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I really don’t understand the business model of making massive fiat loans to “firms” to buy bitcoin. If crypto goes up, you get a small amount of interest. If c

• spamizbad 4y ago
  I think a lot of these projects are less rational and more ideological. People are desperate for applications of crypto, because the survival of the ecosystem depends on it, so they’re willing to chase down high risk / low reward ventures to keep the music going.
  • doopy1 4y ago
    Firms like 3AC exist only to funnel as much money as possible into the crypto economy, most of it raised from ultra-high net worth individuals that won't miss this money at all. They place huge bets, because it's a land grab and the folks that work there got paid already.
• atwood22 4y ago
  It's called picking up pennies in front of a steam roller.
  • a4isms 4y ago
    Also “picking up nickels off of railroad tracks.” It’s very seductive. I like the railroad tracks analogy because in my real-world experience, railroad tracks can be seldom-used, and look like they’ve been abandoned. But every once in a while, something does come driving down it, be it a full train or maybe a pickup truck outfitted with bogeys, belonging to the company. But only once in a while. If you don’t see one for months, you convince yourself you’ll never see one.
• gowld 4y ago
  The people making the loans are also speculating on crypto with other funds. The loans exist to pump the price up by fooling "technical" traders. It's market manipulation.
  • frankharv 4y ago
    I think using the word 'traders' for these scammers is generous. Should reddit be allowed to present financial advice via their forum. That to me is a problem. Free Speech or financial system rules. People can say things on a forum with no repercussions. True or not. AMC is a shit stock now and it was 5 years ago. Gamestock too. Elon Musk says one thing wrong and is attacked by SEC. Not fair at all. Crypto should have been snuffed out by regulation many years ago.
    • celticninja 4y ago
      So anti regulation for Elon, pro regulation for crypto and Reddit. That's definitely a weird take.
• andruby 4y ago
  Perhaps they also own a lot of bitcoin/crypto and the goal of this investment is to prevent the price from dropping (due to firms going down).
• HWR_14 4y ago
  > Just spend a fraction of the sum on bitcoin and do something safe with the rest. What was the plan? On the other hand, I can see investing in firms that then take out huge loans to buy crypto. The math reverses itself. Crypto goes up, and you make far more than buying BTC without leverage. Crypto goes down and you lose your entire investment, but are limited to that (as opposed to taking out the loans yourself). I suppose if they felt the loans were collateralized by something that was more solid than crypto, that makes sense. Like, yes I'll loan you money backed your MSFT shares or whatever, and you can spend it on crypto or whatever.
• nikanj 4y ago
  If it goes up, I gain money. If it goes down, you lose money. They’re gambling with someone else’s cash and keeping the winnings
• wollsmoth 4y ago
  There's probably enough collateral involved that they come out ok either way. In other words you'd secure the loan against some bitcoin you already have that's maybe worth 2x what you're borrowing. So now you're holding 3x that amount. Ideally bitcoin goes up, you sell, then repay the loan and take profits. If btc drops too much, you need to dump your coins and repay the loan. My guess anyway.
• Seattle3503 4y ago
  A better firm would have performed better, regardless of what happens to crypto. Short selling should be a part of any sophisticated strategy. But this firm bet the farm on the price going up. I thought hedge funds were smarter than that, bit apparently not this one.
• jsemrau 4y ago
  Similar to CDOs in 2008 the risk of staked Eth was not well understood.