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We're starting to see the cascade of exchange failures, just like we saw in 2008 with the banks during the GFC. The exchanges all made loans to one another in

We're starting to see the cascade of exchange failures, just like we saw in 2008 with the banks during the GFC. The exchanges all made loans to one another in order to backstop their customer's assets. Now that the value of those loans are evaporating the entire system is going to come crashing down all at once. This is a systemic crisis, and there is no white knight to save it.

_qqm5 4y ago
There's a beautiful difference. Unlike in 2008, today - I can transact efficiently and safely without a bank account. This is currently not possible in traditional finance - Subsequently, none of my assets are locked. I have never stored assets in an exchange, and have no need to do so. - Exchanges can't ask daddy government to mint coins for a bailout. Tl;dr: exchanges and banks who think they can get away with being overleveraged, doing unbacked derivatives trading, lending without locates etc. are in for a bitter surprise. Crypto can't be gamed so easily and it shows.
- twblalock 4y ago
  The problem is, if these exchanges collapse, the value of that crypto you have will drop significantly. So yes, you still have your crypto assets, but there is a real chance they could end up being worthless. Even if you don't use exchanges, you are still exposed to their failure because they are major players in the market that determines the value of the cryptocurrencies. When major players in a market go bust, it's unlikely that any of the other market participants will end up unscathed. Given that crypto value is based solely on what other people are willing to pay for it, it really could go to zero. It probably won't go all the way to zero, but I'd still expect a significant drop.
  - _qqm5 4y ago
    This indicates that the value was propped up by market manipulation. I have no problem with a crash like this, as I have no exposure to centralized * exchanges. I also don't have illusions about price action. I don't invest into crypto to make a quick buck. I invest because I fundamentally oppose traditional finance.
    - twblalock 4y ago
      Really, no exposure to centralized finance? You only use crypto to pay your rent and buy your groceries and your clothing? Your employer pays you in crypto?
      - _qqm5 4y ago
        My bad, I meant centralized exchanges, not finance. Edited my comment. > You only use crypto to pay your rent and buy your groceries and your clothing? Your employer pays you in crypto? Oh how I wish that was true.
        WoahNoun 4y ago
        So in purchasing power terms, you have significant exposure since you now have to sell X% more of your holdings to pay fiat denominated rent.
        _qqm5 4y ago
        That's one perspective sure. You could also say that I have to pay X% more compared to the inflated paper gains I had before.
    - MrMan 4y ago
      crypto *is* traditional finance. whenever humans transact with each other, we reify the behavioral mechanisms which define us as a species. we cannot help but create economies, to trade and transact. all finance is "traditional" finance until our biology changes and new emergent dynamics and equilibriums establish themselves. however thermodynamics, statistics and other math might also have a lot to say on the matter. there is no such thing as traditional finance, just finance.
      - _qqm5 4y ago
        When people talk about traditional finance, we mostly refer to the existing technologies for issuance of currency, settlement of fiat transactions, and the debt hierarchy. Of course finance is an incredibly nuanced word. To quote V. Buterin: > Finance can be viewed as a set of patterns that naturally emerge in many kinds of systems that do not attempt to prevent collusion
  - EVa5I7bHFq9mnYK 4y ago
    Exchanges should not collapse if all they do is collect commissions from people trading. They collapse when they issue their own tokens and borrow hard assets against those very soft tokens.
    - rdtwo 4y ago
      Yeah the exchanges are collapsing because They all held positions and went exchanges. Although at some point they collapse for counter party risk
    - twblalock 4y ago
      Nobody in the crypto industry has the self-control to just be an exchange. The whole idea of crypto attracts the same people as other get-rich-quick schemes. Some scammers, some earnest people. But all ultimately lacking in self control.
  - wruza 4y ago
    if these exchanges collapse, the value of that crypto you have will drop significantly The throne is never empty, right? We are probably still to find out if it’s worth sitting on long term, but since that genie left the bottle, I suspect it is.
- woeirua 4y ago
  Owning coins that can't be exchanged for anything is kind of a pointless endeavor, is it not? The value of most coins is going to zero as a result of this. Crypto is going to be a frigid wasteland after this for quite a while.
  - _qqm5 4y ago
    There are tons of vendors I actively use that accept crypto. Not as much as I'd like, but hardly no one. But yeah, you're right, a currency nobody uses is obviously worthless. I'm attempting to drive adoption so that they CAN be exchanged for goods and services.
    - vermilingua 4y ago
      And when the mom-and-pop bookstore down the road can no longer exchange their crypto for fiat (needed to pay their taxes), do you think they’ll keep accepting your crypto?
      - landemva 4y ago
        It depends on the government. "Crypto Currency Now Accepted For All State Tax Payments" https://tax.colorado.gov/cryptocurrency https://tax.colorado.gov/cryptocurrency
        selectodude 4y ago
        "A sufficient amount of cryptocurrency to cover the tax, obligation and fees is converted to dollars" No it doesn't. Your crypto is not and will not be denominated in crypto. It's still dollars.
        mikeyouse 4y ago
        Good proxy for the promise and reality of crypto though - you need to interact with some shitty PayPal crypto platform and they charge you charge 1.8% for the luxury of doing so.
- machina_ex_deus 4y ago
  You sound just like one of those house owners with a fat mortgage on the eve of 2008. When you buy an asset from heavily leveraged market you get high risk even when you don't use leverage yourself.
  - _qqm5 4y ago
    The crypto I buy is not leveraged, it's sitting in my wallet - unlike IOUs, stocks and derivatives. In crypto, leverage exists solely because of people who aren't doing self-custody and DeFi. They brought this upon themselves.
    - Forgeties79 4y ago
      Genuine question: what are you doing with that crypto anyway if not planning on cashing out back into fiat currency again? My understanding is that the vast majority of cryptos are useless for actually paying for anything and the vast majority of businesses still don’t accept them anyway. So unless you are basically only using and holding BTC (which has a relatively small market of goods that can actually be purchased with it on a daily basis), I’m not really sure what good that crypto is doing for you other than sitting around as a speculative asset which will need to be converted via an exchange.
      - _qqm5 4y ago
        Genuine answer: I'm holding my crypto assets until I can exchange them for the goods and services I need. I never exchange any crypto back to fiat. I don't "invest" to make money. It's a currency. I buy it to use it. I might have to hold it for 5 years, maybe 10, maybe 30, or maybe I'll die and crypto will never be successful (a sad thought but possible). But in the meantime I'll do what I can to improve adoption. That includes working on core protocols, improving UX for non-technical users, or writing software that helps vendors with payment integration. I also make an effort to approach business and show that there is demand for crypto payments. This is literally the only way to make crypto successful. All this price action non-sense, and people wanting to get fiat-rich is just unproductive noise to me.
hn_throwaway_99 4y ago
I'm curious because a lot of this started (in the short term) with Binance dumping their FTT. Just yesterday it looked like a "4D chess move" because then Binance could acquire FTX for next to nothing. Now I'm curious if Binance just tipped over the gasoline can that can finally set this whole shitshow of uselessness ablaze, but potentially taking down Binance with it.
- throwwawayyt 4y ago
  They got lost in their 4d chess maybe. Haha
- twblalock 4y ago
  I'm not sure why the CEO of Binance would have wanted to acquire FTX if he really thought it was in such a bad state internally that it made sense to sell his holdings in FTT. I could buy the idea that he wanted to hurt FTX with his tweet, but things quickly escalated out of control. I also think the offer to buy FTX was motivated by a desire to avoid a broad crypto collapse which would hurt Binance along with everybody else. But that offer had to be withdrawn because things got so bad. Now everybody involved is worse off than they were before, a lot of customers might lose money, and there is a pretty good chance that regulators and governments are going to get more involved in the crypto market in response. If this was planned in advance, it was not 4D chess, it was just a really bad plan.
  - roganp 4y ago
    And also: at the time of Binance's offer to buy FTX, it makes sense only if Binance saw significant contagion risks to FTX's failure. But then they got a little closer and saw the huge hole in FTX's balance sheet and decided that they couldn't do that either. So it's really the worst outcome - they signal that FTX is important to their own business, but then can't do anything to save it. Does not seem to be good news for Binance.
    - buitreVirtual 4y ago
      Binance already knew that there was a hole there. They had just triggered the bank run by calling it out. The attempt to bail out FTX later was only for saving face and maybe also because they freaked out but couldn't stop it at that point.
Kukumber 4y ago
exchange failure? this is a very small player with $500m daily volume only it's a noise https://coinmarketcap.com/exchanges/crypto-com-exchange https://coinmarketcap.com/exchanges/crypto-com-exchange it's the failure of all the suspicious exchanges for sure
- majormajor 4y ago
  It's a "very small player" that has their name plastered on one of the most prominent arenas in the United States. (FTX also had their name on another arena, for that matter!) It's quite possible that the public perception poison will be way worse than any collapses themselves because these players have tried so hard to associate themselves with crypto in the public eye.
princevegeta89 4y ago
Well said. Crypto is nobody's business. And when people lose their assets, it's still nobody's business.
JumpCrisscross 4y ago
> cascade of exchange failures, just like we saw in 2008 They are related in both being cascading crises of confidence. ‘08 manifested from a novel opacity around correlation (lack of centralised counterparty reporting) from novel non-bank banks (shadow banks). This is just a three-point recursion cycle: FTX, FTT and Alameda.
dehrmann 4y ago
> This is a systemic crisis, and there is no white knight to save it. Fortunately, unlike 2008, the global economy doesn't depend on this stuff working.

_qqm5 4y ago

There's a beautiful difference. Unlike in 2008, today - I can transact efficiently and safely without a bank account. This is currently not possible in traditional finance - Subsequently, none of my assets are locked. I have never stored assets in an exchange, and have no need to do so. - Exchanges can't ask daddy government to mint coins for a bailout. Tl;dr: exchanges and banks who think they can get away with being overleveraged, doing unbacked derivatives trading, lending without locates etc. are in for a bitter surprise. Crypto can't be gamed so easily and it shows.

twblalock 4y ago
The problem is, if these exchanges collapse, the value of that crypto you have will drop significantly. So yes, you still have your crypto assets, but there is a real chance they could end up being worthless. Even if you don't use exchanges, you are still exposed to their failure because they are major players in the market that determines the value of the cryptocurrencies. When major players in a market go bust, it's unlikely that any of the other market participants will end up unscathed. Given that crypto value is based solely on what other people are willing to pay for it, it really could go to zero. It probably won't go all the way to zero, but I'd still expect a significant drop.
- _qqm5 4y ago
  This indicates that the value was propped up by market manipulation. I have no problem with a crash like this, as I have no exposure to centralized * exchanges. I also don't have illusions about price action. I don't invest into crypto to make a quick buck. I invest because I fundamentally oppose traditional finance.
  - twblalock 4y ago
    Really, no exposure to centralized finance? You only use crypto to pay your rent and buy your groceries and your clothing? Your employer pays you in crypto?
    - _qqm5 4y ago
      My bad, I meant centralized exchanges, not finance. Edited my comment. > You only use crypto to pay your rent and buy your groceries and your clothing? Your employer pays you in crypto? Oh how I wish that was true.
      - WoahNoun 4y ago
        So in purchasing power terms, you have significant exposure since you now have to sell X% more of your holdings to pay fiat denominated rent.
        _qqm5 4y ago
        That's one perspective sure. You could also say that I have to pay X% more compared to the inflated paper gains I had before.
  - MrMan 4y ago
    crypto *is* traditional finance. whenever humans transact with each other, we reify the behavioral mechanisms which define us as a species. we cannot help but create economies, to trade and transact. all finance is "traditional" finance until our biology changes and new emergent dynamics and equilibriums establish themselves. however thermodynamics, statistics and other math might also have a lot to say on the matter. there is no such thing as traditional finance, just finance.
    - _qqm5 4y ago
      When people talk about traditional finance, we mostly refer to the existing technologies for issuance of currency, settlement of fiat transactions, and the debt hierarchy. Of course finance is an incredibly nuanced word. To quote V. Buterin: > Finance can be viewed as a set of patterns that naturally emerge in many kinds of systems that do not attempt to prevent collusion
- EVa5I7bHFq9mnYK 4y ago
  Exchanges should not collapse if all they do is collect commissions from people trading. They collapse when they issue their own tokens and borrow hard assets against those very soft tokens.
  - rdtwo 4y ago
    Yeah the exchanges are collapsing because They all held positions and went exchanges. Although at some point they collapse for counter party risk
  - twblalock 4y ago
    Nobody in the crypto industry has the self-control to just be an exchange. The whole idea of crypto attracts the same people as other get-rich-quick schemes. Some scammers, some earnest people. But all ultimately lacking in self control.
- wruza 4y ago
  if these exchanges collapse, the value of that crypto you have will drop significantly The throne is never empty, right? We are probably still to find out if it’s worth sitting on long term, but since that genie left the bottle, I suspect it is.
woeirua 4y ago
Owning coins that can't be exchanged for anything is kind of a pointless endeavor, is it not? The value of most coins is going to zero as a result of this. Crypto is going to be a frigid wasteland after this for quite a while.
- _qqm5 4y ago
  There are tons of vendors I actively use that accept crypto. Not as much as I'd like, but hardly no one. But yeah, you're right, a currency nobody uses is obviously worthless. I'm attempting to drive adoption so that they CAN be exchanged for goods and services.
  - vermilingua 4y ago
    And when the mom-and-pop bookstore down the road can no longer exchange their crypto for fiat (needed to pay their taxes), do you think they’ll keep accepting your crypto?
    - landemva 4y ago
      It depends on the government. "Crypto Currency Now Accepted For All State Tax Payments" https://tax.colorado.gov/cryptocurrency https://tax.colorado.gov/cryptocurrency
      - selectodude 4y ago
        "A sufficient amount of cryptocurrency to cover the tax, obligation and fees is converted to dollars" No it doesn't. Your crypto is not and will not be denominated in crypto. It's still dollars.
        mikeyouse 4y ago
        Good proxy for the promise and reality of crypto though - you need to interact with some shitty PayPal crypto platform and they charge you charge 1.8% for the luxury of doing so.
machina_ex_deus 4y ago
You sound just like one of those house owners with a fat mortgage on the eve of 2008. When you buy an asset from heavily leveraged market you get high risk even when you don't use leverage yourself.
- _qqm5 4y ago
  The crypto I buy is not leveraged, it's sitting in my wallet - unlike IOUs, stocks and derivatives. In crypto, leverage exists solely because of people who aren't doing self-custody and DeFi. They brought this upon themselves.
  - Forgeties79 4y ago
    Genuine question: what are you doing with that crypto anyway if not planning on cashing out back into fiat currency again? My understanding is that the vast majority of cryptos are useless for actually paying for anything and the vast majority of businesses still don’t accept them anyway. So unless you are basically only using and holding BTC (which has a relatively small market of goods that can actually be purchased with it on a daily basis), I’m not really sure what good that crypto is doing for you other than sitting around as a speculative asset which will need to be converted via an exchange.
    - _qqm5 4y ago
      Genuine answer: I'm holding my crypto assets until I can exchange them for the goods and services I need. I never exchange any crypto back to fiat. I don't "invest" to make money. It's a currency. I buy it to use it. I might have to hold it for 5 years, maybe 10, maybe 30, or maybe I'll die and crypto will never be successful (a sad thought but possible). But in the meantime I'll do what I can to improve adoption. That includes working on core protocols, improving UX for non-technical users, or writing software that helps vendors with payment integration. I also make an effort to approach business and show that there is demand for crypto payments. This is literally the only way to make crypto successful. All this price action non-sense, and people wanting to get fiat-rich is just unproductive noise to me.

hn_throwaway_99 4y ago

I'm curious because a lot of this started (in the short term) with Binance dumping their FTT. Just yesterday it looked like a "4D chess move" because then Binance could acquire FTX for next to nothing. Now I'm curious if Binance just tipped over the gasoline can that can finally set this whole shitshow of uselessness ablaze, but potentially taking down Binance with it.

throwwawayyt 4y ago
They got lost in their 4d chess maybe. Haha
twblalock 4y ago
I'm not sure why the CEO of Binance would have wanted to acquire FTX if he really thought it was in such a bad state internally that it made sense to sell his holdings in FTT. I could buy the idea that he wanted to hurt FTX with his tweet, but things quickly escalated out of control. I also think the offer to buy FTX was motivated by a desire to avoid a broad crypto collapse which would hurt Binance along with everybody else. But that offer had to be withdrawn because things got so bad. Now everybody involved is worse off than they were before, a lot of customers might lose money, and there is a pretty good chance that regulators and governments are going to get more involved in the crypto market in response. If this was planned in advance, it was not 4D chess, it was just a really bad plan.
- roganp 4y ago
  And also: at the time of Binance's offer to buy FTX, it makes sense only if Binance saw significant contagion risks to FTX's failure. But then they got a little closer and saw the huge hole in FTX's balance sheet and decided that they couldn't do that either. So it's really the worst outcome - they signal that FTX is important to their own business, but then can't do anything to save it. Does not seem to be good news for Binance.
  - buitreVirtual 4y ago
    Binance already knew that there was a hole there. They had just triggered the bank run by calling it out. The attempt to bail out FTX later was only for saving face and maybe also because they freaked out but couldn't stop it at that point.

Kukumber 4y ago

exchange failure? this is a very small player with $500m daily volume only it's a noise https://coinmarketcap.com/exchanges/crypto-com-exchange https://coinmarketcap.com/exchanges/crypto-com-exchange it's the failure of all the suspicious exchanges for sure

majormajor 4y ago
It's a "very small player" that has their name plastered on one of the most prominent arenas in the United States. (FTX also had their name on another arena, for that matter!) It's quite possible that the public perception poison will be way worse than any collapses themselves because these players have tried so hard to associate themselves with crypto in the public eye.

princevegeta89 4y ago

Well said. Crypto is nobody's business. And when people lose their assets, it's still nobody's business.

JumpCrisscross 4y ago

> cascade of exchange failures, just like we saw in 2008 They are related in both being cascading crises of confidence. ‘08 manifested from a novel opacity around correlation (lack of centralised counterparty reporting) from novel non-bank banks (shadow banks). This is just a three-point recursion cycle: FTX, FTT and Alameda.

dehrmann 4y ago

> This is a systemic crisis, and there is no white knight to save it. Fortunately, unlike 2008, the global economy doesn't depend on this stuff working.