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I've seen some comments saying that this is all delayed fallout from the Luna/Terra collapse last spring, it's just that FTX had the means (its own token that i

by faefox 4y ago

I've seen some comments saying that this is all delayed fallout from the Luna/Terra collapse last spring, it's just that FTX had the means (its own token that it could pump and move around its own entities) to paper over the hole in its balance sheet until now. Can anyone more familiar with the situation elaborate? How much further will the contagion spread?

jfdbcv 4y ago
[RUMOR - UNCONFIRMED] People are saying that Alameda Research lost a lot of money due to Luna / Terra and were bailed out by FTX user funds, a loan with FTT as collateral.
- Emma_Goldman 4y ago
  This is my sense of what happened. Alameda's bets went bad in the crypto crash earlier in the year. FTX loaned it up to $10bn in customer deposits against trumped-up collateral (its own token). Somehow, Alameda must have lost most of that money, either by using it to cover its liabilities from the crash, or making more bad bets. When it was leaked to Coin Desk that Alameda's balance sheet was padded with FTX tokens, confidence in the token rapidly collapsed. That obliterated the collateral protecting FTX's loans, ripping open a ~$10bn hole in its finances.
deleted 4y ago
[deleted]
crypt1d 4y ago
Its hard to tell, but looks like the fall out is far from over. There are a lot of rumours running around so unsure what is true and what is not, but we've gotten confirmations from a lot of crypto companies to be affected one way or another. Genesis (a big OTC trading company) lost about 160M but their parent company wrote them a check. BlockFi seems to be in the hole and has closed withdrawals. Blockfolio (an FTX owned company) paused withdrawals. Anything SOL/SRM related is likely affected. Any market maker worth its salt had money on it as well... think we will see a lot of blood in the coming days/weeks.
- acover 4y ago
  For those curious I think srm is serum and sol is solana. https://www.kraken.com/learn/what-is-serum-srm https://www.kraken.com/learn/what-is-serum-srm > Serum is a decentralized exchange software built on Solana where cryptocurrencies can be bought and sold by traders
  - crypt1d 4y ago
    Correct. I've been in this world so long I forget 'normal people' don't really know all the acronyms :) more rumours are surfacing, including Yuga Labs (biggest name in the NFT space), Jump Crypto, Paradigm... this is basically our Lehman Brothers moment edit: looks like Yuga might be ok after all. luckily, sometimes rumour is just a rumour.
    - adriand 4y ago
      What's your take on this for the NFT market more generally?
      - crypt1d 4y ago
        Everyone's confidence is shook, so I expect a lot projects will be delayed due to lack of funding/interest, and volume will dry up significantly in the coming weeks/months. NFT market was never particularly liquid to begin with, so it might grind to a halt for a bit. But there's light at the end of the tunnel, I'm sure. With regulators focusing their eyes on tokens and exchanges, NFTs might get a bit of a revival some time down the road. Especially if money starts flowing into it again looking to escape the regulatory hammer.
    - RustyConsul 4y ago
      I was at the Jump Crypto hackathon during the terra luna depeging. Jump crypto has a unique structure because as part of their investment, they get a chunk of coins to market make with. They have no requirement to be on the long side of the market making so during the terra luna collapse they made an absolute killing (Even though terra/luna was one of their biggest investments). Also, jump has it's other business running HFT on the stock market that is much more profitable so it can always bail out it's other side.
OptoContrarian 4y ago
Scoopy in the Alchemix discord had this to say: "If you are on any CEX or CeFi app or earn product, get out RIGHT NOW. Rumors are swirling and it is possible that none of them are solvent. I am not kidding, really, get out now. I care too much for our community to not have said anything to warn you." Not sure what that all entails.
- ignoramous 4y ago
  > Not sure what that all entails. Those same network effects that propelled web3 into stratosphere are going to bring it down back to earth. Not necessarily vanquish it, but put web3 in its place, so to speak. A scenario I'd imagine where DEXes / DeFi will endure and possibly thrive, but DEXes / DeFis don't have the kind of moats to justify astronomical valuations... which is both a good and a bad thing, depending on which side of the coin you are on. Tech VCs have already circled back to AI, so doubt private companies in need of more money can stay afloat for longer, if they weren't being careful with volatile crypto assets.
- sz4kerto 4y ago
  Even Coinbase?
  - etc-hosts 4y ago
    Coinbase appears now to be relatively boring, highly regulated, and compliant with US laws. I think they'll be fine.
    - polygamous_bat 4y ago
      They will be fine _modulo people's interest in crypto_. The way I think about it is that their business model is taking fees off of every transactions, so as the interest tapers off so will their earnings and valuation.
      - jjfoooo4 4y ago
        On the path to bankruptcy the boring way, not being able to turn a profit
btilly 4y ago
How much further? By their own figures, Tether is now undercapitalized and just had billions withdrawn. They made those payments. But, as Hemmingway said, bankruptcy tends to happen gradually and then all at once. Tether is in a hole. Nobody knows how close they are to not making payments. But when they implode, it will be sudden and the blast radius will be large. Does Tether weather this squall? Based on history, probably. Based on economic fundamentals, they will sink at some point.
- toomuchtodo 4y ago
  Tether might be able to plug the hole depending on how big it is if treasury rates rise fast enough for returns to paper over their previous asset allocation or mismanagement mistakes, and redemptions don’t exceed assets on hand.
  - btilly 4y ago
    Well patio11 just came out with a whole article of BAM about leverage: https://bam.kalzumeus.com/archive/demystifying-financial-leverage/ https://bam.kalzumeus.com/archive/demystifying-financial-lev... The point of this article was to make the consequences of the following statement clear: And now you know enough to understand what I'm saying with an otherwise opaque statement like "Tether is 35:1 levered on risky assets during market contagion." Yes, if everything goes Tether's way, they can weather anything, forever. But eventually it won't, and they won't.
    - toomuchtodo 4y ago
      Ahh, they’re fucked. Thanks for the link.
- deleted 4y ago
  [deleted]
- saurik 4y ago
  > By their own figures, Tether is now undercapitalized... Where has Tether stated this? Last I heard--today--Tether has continued to claim the opposite. (edit to add, 45 minutes later:) I see patio11 makes the same claim, but I've now read both his recent articles on this and he is making a LOT of extremely stretched assumptions to pull off this reasoning, and even then the best he has is that it must have momentarily become insolvent in the past :/. And so like, maybe they are undercapitalized... but if they are it is because they are lying, not because their own figures somehow demonstrate such.
cenal 4y ago
Until the tether fraud collapses the market hasn't corrected.
Alupis 4y ago
For someone that only dabbles in crypto - what are the reasons people choose to use high-risk exchanges like FTX, and buy even higher risk "sh*t coins" on them? Especially the exchange-created-and-owned coins - of which I have yet to see one actually do what it promised. Is Coinbase just not cool anymore, or is there some advantage to using exchanges like FTX until they go belly-up?
- djinnandtonic 4y ago
  For someone that only dabbles in investing, what are the reasons people choose ultra-high-risk investments like crypto?
  - Alupis 4y ago
    That one is easy... FOMO - Fear Of Missing Out. People see the 10,000%+ returns extreme early adopters obtained and think they need to get in before the good-getting is done. Most of the time they're wrong and just throwing money into dark pits... "Gamified" trading apps like Robin Hood have made it all too easy to feel much lower risk that it is in reality though. For the rest, crypto can be part of a diversified investment strategy. Not all crypto is outright scams... but you do need to be able to handle the volatility.
  - jmathai 4y ago
    You would be surprised how easy it is for people to get sucked into a crypto bubble vortex that makes you feel like you're missing out big time by not being invested in crypto. I was pretty heavily involved in the personal finance community on Twitter and there's two camps. 1) VTSAX and chill (basically dump money into an ETF and forget about it) 2) Moar passive income by side hustles and crypto The latter became more and more common and ultimately drowned out the former. I believe it's because the market was doing so well that folks' risk meter just wasn't registering. Probably the same reason why people choose to get into MLMs.
    - paganel 4y ago
      > well that folks' risk meter just wasn't registering. That's because they were probably still in school back in 2008. I remember the days of late October 2008 like it was yesterday, and back then I was a no-name computer programmer working for an independent mortgage broker, not a big finance schmuck from Wall Street.
haasted 4y ago
Saw a theory that their liquidation engine may have failed them during the LUNA meltdown. https://twitter.com/westiecapital/status/1591089073468280832?s=46&t=jGk0V-KU71aT3n_MCK4kXQ https://twitter.com/westiecapital/status/1591089073468280832...
ryanSrich 4y ago
I don't think people realize how big of a collapse UST was. $18 billion market cap that vanished in a week. The fact that Do Kwon is not in jail yet is astonishing to me. FTX by comparison is on the hook for $10 billion, about half of the UST collapse. Everything we're seeing is a result of Do Kwon's scamming.
- World177 4y ago
  Y Combinator also backed a failed company [1] that was trying to take advantage of the high APR (20%) for UST staking. [2] I don't think there has been confirmation yet about how much UST Alameda was holding, but if true, it would add more context to CZ's tweet "liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won't pretend to make love after divorce." [3] [1] https://news.ycombinator.com/item?id=31686140 https://news.ycombinator.com/item?id=31686140 [2] https://www.bloomberg.com/news/articles/2022-03-23/terra-s-promise-of-20-defi-return-raises-sustainability-concern https://www.bloomberg.com/news/articles/2022-03-23/terra-s-p... [3] https://twitter.com/cz_binance/status/1589374530413215744 https://twitter.com/cz_binance/status/1589374530413215744
- lend000 4y ago
  UST wasn't a true stablecoin (it isn't like any dollars disappeared from the ecosystem), so I'd put it in the same category as the hundreds of billions in "vanished" market value that was a simple consequence of the declining value of crypto in general. Whether or not Alameda was holding a bunch of UST or Luna, is another question. SBF seemed to be pretty all in on fringe shitcoins, so I would not be surprised if they had significant exposure.
tootie 4y ago
I think there's a real chance of the entire market going pretty close to zero. The market was only ever suspended by pure belief. If the belief is shattered it's over. There's no earnings report or central bank bailout to stem the tide. The market is in freefall. And the only thing keeping from hitting zero is the collective will of those who are doggedly clinging to their sunk costs.
CPLX 4y ago
Crypto doesn’t do anything there’s no productive asset. Literally every dollar coming out is a subset of the dollars that went in. It’s less than that even due to electric bills and all that. Contrast that to a productive asset, like a farm. You start with land and put dollars in and you get food. And you still have the land. There’s more food than there was before. Or if you’re one of those Elon worshippers, he starts with rocky ore and seawater or whatever and ends up with lithium battery packs. So with that established, when you see this guy running around spending hundreds of millions of dollars the next question has to be whose dollars were those. Because they don’t have them any more and they ain’t getting them back.
hn_throwaway_99 4y ago
This tweet thread by head of R&D at Coin metrics has a good hypothesis: https://mobile.twitter.com/LucasNuzzi/status/1590122590206824448 https://mobile.twitter.com/LucasNuzzi/status/159012259020682... In summary: 1. Alameda essentially needed a bailout in the spring. 2. Alameda, though, also had a large chunk of FTT coming due in the fall that was basically part of the vesting schedule of the original FTT ICO. 3. So, FTX lent Alameda customer funds in the spring. 4. In the fall, when the vested FTT paid out to Alameda, they immediately paid it back to FTX. 5. The thing that looks highly suspicious and fraudulent is that SBF tweeted out that the big FTT move that day was just normal "rotation". Also, particularly interesting to me, the FTX-US president, Brett Harrison, resigned the day before that transaction at the end of September. He also just liked an interview on LinkedIn where Brian Armstrong (Coinbase CEO) was being interviewed, saying "not all crypto companies are like FTX, where it appears they fraudulently misappropriated customer funds". The above is speculation, but it's based on on-chain data.
- googlryas 4y ago
  How would that play have had an effect after the bailout was repaid? I can see if there was the run while the ftts were loaned out, but why would it matter once they were returned?
  - bryananderson 4y ago
    It wasn’t “repaid”, the FTT was posted as collateral for the loans (customer deposits). But still, should be fine at that point, right? The loans are nice and overcollateralized, what could go wrong? Problem is that FTT is itself a bet on FTX. So if the news comes out that FTX and Alameda have these shady linkages, some of your customers will want to withdraw—and at the same time, FTT will fall. Oops—the value of that collateral just crashed and now you don’t have enough assets to process the withdrawals. Which makes FTT fall more, and more people want to withdraw. It’s not like some fluctuation in Bitcoin price, where maybe you could get lucky and wait for it to come back up. FTT is just a bet on you, and you can’t process withdrawals, so why would that ever come back up? And now you’re insolvent.
majormajor 4y ago
https://www.benzinga.com/markets/cryptocurrency/22/06/27630777/ftx-ceo-sam-bankman-fried-predicted-the-downfall-of-terra-luna-what-investors-need-to-know https://www.benzinga.com/markets/cryptocurrency/22/06/276307... Predicted it, but was willing to make money off of suckers anyway, and then also caught himself with his own pants down despite knowing it was BS? Phenomenally stupid, or just plain corrupt and moderately stupid?
michaelcampbell 4y ago
Patrick Boyle's overview is good (and, typically Boyle-esque-ly savage in its dryness): https://www.youtube.com/watch?v=zTFhnpf-IE0 https://www.youtube.com/watch?v=zTFhnpf-IE0

by faefox 4y ago

jfdbcv 4y ago

[RUMOR - UNCONFIRMED] People are saying that Alameda Research lost a lot of money due to Luna / Terra and were bailed out by FTX user funds, a loan with FTT as collateral.

Emma_Goldman 4y ago
This is my sense of what happened. Alameda's bets went bad in the crypto crash earlier in the year. FTX loaned it up to $10bn in customer deposits against trumped-up collateral (its own token). Somehow, Alameda must have lost most of that money, either by using it to cover its liabilities from the crash, or making more bad bets. When it was leaked to Coin Desk that Alameda's balance sheet was padded with FTX tokens, confidence in the token rapidly collapsed. That obliterated the collateral protecting FTX's loans, ripping open a ~$10bn hole in its finances.

deleted 4y ago

[deleted]

crypt1d 4y ago

Its hard to tell, but looks like the fall out is far from over. There are a lot of rumours running around so unsure what is true and what is not, but we've gotten confirmations from a lot of crypto companies to be affected one way or another. Genesis (a big OTC trading company) lost about 160M but their parent company wrote them a check. BlockFi seems to be in the hole and has closed withdrawals. Blockfolio (an FTX owned company) paused withdrawals. Anything SOL/SRM related is likely affected. Any market maker worth its salt had money on it as well... think we will see a lot of blood in the coming days/weeks.

acover 4y ago
For those curious I think srm is serum and sol is solana. https://www.kraken.com/learn/what-is-serum-srm https://www.kraken.com/learn/what-is-serum-srm > Serum is a decentralized exchange software built on Solana where cryptocurrencies can be bought and sold by traders
- crypt1d 4y ago
  Correct. I've been in this world so long I forget 'normal people' don't really know all the acronyms :) more rumours are surfacing, including Yuga Labs (biggest name in the NFT space), Jump Crypto, Paradigm... this is basically our Lehman Brothers moment edit: looks like Yuga might be ok after all. luckily, sometimes rumour is just a rumour.
  - adriand 4y ago
    What's your take on this for the NFT market more generally?
    - crypt1d 4y ago
      Everyone's confidence is shook, so I expect a lot projects will be delayed due to lack of funding/interest, and volume will dry up significantly in the coming weeks/months. NFT market was never particularly liquid to begin with, so it might grind to a halt for a bit. But there's light at the end of the tunnel, I'm sure. With regulators focusing their eyes on tokens and exchanges, NFTs might get a bit of a revival some time down the road. Especially if money starts flowing into it again looking to escape the regulatory hammer.
  - RustyConsul 4y ago
    I was at the Jump Crypto hackathon during the terra luna depeging. Jump crypto has a unique structure because as part of their investment, they get a chunk of coins to market make with. They have no requirement to be on the long side of the market making so during the terra luna collapse they made an absolute killing (Even though terra/luna was one of their biggest investments). Also, jump has it's other business running HFT on the stock market that is much more profitable so it can always bail out it's other side.

OptoContrarian 4y ago

Scoopy in the Alchemix discord had this to say: "If you are on any CEX or CeFi app or earn product, get out RIGHT NOW. Rumors are swirling and it is possible that none of them are solvent. I am not kidding, really, get out now. I care too much for our community to not have said anything to warn you." Not sure what that all entails.

ignoramous 4y ago
> Not sure what that all entails. Those same network effects that propelled web3 into stratosphere are going to bring it down back to earth. Not necessarily vanquish it, but put web3 in its place, so to speak. A scenario I'd imagine where DEXes / DeFi will endure and possibly thrive, but DEXes / DeFis don't have the kind of moats to justify astronomical valuations... which is both a good and a bad thing, depending on which side of the coin you are on. Tech VCs have already circled back to AI, so doubt private companies in need of more money can stay afloat for longer, if they weren't being careful with volatile crypto assets.
sz4kerto 4y ago
Even Coinbase?
- etc-hosts 4y ago
  Coinbase appears now to be relatively boring, highly regulated, and compliant with US laws. I think they'll be fine.
  - polygamous_bat 4y ago
    They will be fine _modulo people's interest in crypto_. The way I think about it is that their business model is taking fees off of every transactions, so as the interest tapers off so will their earnings and valuation.
    - jjfoooo4 4y ago
      On the path to bankruptcy the boring way, not being able to turn a profit

btilly 4y ago

How much further? By their own figures, Tether is now undercapitalized and just had billions withdrawn. They made those payments. But, as Hemmingway said, bankruptcy tends to happen gradually and then all at once. Tether is in a hole. Nobody knows how close they are to not making payments. But when they implode, it will be sudden and the blast radius will be large. Does Tether weather this squall? Based on history, probably. Based on economic fundamentals, they will sink at some point.

toomuchtodo 4y ago
Tether might be able to plug the hole depending on how big it is if treasury rates rise fast enough for returns to paper over their previous asset allocation or mismanagement mistakes, and redemptions don’t exceed assets on hand.
- btilly 4y ago
  Well patio11 just came out with a whole article of BAM about leverage: https://bam.kalzumeus.com/archive/demystifying-financial-leverage/ https://bam.kalzumeus.com/archive/demystifying-financial-lev... The point of this article was to make the consequences of the following statement clear: And now you know enough to understand what I'm saying with an otherwise opaque statement like "Tether is 35:1 levered on risky assets during market contagion." Yes, if everything goes Tether's way, they can weather anything, forever. But eventually it won't, and they won't.
  - toomuchtodo 4y ago
    Ahh, they’re fucked. Thanks for the link.
deleted 4y ago
[deleted]
saurik 4y ago
> By their own figures, Tether is now undercapitalized... Where has Tether stated this? Last I heard--today--Tether has continued to claim the opposite. (edit to add, 45 minutes later:) I see patio11 makes the same claim, but I've now read both his recent articles on this and he is making a LOT of extremely stretched assumptions to pull off this reasoning, and even then the best he has is that it must have momentarily become insolvent in the past :/. And so like, maybe they are undercapitalized... but if they are it is because they are lying, not because their own figures somehow demonstrate such.

cenal 4y ago

Until the tether fraud collapses the market hasn't corrected.

Alupis 4y ago

For someone that only dabbles in crypto - what are the reasons people choose to use high-risk exchanges like FTX, and buy even higher risk "sh*t coins" on them? Especially the exchange-created-and-owned coins - of which I have yet to see one actually do what it promised. Is Coinbase just not cool anymore, or is there some advantage to using exchanges like FTX until they go belly-up?

djinnandtonic 4y ago
For someone that only dabbles in investing, what are the reasons people choose ultra-high-risk investments like crypto?
- Alupis 4y ago
  That one is easy... FOMO - Fear Of Missing Out. People see the 10,000%+ returns extreme early adopters obtained and think they need to get in before the good-getting is done. Most of the time they're wrong and just throwing money into dark pits... "Gamified" trading apps like Robin Hood have made it all too easy to feel much lower risk that it is in reality though. For the rest, crypto can be part of a diversified investment strategy. Not all crypto is outright scams... but you do need to be able to handle the volatility.
- jmathai 4y ago
  You would be surprised how easy it is for people to get sucked into a crypto bubble vortex that makes you feel like you're missing out big time by not being invested in crypto. I was pretty heavily involved in the personal finance community on Twitter and there's two camps. 1) VTSAX and chill (basically dump money into an ETF and forget about it) 2) Moar passive income by side hustles and crypto The latter became more and more common and ultimately drowned out the former. I believe it's because the market was doing so well that folks' risk meter just wasn't registering. Probably the same reason why people choose to get into MLMs.
  - paganel 4y ago
    > well that folks' risk meter just wasn't registering. That's because they were probably still in school back in 2008. I remember the days of late October 2008 like it was yesterday, and back then I was a no-name computer programmer working for an independent mortgage broker, not a big finance schmuck from Wall Street.

haasted 4y ago

Saw a theory that their liquidation engine may have failed them during the LUNA meltdown. https://twitter.com/westiecapital/status/1591089073468280832?s=46&t=jGk0V-KU71aT3n_MCK4kXQ https://twitter.com/westiecapital/status/1591089073468280832...

ryanSrich 4y ago

I don't think people realize how big of a collapse UST was. $18 billion market cap that vanished in a week. The fact that Do Kwon is not in jail yet is astonishing to me. FTX by comparison is on the hook for $10 billion, about half of the UST collapse. Everything we're seeing is a result of Do Kwon's scamming.

World177 4y ago
Y Combinator also backed a failed company [1] that was trying to take advantage of the high APR (20%) for UST staking. [2] I don't think there has been confirmation yet about how much UST Alameda was holding, but if true, it would add more context to CZ's tweet "liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won't pretend to make love after divorce." [3] [1] https://news.ycombinator.com/item?id=31686140 https://news.ycombinator.com/item?id=31686140 [2] https://www.bloomberg.com/news/articles/2022-03-23/terra-s-promise-of-20-defi-return-raises-sustainability-concern https://www.bloomberg.com/news/articles/2022-03-23/terra-s-p... [3] https://twitter.com/cz_binance/status/1589374530413215744 https://twitter.com/cz_binance/status/1589374530413215744
lend000 4y ago
UST wasn't a true stablecoin (it isn't like any dollars disappeared from the ecosystem), so I'd put it in the same category as the hundreds of billions in "vanished" market value that was a simple consequence of the declining value of crypto in general. Whether or not Alameda was holding a bunch of UST or Luna, is another question. SBF seemed to be pretty all in on fringe shitcoins, so I would not be surprised if they had significant exposure.

tootie 4y ago

I think there's a real chance of the entire market going pretty close to zero. The market was only ever suspended by pure belief. If the belief is shattered it's over. There's no earnings report or central bank bailout to stem the tide. The market is in freefall. And the only thing keeping from hitting zero is the collective will of those who are doggedly clinging to their sunk costs.

CPLX 4y ago

Crypto doesn’t do anything there’s no productive asset. Literally every dollar coming out is a subset of the dollars that went in. It’s less than that even due to electric bills and all that. Contrast that to a productive asset, like a farm. You start with land and put dollars in and you get food. And you still have the land. There’s more food than there was before. Or if you’re one of those Elon worshippers, he starts with rocky ore and seawater or whatever and ends up with lithium battery packs. So with that established, when you see this guy running around spending hundreds of millions of dollars the next question has to be whose dollars were those. Because they don’t have them any more and they ain’t getting them back.

hn_throwaway_99 4y ago

This tweet thread by head of R&D at Coin metrics has a good hypothesis: https://mobile.twitter.com/LucasNuzzi/status/1590122590206824448 https://mobile.twitter.com/LucasNuzzi/status/159012259020682... In summary: 1. Alameda essentially needed a bailout in the spring. 2. Alameda, though, also had a large chunk of FTT coming due in the fall that was basically part of the vesting schedule of the original FTT ICO. 3. So, FTX lent Alameda customer funds in the spring. 4. In the fall, when the vested FTT paid out to Alameda, they immediately paid it back to FTX. 5. The thing that looks highly suspicious and fraudulent is that SBF tweeted out that the big FTT move that day was just normal "rotation". Also, particularly interesting to me, the FTX-US president, Brett Harrison, resigned the day before that transaction at the end of September. He also just liked an interview on LinkedIn where Brian Armstrong (Coinbase CEO) was being interviewed, saying "not all crypto companies are like FTX, where it appears they fraudulently misappropriated customer funds". The above is speculation, but it's based on on-chain data.

googlryas 4y ago
How would that play have had an effect after the bailout was repaid? I can see if there was the run while the ftts were loaned out, but why would it matter once they were returned?
- bryananderson 4y ago
  It wasn’t “repaid”, the FTT was posted as collateral for the loans (customer deposits). But still, should be fine at that point, right? The loans are nice and overcollateralized, what could go wrong? Problem is that FTT is itself a bet on FTX. So if the news comes out that FTX and Alameda have these shady linkages, some of your customers will want to withdraw—and at the same time, FTT will fall. Oops—the value of that collateral just crashed and now you don’t have enough assets to process the withdrawals. Which makes FTT fall more, and more people want to withdraw. It’s not like some fluctuation in Bitcoin price, where maybe you could get lucky and wait for it to come back up. FTT is just a bet on you, and you can’t process withdrawals, so why would that ever come back up? And now you’re insolvent.

majormajor 4y ago

https://www.benzinga.com/markets/cryptocurrency/22/06/27630777/ftx-ceo-sam-bankman-fried-predicted-the-downfall-of-terra-luna-what-investors-need-to-know https://www.benzinga.com/markets/cryptocurrency/22/06/276307... Predicted it, but was willing to make money off of suckers anyway, and then also caught himself with his own pants down despite knowing it was BS? Phenomenally stupid, or just plain corrupt and moderately stupid?

michaelcampbell 4y ago

Patrick Boyle's overview is good (and, typically Boyle-esque-ly savage in its dryness): https://www.youtube.com/watch?v=zTFhnpf-IE0 https://www.youtube.com/watch?v=zTFhnpf-IE0