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There is a rumor going around the meme stock circles that financial institutions were using crypto to manage their liquidity/collateral issues. I'm in no way we

by bsanr2 5y ago

There is a rumor going around the meme stock circles that financial institutions were using crypto to manage their liquidity/collateral issues. I'm in no way well-versed in this, but I'll try to convey my understanding. Essentially, banks are carrying too much cash from QE and the emergency infusion due to the COVID crash last year. They don't want to pay the interest on it, but they still need it for their other operations (the conspiracy theory is "manipulating meme stocks and preparing to cover should they fail a margin call"), so they'd been buying up crypto assets, hiding that cash in something that they could pump and dump almost at will. A month-ish ago, some regulation changed where they could no longer hold crypto as an interest-free asset, and coincidentally, we saw the bottom fall out of Bitcoin and the Fed's overnight reverse repo program (where the Fed does a short term swap of US treasuries for cash) begin to expand around the same time. Suffice it to say that everyone figures that SOMEONE big is manipulating the crypto market to their own ends. With Tether serving as the lubricant greasing the wheels of the rest of the market, it has finance's prized "too big to fail" distinction. Edit: I found one of the posts that explained the theory. I probably misunderstood it. https://www.reddit.com/r/Superstonk/comments/nz0fsz/i_found_a_correlation_in_why_reverse_repo_rates/ https://www.reddit.com/r/Superstonk/comments/nz0fsz/i_found_... I know, I know... I present it mostly for you to consider as you may.

xur17 5y ago
> A month-ish ago, some regulation changed where they could no longer hold crypto as an interest-free asset What does it mean to be an interest-free asset?
- deleted 5y ago
  [deleted]
dmw_ng 5y ago
Crypto isn't nearly a sufficient alternative to the money market, in traditional finance its use is highly regulated, the whole reason for the current situation is that since 2008 banks are extremely limited in holding any kind of risk assets. The theory is obviously nonsense, because there are much lower risk instruments a bank could invest in to receive an interest-like return, were it permitted. The issue is not that banks are secretly conspiring to destroy your favourite shitcoin, it's that by law they're extremely restricted in investing excess capital in anything remotely resembling a shitcoin, never mind a stock index. Please stop reading or linking to that sub, it's probably the single greatest free improvement you can make to your life right now.
- bsanr2 5y ago
  Hm. Well, I don't disagree that the crypto market is probably something of a giant Ponzi scheme. I don't have a favorite shitcoin, and I hold a minimal amount of the largest coins, mostly to try out dApps freely. (I can't resist asking you how the market cap of the crypto market has reached some multiple trillions, if not without the assistance of traditional finance.) I think that's a wholly separate issue from that of the specter of bank malfeasance. Which is to say that you're completely off the mark in that regard; it's clear that finance is abusing its position and running right up to the line - if not over it - in spite of the lessons it should have learned after 2008. And the argument here isn't that banks are conspiring to destroy crypto; it's that they are (were?) using crypto as a tool to avoid insolvency due to the fallout from inadvisable activity over the past year or so. Even those not swept up in the cultish thrall of crypto and meme stocks are looking at that behavior with a wary eye; Archegos et al., after all. That said. >Please stop reading or linking to that sub, it's probably the single greatest free improvement you can make to your life right now. No. :) Someone asked a question and I answered with what I thought was a likely explanation. You can disagree, or even be offended by my stupidity, but I presented it respectfully and in good faith, so here it will be. Silliness aside, I do find the core holding of the GME crowd compelling, and likewise, occasionally, their analysis of what is an unfortunately murky subject. If you disagree, the spirit of HN's standard of discourse is to explain the manner in which "obvious nonsense" is such, and not just to simply state so in an offensive and patronizing manner.
throwanem 5y ago
This is Time Cube but for money.
- meowface 5y ago
  A high percentage of finance in general is kind of Time Cube for money.
  - throwanem 5y ago
    Well yeah, but even by that standard, I mean.

by bsanr2 5y ago

xur17 5y ago

> A month-ish ago, some regulation changed where they could no longer hold crypto as an interest-free asset What does it mean to be an interest-free asset?

deleted 5y ago
[deleted]

dmw_ng 5y ago

Crypto isn't nearly a sufficient alternative to the money market, in traditional finance its use is highly regulated, the whole reason for the current situation is that since 2008 banks are extremely limited in holding any kind of risk assets. The theory is obviously nonsense, because there are much lower risk instruments a bank could invest in to receive an interest-like return, were it permitted. The issue is not that banks are secretly conspiring to destroy your favourite shitcoin, it's that by law they're extremely restricted in investing excess capital in anything remotely resembling a shitcoin, never mind a stock index. Please stop reading or linking to that sub, it's probably the single greatest free improvement you can make to your life right now.

bsanr2 5y ago
Hm. Well, I don't disagree that the crypto market is probably something of a giant Ponzi scheme. I don't have a favorite shitcoin, and I hold a minimal amount of the largest coins, mostly to try out dApps freely. (I can't resist asking you how the market cap of the crypto market has reached some multiple trillions, if not without the assistance of traditional finance.) I think that's a wholly separate issue from that of the specter of bank malfeasance. Which is to say that you're completely off the mark in that regard; it's clear that finance is abusing its position and running right up to the line - if not over it - in spite of the lessons it should have learned after 2008. And the argument here isn't that banks are conspiring to destroy crypto; it's that they are (were?) using crypto as a tool to avoid insolvency due to the fallout from inadvisable activity over the past year or so. Even those not swept up in the cultish thrall of crypto and meme stocks are looking at that behavior with a wary eye; Archegos et al., after all. That said. >Please stop reading or linking to that sub, it's probably the single greatest free improvement you can make to your life right now. No. :) Someone asked a question and I answered with what I thought was a likely explanation. You can disagree, or even be offended by my stupidity, but I presented it respectfully and in good faith, so here it will be. Silliness aside, I do find the core holding of the GME crowd compelling, and likewise, occasionally, their analysis of what is an unfortunately murky subject. If you disagree, the spirit of HN's standard of discourse is to explain the manner in which "obvious nonsense" is such, and not just to simply state so in an offensive and patronizing manner.

throwanem 5y ago

This is Time Cube but for money.

meowface 5y ago
A high percentage of finance in general is kind of Time Cube for money.
- throwanem 5y ago
  Well yeah, but even by that standard, I mean.