11 ms·

Peter Thiel-Backed Crypto Lender Vauld Suspends Withdrawals

191 points by crhulls 4y ago

paulpauper 4y ago
never even heard of this one too. waiting for one of the big ones to fail.
- corndoge 4y ago
  Celsius Network is pretty big
  - KennyBlanken 4y ago
    Yeah, about that... https://www.washingtonpost.com/business/2022/06/13/celsius-crypto-bank-withdrawals-freeze/ https://www.washingtonpost.com/business/2022/06/13/celsius-c...
neals 4y ago
I'm a crypto enthusiast and I don't share the common view here that blockchain is useless, however ... how do you offer 12% interest on a stable coin? Where is that money even supposed to be coming from?
- dorkwood 4y ago
  When new people invest, you can take their money and use it to pay the people who were already invested.
  - suction 4y ago
    Why am I thinking of Egypt now?
- theplumber 4y ago
  Maybe from "investments" in shitcoins?
- Jommi 4y ago
  token farming from tokens that are given as incentives for using different dApps. These incentive tokens have value because of the speculative nature of the human brain.
dangle1 4y ago
https://archive.ph/0tsZR https://archive.ph/0tsZR "The platform, Vauld, said Monday that it froze the operations after users pulled almost $200 million over the last three weeks."
- JumpCrisscross 4y ago
  Assuming their assets are in crypto, this sounds like they (and Celsius and the rest) are hoping Bitcoin rallies before anyone notices they're insolvent.
Barrera 4y ago
> A cryptocurrency lender backed by Peter Thiel and Coinbase Global Inc. suspended withdrawals, trading and deposits on its platform, citing volatile market conditions and financial difficulties facing key business partners. > The platform, Vauld, said Monday that it froze the operations after users pulled almost $200 million over the last three weeks. A sharp decline in cryptocurrency prices that began with the collapse of two cryptocurrencies in May has spooked traders and caused knock-on effects in the digital asset world. It's called "a bank run": > A bank run or run on the bank occurs when many clients withdraw their money from a bank, because they believe the bank may cease to function in the near future. ... https://en.wikipedia.org/wiki/Bank_run https://en.wikipedia.org/wiki/Bank_run Except this bank has no FDIC insurance, no backstop, nothing. Oddly enough, I think US tax policy may play a factor here in motivating people to ignore the repeated and loud warnings about how this was a really, really bad idea. When you're facing massive capital gains taxes, and have an inkling that those gains will turn to losses, the idea of lending out the asset, spending the cash without incurring tax, then getting the asset back starts to look attractive. Of course, the real problem was that those warnings got ignored. I mean, who reads something like this without alarm bells going off all over the place? > Our interest rates and trading fees are among the best in the industry. You can earn interest of up to 11.57% (APY) on your cryptocurrencies, and borrow tokens with our spread being as low as 1%. We don't charge deposit or withdrawal fees, or fix a cap on your daily withdrawals. You can check all our fees and rates here. https://www.vauld.com/home https://www.vauld.com/home
- bshipp 4y ago
  When an asset class increases in value for a long enough period of time there is no shortage of explanations for why it's different this time. Real estate, commodities, tech companies, it makes no difference, It's always the same.
  - vecinu 4y ago
    Real estate is an outlier in your examples due to there being limited supply and people need shelter.
greyface- 4y ago
Discussion from 16 hours ago: https://news.ycombinator.com/item?id=31974146 https://news.ycombinator.com/item?id=31974146
cesarvarela 4y ago
Unregulated fractional banking, what could go wrong.
- kurthr 4y ago
  From one to zero!
  - balsam 4y ago
    From N/N+1 to 1/N
    - xref 4y ago
      I’m guessing nobody boundary tested this
      - balsam 4y ago
        No doubt margin calls have been attempted.. to be fair
ggm 4y ago
Thiel is a smart investor but even smart investors lose money on some investments. "backed" can have many meanings. I would imagine he has some kind of stop-loss on his exposure to risk here. And indeed, its "Valar Ventures" which has invested, an indirect vehicle. Note: I dislike the guys politics, but that has nothing to do with an objective assessment of his financial investment chops. Same with Andreessen, he doesn't figure in my 'friends of carlotta' list but he obviously knows a good investment when he sees one. My personal belief is that Thiel is too smart to have believed any of the bullshit about coins and NFT, and was in this as risk play for the upside. I am sure he made heaps doing this elsewhere in the crypto bubble, he can wear this (small, in his terms) downside outcome.
- markdown 4y ago
  > My personal belief ... was just proved wrong and now I realise that billionaires can make stupid mistakes just like everyone else.
  - ggm 4y ago
    yes. I realize this. Do you think he's poor? If you want stupid, I wouldn't put Thiel at the head of the pack, the room of stupid rich people is pretty full right now. The really stupid ones put everything into cryptos. I don't think he did this. I upvoted you for a good rebuttal!
- fmajid 4y ago
  Thiel's hedge fund Clarium Capital lost a fortune.
  - ggm 4y ago
    Yes, but his position overall is still high-net-worth surely? I'd be delighted if the wunderkid of the libertarian right lost his shirt, but I suspect he's still ahead of where he was 10 years ago, and in the long run is going to continue to make a shedload of money. Clarium lost bigtime. No disagree. He has about 5 other vehicles as I see it. His roth IRA alone is going to be fantastic. I wouldn't use him as my financial investment agent, personally. I'm not tracking his investments, I let my superannuation fund make it's own mind up.
brentm 4y ago
I've been in and out of crypto since 2014 or so but I've never been more bearish than 2021. When the majority of my Twitter feed became visionaries predicting web3 it all seemed destined for pain. There are billions of reasons to embrace the idea of a platform shift but when everyone can see it coming a mile away they're probably either wrong or a deep trough of sorrow away from it working out.
- axg11 4y ago
  You've never been more bearish than when the highest number of developers and builders are working on crypto?
  - ianbutler 4y ago
    I don't know why number of people working on an idea has bearing on the quality of the idea. An insane number of people were working on things that didn't pan out during the dotcom bust too. It's more indicative of the amount of money in the system imo and the reason there's money in the system is because some powerful VCs really would like the transition of power from classical finance to their newly minted financial system. Then the rest hopped on the bandwagon.
  - deleted 4y ago
    [deleted]
  - kobiguru 4y ago
    People working in this doesn't necessarily translate to future progress. You can confusing lead and lag indicators. Some people enthusiastically using a product and ready to pay money for it, is a lead indicator. A lot of people working on solution for a problem that does not exist is no indicator at all.
  - johnthewise 4y ago
  - brentm 4y ago
    Bearish in terms of the price of the assets at the time/medium term, not necessarily on the technology in the long term.
IncRnd 4y ago
https://archive.ph/20220704153124/https://www.wsj.com/articles/peter-thiel-backed-crypto-lender-vauld-suspends-withdrawals-11656945617 https://archive.ph/20220704153124/https://www.wsj.com/articl...
deleted 4y ago
[deleted]
IncRnd 4y ago
"On Wednesday, Voyager issued a notice of default to crypto hedge fund Three Arrows Capital after it failed to repay a loan of 15,250 bitcoin and $350 million in USD Coin, a stablecoin whose value is pegged to the dollar. The loan is equivalent to about $646 million based on bitcoin’s current price." https://archive.ph/uzdMe https://archive.ph/uzdMe
civilized 4y ago
The second there is a shiny new asset increasing in value, businesses will sprout up with models that absolutely require this asset to continue skyrocketing in value forever.
ilrwbwrkhv 4y ago
Peter Thiel is the Jordan Peterson of capitalism.
mightytravels 4y ago
I can’t believe that all the crypto yield Cefi companies Al just gave their money to 3AC. There’s literally hundreds of high yield strategies out there. Many of them well hedged but nobody went that route (at scale).
- cycrutchfield 4y ago
  Unless you think you know better than them, maybe this should tell you something about the landscape of investment opportunities.
imgabe 4y ago
Is there any other VC who gets specifically mentioned as an investor any time one of the companies they invest in does something?
- iso8859-1 4y ago
  Yes, Bill Gates for example: https://www.theguardian.com/us-news/2021/nov/16/bill-gates-natrium-nuclear-power-plant-wyomning-kemmerer https://www.theguardian.com/us-news/2021/nov/16/bill-gates-n...
- MrThoughtful 4y ago
  When you sees news about some company and the news does not mention Thiel, how do you know he is not invested in them?
- rsynnott 4y ago
  When a company implodes, it's typical to mention the major backers in news articles about the implosion.
spoonjim 4y ago
I don’t think these investments were necessarily stupid. A lot of people in crypto found bagholders and Thiel was probably hoping he could find his own.
spaceman_2020 4y ago
The weird thing about crypto is that it can become a $20T asset class without it ever truly affecting the "real" world, as long as the money stays circulating within the crypto ecosystem. Crypto marketcap topped $3T this run. It was likely much higher given that this $3T figure comes from CoinGecko and it doesn't track NFTs and unlisted tokens. Yet the real world impact of this market crashing wasn't really as big as it would have been if a "real" $3T market was to drop by 2/3rd. I suspect that in the absenece of real world growth and quickly depleting real world assets, more and more businesses will pile into web3/meta/crypto. In the metaverse, you can theoretically have infinite growth as long as that money stays within the metaverse ecosystem.
- grey-area 4y ago
  This does have real world consequences for all those small players who were suckered into buying cryptocurrencies at the peak by the likes of Saylor, Thiel and Musk at the peak. Many lost their savings and many more will. Re the market caps, these are a fantasy propped up by unaudited exchanges currencies like tether. So it’s unsurprising all that perceived wealth melts into air - it never existed. Interesting that you think web3/meta/crypto are tied together and have a future when nobody wants to use them. They were simply vehicles for speculation in a very large asset bubble, now that the bubble has started to pop nobody wants these speculative assets but we haven’t seen capitulation in markets yet nor the end of fed rate hikes, so the pain will continue. Re infinite growth and business interest in these three areas, I see no evidence of that.
- hahaxdxd123 4y ago
  This might be true, but it's not that interesting imo. It's not a closed ecosystem people cash out of crypto to interact with the real world and buy their lambos. When there are major shocks in the real world - war & inflation this time - the facade disappears.
  - spaceman_2020 4y ago
    Cashing out is actively discouraged by the dominant "HODL" culture. Sure, people do cash out a lot. But its a fraction of the paper wealth circulating through the crypto ecosystem.
nieve 4y ago
Doesn't look like a happy ending on the 3AC side: https://archive.ph/20oUJ https://archive.ph/20oUJ A British Virgin Islands court ordered the liquidation of Three Arrows Capital Ltd. after creditors sued the cryptocurrency hedge fund for failure to repay debts. Nichol Yeo, a partner at law firm Solitaire LLP, said Three Arrows Capital is considering its options and seeking legal advice in the British Virgin Islands.

191 points by crhulls 4y ago

paulpauper 4y ago

never even heard of this one too. waiting for one of the big ones to fail.

corndoge 4y ago
Celsius Network is pretty big
- KennyBlanken 4y ago
  Yeah, about that... https://www.washingtonpost.com/business/2022/06/13/celsius-crypto-bank-withdrawals-freeze/ https://www.washingtonpost.com/business/2022/06/13/celsius-c...

neals 4y ago

I'm a crypto enthusiast and I don't share the common view here that blockchain is useless, however ... how do you offer 12% interest on a stable coin? Where is that money even supposed to be coming from?

dorkwood 4y ago
When new people invest, you can take their money and use it to pay the people who were already invested.
- suction 4y ago
  Why am I thinking of Egypt now?
theplumber 4y ago
Maybe from "investments" in shitcoins?
Jommi 4y ago
token farming from tokens that are given as incentives for using different dApps. These incentive tokens have value because of the speculative nature of the human brain.

dangle1 4y ago

https://archive.ph/0tsZR https://archive.ph/0tsZR "The platform, Vauld, said Monday that it froze the operations after users pulled almost $200 million over the last three weeks."

JumpCrisscross 4y ago
Assuming their assets are in crypto, this sounds like they (and Celsius and the rest) are hoping Bitcoin rallies before anyone notices they're insolvent.

Barrera 4y ago

> A cryptocurrency lender backed by Peter Thiel and Coinbase Global Inc. suspended withdrawals, trading and deposits on its platform, citing volatile market conditions and financial difficulties facing key business partners. > The platform, Vauld, said Monday that it froze the operations after users pulled almost $200 million over the last three weeks. A sharp decline in cryptocurrency prices that began with the collapse of two cryptocurrencies in May has spooked traders and caused knock-on effects in the digital asset world. It's called "a bank run": > A bank run or run on the bank occurs when many clients withdraw their money from a bank, because they believe the bank may cease to function in the near future. ... https://en.wikipedia.org/wiki/Bank_run https://en.wikipedia.org/wiki/Bank_run Except this bank has no FDIC insurance, no backstop, nothing. Oddly enough, I think US tax policy may play a factor here in motivating people to ignore the repeated and loud warnings about how this was a really, really bad idea. When you're facing massive capital gains taxes, and have an inkling that those gains will turn to losses, the idea of lending out the asset, spending the cash without incurring tax, then getting the asset back starts to look attractive. Of course, the real problem was that those warnings got ignored. I mean, who reads something like this without alarm bells going off all over the place? > Our interest rates and trading fees are among the best in the industry. You can earn interest of up to 11.57% (APY) on your cryptocurrencies, and borrow tokens with our spread being as low as 1%. We don't charge deposit or withdrawal fees, or fix a cap on your daily withdrawals. You can check all our fees and rates here. https://www.vauld.com/home https://www.vauld.com/home

bshipp 4y ago
When an asset class increases in value for a long enough period of time there is no shortage of explanations for why it's different this time. Real estate, commodities, tech companies, it makes no difference, It's always the same.
- vecinu 4y ago
  Real estate is an outlier in your examples due to there being limited supply and people need shelter.

greyface- 4y ago

Discussion from 16 hours ago: https://news.ycombinator.com/item?id=31974146 https://news.ycombinator.com/item?id=31974146

cesarvarela 4y ago

Unregulated fractional banking, what could go wrong.

kurthr 4y ago
From one to zero!
- balsam 4y ago
  From N/N+1 to 1/N
  - xref 4y ago
    I’m guessing nobody boundary tested this
    - balsam 4y ago
      No doubt margin calls have been attempted.. to be fair

ggm 4y ago

Thiel is a smart investor but even smart investors lose money on some investments. "backed" can have many meanings. I would imagine he has some kind of stop-loss on his exposure to risk here. And indeed, its "Valar Ventures" which has invested, an indirect vehicle. Note: I dislike the guys politics, but that has nothing to do with an objective assessment of his financial investment chops. Same with Andreessen, he doesn't figure in my 'friends of carlotta' list but he obviously knows a good investment when he sees one. My personal belief is that Thiel is too smart to have believed any of the bullshit about coins and NFT, and was in this as risk play for the upside. I am sure he made heaps doing this elsewhere in the crypto bubble, he can wear this (small, in his terms) downside outcome.

markdown 4y ago
> My personal belief ... was just proved wrong and now I realise that billionaires can make stupid mistakes just like everyone else.
- ggm 4y ago
  yes. I realize this. Do you think he's poor? If you want stupid, I wouldn't put Thiel at the head of the pack, the room of stupid rich people is pretty full right now. The really stupid ones put everything into cryptos. I don't think he did this. I upvoted you for a good rebuttal!
fmajid 4y ago
Thiel's hedge fund Clarium Capital lost a fortune.
- ggm 4y ago
  Yes, but his position overall is still high-net-worth surely? I'd be delighted if the wunderkid of the libertarian right lost his shirt, but I suspect he's still ahead of where he was 10 years ago, and in the long run is going to continue to make a shedload of money. Clarium lost bigtime. No disagree. He has about 5 other vehicles as I see it. His roth IRA alone is going to be fantastic. I wouldn't use him as my financial investment agent, personally. I'm not tracking his investments, I let my superannuation fund make it's own mind up.

brentm 4y ago

I've been in and out of crypto since 2014 or so but I've never been more bearish than 2021. When the majority of my Twitter feed became visionaries predicting web3 it all seemed destined for pain. There are billions of reasons to embrace the idea of a platform shift but when everyone can see it coming a mile away they're probably either wrong or a deep trough of sorrow away from it working out.

axg11 4y ago
You've never been more bearish than when the highest number of developers and builders are working on crypto?
- ianbutler 4y ago
  I don't know why number of people working on an idea has bearing on the quality of the idea. An insane number of people were working on things that didn't pan out during the dotcom bust too. It's more indicative of the amount of money in the system imo and the reason there's money in the system is because some powerful VCs really would like the transition of power from classical finance to their newly minted financial system. Then the rest hopped on the bandwagon.
- deleted 4y ago
  [deleted]
- kobiguru 4y ago
  People working in this doesn't necessarily translate to future progress. You can confusing lead and lag indicators. Some people enthusiastically using a product and ready to pay money for it, is a lead indicator. A lot of people working on solution for a problem that does not exist is no indicator at all.
- johnthewise 4y ago
- brentm 4y ago
  Bearish in terms of the price of the assets at the time/medium term, not necessarily on the technology in the long term.

IncRnd 4y ago

https://archive.ph/20220704153124/https://www.wsj.com/articles/peter-thiel-backed-crypto-lender-vauld-suspends-withdrawals-11656945617 https://archive.ph/20220704153124/https://www.wsj.com/articl...

deleted 4y ago

[deleted]

IncRnd 4y ago

"On Wednesday, Voyager issued a notice of default to crypto hedge fund Three Arrows Capital after it failed to repay a loan of 15,250 bitcoin and $350 million in USD Coin, a stablecoin whose value is pegged to the dollar. The loan is equivalent to about $646 million based on bitcoin’s current price." https://archive.ph/uzdMe https://archive.ph/uzdMe

civilized 4y ago

The second there is a shiny new asset increasing in value, businesses will sprout up with models that absolutely require this asset to continue skyrocketing in value forever.

ilrwbwrkhv 4y ago

Peter Thiel is the Jordan Peterson of capitalism.

mightytravels 4y ago

I can’t believe that all the crypto yield Cefi companies Al just gave their money to 3AC. There’s literally hundreds of high yield strategies out there. Many of them well hedged but nobody went that route (at scale).

cycrutchfield 4y ago
Unless you think you know better than them, maybe this should tell you something about the landscape of investment opportunities.

imgabe 4y ago

Is there any other VC who gets specifically mentioned as an investor any time one of the companies they invest in does something?

iso8859-1 4y ago
Yes, Bill Gates for example: https://www.theguardian.com/us-news/2021/nov/16/bill-gates-natrium-nuclear-power-plant-wyomning-kemmerer https://www.theguardian.com/us-news/2021/nov/16/bill-gates-n...
MrThoughtful 4y ago
When you sees news about some company and the news does not mention Thiel, how do you know he is not invested in them?
rsynnott 4y ago
When a company implodes, it's typical to mention the major backers in news articles about the implosion.

spoonjim 4y ago

I don’t think these investments were necessarily stupid. A lot of people in crypto found bagholders and Thiel was probably hoping he could find his own.

spaceman_2020 4y ago

The weird thing about crypto is that it can become a $20T asset class without it ever truly affecting the "real" world, as long as the money stays circulating within the crypto ecosystem. Crypto marketcap topped $3T this run. It was likely much higher given that this $3T figure comes from CoinGecko and it doesn't track NFTs and unlisted tokens. Yet the real world impact of this market crashing wasn't really as big as it would have been if a "real" $3T market was to drop by 2/3rd. I suspect that in the absenece of real world growth and quickly depleting real world assets, more and more businesses will pile into web3/meta/crypto. In the metaverse, you can theoretically have infinite growth as long as that money stays within the metaverse ecosystem.

grey-area 4y ago
This does have real world consequences for all those small players who were suckered into buying cryptocurrencies at the peak by the likes of Saylor, Thiel and Musk at the peak. Many lost their savings and many more will. Re the market caps, these are a fantasy propped up by unaudited exchanges currencies like tether. So it’s unsurprising all that perceived wealth melts into air - it never existed. Interesting that you think web3/meta/crypto are tied together and have a future when nobody wants to use them. They were simply vehicles for speculation in a very large asset bubble, now that the bubble has started to pop nobody wants these speculative assets but we haven’t seen capitulation in markets yet nor the end of fed rate hikes, so the pain will continue. Re infinite growth and business interest in these three areas, I see no evidence of that.
hahaxdxd123 4y ago
This might be true, but it's not that interesting imo. It's not a closed ecosystem people cash out of crypto to interact with the real world and buy their lambos. When there are major shocks in the real world - war & inflation this time - the facade disappears.
- spaceman_2020 4y ago
  Cashing out is actively discouraged by the dominant "HODL" culture. Sure, people do cash out a lot. But its a fraction of the paper wealth circulating through the crypto ecosystem.

nieve 4y ago

Doesn't look like a happy ending on the 3AC side: https://archive.ph/20oUJ https://archive.ph/20oUJ A British Virgin Islands court ordered the liquidation of Three Arrows Capital Ltd. after creditors sued the cryptocurrency hedge fund for failure to repay debts. Nichol Yeo, a partner at law firm Solitaire LLP, said Three Arrows Capital is considering its options and seeking legal advice in the British Virgin Islands.