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For anyone wondering why 3AC becoming insolvent is such a big deal, this Twitter thread does a fair job of summarizing: https://twitter.com/hodlKRYPTONITE/stat

For anyone wondering why 3AC becoming insolvent is such a big deal, this Twitter thread does a fair job of summarizing: https://twitter.com/hodlKRYPTONITE/status/1536902115540742144 https://twitter.com/hodlKRYPTONITE/status/153690211554074214... Basically, they're a large crypto fund that has borrowed from almost every major crypto lender, and if they can't cover their margin calls (which is expected if they're insolvent), the risk of the debt is then transferred to the lenders themselves.

onlyrealcuzzo 4y ago
I'm out of the loop on crypto. Are the loans denominated in crypto or dollars? Does this mean the lenders will have to sell crypto when they realize the loss?
- anonymoushn 4y ago
  The situation is not entirely clear because some lenders may not loudly announce that they have liquidity issues as early as possible. It seems like a large part of the forced selling by 3AC and counterparties is already over, and it seems like many counterparties don't actually have any collateral from 3AC to sell and must eat the loss.
- kersplody 4y ago
  The answer is probably yes for both questions. These crypto and loan contracts are typically very complex and involve many classes of crypto and physical assets involving many 3rd parties. Therefore it's going to take awhile to untangle things to the point where each party knows their precise risk exposure and ability to take loans out against this exposure/loss.
deleted 4y ago
[deleted]
josh2600 4y ago
3AC isn’t just large. 3AC is the largest trader by volume in the world for like 4 years. Them going bankrupt is like long term capital management going bankrupt.
- 3327 4y ago
- sillysaurusx 4y ago
  Mt Gox says hello. We’ve been here before, we’ll be here again, a bunch of people will lose money and the cycle will repeat. It’ll all work out.
  - arcticbull 4y ago
    Hopefully this time, we get some regulator action so we're never back here again. Each time the cycle gets bigger, the tendrils work their way into traditional finance - and more people get hurt. This time, the Quebec public servants are getting rekt on their investment into Celsius [1]. Now it's hurting pensioners, not just a bunch of degenerate gamblers and moonbois. It's fine for a bunch of pokemon card traders to get rekt - but by the time you get to 3AC scale, it's time for regulators to put the kibosh on the whole space. They're securities. They either get registered or you go to Club Fed. With all due respect, fingers crossed, this time it does not work out. [1] https://www.cdpq.com/en/news/pressreleases/celsius-network-announces-investment-led-westcap-cdpq-valuation-more-us-3b https://www.cdpq.com/en/news/pressreleases/celsius-network-a...
    - ycta2022061715 4y ago
      Question: what is the point of crypto if it becomes regulated like traditional financial assets? Crypto doesn't have any actual use-value like stocks or real estate, and its entire selling point was that it's decentralized and unregulated.
      - deleted 4y ago
        [deleted]
      - junofan 4y ago
        Simplifies and modernizes cross-border flows. Try buying shares in a firm listed on the Indonesia Stock Exchange—you’ll spend days to weeks dealing with middlemen. Should be a couple clicks to submit to a public ledger. I don’t see where lack of regulation is a selling point—it greatly limits invested capital.
StayTrue 4y ago
Without loginwall: https://nitter.net/hodlKRYPTONITE/status/1536902115540742144 https://nitter.net/hodlKRYPTONITE/status/1536902115540742144
vba616 4y ago
Matt Levine had an aside in one of his recent columns about how ironically, "safe" investments are frequently the most un-safe, because the tiniest crack in the faith people have in them leads to panic. For instance, the stablecoins. Bitcoin itself doesn't seem to be vulnerable, exactly because there's no particular objective value. If it goes down 90%, well, nobody promised it wouldn't.
- dredmorbius 4y ago
  Link to that? Sounds as if that's somewhat related to J.K. Galbraith's variant of Gresham's Law, in which "bad assets drive out good", during a crash, as the need to cover obligations as bad assets tank leads to sale of quality assets / securities. From The Great Crash: 1929. One of my favourite books.
  - hagy 4y ago
    https://www.bloomberg.com/opinion/articles/2022-05-13/elon-musk-trolls-twitter https://www.bloomberg.com/opinion/articles/2022-05-13/elon-m... > Safe assets are much riskier than risky ones. This is I think the deep lesson of the 2008 financial crisis, and crypto loves re-learning the lessons of traditional finance. Systemic risks live in safe assets. Equity-like assets — tech stocks, Luna, Bitcoin — are risky, and everyone knows they’re risky, and everyone accepts the risk. If your stocks or Bitcoin go down by 20% you are sad, but you are not that surprised. And so most people arrange their lives in such a way that, if their stocks or Bitcoin go down by 20%, they are not ruined. > On the other hand safe assets — AAA mortgage securities, bank deposits, stablecoins — are not supposed to be risky, and people rely on them being worth what they say they’re worth, and when people lose even a little bit of confidence in them they crack completely. Bitcoin is valuable at $50,000 and somewhat less valuable at $40,000. A stablecoin is valuable at $1.00 and worthless at $0.98. If it hits $0.98 it might as well go to zero. And now it might!
    - dredmorbius 4y ago
      Thanks!
  - 4y ago
rufius 4y ago
Frankly, this sounds like a feature rather than a bug. Speculation of this type is high risk/reward. If this guts the lenders, that’s a good thing - they’re not treating this with the appropriate amount of respect for speculating and protecting their balance sheets. TL;DR - like Usher said, “let it buuuuurrn”
nimbius 4y ago
for commenters assuming the US Government would step in, absolutely not. the death of Crypto is inherently in the interest of US foreign policy as it strengthens regional soft power in denied spaces by gutting uncooperative states (iran, venezuela, cuba, etc...) of their ability to sidestep western capital embargos. it also guts Wikileaks ability to defend itself in court, as its sitting on a good deal of crypto since being denied access to regular donations. it also helps dampen inflation by strengthening the dollar, at whatever level that may be.
- null0pointer 4y ago
  I like crypto, though not really what it has become in recent years. I too hope the US government does not step in. That would be totally antithetical to the entire point of crypto.

onlyrealcuzzo 4y ago

I'm out of the loop on crypto. Are the loans denominated in crypto or dollars? Does this mean the lenders will have to sell crypto when they realize the loss?

anonymoushn 4y ago
The situation is not entirely clear because some lenders may not loudly announce that they have liquidity issues as early as possible. It seems like a large part of the forced selling by 3AC and counterparties is already over, and it seems like many counterparties don't actually have any collateral from 3AC to sell and must eat the loss.
kersplody 4y ago
The answer is probably yes for both questions. These crypto and loan contracts are typically very complex and involve many classes of crypto and physical assets involving many 3rd parties. Therefore it's going to take awhile to untangle things to the point where each party knows their precise risk exposure and ability to take loans out against this exposure/loss.

deleted 4y ago

[deleted]

josh2600 4y ago

3AC isn’t just large. 3AC is the largest trader by volume in the world for like 4 years. Them going bankrupt is like long term capital management going bankrupt.

3327 4y ago
sillysaurusx 4y ago
Mt Gox says hello. We’ve been here before, we’ll be here again, a bunch of people will lose money and the cycle will repeat. It’ll all work out.
- arcticbull 4y ago
  Hopefully this time, we get some regulator action so we're never back here again. Each time the cycle gets bigger, the tendrils work their way into traditional finance - and more people get hurt. This time, the Quebec public servants are getting rekt on their investment into Celsius [1]. Now it's hurting pensioners, not just a bunch of degenerate gamblers and moonbois. It's fine for a bunch of pokemon card traders to get rekt - but by the time you get to 3AC scale, it's time for regulators to put the kibosh on the whole space. They're securities. They either get registered or you go to Club Fed. With all due respect, fingers crossed, this time it does not work out. [1] https://www.cdpq.com/en/news/pressreleases/celsius-network-announces-investment-led-westcap-cdpq-valuation-more-us-3b https://www.cdpq.com/en/news/pressreleases/celsius-network-a...
  - ycta2022061715 4y ago
    Question: what is the point of crypto if it becomes regulated like traditional financial assets? Crypto doesn't have any actual use-value like stocks or real estate, and its entire selling point was that it's decentralized and unregulated.
    - deleted 4y ago
      [deleted]
    - junofan 4y ago
      Simplifies and modernizes cross-border flows. Try buying shares in a firm listed on the Indonesia Stock Exchange—you’ll spend days to weeks dealing with middlemen. Should be a couple clicks to submit to a public ledger. I don’t see where lack of regulation is a selling point—it greatly limits invested capital.

StayTrue 4y ago

Without loginwall: https://nitter.net/hodlKRYPTONITE/status/1536902115540742144 https://nitter.net/hodlKRYPTONITE/status/1536902115540742144

vba616 4y ago

Matt Levine had an aside in one of his recent columns about how ironically, "safe" investments are frequently the most un-safe, because the tiniest crack in the faith people have in them leads to panic. For instance, the stablecoins. Bitcoin itself doesn't seem to be vulnerable, exactly because there's no particular objective value. If it goes down 90%, well, nobody promised it wouldn't.

dredmorbius 4y ago
Link to that? Sounds as if that's somewhat related to J.K. Galbraith's variant of Gresham's Law, in which "bad assets drive out good", during a crash, as the need to cover obligations as bad assets tank leads to sale of quality assets / securities. From The Great Crash: 1929. One of my favourite books.
- hagy 4y ago
  https://www.bloomberg.com/opinion/articles/2022-05-13/elon-musk-trolls-twitter https://www.bloomberg.com/opinion/articles/2022-05-13/elon-m... > Safe assets are much riskier than risky ones. This is I think the deep lesson of the 2008 financial crisis, and crypto loves re-learning the lessons of traditional finance. Systemic risks live in safe assets. Equity-like assets — tech stocks, Luna, Bitcoin — are risky, and everyone knows they’re risky, and everyone accepts the risk. If your stocks or Bitcoin go down by 20% you are sad, but you are not that surprised. And so most people arrange their lives in such a way that, if their stocks or Bitcoin go down by 20%, they are not ruined. > On the other hand safe assets — AAA mortgage securities, bank deposits, stablecoins — are not supposed to be risky, and people rely on them being worth what they say they’re worth, and when people lose even a little bit of confidence in them they crack completely. Bitcoin is valuable at $50,000 and somewhat less valuable at $40,000. A stablecoin is valuable at $1.00 and worthless at $0.98. If it hits $0.98 it might as well go to zero. And now it might!
  - dredmorbius 4y ago
    Thanks!
- 4y ago

rufius 4y ago

Frankly, this sounds like a feature rather than a bug. Speculation of this type is high risk/reward. If this guts the lenders, that’s a good thing - they’re not treating this with the appropriate amount of respect for speculating and protecting their balance sheets. TL;DR - like Usher said, “let it buuuuurrn”

nimbius 4y ago

for commenters assuming the US Government would step in, absolutely not. the death of Crypto is inherently in the interest of US foreign policy as it strengthens regional soft power in denied spaces by gutting uncooperative states (iran, venezuela, cuba, etc...) of their ability to sidestep western capital embargos. it also guts Wikileaks ability to defend itself in court, as its sitting on a good deal of crypto since being denied access to regular donations. it also helps dampen inflation by strengthening the dollar, at whatever level that may be.

null0pointer 4y ago
I like crypto, though not really what it has become in recent years. I too hope the US government does not step in. That would be totally antithetical to the entire point of crypto.