What is this, four organizations suspending withdrawals after FTX's demise? Five?
I'm not the most plugged-in to the cryptocurrency community; anyone know what proportion of cryptocurrency business this makes up?
I'm not the most plugged-in to the cryptocurrency community; anyone know what proportion of cryptocurrency business this makes up?
There is a pretty fundamental difference between houses and crypto.
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None of that exists in the crypto space. The exchanges control the price and regularly trade against their own customers, and recent events have shown that they are all co-mingled and propping each other up.
Exchanges going down is bad news even if you keep your coins in your own wallets. With the exchanges gone, actually using your coins will become much harder. Worse, as power consolidates among fewer exchanges the price becomes even easier to manipulate.
Bullshit. It exists, it's just that the UI/UX is awful and most people in the developed world have no need for it. But they do exist. My work on hub20 [0] is exactly that, to have a system that would let people and communities create their actual self-custodial "crypto banks".
[0]: https://hub20.io
The two problems with this setup are:
* The exchanges are dishonest and unregulated.
* The exchanges are exploding like a chain of firecrackers.
So crypto is going from a state of having most transactions go through dishonest exchanges to being in a state where people own crypto but trading will become almost impossible.
Is the price going to go up? Will it go down? It doesn't matter, since without exchanges you can't actually use it for anything.
Before repeating your baseless argument, please read about my project. Start with the about page. Understand that we can have global commerce with crypto without the big centralized exchanges. It's only an issue of scaling down and accepting that even though "trust" is needed for efficient transactions, this can happen at a much lower level.
A currency has no intrinsic financial investment value. Especially not an arbitrarily created crypto currency.
The only reason it's price would go up is people speculating that someone else will want to speculate on it in the future, and will pay a premium to do so.
We all know what it looks like when the future speculators dry up.
I'm not sure your point here. Derivatives absolutely are a driver on the price of the underlying assets. Derivatives are what inflated the housing bubble prior to 2008.
I generally agree with you that homes have an intrinsic value, and that currencies do not necessarily have that. But that intrinsic value of homes was probably around the bottom of the 2008 housing market, not the top. On either side of that, home values exceeded the fundamental value due do manipulation or excessive leverage. In my mental model, fundamental value merely establishes a price "floor" of a market, but beyond this price floor every market is subject to mania and bubbles. For housing, the fundamental floor is non zero, for crypto, you could argue that it is zero.
> The only reason it's price would go up is people speculating that someone else will want to speculate on it in the future, and will pay a premium to do so.
This is true for housing also. Having a intrinsic value does not mean that housing prices should be expected to go up forever. As a clear counter example, deflationary goods like computers have a clear intrinsic value, but are not a good investment as they will almost certainly lose value.
Yes derivatives are a big part of what inflated the bubble prior to 2008, but the fed purchasing them didn't do anything to maintain home prices.
The combination of (ARMs + low interest rates) and lenders being able to immediately flip mortgages to other to be combined in CDOs and other MBS derivates inflated housing. Lenders could make loans that they knew borrowers could not repay, but because it would be off their books before that time hit they continued to make them. Derivatives inflated the bubble.
But as rates continued to rise, ARMs began to reset, and buyers at the new prices dried up, prices began to crash and people began to walk away from homes. This immediately dropped home values and caused MBSes to devalue quickly. Demand for MBSes dropped immediately. Lenders stopped making loans because they realized they could no longer flip to loans to others to securitize them. As nobody wanted to buy a MBS now. This dried up the demand side, plus foreclosures added to supply side.
The fed stepped in and began buying close to worthless MBS for way above value not because of any impact on the housing market (overall MBS demand was still enormously down), but because they were buying them above their value to prop up the market so financial companies could still price them to "market" on their books and (via façade) maintain their capital requirements. They also purchased them to help inject capital into the markets and take more MBS off their book. The fed purchased these to prop up the financial system - it had nothing to do with home prices and had little impact on home prices. Lenders stopped pushing unviable loans to borrowers because they now held the risk. And they would hold the risk regardless.
The fed didn't prop up the housing market in 2008, they propped up the financial markets because so many people tried to get rich quick off mortgage backed securities and the bubble burst.
The bubble is now bursting in crypto. As you said, the floor for crypto (with little to no intrinsic value) is zero. The only question is how close to it's intrinsic value will it fall.
Wall St. pushed hard to keep MBSes unregulated, they formed a bubble and then fell back to close to their intrinsic value. Their intrinsic value was maybe 30% off of their peak value. (Maybe a bit lower, but due to the illiquid nature of housing the market never fully fell to it). So now crypto also unregulated has pushed a bubble, how far does it have to fall to hit its intrinsic value?
That's like saying "Avoiding nuclear war is propping up the housing market. If we have nuclear war then society ends, the population collapses and the housing market with it. So avoiding nuclear war is propping up the housing market."
It's a terrible analogy to attempt to make. And it's wrong.
> What was the policy objective of the Federal Reserve's program to purchase agency mortgage-backed securities? The goal of the program was to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally.
A house is 99% crypto and 1% "need."
Crypto follows a similar trajectory. The vast majority is speculatory and un-"need"ed bullshit and a tiny slice is stuff where it has a comparative advantage to traditional finance/money.
Are they allowed to do that?
Actually, scratch that. Nerds will lose their crypto wallet AND their physical wallet to the rubber hose cryptanalysis. In fact, this is a great opportunity for enterprising criminal minds.
Last time I had to "verify my ID" online, it amounted to a photo of my driver's license and knowing my previous address.
As in, "you have to be ready for a 90% withdrawal at any time".
This would have solved every problem.
And of course, once you've opened the door to not being fully backed, now we're just arguing about exactly how not backed things are. There are other reasons you may need to flex a bit more than you might expect.
It is probably more profitable to try to delineate what they are allowed to do rather than what they are not allowed to do.
Also, some really superficially appealing regulations cause problems if you try to manifest them in the world. My guts wants to agree that you should always have to have the exact thing your account is denominated in, but if you want to enable international transactions, surely a sensible thing to want to do, now you need to allow some flex for the fact that if there's a three-way transaction between dollars, yen, and bitcoin, there's going to be some conversion. If the exchange is going to permit this, they probably don't want to acquire the other currencies for every single transaction, paying a non-trivial overhead each time, they're going to need to be allowed to hold a certain amount of reserves of each currency they transact in, even though this will come out of the customer funds.
All this stuff makes sense and if done responsibly isn't necessarily a problem. The problem is that over the weeks, months, years, decades of it being done in a way that isn't necessarily a problem, there's all the incentive in the world to chip away bit by bit until it becomes a problem. This goes back all the way to the concept of coin shaving (the reason your coins all have ridges on the side) and I'm sure it wasn't a new idea then. Put whatever rails in you like, people always find ways of going right up to them, and then just a bit beyond, and then a bit more beyond....
They will not.
According to the Financial Times, A recent (or future?) EU legislation allow supervised crypto exchanges EU wide with the condition of 50.000 euros minimun capitalisation.
A member of the board of director of ECB commented: - Crypto providers are very hard to regulate - Banks should step in. - Crypto preys on very fragile people, i.e. poors, minorities, financially illiterates, etc...
It sounds like an injonction masquerading as a mere statement.
I'm not a crypto guy, so this may be a very basic question: If people can hold coins in their own wallets, why did they give them to these companies acting like banks? Were they promised interest or something?
I hope that crypto exchanges are outlawed soon.
Isn't the primary use case for crypto that it's beyond the reach of laws?
- Self custody can be hard to do securely for less technically savvy investors
- Fast access to trading; some people want to swing trade or just have it available to sell or buy in a moments notice
And yes, most of these exchanges have programs where you earn interest or otherwise get various perks for staking your coins on the exchange. FTX was offering 8% APR at one point, which should have triggered people's too good to be true whiskers, but the greed around getting rich quick with crypto coins has people breezing right past that.
All of the pure shitcoin exchanges, centralised "loan" providers, etc etc are probably going under. Most people I know have had this priced in since forever, they come and go all of the time.