In the case of crypto companies who create their own tokens and then use them as collateral, they never actually paid anything for the tokens they own. There's not even a cost basis. It's entirely made up.
Not only is what the crypto companies doing much worse, but it is rare for VCs to leverage their investments in companies. It's not like their fund is levering up 2:1 and buying companies, like a PE fund does, because in the case of VCs their investments are usually not producing cash flow. But in the case of some of these crypto companies, they were levering up using collateral of tokens they made up that they never paid anything for.
It's much, much worse than anything recently seen in finance. CDOs were bad in 2008, but at least the mortgages were a secured claim on a physical asset that someone actually paid something for.
Don't know the "real" price because it's infrequently (or never) traded.
Tokens, etc. are easiest to think of as securities (aka stock) generally, albeit securities in a more abstract thing than a company.
Also; stock in private companies is often not tradeable at all, but no accountant is going to call those fake.
There are multiple ways of plausibly pricing assets.
None are generally accepted that would let someone just make up a ridiculous valuation and stand up to any scrutiny, but people can always do what they want until the auditors show up anyway.
Now, whether or not this is how banks act in practice is another question. It is, perhaps, how they should act if they're being conservative, but it is likely that others will swoop in and often enough grab that interest for themselves. And in the rate environment we've been in until very recently, those are likely the banks that have managed to survive in many cases.
The fundamentals for your ponzi coins are so bad they might as well be worth zero, so why would that insignificant value difference matter anyway?
Crypto tokens are unable to generate revenue.
In some cases you could see it being positive not having your stock price drop everytime the Fed announces a new rate increase or jump everytime they don't (or etc etc with other events) if your primary goal is to continue at a steady pace to achieve some goal.
That’s a rather fine and unimportant distinction.
It is characteristic of crypto, just not only crypto.
And, in the case of crypto, the asset never represents anything but itself.
> in the case of crypto, the asset never represents anything but itself.
This is the foul taste of all crypto "assets". They are not assets because they have no intrinsic value for anything.
The nearest real economy analogy is the art market, which is hopelessly inflated, utterly riddled with fraud, and with very little intrinsic value.
But you can hang a painting on a wall and look at it. Even if it is a fake it still looks good on the wall.
Crypto has none of that. All it has is the scam, the fake, the hope of a bigger fool.
Shame on us for letting this happen. It gives a bad name to geeks in general and cryptography specifically.
Crypto doesn't have the same properties, but if a crypto token isn't a security then you can get some other tax benefits via wash sales.