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I was having this exact conversation with my friends y'day. An exchange marketplace shouldn't be in this position unless they are also participating in the mark

I was having this exact conversation with my friends y'day. An exchange marketplace shouldn't be in this position unless they are also participating in the market directly or indirectly through funds, their own and the customers' funds. Customers' assets (either crypto or fiat/USD) should be backed 1:1. The only reason for FTX to pause withdrawals and then assure investors that their money is safe is a sign that they are using customers' assets/funds to participate in the market. How long before SEC/regulators wake up and regulate these shadow-banks disguised as exchanges as other exchanges?

JumpCrisscross 4y ago
> having this exact conversation with my friends y'day There is a strong, vested interest in portraying FTX's collapse as a one off. Binance doing them dirty doesn't cast a pall across the industry. Fundamental problems, likely replicated systemically, does.
ugh123 4y ago
Sounds like a crypto ponzi scheme
seanhunter 4y ago
> An exchange marketplace shouldn't be in this position unless they are also participating in the market directly or indirectly through funds, their own and the customers' funds. Yes, although the limitation with this line of thinking is that in most market-related activities (including running an exchange) it's hard not to be structurally long the market in various important ways. For example as an exchange your commissions are going to be highly correlated with market activity and may also be per unit in some cases and so would be directly correlated with market prices in that case. As a second-order effect, customers' trading limits are going to be affected as prices fluctuate even if you don't directly offer margin yourself, because not only does the value of the thing they've deposited with you change and therefore affect how much other stuff they can sell this for but also they may have made that deposit by pledging collateral elsewhere and borrowing against that to create margin so that margin loan will be affected. You can definitely try harder to avoid the problem than FTX though which seems to have been pretty much all-in on it's own illiquid token (FTT) and Alameda using leverage on FTT as their main source of funding. One of the things I learned at Goldman during the crisis is that you can't rely on a mark for anything illiquid - you have to have a real liquid market price.
MrPatan 4y ago
> How long before SEC/regulators wake up and regulate these shadow-banks disguised as exchanges as other exchanges? Very long in this case, as SBF was the biggest donor to the Biden campaign. Last few weeks he was even trying to involve himself in writing the regulations he wanted, trying to kill DeFi and make it comfy for himself against other CEXes, no doubt. Some people say that's what triggered CZ to act. And now the whole of FTX and $8 buys you a mosquito net, what a world.
- kasey_junk 4y ago
  Do you have a source for the Biden funding remark? Open secrets suggests about 11M in donations came from SBF controlled entities but that’s pretty far down the list. The top contributions were from Bloomberg at 93M. Those are for company controlled pacs as well, so not just SBF. For individuals the best info I could find doesn’t list SBF as a major donor. https://www.opensecrets.org/2020-presidential-race/joe-biden/contributors?id=N00001669 https://www.opensecrets.org/2020-presidential-race/joe-biden...

JumpCrisscross 4y ago

> having this exact conversation with my friends y'day There is a strong, vested interest in portraying FTX's collapse as a one off. Binance doing them dirty doesn't cast a pall across the industry. Fundamental problems, likely replicated systemically, does.

ugh123 4y ago

Sounds like a crypto ponzi scheme

seanhunter 4y ago

> An exchange marketplace shouldn't be in this position unless they are also participating in the market directly or indirectly through funds, their own and the customers' funds. Yes, although the limitation with this line of thinking is that in most market-related activities (including running an exchange) it's hard not to be structurally long the market in various important ways. For example as an exchange your commissions are going to be highly correlated with market activity and may also be per unit in some cases and so would be directly correlated with market prices in that case. As a second-order effect, customers' trading limits are going to be affected as prices fluctuate even if you don't directly offer margin yourself, because not only does the value of the thing they've deposited with you change and therefore affect how much other stuff they can sell this for but also they may have made that deposit by pledging collateral elsewhere and borrowing against that to create margin so that margin loan will be affected. You can definitely try harder to avoid the problem than FTX though which seems to have been pretty much all-in on it's own illiquid token (FTT) and Alameda using leverage on FTT as their main source of funding. One of the things I learned at Goldman during the crisis is that you can't rely on a mark for anything illiquid - you have to have a real liquid market price.

MrPatan 4y ago

> How long before SEC/regulators wake up and regulate these shadow-banks disguised as exchanges as other exchanges? Very long in this case, as SBF was the biggest donor to the Biden campaign. Last few weeks he was even trying to involve himself in writing the regulations he wanted, trying to kill DeFi and make it comfy for himself against other CEXes, no doubt. Some people say that's what triggered CZ to act. And now the whole of FTX and $8 buys you a mosquito net, what a world.

kasey_junk 4y ago
Do you have a source for the Biden funding remark? Open secrets suggests about 11M in donations came from SBF controlled entities but that’s pretty far down the list. The top contributions were from Bloomberg at 93M. Those are for company controlled pacs as well, so not just SBF. For individuals the best info I could find doesn’t list SBF as a major donor. https://www.opensecrets.org/2020-presidential-race/joe-biden/contributors?id=N00001669 https://www.opensecrets.org/2020-presidential-race/joe-biden...