Tether's Troubles in November 2022 | Hacker News Reader

Tether's Troubles in November 2022

kalzumeus.com

164 pointspicture122 comments

> The risk-on assets are 12.86% of the reserves, via simple division. Their equity is 0.36% of assets. If their risk-on assets were impaired by more than about 2.86%, Tether must have (by their own numbers) needed recapitalization. It is not credible that they suffered no serious impairment. Bitcoin, the blue chip cryptocurrency, is down by more than 10%.

> I challenge anyone to find a portfolio construction for digital token investments that possibly survived this environment with only a 2.86% impairment.

Last sentence right there is the nail in the coffin. There is no such possible investment that can exist without recapitilization based on these data.

Yes tether is an obvious lie, and it’s now just a question of when, not if, they collapse.

If Tether is 87% backed they'll be fine; they can find some way to hide that shortfall. (To be clear this is illegal and I want Tether to die but we need to acknowledge the realpolitik of the crypto market.)

1. They are not backed at all, esp when coin prices collapse 2. Even if partially backed loss of confidence will be catastrophic.

Also curious if it happens instantaneously or somehow drags on.

what would have to trigger the catalyst for their collapse and why hasn’t it happened yet? are they growing stronger or weaker every day?

This will be the true extinction level event for this era of crypto. I now fully expect it to happen on this bear cycle. It will be interesting to watch - potentially the FTX investigation coming off the bankruptcy will set loose enough threads we will learn the truth.

> will be the true extinction level event for this era of crypto

People keep saying this, but it runs counter to the history of gambling. As long as enthusiasts have money, the game will keep going.

I've said this like 5 times and I've been wrong 5 times. But eventually there won't be any more bagholders.

New ones are born every day. We will never run out.

Enthusiasts staying long isn’t enough to keep things going, mining is a raging beast that must be satisfied or people start doing double spend attacks for the lulz.

If FED doesn't loosen and start pumping money. I think there might be lack of money for a while...

As long as there are enthusiasts. When the music stops, everyone is rushing for the exits at the same time.

The music stopped sometime last year, now we’re in the end game.

I don't believe that. Traders do trade because price action is still there. The price itself is not as important as much as the movement!

LUNC (Luna Classic) is still having 1.2bn USD futures volume on OKX, although its value should be zero. Why is this happening? Because LUNC still hasmovements from 0.000184 USD to 0.00019 USD; that's around 4%.

Traders will use this price action, and by doing this they add their own weight to the price action. Simple intermittent reinforcement.

No one has ever said this is the end of crypto every 6 months. Never happened :)

Tether is a joke but your bank also doesnt have every1s money. Oh it's FDIC insured! Yeah by the ppl who print the money. It's a solid grift, but it's also a grift.

nah, just makes more resilient systems.

its a ballast system, as the "marketcaps" crater, it takes much less activity to move them. so it doesn't matter that many people won't show up anymore, once they see their neighbor that's dumber than them getting richer than them - again - they'll come right back and primarily use new products with new tokens

none of the top players/tokens involved existed before this cycle, or were created during the last crypto winter

none of the top players/tokens from the prior bull cycle recovered to be the top ones this cycle

I expect the same to continue, I don't really see anything to the contrary

I have a theory of why Tether is able to dodge risk. If they are owned by Bitfinex can they not front-run the Bitfinex order book to guarantee their stops will hit their target? They know the bitfinex order depth for every asset so they can for example buy into bitcoin and then calculate exactly when they must get out. Its possible this could be built into the core layer of their exchange software. That’s how I would do it if I wanted max profit without the risk and didn’t care about regulation.

>If they are owned by Bitfinex can they not front-run the Bitfinex order book to guarantee their stops will hit their target? They know the bitfinex order depth for every asset so they can for example buy into bitcoin and then calculate exactly when they must get out.

This makes no sense to me. Can you rephrase/elaborate what you mean by this?

Bitfinex (B) sees orders incoming for BTC or other currency. Then B acquires for $X. Then B fills the order to clients at $X.03

Boom, $0.03 free money. Multiply by scale of their client base.

Even more profitable is printing their own currency with nothing backing it, then lying about having it fully backed to set the value at or just below $1.

Each USDT printed and sold to a sucker = $1 USD free money.

You're describing post-1971 USD. It's getting difficult to tell which currency is the bigger scam at this point.

It's not a scam if everyone knows how the system works. The Federal Reserve doesn't pretend like the dollar is backed by anything. The Federal Reserve also manipulates supply to try to keep prices stable. They've messed that up the last two years, but rather just continuing to print money they are reducing the supply on purpose.

It's nothing like Tether.

Everyone knows how Tether works. I bought some after the de-peg before the most recent one anyway because I needed something worth about $1 USD to buy Monero. And I'd still be happy to point out that USDT is unbacked and extremely risky (ie, going to collapse eventually by design).

It is obvious that the people who own "wealth" in Tether will lose it sooner or later. If there are a large pool of people who believe Tether is 1:1 backed they:

1. Haven't read any news about Tether.

2. Haven't researched it at all.

3. Aren't a member of any social network like HN where Tether's flaws are trumpeted.

4. Are quite gullible.

EDIT 5. Haven't looked at a price chart of Tether showing it's regular de-pegs.

Such a person will fall for any scam, Crypto-related or otherwise. Regulated industries will still have people willing to take all their money since they aren't financially literate.

> The Federal Reserve also manipulates supply to try to keep prices stable.

Prices rise continuously, that isn't stable. The Fed tries to keep the rate that the US dollar loses value stable. The backers of Tether are making better guarantees than the Fed are - actual stability. They have less power to force people to go along with them though.

Except the latter is backed by an army and you can actually buy stuff with it. The former is so volatile that you don’t know if it’ll exist next year or not

8% of every dollar in your pocket a year ago no longer exists.

Military still there tho.

Edit: happy Veterans Day (USA) to those who served.

I've asked this before and every time it's been ignored and downvoted, but it's a genuine question that I do want answered, so I'll ask again: what does this mean? how does the US military guarantee the value of the dollar? It seems to me like the main capability of the military is killing people, and the definition of the "the dollar has value" is "people will accept dollars in exchange for goods and services". Is the military going to kill people who refuse to accept dollars as payment? What does the scenario where the military gets involved in this look like?

If this is somehow an offensive question or reads as trolling I would love to know, because I don't understand the statement and I don't understand why nobody is willing to answer me.

This is a good question!

There are two sources of demand for a currency: consumption demand - you want to buy American-made goods -- and investment demand - you want to buy American capital.

In terms of consumption demand, as long as the US produces large quantities of goods for sale that the rest of the world wants, there will be this demand for dollars.

Similarly, as long as the US is a safe haven for other countries to store their wealth, knowing that we will not confiscate their investment and maintain the purchasing power of the dollar over time, there will be this investment demand. When people talk about the dollar being a "reserve currency", what they refer to is this investment demand. It's good to invest in the US because your money will be safe here. Many focus on, say, oil being priced in dollars, but what matters more is where you store the proceeds of your sale, and that's a decision based on where you think your money will be safe to store over the long term.

Therefore operationally, the US military has nothing to do with the desirability of the dollar -- except to undermine it with excess military spending :)

However one observes that the U.S. tends to fight a major war every 25 years or so, and invades/bombs a country every year or two, and all of this is done to promote US interests, of which we assume that economic interests play an important role. Those who try to interpret US geopolitical strategy in terms of serving business interests assume that we will use our military to ensure a steady supply of cheap raw materials and open markets for our goods, and therefore this indirectly supports the consumption demand for the dollar.

To a lesser degree, having a large army protect the country tells investors that the factory they buy wont be bombed or taken over by a rival power, which supports the investment demand as well.

In this way, the US military is said to support the dollar.

However I am skeptical of this interpretation of US geopolitical behavior. It may have been the case in the 1900s, and to a lesser degree in the 1980s, but I don't think it's the case today. Today, the US military - on balance - is a drag on the dollar. Getting into a detailed debate about this would require taking a long inventory of US interventions over the last few decades, which is over 100 interventions -- and then decide whether they promoted the investment and consumption demands, on net.

But just to sketch an idea of the argument, now we have sanctions against Venezuela, Iran, and Russia, which are a good chunk of the world's oil supply. Far from using our military to ensure a steady supply of raw materials, we are actually cutting ourselves off from raw materials. Moreover the purpose of sanctions is to prevent selling our goods in other countries. Therefore clearly the purpose of the sanctions policy is not to support the consumption demand for dollars, either via protecting inputs, nor via keeping markets open.

Finally, we are busy gearing up for a conflict with China, which again would not be good for the business community.

Really US geopolitics is difficult to understand at the moment - whatever goals or grand strategy we have, it's no longer the case that safeguarding the dollar is one of these goals. I believe that, during the cold war, this was a goal, because fighting communism could be justified as keeping markets open to the US. But since the 1990s, things began to change.

Honestly I don't even understand why we are still bombing Yemen(*) or still have troops in Syria, or what the point of occupying Afghanistan was. Maybe making defense contractors richer, but that doesn't support either the consumption or investment demand for the dollar.

Therefore although our military is a powerful tool, it's not the case that we are still using this tool to support the dollar.

Long term, this is bad news for the dollar.

- - -

(*) Technically, Saudi Arabia is bombing Yemen with US planes and US ammunition. However, we also send US pilots in the planes to "advise" the Saudi pilots, and they often do the bombing. There is a lot of sheep-dipping going on as well here and in other proxy wars.

What does the military have to do with the USD?

Many countries had a military and that didn't stop their currencies from completely collapsing.

The power of a major government behind a currency is like the framing of a building.

A building with a frame can collapse, but the odds are much worse if you don't have one.

> The power of a major government behind a currency is like the framing of a building.

Only if the frame were able to make decisions that devalue or collapse the building without anyone being able to stop it (and quite a few "frames" have done that). As you can see, not a good analogy.

> A building with a frame can collapse, but the odds are much worse if you don't have one.

Well, actually the "frame" is the cause of the collapse. A "building" without the "frame" wouldn't actually collapse due to hyperinflation.

Although I'm not sure what "being backed by the military" has anything to do with what you said. It's not like the military is going to do something when a currency is devalued by a government or when it collapses.

Uh, plenty of currencies not tied to governments have collapsed.

And the military is part of keeping the country going and enforcing the currency as legal tender.

> Uh, plenty of currencies not tied to governments have collapsed.

Widely used currencies? Which ones?

> And the military is part of keeping the country going and enforcing the currency as legal tender.

No, actually it isn't. The courts and law enforcement are. And legal tender doesn't mean that a citizen or company has to accept the currency (unless it's for a payment of a debt, and even then there are several restrictions).

Which is why even if we're both in the US, I could sell you something for bitcoins (or EUR or whatever) and neither the military, nor the courts nor law enforcement would do anything to enforce that I sell you things for the USD instead.

So saying that a currency is "backed by the military" means nothing.

Not only is that adjacent to, but itself, a wrong statement, what does it even have to do with anything?

If you have 100,000 BTC and it goes down to 0, you still have 100,000 btc.

What’s the bitcoin ecosystem worth as a collectible?

(Keep in mind that BTC at a low enough valuation is either unmineable and thus can’t be transacted or is mineable for very little money and thus subject to 51% attacks by anyone who is inspired to do so.)

If you had 100,000 shells and the shells are worth 0, you still have 100,000 shells.

Beanie babies, tulips, German marks from 1920s at least have some physical properties just like shells.

If you have 100,000 cryptocurrency tokens worth 0, that presumably means there is no activity (no transactions, no validations, no mining).

I suppose one could set up a few validators and attempt to restart the chain.

The problem is that for many worthless coins that no one wants to mine, the difficulty is too high to restart.

So that leaves forking the chain with lower difficulty requirements, which is just as pointless.

Indeed. If you have 100k shells, you can at least sell them on Craigslist. With a fully collapsed Bitcoin valuation, the last “good” state of the chain is public knowledge, and you may know the private key associated with 100k BTC as indicated by the last good chain, but you can’t reliably do anything with that knowledge.

So the chain itself could become a fascinating artifact, but the magic that made it possible to move Bitcoin around would be gone.

Just because you have the 100k shells doesn't mean you can sell them.

I love this.

That's such a beautiful example why Bitcoin is garbage.

If you have 100.000k shells and have 0 value you still have physically 100.000k shells you can still do things with.

While you have literally a private key representing 100.000k bitcoins with no value.

1. This only applies to market orders. 2. Bitfinex is not the only exchange where people can trade BTC or other crypto. 3. How does B acquire BTC for $X at scale?

1. They can see an order match for a limit order and preempt it with a better offer before pushing it through by a micro-fraction of a penny

2. They can run trading bots on all major exchanges to keep USDT pegged —- while not foolproof it will hold in most situations provided there is enough liquidity in their accounts on every exchange.

That's just front running though? I'm not sure how tether has to do with it. You can pull that off with or without creating a stablecoin with questionable backing.

At any moment they can see the order book size in btc and the prices so if they buy btc with USDT they can safely hold the Bitcoin provided they are monitoring the order book. If a big sell order comes in or someone tries to cancel a buy order they can preempt it with a sell from their holdings to make sure they don’t end up in the red.

Bottom line if you can freely frontrun an order book you can make a lot of money. USDT provides the liquidity to do that.

> [Even] in [our] darkest days, Tether has never once failed to honor a redemption request from any of [our] verified customers.

Bold statement by tether given that they, if I recall correctly had a very extended period in their past (months) where they were not allowing withdrawals. Wether they openly stated that or not is irrelevant, plenty of people could not get money out.

> Madoff lasted more than 17 years. Tether won’t.

The sooner Tether is gone, the better.

better for whom?

Presumably the world in general. Just like the sooner cigarettes are gone the better.

Or coal power plants or something, since crypto energy consumption is massive

Miners are literally buying fossil fuel generation plants to make enough power to mine. It's a direct link to global harm.

If that's the case, we should definitely ban fossil fuel generation plants. Or at least, tax them heavily. Since they're the ones actually doing the "global harm".

Not necessarily. The energy generated may be used for purposes such as heating people’s homes, or industrial processes essential for creating medicine, operating schools and hospitals etc. Of course we need to move away from these energy sources, but there are reasons we don’t just ban them overnight.

You can see how this is very different from using the energy simply to operate an online gambling operation or to perpetrate large scale securities fraud.

> Not necessarily. The energy generated may be used for purposes such as heating people’s homes, or industrial processes essential for creating medicine, operating schools and hospitals etc.

... or securing a global, permissionless, decentralized, cryptography-based monetary system which cannot be debased or otherwise corrupted by the government-de-jour, including those who oppress their people.

> You can see how this is very different from using the energy simply to operate an online gambling operation or to perpetrate large scale securities fraud.

Indeed, I can see that. Fortunately, miners aren't in either of those businesses.

But since we're deciding who gets or doesn't get to use energy, let's also ban casinos, online gambling (like you said), heck.. anything that might waste energy or use it for things that we don't like (even though other people might like it or even need it).

Instead of, you know, letting the market decide who can or cannot use energy based on what provides the most value for their use of it.

> cannot be debased or otherwise corrupted by the government-de-jour

It doesn’t seem to need the government to corrupt it.

I just hope that this is the beginning of the end for the whole crypto space. Good riddance.

This fraud galore has no legal basis for existing.

Don't forget the utterly insane amounts of both financial and human capital that have been invested in this space with virtually nothing to show for it. The whole thing is an infinite sinkhole.

Cryptocurrency kind of reminds me of that Star Trek episode where they were going to destroy the Borg by giving them this impossible n-dimensional object to ponder. It had no solution but was infinitely interesting so they would ponder it, and ponder it, enlisting more and more minds in the collective until the entire Borg were occupied doing nothing but considering this shape. Cryptocurrency kind of seems to have done that to hacker culture. It's infinitely technically fascinating and pushes all the right cyber-libertarian buttons so it sucks in more and more resources forever but amounts to nothing.

This comment hits the nail on the head. Just this morning when I saw FTX and BlockFi's news I thought to myself "yeah all the electricity spent on this is bad, but the real problem is how many hours of human thought have been spent on coming up with these schemes just for them to blow up on our faces".

Crypto is like the mental virus in the movie "Pontypool" [0] - people are infected by it and cannot think about anything else.

[0] - https://www.rottentomatoes.com/m/pontypool

Is there a term for this type of highly interesting problem that is ultimately a waste of time? I have been calling it a “brain sink”in my head, it is deeply sad to me how many smart people have jumped on the bandwagon and what they could have done otherwise with their potential.

Now that the world is hyper connected we should expect an increasing number of increasingly virulent memetic plagues like this to emerge. Be skeptical out there.

XKCD: https://xkcd.com/356/

If crypto didn't exist, these people would either go to wallstreet, or play poker.

I wish that were true. But sadly I think crypto's gravitational pull has yanked in plenty of folks that could have accomplished great things (for themselves or others).

The potent mix of greed, exclusivity, and novelty applied at the right time someone's life can ruin just about anyone.

On other hand we might have more gig economy companies... Making everything worse on average...

I’m still amused by how much investment still VCs make into this space. If the industry shakes the bad apples out that would be truly great for the entire economy.

The industry IS a bad apple. There are zero legitimate use cases STILL of any crypto related product.

Might even be an existential risk. One possible solution to the Fermi Paradox is that they invented crypto and it wrecked them.

The thing it's trendy to hate on is probably just like other things it's been trendy to hate on, and claiming otherwise looks pretty silly. Unless flavored vapes are also a potential filter event, that is.

Crypto's mostly gamed and fanciful market cap is still smaller than Apple's actual market cap.

What about Primecoin? Finds new prime numbers all the time. Filecoin pays and gets paid for server storage space. How in any way are these projects scams? There are dozens of projects that utlize the blockchain and have a token and are not scams. The fukk outa here with this oh everything crypto is a scam. Bitter, you are.

Filecoin is interesting because there is bona fire economic activity associated with it. But, if you believe:

https://file.app/

The cost of storage on Filecoin is $0.0000001 USD / GiB / mo.

This makes no sense. That’s $10^-4 per TiB per month or one cent per TiB per 10 years. You can’t buy anything remotely resembling a hard drive, even used, for anything resembling this price. You can’t buy a disk controller. You can’t buy power to run the thing.

This means that miners have absolutely no incentive to store your data except for the lulz. This is useless for any serious purpose.

Finance is a legit use case. If you think it's not then by extension you have to write off the legacy financial system as well.

Think about something like private/public pensions, annuities etc. A cogitating being knows that they are getting older and will need money for retirement, but they also should know that there are essentially just 4 ways to make an investment grow without any labor input from the investor: the bond market, the stock market, the real estate market and private lending to companies or individuals.

Now with the possible exception of private lending a citizen can do all the above, and remember they also know that they will need money for retirement. So tell me again why do they need public/private pensions and annuities? And why we allow such actors to operate given they redundacy considering the fact that they are preying on people's fears that they won't be able to make it in the future?

If crypto preys on people's greed then the legacy financial system preys on people's fears. They are 2 equally bad behaviors.

All coins are scams? Wow that's quite a bold statement and clearly from someone who has researched all the top 500 projects in the space and clearly not some1 who is bitter they didnt get in at the beginning despite being there and not pulling the trigger.

This is such a tiresome common refrain, and a very telling one.

Critical? Then you must not have gotten rich/must not be money material!

This is quite literally the line used by "energy deregulation" MLM hucksters.

It's OK to admit that you're enthusiastic about something because you think it'll make you rich. Heck, it's even OK to promote it because you think that will help pump things in some small way (or a large way, depending on which sketchy Telegram chats you're pumping it in).

But don't BS others, or yourself, about your reasons for doing this.

The music's been fading out for a bit. The world changing innovations didn't happen, the grand plans were very nearly all vaporware, and the few that were even arguably real have come to naught.

It doesn't take any bitterness to come to an overwhelmingly negative opinion about this entire area and anyone even somewhat bullish on it.

Project devs often have next to nothing to do with pricing. They're building whatever product with a public ledger and a currency type of thing involved with it. Please stop blanket statements of this is a scam! One can say the valuation is grossly inflated, there are a lot of bad actors, etc. but my god this idea that internet money (but of course not that inflation-ridden bombs-not-gold-backed USD!) Is a scam by definition is childish.

Tether? Scam. Ripple? Scam. Most shitcoins? Scam. Crypto as a technology? It's just code, and open source (usually) and you personally can get involved by submitting a PR.

People buy stonks with VERY little understanding of what makes it worth something. Same shit

Pretty sure that requiring all new products to have a "legal basis" before invention would be a very bad idea.

Why do people use Tether scamcoin over Gemini stablecoin GUSD? It's supposedly backed 1:1 GUSD:USD and has US-regulated books. I get 5-8% interest on it and hasn't had an issue for its handful of years of being issued.

> I get 5-8% interest on it and hasn't had an issue for its handful of years of being issued.

I agree that GUSD is a good, low risk stablecoin choice, but that's only if you directly hold it. If you're depositing it into an interest earning account, note that you're taking on additional lending risk (which I'd highly recommend against right now).

Agreed! I do hold it all in my earning account and if borrowers skip town, then I lose.

I treat it as a low risk/low reward in my portfolio. Coincidentally, my "earnings" I pulled out recently was almost the exact opposite amount of current inflation so it's like a hedge against inflation.

If you're holding it on Gemini Earn, I highly recommend withdrawing, even if only for the next few months.

Gemini Earn deposits into Genesis Trading, and they have admitted to having direct exposure to FTX ($175M [0]). While they can likely weather that loss, I have concerns about other indirect exposure they may have in the coming weeks. I don't think we've seen the end of the FTX story.

If I were you, I'd take the money out yesterday, and hold it in either US Treasuries (6 month pays 4.45%), or put it into a liquid money market while this all blows over. The extra couple of percentage points you'll earn does not at all seem worth the elevated risk right now.

[0] https://twitter.com/GenesisTrading/status/159083659438203289...

> I get 5-8% interest on it

You know these 'yield' schemes generate money by investing in ponzis right? There is just a slow countdown until your money vanishes. Gemini, in spite of their frequent comparisons with savings accounts, makes no guarantees that your money won't vanish.

I believe previously their yield was through genesis trading --- who just took on huge losses from FTX...

Probably because it is regulated and has KYC requirements.

Do you have to prove your funds are not black money to buy "GUSD"?

No idea. I transferred a bunch of coins from Bittrex and Coinbase, sold some for USD for a nice profit, put that USD in to GUSD, and a month ago pulled out last year's interest of ~$1500 USD to buy some beautiful pendant lights, brass faucet, and a mediocre range hood for my new kitchen remodel.

And what economic activity did the borrower engage in to pay out more than risk-free interest?

No idea but I doubt they were bombing brown people and guarding Arab oil investments for profit, nor were they attempting coups in resource-rich countries. All that happens with my USD savings account.

How can a fully backed coin offer 5-8% interest without being a scam? The math doesn’t work out since you can’t get 5-8% yields from short term treasuries.

Though it’s not clear that their “risk-on” assets are actually risky, it’s certainly weird that they haven’t built up more equity. Between interest they earn on short term treasuries, and being able to arbitrage periodic seller panics, a normal non-scammy strategy should be able to generate healthy profits.

Can someone explain why the bank run on Tether hasn't already happened?

We've seen with FTX that it only takes a little FUD for people to get scared and start withdrawing.

It's not like there isn't more credible stablecoin alternatives, USDC looks a lot more credible.

A (partial) bank run on Tether already happened. From May 2022 - July 2022, Tether capitalization went from $83B to $66B ($17B withdrawn).

The recent bank run has so far been a lot smaller. From Nov 9th to today, the move has been from $69.75B to $67.25B ($2.5B withdrawn). Maybe if the FTX contagion extends, we'll see more redemptions.

https://coinmarketcap.com/currencies/tether/

A bank "run" where it successfully honors redemptions, and the vast majority don't need to redeem, isn't really what is meant by a run.

There's no real offramp from Tether to USD. And its likely that Tether is all crypto and not much actual USD involved at all, and it looks more like crypto collateralized loans. I doubt that Tether dying kills crypto, but probably the other way around and crypto dying obviously kills Tether[*]. And the "redemptions" are likely loans being paid back (which is just Tether being returned and burned) rather than $USD going out the door. It is very simply not at all believable that the $17B drawdown in the float earlier this year was $17B of USD going out the door -- that interpretation of how Tether operates has to be wrong if you think about it for longer than a few seconds.

Destroying Tether would trigger a crash that benefits no one in crypto.

A casino going bankrupt means gambling addicts will be able to seek treatment for their illness.

Like half of HN feed is crypto now, when will that shitfountain stop?

https://www.urbandictionary.com/define.php?term=When%20it%27...

I love tether

It's depressing to me that there is such a vocal group of people cheerleading the demise of an industry that seeks to improve the financial system on a global scale. Truly disheartening are the financially disenfranchised (and what I believe) young voices for whom any system would be better than the current. It's to the extent that many think that attacking capitalism itself is the answer.

There is an incredible amount of fraud in crypto and it should be identified, stamped out and vigorously prosecuted. But there is also genuine genius at work solving difficult problems for everyone's benefit. It is terrible that people are losing money so easily and is a reminder that crypto isn't solving the problem of fools being parted from their money. Presumably that's what laws and regulations do.

>It's depressing to me that there is such a vocal group of people cheerleading the demise of an industry that seeks to improve the financial system on a global scale.

This kind of feels like a disingenuous description of what's happening, as though it's willfully ignorant of what's clearly being discussed here. People are cheerleading the demise of the snake oil and grifting that is insanely prevalent in a new, unregulated industry.

>There is an incredible amount of fraud in crypto and it should be identified, stamped out and vigorously prosecuted.

So you're on board with us then! :p

>But there is also genuine genius at work solving difficult problems for everyone's benefit.

Yep. Good for them. Fuck everyone else taking part in the grift. I'm certain you'll find plenty of people "cheerleading the demise of the industry" who share this viewpoint.

> It is terrible that people are losing money so easily and is a reminder that crypto isn't solving the problem of fools being parted from their money. Presumably that's what laws and regulations do.

At the risk of starting a much larger discussion that I am wholly unqualified to take part in, that's a pretty damning comment to make in regards to DeFi. Doesn't bode well for it's future if a lack of regulation is just going to push people away from adopting it out of fear of losing money.

Edit: If you want "crypto" or DeFi to succeed, you should be cheering with us when these assholes fall.

> If you want "crypto" or DeFi to succeed, you should be cheering with us when these assholes fall.

Oh, I am. I was taking issue with the ubiquitous shortsighted comments accompanying crypto threads that want to see crypto fail at every cost.

To your point, I don't necessarily want "crypto" to succeed, but innovation that is best for everyone. The financial system is certainly ripe for renewal and could be gutted. I'm not a fan of DeFi. While I might have missed something there as there is a lot of work being done, what I've seen simply reinvents the ongoing financialization of everything.

The issue is that we don't believe the crypto industry seeks to improve the financial system, on any scale. It's not just that so many of them have turned out to be scammers — it's that the industry as a whole has not put in any work to prevent that, and often has actively worked to prevent any sort of guardrails.

Right. In many of the "OMG What Happened to SBF?" articles this week, it's mentioned over and over that SBF ran afoul of many of his industry counterparts because he cozied up to Washington and pushed for regulation. I don't know how someone can feel comfortable handing their money over to anyone who essentially says, "I don't want there to be any rules around what I can do with this, and people who can punish me for abusing this need to stay away". That's INSANE to me.

I don't doubt that there are a few companies in the space that are trying to do some genuine good. But I'd wager that I can count them on one hand.

Edit: And if someone's going to say, "This industry has potential, don't cheer it's demise," then show me the potential. Show me the companies doing that good stuff, because we're not seeing it.

This is a very interesting point. Traditional banking would certainly be able to come together (and often do) to serve their own interests by restricting entrants.

It's not clear to me how open source projects like a bitcoin might prevent scammers from cloning the source and opening a discord channel to people leading to an eventual rugpull. The success of bitcoin has led many to think that duplicating network effects is the path to easy riches. I guess they are not wrong.

We’re not just talking about open source, though. Crypto is propped up by billions of dollars from some of the most powerful people on the planet. The fact that funds like Sequoia and a16z are showering crypto companies like FTX with money — while doing minimal due diligence and without taking any meaningful action to fight scammers — is incredibly revealing.

But even insofar as we are talking about “little guys”, so to speak, one very simple thing they could do would be to actively call out people and projects that are scams.

I imagine the ability of those in crypto, big or little, to identify or pursue criminality will remain limited. The problem hasn't been solved in traditional finance. SBF testified in front of Congress. I have no attachment to FTX and didn't even know its name a week ago, but it seems pretty legit knowing that one fact.

As for Tether, a few moments of reflection on how a stablecoin stays stable in crypto should be enough for people to worry. I won't even go into the trust placed in exchanges. But there is evidently an endless supply of fiat that will continue to go into these scams.

Perhaps a better focus would be on pursuing negligence on the part of the founders and investors such as Sequoia and a16z. Frequently these scams are only obvious after they fail and are merely unprovable suspicions before.

> It's depressing to me that there is such a vocal group of people cheerleading the demise of an industry that seeks to improve the financial system on a global scale. Truly disheartening are the financially disenfranchised (and what I believe) young voices for whom any system would be better than the current.

Look at it this way: the scammers are not doing that, at all. In fact, they are making it less likely that anyone will do so because they are turning people off to the field categorically, making it hard for an honest business to get customers, and dramatically increasing the likelihood of strict regulation. Those young people who you're concerned about are in many cases losing or about to lose what assets they have, and they're going to be angry about it — do you think they'd give any time of day to another company in that sector which sounds just like the people who defrauded them?

If you're serious about that goal, you should be on the frontline attacking these companies and especially making it super clear who you think is doing it right. When the dotcom crisis hit, yeah, a ton of never-had-a-chance companies failed but the web was just fine because there were a ton of people delivering real value to organizations all around the world. If there's “genuine genius at work solving difficult problems for everyone's benefit”, ignore the crooks being criticized and focus on directing attention to those geniuses because they've been massively outshadowed.

Indeed. You are absolutely correct. To be clear, I'm no fan of Tether. This is just another anti-crypto thread where I had time to post some thoughts. I suppose I've gotten jaded frontlining anything crypto. When I speak about it to people, mostly they are interesting in what's going to the moon. I have little patience for those conversations. Actually, I can't think of more than a handful that actually want to know the technology or what a pre-mine is and so on before investing.

It reminds me a lot of the 1998-2000 period where people were looking for hot stocks but not doing any research beyond Internet forums and seeing whether a number had gone up.

Some of the people caught out deserved mockery but many were well-marketed to and far out of their league. I’m thinking of a sales guy I knew who mentioned one morning that he’d “invested” all of their wedding money and was now far below water.

You should be cheering for the demise of any project that undercuts the goal of establishing a safe, well-considered, functional alternative.

They're not cheering for it to fail. They're cheering that the long-standing failure is being remedied, removing yet another scammer from the cryptocurrency space.

They don't get to win for solving difficult problems. They win if they present a complete solution. "We did some remarkable math but didn't fix the sheer quantity of fraud" is not a solution.

seeks to improve the financial system on a global scale

They've been at this for a decade and they're not actually improving it. The purpose of crypto is what it does: take money from the middle class and give it to billionaires.

young voices for whom any system would be better than the current

No, there are many possible systems that are far worse. If people believed this they'd move to Somalia to seek their fortune.

Many see that crypto isn't actually needed for that. We have already implemented many ways to do it without crypto. Think of Africa, China and India.

What is actually needed is stability around the world which allows financial systems to operate. And crypto really has done nothing for this goal. Only positive side is to allow moving currency bit cheaper in some cases.

People are cheering the crypto scams and ponzis going away. Those are the real threat to the potential benefits, not people being critical on the internet.

People are cheerleading the ponzi-scheme part of it.

I'm a huge crypto bear, but the Fed Balance sheet is still way to big for the entire space to go to zero. Where would all the money go? SPX X 2, hyperinflation?

https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

Crypto isn’t money. The money has already changed hands when people speculated on the tokens. If anything, wiping crypto off the books will be deflationary to real currencies.

Nowhere. Just like Sequoia's $240m investment - it's just marked down to $0.

Can you elaborate? How does crypto going to zero create money that has to go somewhere? How does crypto dropping in value in any way create money that needs to go somewhere?

I think you have things backwards...

Mainstream media is saying it’s pretty much a bankrun. So massive amount of outflows (from everyones wallets on the exchange) is also what tanked the token?

There would still be the same amount of dollars, there would still be the same amount of crypto. Just nobody would want to swap dollars for crypto any more.

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