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(edit) I find it unfortunate how far we have come from people being mad at SEC for not catching a lot of the 2008 era frauds. Now we have people mad that SEC w

(edit) I find it unfortunate how far we have come from people being mad at SEC for not catching a lot of the 2008 era frauds. Now we have people mad that SEC won't rubber stamp a spot bitcoin ETF to allow more dumb money to enter the crypto space as exit liquidity with fewer clicks. We should be happy the SEC is taking a serious look in advance in order to do some prevention, rather than closing the doors after the horse has bolted which is the usual course of action..

dang 4y ago
Please don't post in the flamewar style about classic flamewar topics. It leads to flamewars, which we're hoping to avoid here because they're so nasty and so repetitive. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html (Your other comments in this thread seem vastly better and much more in keeping with the intended spirit of the site.)
- steveBK123 4y ago
  fair, edited
  - dang 4y ago
    Appreciated!
LatteLazy 4y ago
The SECs job isn't to stop people making mistakes or bad decisions. It's meant to stop people being treated unfairly and to ensure orderly markets. If people want to throw money at ShitCoin, that's their right. The SEC just needs to make sure it's clear what they're buying and the market for the ETF works as expected...
- JumpCrisscross 4y ago
  > SEC just needs to make sure it's clear what they're buying and the market for the ETF works as expected Which APs can’t do if the spot price is untrustworthy.
  - LatteLazy 4y ago
    That's fine. But does anyone actually think the world BTC price is being manipulated? And if so, why is an ETF on a Future on Spot Ok, but a ETF direct on spot is not? Allowing one but not the other seems like a tickbox exercise no?
    - JumpCrisscross 4y ago
      > does anyone actually think the world BTC price is being manipulated? There are tonnes of papers showing it was in specific cases [1][2]. In the general case, we simply don’t have the data. (For example, everything connected to Tether.) > why is an ETF on a Future on Spot Ok, but a ETF direct on spot is not? Futures are a punt to the CFTC. Also, the failure mode of a futures-based ETF is cleaner. A leveraged ETF based on futures will price truly to the futures even if the futures’ prices lose meaning. (The central clearinghouse for future ensures that while the price may be meaningless, there will be an agreed-upon value for price.) An ETF based on spot will need to be frozen if a handful of exchanges go under and the price of Bitcoin starts varying by 90% depending on which exchange one is looking at. Such an event will also wreak havoc on the futures market. But the future-based ETF will continue settling against that broken market in a way the spot ETF will be unable to. That means everyone who borrowed or lent or wrote derivatives on or pledged collateral with their ETF units will be able to happily continue on their way. That’s market stability, something crypto has so far not prioritised. [1] https://arxiv.org/pdf/1902.01941.pdf https://arxiv.org/pdf/1902.01941.pdf [2] https://www.tandfonline.com/doi/full/10.1080/13504851.2020.1861183?scroll=top&needAccess=true https://www.tandfonline.com/doi/full/10.1080/13504851.2020.1...
    - Galanwe 4y ago
      > That's fine. But does anyone actually think the world BTC price is being manipulated? Hum, yes, I mean, it's not even a matter of believing it or not, it's well known fact. We had at least 5 BTC flashcrashes in 2021, caused by massive sell-off from individual holders, which often trace back to crypto funds. Bear with me though, I'm not saying the overall BTC price is manipulated _all the time_. What I'm saying is that there are a _lot_ of individual BTC spot markets, with very different liquidity, market makers, and participants. Some players have historically manipulated BTC in the past, and will likely continue in the future. The reason of these sell-off are open to speculation, but are often attributed to tentatives of triggering short squeezes by mass liquidation. Or just triggering a massive buy back from others stop losses. etc These types of manipulations are possible only when an individual holder can have a significant market impact because of the low liquidity present in the book, or if market makers have loose liquidity constraints. Both are true for pretty much all BTC spot markets. The future market is largely unaffected since there's so much more liquidity on BTC futures, no holder could dry it out in an instant. Also, in the case of CME futures, the participants are regulated, so market manipulation is pretty much out of reach anyway and would instantly trigger an investigation. At the time of this writing, there's just ~$700k on the top of the spot BTC/USDT book of Binance, while there's around $6M on the perpetual future book. Imagine how dry the fiat USD book would be. Anyone with $500k worth of BTC would crash it at will.
rsynnott 4y ago
Well, I mean, I think it's largely _different people_ who are annoyed. Basically everyone is annoyed at the profound regulatory failure that presaged 2008. People who are really into bitcoin are annoyed at this decision, because number will not now go up. Everyone else is either relieved, or couldn't care less.
dangerface 4y ago
The etf would be backed by bitcoin 1 to 1 its value would always be that of bitcoin. The 2008 financial crises was because big banks where making loans with only loans as the backing. It was literally a house of cards that the SEC looked at and backed not because of economic reasons but because of the authority of the people behind it.
- pjc50 4y ago
  Sure, but the defi space has now replicated that structure with a collection of shadow banks and "hedge funds", which has a significant impact on the bitcoin price.
- gitfan86 4y ago
  Part of the reason the 2008 crises happened was because consumers signed up for loans they shouldn't have (Dumb Money). So to avoid another disaster maybe we should also make it more difficult for that same type of Dumb Money to go into crypto. In 2008 the dumb money was told by their Realtor and licensed mortgage broker that they could afford the mortgage. Instead of thinking for themselves these people just assumed that the government wouldn't allow these mortgages to happen if they were a bad idea. Maybe it isn't good to have stock brokers pitching ETFs that appear to be legit investments, to people who don't understand anything about crypto.

dang 4y ago

Please don't post in the flamewar style about classic flamewar topics. It leads to flamewars, which we're hoping to avoid here because they're so nasty and so repetitive. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html (Your other comments in this thread seem vastly better and much more in keeping with the intended spirit of the site.)

steveBK123 4y ago
fair, edited
- dang 4y ago
  Appreciated!

LatteLazy 4y ago

The SECs job isn't to stop people making mistakes or bad decisions. It's meant to stop people being treated unfairly and to ensure orderly markets. If people want to throw money at ShitCoin, that's their right. The SEC just needs to make sure it's clear what they're buying and the market for the ETF works as expected...

JumpCrisscross 4y ago
> SEC just needs to make sure it's clear what they're buying and the market for the ETF works as expected Which APs can’t do if the spot price is untrustworthy.
- LatteLazy 4y ago
  That's fine. But does anyone actually think the world BTC price is being manipulated? And if so, why is an ETF on a Future on Spot Ok, but a ETF direct on spot is not? Allowing one but not the other seems like a tickbox exercise no?
  - JumpCrisscross 4y ago
    > does anyone actually think the world BTC price is being manipulated? There are tonnes of papers showing it was in specific cases [1][2]. In the general case, we simply don’t have the data. (For example, everything connected to Tether.) > why is an ETF on a Future on Spot Ok, but a ETF direct on spot is not? Futures are a punt to the CFTC. Also, the failure mode of a futures-based ETF is cleaner. A leveraged ETF based on futures will price truly to the futures even if the futures’ prices lose meaning. (The central clearinghouse for future ensures that while the price may be meaningless, there will be an agreed-upon value for price.) An ETF based on spot will need to be frozen if a handful of exchanges go under and the price of Bitcoin starts varying by 90% depending on which exchange one is looking at. Such an event will also wreak havoc on the futures market. But the future-based ETF will continue settling against that broken market in a way the spot ETF will be unable to. That means everyone who borrowed or lent or wrote derivatives on or pledged collateral with their ETF units will be able to happily continue on their way. That’s market stability, something crypto has so far not prioritised. [1] https://arxiv.org/pdf/1902.01941.pdf https://arxiv.org/pdf/1902.01941.pdf [2] https://www.tandfonline.com/doi/full/10.1080/13504851.2020.1861183?scroll=top&needAccess=true https://www.tandfonline.com/doi/full/10.1080/13504851.2020.1...
  - Galanwe 4y ago
    > That's fine. But does anyone actually think the world BTC price is being manipulated? Hum, yes, I mean, it's not even a matter of believing it or not, it's well known fact. We had at least 5 BTC flashcrashes in 2021, caused by massive sell-off from individual holders, which often trace back to crypto funds. Bear with me though, I'm not saying the overall BTC price is manipulated _all the time_. What I'm saying is that there are a _lot_ of individual BTC spot markets, with very different liquidity, market makers, and participants. Some players have historically manipulated BTC in the past, and will likely continue in the future. The reason of these sell-off are open to speculation, but are often attributed to tentatives of triggering short squeezes by mass liquidation. Or just triggering a massive buy back from others stop losses. etc These types of manipulations are possible only when an individual holder can have a significant market impact because of the low liquidity present in the book, or if market makers have loose liquidity constraints. Both are true for pretty much all BTC spot markets. The future market is largely unaffected since there's so much more liquidity on BTC futures, no holder could dry it out in an instant. Also, in the case of CME futures, the participants are regulated, so market manipulation is pretty much out of reach anyway and would instantly trigger an investigation. At the time of this writing, there's just ~$700k on the top of the spot BTC/USDT book of Binance, while there's around $6M on the perpetual future book. Imagine how dry the fiat USD book would be. Anyone with $500k worth of BTC would crash it at will.

rsynnott 4y ago

Well, I mean, I think it's largely _different people_ who are annoyed. Basically everyone is annoyed at the profound regulatory failure that presaged 2008. People who are really into bitcoin are annoyed at this decision, because number will not now go up. Everyone else is either relieved, or couldn't care less.

dangerface 4y ago

The etf would be backed by bitcoin 1 to 1 its value would always be that of bitcoin. The 2008 financial crises was because big banks where making loans with only loans as the backing. It was literally a house of cards that the SEC looked at and backed not because of economic reasons but because of the authority of the people behind it.

pjc50 4y ago
Sure, but the defi space has now replicated that structure with a collection of shadow banks and "hedge funds", which has a significant impact on the bitcoin price.
gitfan86 4y ago
Part of the reason the 2008 crises happened was because consumers signed up for loans they shouldn't have (Dumb Money). So to avoid another disaster maybe we should also make it more difficult for that same type of Dumb Money to go into crypto. In 2008 the dumb money was told by their Realtor and licensed mortgage broker that they could afford the mortgage. Instead of thinking for themselves these people just assumed that the government wouldn't allow these mortgages to happen if they were a bad idea. Maybe it isn't good to have stock brokers pitching ETFs that appear to be legit investments, to people who don't understand anything about crypto.