) and it costs twice as much to run BUT there is no point to endlessly increase the number of nodes. Less nodes but strategically placed around the world operated by different entities is way way more efficient and cost way less than the blind "more is better" approach.
Some quick back-of-the-envelope calculation:
1 node hardware + energy and maintenance cost per year $100k USD. 50 such severs distributed all over the world.
This system would therefore cost about 5 million per year. Sounds like a lot but assume there are 1 million transactions per day that would mean 1 Tx cost only $0.0137. Obviously more Tx/d would reduce the price per Tx because operation cost cost does not grow at the same rate.
Give $0.0137 USD to the operators for each Tx sound like a good idea but most system also give the operators the power to change that price, which is comically stupid.
The reason Tx fees on some blockchains are order of magnitudes higher, is because of bad design, completely pointless levels of redundancy, and most importantly because the operators do make huge profits.
Its only logical that they would double the fee if that reduced the number of Tx by less than 50%. They dont care if you cant use the system anymore because the fees are too high for you they only care about the sum of all fees.
Imagine HN but every comment would cost money and the operator would want to make the maximum profit possible. You could plot the average number of comment at a given cost and find the price that leads to the maximum profit. One thing is for sure, comments would not be cheap.
Sorry I meant block chain transaction fee, not exchange fee, I mistyped the second instance.
For a more advanced use of the XRPL DEX there is Sologenic[2] which is build on top of the XRPL DEX.
[1] https://xrpl.org/decentralized-exchange.html [2] https://sologenic.org/trade
*Free as in no one earns money from your usage. There is a tiny fee burnt to prevent spam for each offer/transaction. A typical fee is under $0.0001.
Even leveraged trades are very efficient on a decentralized platform like GMX.
I fully expect CZ to say that the hole was too big and that customers are now suffering due to FTXs recklessness
It might have won over some volume but it's not like FTXs volume dropped to zero overnight because of it
Binance just has first mover advantage; as a result of inventing this "my coin can just be printed forever" crypto exchange model, they have more use and $$ which gives them a better cushion. But it's still only a cushion.
This reminds me of 2008, when companies were trying to get "rescued", such as Lehman, but Lehman couldn't make a compelling argument why they were worth acquiring, once the accounting books were opened.
They are the biggest exchange now, they gotta look like they care and tried to help so they can attract all the ones who need a new home
You still dont get crypto dinamics, is not about the tech, is about how much money you can extract from people trusting you
So far it has cost them a couple of tweets.
Binance or CZ paid never paid face cash value for any those tokens, simple as that.
And most important, he hasn't purchase FTX. So it was just tweets and have your PR team contact major crypto news sites
When you are the biggest shop at the fair you wanna keep the festival going as well.
Worded like that you make it sound like that's a lie.
CZ didn't declare them insolvent. He just made the fact public.
Binance was the little boy.
”The survival is not a zero sum games. For banks to survive it is beneficial to other banks to survive as well.”
Maybe I'm missing something but isn't Binance just insuring funds... with their own coins? (ie. what Alameda basically did with FTT tokens)
1. Couldn't Binance be subject to the same rundown FTX just experienced? / How could Binance realistically rescue FTX at all?
2. Was this offer ever serious?
[1] https://academy.binance.com/en/glossary/secure-asset-fund-fo...
[2] https://bscscan.com/address/0x4B16c5dE96EB2117bBE5fd171E4d20...
IMO Binance has billions of their own cash reserves (not user funds), based on their activity in the last year (acquision of coinmarketcap for 0.4B, commiting $1B to boost crypto projects and companies etc.. this must be a fraction of their overall worth and in that case, $6B should also not be a huge issue, especially since they can get a lot of goodwill and millions of FTX users).
Binance collects billions of dollars from fees every year and also get money from their external investments (e.g. Binance invested in FTX and sold their shares last year for $2B ($1.5B and $0.5B FTT)).
Right now it is very very profitable for them. They can earn interest rates for free, without a high risk.
Cryptos seem to be: 1) a tech stock 2) a "fair weather" asset.
The political cost of being in a depression is far too severe for those in power to not prevent it. They are armed with far more tools and knowledge today than 1929. This will be merely yet another recession in a long history of human society oscillations.
>Cryptos seem to be: 1) a tech stock 2) a "fair weather" asset.
I do agree with that, but it's a result of crypto being played by the same people who played tech stocks and fair weather assets. The OG evangelists who saw it represent the antithesis of the current world order have pretty much disappeared as crypto picked up attention from VCs.
On the contrary, the assumption seems to be on your part. You say "it's just the beginning" but the Fed has already been signaling that they will slow down and then cease the interest rate increases over the next several months.
Do we now know that:
A) FTX were not segregating those client funds;
B) They were speculating with them after SBF said “not even invested in treasuries”;
C) Seperately, they were leveraging up FTT on their balance sheet.
FTT price fall seems to be the catalyst, but this shouldn’t impact segregated client funds unless they are also being used in funky ways, right?
Surely one of the above is bad enough, but all 3 is an astounding abuse of trust no?
I have defended Crypto and even dabbled in the industry for a while, but this is shocking to find one of the blue chip names losing client funds.
Steel yourself for future challenges.
FTX.us is either OK or some people are going to jail. Too soon to tell which.
Edit: FTX Japan has halted withdrawals too.
Entertaining? Absolutely.
Shocking? Not to anyone who’s been paying attention.
Sounds like liabilities exceeded assets
Source: https://twitter.com/cobie/status/1590384255091499008
Could be fake.
Edit: Looks like the parent commenter was referring to Binance's balance sheet, which might be what you were asking about. The balance sheet I linked is FTX+Alameda.
When the housing bubble collapsed you had millions of people who probably didn’t know the risks (because everyone with a voice was saying housing prices never go down) and politicians cared a whole lot.
I’d say even if the whole crypto craze went bust overnight all you’d get is a collective shrug.
Is entirely fallacy/fantasy when people talks about shorting on crypto market.
You can't win shorting actual crashes in unregulated markets, the only way u win shorting in crypto is that you were lucky to guess what a whale/org was doing at the same time so pretty much a russian roulette
Marketmakers are not legit and all the movements are pretty much fabricated, its just not regulated and its obvious
but when you have to guess stuff about the crypto market, you literally have to think the worst things or the best things and you will be right
my guess here is simple, CZ has liquidated everything that can be liquidated that doesnt make him look bad, hes deep in the very same business than FTX/Sam was, he doesnt need to look the balance sheet, chances are his balance sheets are similar or worse haha
So he probally liquidated longs if any, he probally did OTCs with other tokens/assets and just kept the FTT as a PR move to pretend he was a nice guy, anyways having an amount of $ "lost" by a token that was never worth anything is still 0 lost, he most likely got those tokens in exchange for other tokens worth nothing, or during ICOs stage so pretty much hes not losing any cash even tho you will read people saying how much he lost, remember all of that is nominal value, not real cash value at the end, the very same reason things are falling now.
> Is entirely fallacy/fantasy when people talks about shorting on crypto market.
What do you mean by this? I shorted FTT the second I saw the tweet, and then I shorted the entire cryptocurrency market. I successfully made money, so how could it be a fantasy?
Tell me who at the same level of insider info, gonna OTC borrow you millions of FTT for you to short, when most likely that person/entity owning millions of FTT is already trying to protect their value?
You have to remember that when you short and you bet for price going down, the other side is betting for price going up or at least for the price to stay at the same levels, the person borrowing you has to be constantly doing DD to be sure that its the right moment to borrow the asset, and its pretty obvious that someone holding big amounts of FTT was/is very aware of whats comming
if I was an OTC shorter and had millions of FTT and you see Binance CEO comming to you to short, I inmediatly said no and cashed out those FTT instead of shorting, cause clearly at those levels there is certainty of what they are doing.
God I wish I could be this lucky every single time.
Work at a trading firm and we saw the entire thing play out, but we're algorithmic so we weren't set up to take advantage.
Though if you're a small player, there's a lot of opportunity here. Some times, the difference between the price for liquidation and the price you can get somewhere else is high. We saw one dude make a quick $300k through a flash loan. The market isn't fully efficient yet, so this opportunity was available for 10 min before someone took it.
> there were at least some players who burned others frequently on the path down
I don't know. If there's a risk of getting liquidated during one of those minor reactionary pumps, the position is probably overleveraged to begin with. Also, do people not configure a stop loss?
It should not be, but it's a scam and unregulated.
I made the painfull experience of it with a future on DJIA in 2009, and it was a regulated market place (CBOT, i think)... I was long because I supposed a reversal of the bear market. I put a stop loss at 8000$ or something. Price went just 1 tick (0.01$) under my stop loss then went up.
It happens market place members (big players or market makers ; you pay to be a market place member which give you some advantages over regular traders) have full visibility of market orders book, but not retail traders. So they have access to your stop loss order. So then can put pressure on prices whatever the direction to force you to close your trade until orders book on one side at a price level is empty and the price can only reverse course.
https://www.washingtonpost.com/politics/interactive/2022/top...
Michael: Sam Bankman Fried is why I'm calling https://twitter.com/sbf_ftx/status/1514588820641128452 https://www.vox.com/platform/amp/recode/2021/3/20/22335209/s... https://ftx.us
Elon: ??
Elon: I'm backlogged with a mountain of critical work matters. ls this urgent?
Michael: Wants 1-Sb. Serious about partner w/you. Same security you own
Michael: Not urgent unless you want him to fly tomorrow. He has a window tomorrow then he's wed-Friday booked
Michael: Could do $5bn if everything vision lock. Would do the engineering for social media blockchain integration. Founded FTX crypto exchange. Believes in your mission. Major Democratic donor. So thought it was potentially worth an hour tomorrow a la the Orlando meeting and he said he could shake hands on 5 if you like him and I think you will. Can talk when you have more time not urgent but if tomorrow works it could get us $5bn equity in an hour
Elon: Blockchain twitter isn't possible, as the bandwidth and latency requirements cannot be supported by a peer to peer network, unless those "peers" are absolutely gigantic, thus defeating the purpose of a decentralized network.
Elon: ["disliked" "Could do $5bn ..."]
Elon: So long as I don't have to have a laborious blockchain debate
Elon: Strange that Orlando declined
Elon: Please let him know that I would like to talk and understand why he declined
Elon: Does Sam actually have $38 liquid?
Michael: I think Sam has it yes. He actually said up to 10 at one point but in writing he said up to 5. He's into you. And he specifically said the blockchain piece is only if you liked it and not gonna push it. Orlando referred Sams interest to us and will be texting you to speak to say why he (Orlando) declined. We agree orlando needs to call you and explain given everything he said to us and you. Will make that happen We can push Sam to next week but I do believe you will like him. Ultra Genius and doer builder like your formula. Built FTX from scratch after MIT physics. Second to Bloomberg in donations to Biden campaign.
Just pure Machiavellian outcomes
Leaving only more resilient ones in their wake
Let me know if you know a word for that
His seminal work reads like a groveling apology masquerading as advice to the politicians who had banished him.
IMO, the word works fine for describing someone who gambled on their own dubious advice and lost. Even moreso if the loss stems from a cyclical event, like the boom/bust nature of financial institutions which let the Medicis buy their way to political power in the 1400s.
Bailouts are good when a private company does it (with money slurped up from sovereign wealth funds and pension plans)
/s
Where do you think it went?
They pumped the coins on the way up - Google willybot - which sucked retail money in. The smart exchange fraudsters cashed out on the way up. The uber-greedy exchange fraudsters held on thinking they could get more $$ if the price goes up, only to see that the price didn't go up, causing balance sheet holes which result in their demise a la ftx
Not as fun admittedly as gambling, but commas are commas. Wealth is sticky is this comment’s thesis.
[1]: https://www.cnbc.com/2022/05/13/robinhood-shares-jump-after-...
https://www.bloomberg.com/news/articles/2022-11-09/us-probes...
He very much wasn't. Probes had been ongoing for months [1].
[1] https://www.bloomberg.com/news/articles/2022-11-09/us-probes...
There's a previous submission from a different source: https://news.ycombinator.com/item?id=33535015