19 ms·

Crypto dominoes fall in the wake of FTX's collapse

300 points by rurp 4y ago

chitowneats 4y ago
> What we're watching: Any sign that the carnage in crypto land makes the jump to the real world of Wall Street and actual economic activity. > actual economic activity Nice subtle burn at the end of the article.
- zhdc1 4y ago
  There are some legitimate use cases for decentralized ledgers and other "crypto-like" tech. As far as I'm aware, none of those involve anything that looks remotely like financial speculation.
  - chitowneats 4y ago
    Name them please. This technology has had very smart and very financially motivated people trying to apply it for more than a decade.
    - zhdc1 4y ago
      GNU Thaler for central-bank regulated digital currencies.
      - chitowneats 4y ago
        GNU Taler is an interesting toy. I was hoping you had an example that has actually been used in practice.
      - selectodude 4y ago
        A quick glance at the website makes it seem like PayPal but using "tokens" instead of just leaving everything in normal currency values.
    - deleted 4y ago
      [deleted]
    - unintendedcons 4y ago
      Distributed domain name services. ENS is the only good example, standing naturally next to many imitators and scams.
      - polygamous_bat 4y ago
        You mean the service that had to beg people online far and wide to change their domain names from .link to .limo because the founder was in jail for aiding North Korea in money laundering? Quite the shining beacon of decentralization in a centralized land, yeah. (If you ever wonder why people treat crypto as a joke, think back to this moment.)
        unintendedcons 4y ago
        You're not making the point you think you're making. The ENS and ens.link are different people. You have misunderstood the situation.
    - EthanHeilman 4y ago
      I know everyone will laugh at me for saying this but... we are still in the early stages of cryptocurrency from a technology development perspective. I'm not aware of anyway to securely scale a decentralized cryptocurrency without recursive proofs of correctness that are fast to prove and fast to verify. Every year since 2016 I've seen major progress being made in this area but we have far to go. We just barely got there in 2020. We could probably build a scalable decentralized cryptocurrency in 2020, maybe. Give it another 5-10 years of advancement like we saw over the last 5 and you will have the ability to build scalable decentralized cryptocurrencies. That doesn't mean people will build them or that even if they do the built systems won't suffer from serious drawbacks. It is a long road ahead. Now there are other problems to solve as well, but everything i being gated right now by proofs of correctness. We have a steam engine, we can put it on rails and it can pull a small load. Unfortunately the expectation has been set that we have train that can move millions of people. The fact that we can't meet this expectation doesn't mean that steam engines or engines in general are bad.
      - psychlops 4y ago
        It's fascinating the amount of repetitive comments that believe there should be some sort of time limit for a technology to succeed. It's not clear to me where this line of thinking comes from, the implication being that if something doesn't work after x years, people should just give up and go back to the old ways.
        EthanHeilman 4y ago
        It's the confusion between: It is unlikely that Charles Babbage is going to be able to build his difference engine and even if he does it is so complex and so prone to failure that it probably will never be commercially viable. vs. It is unlikely that Charles Babbage is going to be able to build his difference engine, thus proving computers can't work and have no utility.
    - psychlops 4y ago
      Money not controlled by a central entity. I don't think it's more complex than that. The closer the idea gets to centralization, the more scams erupt.
      - oblio 4y ago
        That's not even a problem. It's just a statement. What does "money not controlled by a central entity" do? What problem does it solve? Why do I need it? Keep in mind that in my day to day life, I rely on a central entity, a government. And in places where people can't, life is NOT BETTER. It's awful. We call those places failed (fragile if you want to be nice) states. And government should be able to control money. Money is tied to the economy, it's tied to politics, it's tied to the society. The idea that by decentralizing things money will be fully democratic is just silly. Plus, full blown democracy doesn't even work. It leads to tyranny of the masses, that's why every modern country has a constitution that basically say: "you can't do that, no matter how much you want, since you can't abuse others you don't like[1]". [1] In practice, "can't do that" means something really hard to do, usually stuff like "persuade at least 67% of your countrymen to let you do it", to rein in the insanity.
    - drkstr 4y ago
      I setup a double entry bookkeeping solution for my LLC that uses Amazon QLDB as a block chain ledger. Not sure if this really counts, but it seemed like a good use case for the tech. I used amazon-qldb-double-entry-sample-java as a starting point if anyone is curious.
- chasd00 4y ago
  if there was risk to the overall system then I think the PowersThatBe(tm) would have much more interest in these setups and not let them run so wild and free... off a cliff.
fallingknife 4y ago
I keep reading this but I haven't seen any signs of more major drops that would be indicative of forced liquidations since the initial FTX news. That's not to say it's necessarily false, but I just haven't seen any evidence yet of a larger market contagion.
- genghisjahn 4y ago
  This is perhaps a sign? "Gemini, BlockFi, Genesis announcing new restrictions as FTX contagion spreads" https://www.cnbc.com/2022/11/16/genesis-lending-unit-halts-withdrawals-in-aftermath-of-ftx-collapse.html https://www.cnbc.com/2022/11/16/genesis-lending-unit-halts-w...
- lukeqsee 4y ago
  For two: BlockFi and Gemini Earn both have stopped withdrawing. This means a lot of people have a lot of crypto that they may or may not ever get back. I suspect it will take some time, but at the ecosystem level, contagion is already here. Time will tell if it spreads beyond to the markets (but it feels inevitable at some level).
- deleted 4y ago
  [deleted]
- vgatherps 4y ago
  This article mostly focuses on smaller dominos. The serious domino is Genesis which is only mentioned in passing. Depending on the size of the hole Genesis might outside the other non-ftx ones combined, and is structurally much more important than them.
- stephc_int13 4y ago
  There is a major panic ongoing, but most of it is happening behind closed doors. Despite the appearance, this is not the story of a bunch of degenerate kids playing with made-up money. Real serious money is at stake, billions of it, people are losing their shirts, or something else.
  - 4y ago
k__ 4y ago
Aren't these "dominoes" just more or less TradFi companies?
- ForHackernews 4y ago
  No, these are the unregulated bucket shops and wildcat banks favored by the bold adventurers of web3.
- polygamous_bat 4y ago
  They are the pioneers of Web3 and crypto adoption as long as they're paying unreasonable APY in a 0% interest rate regime, and a more or less tradfi company as soon as they are exposed to be a ponzi scheme. Because we all know crypto is perfect and can't fail.
  - rippercushions 4y ago
    Interest rates aren't 0% anymore. Of course, this only makes things even harder for crypto Ponzis, because they have to offer even more unsustainable rates to keep up.
    - polygamous_bat 4y ago
      I agree with you, arguably interest rate raising above the minimum is what exposed a lot of these scams.
- joosters 4y ago
  If you want to talk in terms of coins, some of the direct fallout includes: FTT: $26 -> $1.60 Serum: $0.80 -> $0.26 Solana: $36 -> $14 Or, more indirectly all crypto 'market cap' in general: $1050B -> $825B. Ok, so market cap is pretty ephemeral, but chances are, if you held any crypto prior to FTX collapsing, its theoretical value has dropped because of it. DeFi doesn't make you immune.
- vintermann 4y ago
  Sure. TradFi companies that everyone in the RadFi ecosystem rely on.
ForHackernews 4y ago
> paused withdrawals So... chapter 11 by Monday?
- chasd00 4y ago
  dead by dawn! dead by dawn! - Evil Dead 2
jpm_sd 4y ago
The incomparable Molly White has put together a contagion flow chart, which she is updating regularly: https://www.mollywhite.net/etc/ftx-contagion https://www.mollywhite.net/etc/ftx-contagion See also her explanatory newsletter https://newsletter.mollywhite.net/ https://newsletter.mollywhite.net/
- shmatt 4y ago
  I can't believe I missed the news the big corporate Gemini also halted withdrawals on their APY product If its not completely clear by now: no, these companies can't promise you 8% APY without essentially running a ponzi scheme. I'm sure even Madoff had some good years during bull runs. The only other semi-possible option is burning VC money with those APY's, which is maybe what Coinbase is doing
  - zhdc1 4y ago
    > If its not completely clear by now: no, these companies can't promise you 8% APY without essentially running a ponzi scheme. I'm sure even Madoff had some good years during bull runs It's almost impossible to beat the market after fees. Anyone who promises to do so, consistently, is full of it. French (2008) and a whole body of literature before and after.
    - xorcist 4y ago
      Which market? I own some bonds that yields 8%.
      - chollida1 4y ago
        Yield to maturity is far different that yearly yield. though it is possible to find some bonds that have an annual yield of 8%. Though no one would expect them all to make it maturity without any credit issues.
        bombcar 4y ago
thrillgore 4y ago
It continues to baffle me why anyone would want to deal with Crypto if a failure like FTX causes the entire "decentralized" ecosystem to collapse.
- jpeterson 4y ago
  Exchanges and trading firms are not "Crypto". They're human institutions which happen to sit atop cryptocurrency instruments. What we're seeing play out in realtime is what happens when unregulated human institutions come to possess fantastical amounts of wealth -- in short, they go pathological.
  - chitowneats 4y ago
    "Happen to sit atop" is so far from an accurate accounting of the multi-headed hydra that is the crypto/defi space. Good thing I'm not expecting much in the way of accurate accounting.
  - ninepoints 4y ago
    It's almost as if the unregulated anti-establishment ethos of crypto allowed this to happen, and allows it to keep happening.
    - jpeterson 4y ago
      If crypto has an "ethos", it's decentralization and departure from human institutions. The FTX fiasco is the opposite of that.
      - rurp 4y ago
        What percent of crypto activity happens on centralized platforms. 90%? 95%? Whatever the precise number, it's really high. It's hard to argue that 95% of people in Scotland aren't true Scots.
        MacsHeadroom 4y ago
warinukraine 4y ago
> Crypto hedge fund Galois Capital said roughly half its capital is stuck in FTX, according to the Financial Times. "stuck" - LOL. Hope dies last.
photochemsyn 4y ago
> "State of play: The Gemini Earn program allowed users to deposit their coins in exchange for regular interest payments — typically at generous rates that could be as high as 8%." Bernie Madoff's exclusive private fund had investors lining up to get in, based on Madoff's history of returning a steady 10% to investors. Of course it was all a big Ponzi scheme...
ninepoints 4y ago
> "Galois Capital" What a stain on the name of a great mathematician
- EthanHeilman 4y ago
  Galois should remove this stain by demanding that Galois Capital face him on the field of honor.
  - blululu 4y ago
    Ironic too since Galois was a devoted Republican while these folks are clearly in the Orleanist camp.
- oldgradstudent 4y ago
  Had Galois been alive he probably would have challenged them to a duel.
lob_it 4y ago
They are just pushing up the price of tulips. Thats all :p https://www.investopedia.com/terms/d/dutch_tulip_bulb_market_bubble.asp https://www.investopedia.com/terms/d/dutch_tulip_bulb_market... Did they even get a moment of silence? Vaporware has a way of eviscerating
- latchkey 4y ago
  As noted in the article you linked and this one as well [0]. There never was a real tulip fever. [0] https://www.smithsonianmag.com/history/there-never-was-real-tulip-fever-180964915/ https://www.smithsonianmag.com/history/there-never-was-real-...
  - lob_it 4y ago
    It was polite joke about pushing up tulips :p Notice how I didn't say disemboweled with entrails all over the place with all of the fud being distributed about crypto ponzis/vaporware. https://www.wordnik.com/words/eviscerate https://www.wordnik.com/words/eviscerate Literacy is fun the mental in your case :p
- 2sk21 4y ago
  Yes - as an outsider, it feels as if the entire crypto space consists of people selling tulip bulbs to each other.
  - lob_it 4y ago
    It was more of a scarcity pun with all the tulips needed for all of them getting buried :p https://www.investopedia.com/terms/l/law-of-supply-demand.asp https://www.investopedia.com/terms/l/law-of-supply-demand.as... https://poemanalysis.com/idiom/pushing-up-daisies/ https://poemanalysis.com/idiom/pushing-up-daisies/
dougmwne 4y ago
I wonder if a crypto contagion could actually help the broader economy by acting as an escape valve. For the past 14 years, the government keeps stepping in to bail out bad bets and keep all the scum floating. But with crypto, it was an an area of the economy that government largely kept its distance from and lacked a mandate. So there will be no will to rescue anything and a full on bank run can commence, destroying lots of wealth. When will then take some of the extra money out of the real economy without having to destroy any traditional business.
- groestl 4y ago
  Well, the money is not gone. It's just that somebody else has it. Interesting idea though.
  - NortySpock 4y ago
    Crypto tokens are in one pocket and US Dollars are in someone else's pocket. Which one retains value in a market crash? My money is on US Dollars, but you are free to disagree with me.
  - verelo 4y ago
    Isn’t that generally the case?
  - crazygringo 4y ago
    That's incorrect. When asset prices fall, wealth is indeed gone. It's not transferred to someone else, it just vanishes. It's true no matter if you're talking about falling stocks or falling crypto.
    - shafyy 4y ago
      Not sure what you mean. If I buy some cryptocurrency coin for $10 somebody received $10 from me. If now the value of the crypto goes $0, I have lost $10 but the who I gave $10 to still has that money. It has not magically disappeared. Or do you mean something else?
kerblang 4y ago
Dunno if it made it thru HN yet but a Vox reporter aggregated up her recent Twitter conversations with SBF, and it's kinda damning: https://www.vox.com/future-perfect/23462333/sam-bankman-fried-ftx-cryptocurrency-effective-altruism-crypto-bahamas-philanthropy https://www.vox.com/future-perfect/23462333/sam-bankman-frie...
- metadat 4y ago
  Discussed yesterday: https://news.ycombinator.com/item?id=33630150 https://news.ycombinator.com/item?id=33630150 (336 points, 344 comments)
thedangler 4y ago
Not your wallet, Not your coins. Or Synthetic coins for most of these exchanges.
- ceejayoz 4y ago
  "Not your wallet, not your coins" is true, but kinda irrelevant here. The coins themselves are sometimes worthless (like FTX's token), or can be frozen (Tether does this: https://www.coindesk.com/business/2022/11/10/tether-freezes-46m-of-usdt-following-law-enforcement-request/ https://www.coindesk.com/business/2022/11/10/tether-freezes-...). It doesn't matter if you hold a collapsed coin in your wallet or an exchange's; it's still not gonna do you any good.
  - rufusroflpunch 4y ago
    It matters a bit, as it seemed that FTX had $1+ billion in Bitcoin customer liabilities which have evaporated.
    - thedangler 4y ago
      Because they never bought the coins to begin with. It's marked down in a ledger that this person has this many coins. It only matters when someone wants to transfer coins to another exchange or their own wallet. Then they have to purchase the coins and send them.
      - hanniabu 4y ago
        > Because they never bought the coins to begin with. Users bought it but the exchange didn't have it, which is what the OP was saying. If you don't have the keys, you don't really have the coins.
        thedangler 4y ago
        Also interesting. Is this the same thing. https://i.redd.it/qofb7x8zmj0a1.jpg https://i.redd.it/qofb7x8zmj0a1.jpg Citadel Securities has in their books securities sold, not yet purchaed. $65 billion. How is this not the same thing ? lol
rchaud 4y ago
Part of the reason crypto's history maps to tradFi's history so precisely is because there aren't that many unique ways to make more money out of an existing pile of money. The debate about whether these tokens meet economic definitions of currency is besides the point; the goal, like tradFi, is to accumulate as many of them as possible and do whatever it takes to protect their price (pump) until you're ready to shift the risk to someone else (dump).
- deebosong 4y ago
  well said. very simple, clear, and observable in reality. i feel like i've said this in a more roundabout way to friends, fam, and myself (when trying to wrap my head around all of this to explore it or steer clear).
- lottin 4y ago
  TradFi is built around providing financial services. It's not built around issuing virtual assets and then pumping & dumping them, I don't know where you get this notion from.
  - oblio 4y ago
    He said history :-) Traditional finance also had plenty of those, but they're super heavily regulated, so now they're a lot rarer.
gjsman-1000 4y ago
I actually had accounts with Gemini Earn, Celsius Network, and BlockFi, and money in all of them (as a just in case one fails thing). However, after the crypto crash earlier this year, and reading "Not your keys - not your crypto" for the millionth time, I pulled them all out and put them in an Exodus wallet. I calculated the APY loss but decided better safe than sorry - even though, in my head, I thought the odds of any individual one of them failing was extremely low, let alone all of them. Holy !@#$ing cow. Dodged multiple bullets. At least I didn't share my financial plan at the time at the Thanksgiving table last year or it would be really awkward now (thank goodness my uncle took that role in a small capacity)...
- chasd00 4y ago
  > the odds of any individual one of them failing was extremely low, let alone all of them. that reminds me of the tranches in mortgage backed securities during the 2008/9 financial crisis. See this scene from The Big Short https://www.youtube.com/watch?v=4WUGhteNlzM https://www.youtube.com/watch?v=4WUGhteNlzM
- oblio 4y ago
  I don't know what your savings plan look like, but I hope your idea of diversification is not to have all of your savings in a varied array of crytocurrencies :-)))
  - gjsman-1000 4y ago
    Of course not - I only saw it as a way of diversifying the crypto portion of my diversified investments. But there was a bit of crypto - I'm just glad I didn't recommend others join me.
- no_butterscotch 4y ago
  > Exodus wallet I've still got everything on just Coinbase, which I assume (?!) is reliable enough to not be at risk. What's the "upsell" for using a wallet? The "not your keys" argument logically makes sense to me but it doesn't seem worth it from a convenience stand-point.
kdragon 4y ago
As a Bitcoin maxi this is fun to watch. It's like the 08' financial collapse all over again, but there's no bailout coming this time around. I think it is glaringly obvious at this point that most of society does not understand how money works, and will fall victim to the same old scams no matter where they manifest. This entire crypto collapse has been a long time coming. You can't simply manufacture money out of nothing, nor can you inflate debt endlessly. Bitcoin as a community has distanced themselves from 'crypto' and these boiler-room pump and dump scams. Bitcoin maxis fight for the simplicity and real-word cost behind proof of work for a reason. Bitcoin may be arbitrary digits in a ledger but it isn't free to make. The supply is capped, yet the work anyone can put into securing the ledger is unbounded. Regardless of where you choose to invest, self custody is king. Get your tokens off exchanges. Not your keys, not your coins.
- highwaylights 4y ago
  "Don't buy Tony's magic beans. Tony's magic beans are a scam, they're not really magic at all. I buy my magic beans from Frank. Everyone knows that only Frank grows real magic beans."
  - kayamon 4y ago
    The beans with the weird pyramid and floating eye logo are definitely the best beans.
    - polygamous_bat 4y ago
      I agree. They even have a whole army to defend that, unlike, uh, a whole room full of dusty old GPUs burning up a rainforest every time someone makes a transaction. /s
    - snapcaster 4y ago
      I know you're being sarcastic but what you said is true. USD is currently the best currency on stability, usage, acceptance, etc.
  - rufusroflpunch 4y ago
vishnugupta 4y ago
This is when I get to say “I told you so”. Excerpt from my 9 month old comment [1] A whole bunch of these startups have sprung up; which take up real money (USDT or even USD, INR etc.,) promising very attractive guaranteed returns without locking up customers' fund. Look at these[1] for examples. Anyone who knows anything about banking in the traditional world knows how ridiculous it is. And indeed some of these are beginning to unravel[2]. In Anchor's case there are way more lenders than borrowers so Anchor is resorting to pay those high yields from their reserves. It's cutting close to being a Ponzi scheme at the moment. In a traditional banking world businesses take a loan either to cover for a short-term cashflow crunch (example an invoice that's delayed by their client) or for longer term investment. That money usually goes into economic activities which are expected (hoped?) to bear fruit to repay the loan. In the crypto world however such loans are taken only to be put back into the crypto world; to be swapped into some hot new coin to be staked and what not. The music has got to stop at some point. [1] https://news.ycombinator.com/item?id=30335625 https://news.ycombinator.com/item?id=30335625
- hanniabu 4y ago
  You're still wrong. The issue here isn't crypto, it's centralized entities which act similar to banks. It also failed because user money was stolen and mismanaged by hugely incompetent 20 year olds, not because it was invested in crypto. It's like someone saying the whole stock market is a scam because of Bernie Madoff.
  - TremendousJudge 4y ago
    I'd say the difference with the stock market is that that the bottom of it is composed of companies that produce and sell actual, tangible products: cars, planes, oil, computer software, construction materials, etc. All financial instruments (legitimate or not) are built on top of this. You buy into some index fund under the assumption that, on some level, you're putting money into the production of goods and services. Meanwhile, the "crypto market" deals only in hype all the way down. There are no goods and services produced (unless you count "hype"), only dollars going in one end and coming out the other. If I put my dollars in some "crypto investment", it's only so that some early adopter with 50000 btc can get some dollars out. The rest is misdirection.
spoonjim 4y ago
Hopefully this is the end of this entire dumbfuck historical moment. Absolute fleecing of normal people disguised as some kind of technosocial revolution.
- fullshark 4y ago
  Nah, it'll happen again. This will spur on regulations for custodial wallets, and the next boom cycle will involve TradFi contagion risk. BTC price isn't moving, no one is liquidating, volatility is lowest its ever been, none of the hodlers have given up yet and probably won't, they are just waiting it out to try again in 2-5 years.
- kayamon 4y ago
  Do you not want a technosocial revolution?
shakezula 4y ago
> Crypto hedge fund Galois Capital said roughly half its capital is stuck in FTX, according to the Financial Times. This is astounding to me. I would be curious how long they kept their money in an exchange and if that’s common practice among other firms.
- DonsDiscountGas 4y ago
  I would guess they traded crypto on FTX very frequently.
SevenNation 4y ago
> On Wednesday, the crisis touched a high-profile crypto lender run by the billionaire twins Cameron Winklevoss and Tyler Winklevoss, forcing them to halt withdrawals from their Gemini Earn crypto lending program. ... The Gemini Earn program allowed users to deposit their coins in exchange for regular interest payments — typically at generous rates that could be as high as 8%. The Gemini Earn page appears to redirect to this announcement: > We are aware that Genesis Global Capital, LLC (Genesis) — the lending partner of the Earn program — has paused withdrawals and will not be able to meet customer redemptions within the service-level agreement (SLA) of 5 business days. We are working with the Genesis team to help customers redeem their funds from the Earn program as quickly as possible. We will provide more information in the coming days. https://www.gemini.com/blog/an-important-message-regarding-gemini-earn https://www.gemini.com/blog/an-important-message-regarding-g... The language of this announcement is bizarre. Withdrawals are "paused," not "halted" as reported. In other words, there's a chance that Genesis will cough up the funds. But the biggest red flag is that nothing is said about new deposits. Apparently, Team Gemini is still taking them. This is, unfortunately, par for the course with these schemes going all the way back to Mt Got. "Pause" withdrawals, but continue to allow deposits. The language of the announcement makes this look like a temporary blip that will soon be resolved. It's a tactic with a long history and an almost boringly predictable outcome.
- codehalo 4y ago
  Gemini hasn't pause withdrawals, Genesis has. Did you read the article you linked to?
BurnGpuBurn 4y ago
I just can't get my head around why SBF and his cronies aren't in jail yet. Guess it might never happen with friends like that.
- dehrmann 4y ago
  What specific crime are you accusing him of?
  - hanniabu 4y ago
    He stole user funds to use in his investment company. He even built a backdoor in the accounting system to move the money without setting off alerts with the security send audit team.
  - recursive 4y ago
    "I'm surprised you didn't hit any trees running through that forest with your eyes closed." "Which specific tree do you think I should have hit?"
- ceejayoz 4y ago
  No criminal fraud prosecution happens that quickly, and the "friends" are only friends when there's millions of donations to throw around. None of the politicians SBF and his co-CEO were purchasing will be returning their calls today.
- rufusroflpunch 4y ago
  Hopefully it is just a matter of them still trying to figure out the depth and nature of the crimes.
- kayamon 4y ago
  People in finance don't go to jail.
- IfOnlyYouKnew 4y ago
  Going bankrupt is not a crime in itself (ask any former president, one has experience and the other is a lawyer)). Yes, there is a lot that looks kinda criminal, but it will take a bit more than a week to put together a criminal prosecution.
majani 4y ago
Dominoes indeed are falling, but the coin prices are staying largely the same. Perhaps we're at a point where most people are already down so much from last year that it makes no sense to sell, no matter what the news says
IanDrake 4y ago
Animats 4y ago
The good news is that the problems seem to be confined to the crypto sector. There are a few hedge funds and pension funds with losses, but so far, nobody in "traditional finance" seems to have huge exposure to crypto. So the real world economy keeps on running normally while the crypto sector gets flushed.
- onlyrealcuzzo 4y ago
  Starting a few months ago, some major banks were issuing loans using Crypto as collateral: https://www.forbes.com/advisor/personal-loans/crypto-loans/ https://www.forbes.com/advisor/personal-loans/crypto-loans/ Glad it's falling apart now before it sucks the entire economy down with it.
- sgloutnikov 4y ago
  It's just a blip in a way. The entire global crypto market cap has gone down around $800B, roughly the same market cap that Amazon has lost recently.
  - NationalPark 4y ago
    The difference, of course, is that Amazon's market cap has actual assets and cash flows behind it. The liquidation value of all of crypto on the other hand is approximately $0.
- ilamont 4y ago
  I don't think we've heard the whole story about the exposure of legit orgs and businesses. If a pension fund loses 1%, that's manageable. If it's 10%, that's a crisis for anyone expecting benefit checks every month, and possibly a much wider pool of people/orgs if some kind of rescue or bailout is required.
- IfOnlyYouKnew 4y ago
  It’s noteworthy that this is not a coincidence (coin-incidence?) but the result of, first among others, the SEC holding steady in the face of a lot of pressure in limiting the financial system‘s exposure.
jokoon 4y ago
Capitalism is at fault here. Unless there are right regulations in a capitalistic system, capitalism will create abuse and problems. We are in 2022 and it's really annoying how we cannot discuss deep changes in how capitalism functions unless an army of trolls brings up the gulag point: "the soviet union failed, thus there is no viable alternative to capitalism". It's already almost difficult to discuss it criticize growth, so socialism is really beyond taboo.
- rolobio 4y ago
  Many of the things done at FTX are already a crime. The laws simply aren't being enforced for the mega rich.
- kspacewalk2 4y ago
  Capitalism is not any more at fault here than GPUs or math. Yes, the right regulations are indeed vital for a capitalistic system. Saying "capitalism will create abuse and problems without regulations" is like saying "cars will cause death and destruction without a steering wheel". That's why we don't build them without steering wheels, and a car without a steering wheel is not really a car. A financial market is a market, the very word "market" necessarily implies regulation, like all markets had since the dawn of time (it's why you brought your stuff there, and why the customers came). If a new technology creates a new niche in the financial market, and regulation has not caught up yet, nothing is wrong with the concept of capitalism, the problem is that regulation has not caught up yet. And now it largely has, and these companies are blowing up, and the system works. Not sure what is supposed to make us "discuss deep changes in how capitalism functions" if how modern capitalism functions is fixing the problem.
- nyolfen 4y ago
  > It's already almost difficult to discuss it criticize growth turning the social meta from positive sum to zero or negative sum is the most disastrous idea conceivable. everything you cherish, including your physical safety, is built on an assumption of shared future rewards. people will seek advantage no matter what; they must have a socially productive avenue or it will be taken from others. if you are so sure an alternative is possible, i encourage you to demonstrate it -- live your life with others in a way that defies market forces. the proof is in the pudding; for now, there is only one game in town.
isitpossible88 4y ago
Does anyone know Coinbase's involvement or reach into FTX?
- machinekob 4y ago
  15 000 000 usd minimal exposure.
woeirua 4y ago
Tick, tick, tick. The doomsday clock for Tether just moved closer to midnight. When Tether finally depegs, all the exchanges will go under (except maybe Coinbase and a few others that are tightly regulated). Coinbase will probably still go bankrupt because the crypto trading market is going to evaporate. The value of most coins will go to zero. There will be a liquidity crisis the likes of which we haven't seen since the 19th century.
- prox 4y ago
  Who knew if you made an unregulated market full of sharks that you would get this outcome? /s [0] 0 : https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929 https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929
- sroussey 4y ago
  I wonder: what will be the last straw that breaks confidence in Tether?
  - Animats 4y ago
    Something is happening in stablecoins.[1] Binance and OKX exchanges "temporarily suspended" support for USDC and USDT on the Solana blockchain. Unclear why. [1] https://www.coindesk.com/markets/2022/11/17/crypto-exchanges-binance-and-okx-suspend-support-for-solana-versions-of-usdt-usdc-stablecoins/ https://www.coindesk.com/markets/2022/11/17/crypto-exchanges...
    - gruez 4y ago
      But that's in the wrong direction? They're suspending deposits, not withdraws.
      - Animats 4y ago
        Maybe they don't want to be holding those "stablecoins". If you withdraw USDT or USDC, it's off their books and they have no further risk. If you deposit it, and it's credited as US dollars...
DebtDeflation 4y ago
https://twitter.com/Bitfinexed/status/1593102572151222273 https://twitter.com/Bitfinexed/status/1593102572151222273 Alameda received more Tether ($36.7B) than anyone else in history. Where are they? Did they ever even exist?
friend_and_foe 4y ago
Somewhat off topic but I can't stand axios' format. It's framed as "meat and potatoes" but what it actually is is someone telling you want to think instead of reporting information while avoiding actually including information. The goal seems to be to convince while revealing as little detail as possible. It's awful.
Dig1t 4y ago
What I don't understand is why the New York Times is saying that the guy who created and ran this scheme is a great guy. They wrote an extremely flattering article about him and are even hosting an event where he's a prestigious speaker. He seems like a grifter and responsible for presiding over the loss of a boatload of money for investors. https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankman-fried-crypto-bankruptcy.html https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankma... https://www.nytimes.com/events/dealbook-summit#speakers https://www.nytimes.com/events/dealbook-summit#speakers
- polygamous_bat 4y ago
  I know for example SEC has, in the past, used a crypto summit in New York to serve a subpoena to another crypto grifter. [0] I would not be surprised if there is government pressure on NYT to pretend everything is fine to lure Sam Bankman-Fried out of his safe haven in the Bahamas. [0] https://nymag.com/intelligencer/2021/09/crypto-conference-jolted-by-rumor-of-sec-serving-subpoena.html https://nymag.com/intelligencer/2021/09/crypto-conference-jo...
  - deleted 4y ago
    [deleted]
- aksss 4y ago
  Wasn't he like the second largest democrat donor in the US this year? $39.7 million to federal races. The soft-glove treatment from the NYT is the least he could expect. Maybe he knew what was coming. https://www.nbcnews.com/meet-the-press/meetthepressblog/sam-bankman-frieds-downfall-deprives-dems-key-donor-rcna57091 https://www.nbcnews.com/meet-the-press/meetthepressblog/sam-...
  - ceejayoz 4y ago
    Both co-CEOs of FTX were large donors, one to each party. Neat trick. https://www.bloomberg.com/news/articles/2022-11-08/ftx-crypto-bros-clashing-politics-meet-cz-chaos-on-election-day https://www.bloomberg.com/news/articles/2022-11-08/ftx-crypt... > Bankman-Fried, known as SBF, threw more money at Democrats this cycle than anyone but George Soros, according to OpenSecrets data. One of his top lieutenants, Ryan Salame, has been bankrolling Republicans at almost the same pace as Steve Schwarzman and Peter Thiel. There's a good chart of how the company distributed things at https://www.ft.com/content/428c7800-c72d-4c59-9940-4376fea6e263 https://www.ft.com/content/428c7800-c72d-4c59-9940-4376fea6e... None of those politicians are gonna stay bought; no more money is coming. There's no reason to think FTX can exert further lobbying pressure; they're cooked.
tacker2000 4y ago
For now i think only BTC and ETH will remain, and maybe some coin that is REALLY backed by actual USDs. This is the first big clearout of the shitcoins and fraudcoins. Crypto will never really die in my opinion, its just going through its infancy phase. Real regulation is probably the thing that is the next on the horizon, in order to build up trust that was lost (or never there anyway). Users must be sure that their coins can not all of a sudden be frozen by some shady exchange operating out of the Bahamas or wherever. Crypto has to mature now.
- NateEag 4y ago
  > Crypto has to mature now. "Mature" ~= "lose the decentralized anti-regulation design that was its entire reason for existing in the first place"
  - tacker2000 4y ago
    Well, i get your point, but as we can see this hasnt panned out in a good way. Maybe some hybrid model would work?
    - NateEag 4y ago
      Maybe? I just don't see the point, though. Once you've said "it's gotta be under the watchful eye of the government," well... Fiat currency is a thing, and doesn't require massive computer networks with mindbendingly-complex algorithms to do. I see absolutely no advantage to the cryptocurrency design if it's going to be used and regulated in a centralized manner. Once you go there, it just seems like it's "banks 2.0, but with software that's way harder to get right."
Animats 4y ago
UC Berkeley had a stadium naming deal with FTX.[1] Is there a connection between FTX and Cal? FTX Chief Operating Officer Sina Nader earned his bachelor's degree in humanities from Cal and was a walk-on member of the Golden Bear football team as an undergraduate. He played defensive end from 1999-2001, when he was a teammate of such players as Andre Carter, Tully Banta-Cain and Scott Fujita, and graduated in 2002. Sina's last named at the time was Pyghambarzadeh (he changed it to Nader to make life a lot easier!). Who at Cal was involved in the decision? Members of the athletic department worked with Cal Bears Sports Properties (Cal's multimedia rightsholder and local dedicated LEARFIELD team) to lead the discussions that led to the agreement with FTX. University leadership were informed throughout the process, including Chancellor Carol Christ. The approval for naming FTX Field at California Memorial Stadium came from the Space Assignments and Capital Improvements Committee, chaired by Vice Provost Lisa Alvarez-Cohen, which addresses use and assignment of campus space, capital-projects planning and the development of the capital-improvement program. [1] https://calbears.com/news/2021/8/23/athletics-news-cal-ftx-agreement-faq.aspx https://calbears.com/news/2021/8/23/athletics-news-cal-ftx-a... (Archived at https://archive.ph/wip/MhjHd https://archive.ph/wip/MhjHd)
- ShamelessC 4y ago
  Hope they feel good about propping this whole scam up a bunch.
  - Animats 4y ago
    The FTX logo has already been removed from the field sidelines.
    - ShamelessC 4y ago
      Too little, too late.

300 points by rurp 4y ago

> What we're watching: Any sign that the carnage in crypto land makes the jump to the real world of Wall Street and actual economic activity. > actual economic activity Nice subtle burn at the end of the article.

zhdc1 4y ago
There are some legitimate use cases for decentralized ledgers and other "crypto-like" tech. As far as I'm aware, none of those involve anything that looks remotely like financial speculation.
- chitowneats 4y ago
  Name them please. This technology has had very smart and very financially motivated people trying to apply it for more than a decade.
  - zhdc1 4y ago
    GNU Thaler for central-bank regulated digital currencies.
    - chitowneats 4y ago
      GNU Taler is an interesting toy. I was hoping you had an example that has actually been used in practice.
    - selectodude 4y ago
      A quick glance at the website makes it seem like PayPal but using "tokens" instead of just leaving everything in normal currency values.
  - deleted 4y ago
    [deleted]
  - unintendedcons 4y ago
    Distributed domain name services. ENS is the only good example, standing naturally next to many imitators and scams.
    - polygamous_bat 4y ago
      You mean the service that had to beg people online far and wide to change their domain names from .link to .limo because the founder was in jail for aiding North Korea in money laundering? Quite the shining beacon of decentralization in a centralized land, yeah. (If you ever wonder why people treat crypto as a joke, think back to this moment.)
      - unintendedcons 4y ago
        You're not making the point you think you're making. The ENS and ens.link are different people. You have misunderstood the situation.
  - EthanHeilman 4y ago
    I know everyone will laugh at me for saying this but... we are still in the early stages of cryptocurrency from a technology development perspective. I'm not aware of anyway to securely scale a decentralized cryptocurrency without recursive proofs of correctness that are fast to prove and fast to verify. Every year since 2016 I've seen major progress being made in this area but we have far to go. We just barely got there in 2020. We could probably build a scalable decentralized cryptocurrency in 2020, maybe. Give it another 5-10 years of advancement like we saw over the last 5 and you will have the ability to build scalable decentralized cryptocurrencies. That doesn't mean people will build them or that even if they do the built systems won't suffer from serious drawbacks. It is a long road ahead. Now there are other problems to solve as well, but everything i being gated right now by proofs of correctness. We have a steam engine, we can put it on rails and it can pull a small load. Unfortunately the expectation has been set that we have train that can move millions of people. The fact that we can't meet this expectation doesn't mean that steam engines or engines in general are bad.
    - psychlops 4y ago
      It's fascinating the amount of repetitive comments that believe there should be some sort of time limit for a technology to succeed. It's not clear to me where this line of thinking comes from, the implication being that if something doesn't work after x years, people should just give up and go back to the old ways.
      - EthanHeilman 4y ago
        It's the confusion between: It is unlikely that Charles Babbage is going to be able to build his difference engine and even if he does it is so complex and so prone to failure that it probably will never be commercially viable. vs. It is unlikely that Charles Babbage is going to be able to build his difference engine, thus proving computers can't work and have no utility.
  - psychlops 4y ago
    Money not controlled by a central entity. I don't think it's more complex than that. The closer the idea gets to centralization, the more scams erupt.
    - oblio 4y ago
      That's not even a problem. It's just a statement. What does "money not controlled by a central entity" do? What problem does it solve? Why do I need it? Keep in mind that in my day to day life, I rely on a central entity, a government. And in places where people can't, life is NOT BETTER. It's awful. We call those places failed (fragile if you want to be nice) states. And government should be able to control money. Money is tied to the economy, it's tied to politics, it's tied to the society. The idea that by decentralizing things money will be fully democratic is just silly. Plus, full blown democracy doesn't even work. It leads to tyranny of the masses, that's why every modern country has a constitution that basically say: "you can't do that, no matter how much you want, since you can't abuse others you don't like[1]". [1] In practice, "can't do that" means something really hard to do, usually stuff like "persuade at least 67% of your countrymen to let you do it", to rein in the insanity.
  - drkstr 4y ago
    I setup a double entry bookkeeping solution for my LLC that uses Amazon QLDB as a block chain ledger. Not sure if this really counts, but it seemed like a good use case for the tech. I used amazon-qldb-double-entry-sample-java as a starting point if anyone is curious.
chasd00 4y ago
if there was risk to the overall system then I think the PowersThatBe(tm) would have much more interest in these setups and not let them run so wild and free... off a cliff.

fallingknife 4y ago

I keep reading this but I haven't seen any signs of more major drops that would be indicative of forced liquidations since the initial FTX news. That's not to say it's necessarily false, but I just haven't seen any evidence yet of a larger market contagion.

genghisjahn 4y ago
This is perhaps a sign? "Gemini, BlockFi, Genesis announcing new restrictions as FTX contagion spreads" https://www.cnbc.com/2022/11/16/genesis-lending-unit-halts-withdrawals-in-aftermath-of-ftx-collapse.html https://www.cnbc.com/2022/11/16/genesis-lending-unit-halts-w...
lukeqsee 4y ago
For two: BlockFi and Gemini Earn both have stopped withdrawing. This means a lot of people have a lot of crypto that they may or may not ever get back. I suspect it will take some time, but at the ecosystem level, contagion is already here. Time will tell if it spreads beyond to the markets (but it feels inevitable at some level).
deleted 4y ago
[deleted]
vgatherps 4y ago
This article mostly focuses on smaller dominos. The serious domino is Genesis which is only mentioned in passing. Depending on the size of the hole Genesis might outside the other non-ftx ones combined, and is structurally much more important than them.
stephc_int13 4y ago
There is a major panic ongoing, but most of it is happening behind closed doors. Despite the appearance, this is not the story of a bunch of degenerate kids playing with made-up money. Real serious money is at stake, billions of it, people are losing their shirts, or something else.
- 4y ago

k__ 4y ago

Aren't these "dominoes" just more or less TradFi companies?

ForHackernews 4y ago
No, these are the unregulated bucket shops and wildcat banks favored by the bold adventurers of web3.
polygamous_bat 4y ago
They are the pioneers of Web3 and crypto adoption as long as they're paying unreasonable APY in a 0% interest rate regime, and a more or less tradfi company as soon as they are exposed to be a ponzi scheme. Because we all know crypto is perfect and can't fail.
- rippercushions 4y ago
  Interest rates aren't 0% anymore. Of course, this only makes things even harder for crypto Ponzis, because they have to offer even more unsustainable rates to keep up.
  - polygamous_bat 4y ago
    I agree with you, arguably interest rate raising above the minimum is what exposed a lot of these scams.
joosters 4y ago
If you want to talk in terms of coins, some of the direct fallout includes: FTT: $26 -> $1.60 Serum: $0.80 -> $0.26 Solana: $36 -> $14 Or, more indirectly all crypto 'market cap' in general: $1050B -> $825B. Ok, so market cap is pretty ephemeral, but chances are, if you held any crypto prior to FTX collapsing, its theoretical value has dropped because of it. DeFi doesn't make you immune.
vintermann 4y ago
Sure. TradFi companies that everyone in the RadFi ecosystem rely on.

ForHackernews 4y ago

> paused withdrawals So... chapter 11 by Monday?

chasd00 4y ago
dead by dawn! dead by dawn! - Evil Dead 2

jpm_sd 4y ago

The incomparable Molly White has put together a contagion flow chart, which she is updating regularly: https://www.mollywhite.net/etc/ftx-contagion https://www.mollywhite.net/etc/ftx-contagion See also her explanatory newsletter https://newsletter.mollywhite.net/ https://newsletter.mollywhite.net/

shmatt 4y ago
I can't believe I missed the news the big corporate Gemini also halted withdrawals on their APY product If its not completely clear by now: no, these companies can't promise you 8% APY without essentially running a ponzi scheme. I'm sure even Madoff had some good years during bull runs. The only other semi-possible option is burning VC money with those APY's, which is maybe what Coinbase is doing
- zhdc1 4y ago
  > If its not completely clear by now: no, these companies can't promise you 8% APY without essentially running a ponzi scheme. I'm sure even Madoff had some good years during bull runs It's almost impossible to beat the market after fees. Anyone who promises to do so, consistently, is full of it. French (2008) and a whole body of literature before and after.
  - xorcist 4y ago
    Which market? I own some bonds that yields 8%.
    - chollida1 4y ago
      Yield to maturity is far different that yearly yield. though it is possible to find some bonds that have an annual yield of 8%. Though no one would expect them all to make it maturity without any credit issues.
      - bombcar 4y ago

thrillgore 4y ago

It continues to baffle me why anyone would want to deal with Crypto if a failure like FTX causes the entire "decentralized" ecosystem to collapse.

jpeterson 4y ago
Exchanges and trading firms are not "Crypto". They're human institutions which happen to sit atop cryptocurrency instruments. What we're seeing play out in realtime is what happens when unregulated human institutions come to possess fantastical amounts of wealth -- in short, they go pathological.
- chitowneats 4y ago
  "Happen to sit atop" is so far from an accurate accounting of the multi-headed hydra that is the crypto/defi space. Good thing I'm not expecting much in the way of accurate accounting.
- ninepoints 4y ago
  It's almost as if the unregulated anti-establishment ethos of crypto allowed this to happen, and allows it to keep happening.
  - jpeterson 4y ago
    If crypto has an "ethos", it's decentralization and departure from human institutions. The FTX fiasco is the opposite of that.
    - rurp 4y ago
      What percent of crypto activity happens on centralized platforms. 90%? 95%? Whatever the precise number, it's really high. It's hard to argue that 95% of people in Scotland aren't true Scots.
      - MacsHeadroom 4y ago

warinukraine 4y ago

> Crypto hedge fund Galois Capital said roughly half its capital is stuck in FTX, according to the Financial Times. "stuck" - LOL. Hope dies last.

photochemsyn 4y ago

> "State of play: The Gemini Earn program allowed users to deposit their coins in exchange for regular interest payments — typically at generous rates that could be as high as 8%." Bernie Madoff's exclusive private fund had investors lining up to get in, based on Madoff's history of returning a steady 10% to investors. Of course it was all a big Ponzi scheme...

ninepoints 4y ago

> "Galois Capital" What a stain on the name of a great mathematician

EthanHeilman 4y ago
Galois should remove this stain by demanding that Galois Capital face him on the field of honor.
- blululu 4y ago
  Ironic too since Galois was a devoted Republican while these folks are clearly in the Orleanist camp.
oldgradstudent 4y ago
Had Galois been alive he probably would have challenged them to a duel.

lob_it 4y ago

They are just pushing up the price of tulips. Thats all :p https://www.investopedia.com/terms/d/dutch_tulip_bulb_market_bubble.asp https://www.investopedia.com/terms/d/dutch_tulip_bulb_market... Did they even get a moment of silence? Vaporware has a way of eviscerating

latchkey 4y ago
As noted in the article you linked and this one as well [0]. There never was a real tulip fever. [0] https://www.smithsonianmag.com/history/there-never-was-real-tulip-fever-180964915/ https://www.smithsonianmag.com/history/there-never-was-real-...
- lob_it 4y ago
  It was polite joke about pushing up tulips :p Notice how I didn't say disemboweled with entrails all over the place with all of the fud being distributed about crypto ponzis/vaporware. https://www.wordnik.com/words/eviscerate https://www.wordnik.com/words/eviscerate Literacy is fun the mental in your case :p
2sk21 4y ago
Yes - as an outsider, it feels as if the entire crypto space consists of people selling tulip bulbs to each other.
- lob_it 4y ago
  It was more of a scarcity pun with all the tulips needed for all of them getting buried :p https://www.investopedia.com/terms/l/law-of-supply-demand.asp https://www.investopedia.com/terms/l/law-of-supply-demand.as... https://poemanalysis.com/idiom/pushing-up-daisies/ https://poemanalysis.com/idiom/pushing-up-daisies/

dougmwne 4y ago

I wonder if a crypto contagion could actually help the broader economy by acting as an escape valve. For the past 14 years, the government keeps stepping in to bail out bad bets and keep all the scum floating. But with crypto, it was an an area of the economy that government largely kept its distance from and lacked a mandate. So there will be no will to rescue anything and a full on bank run can commence, destroying lots of wealth. When will then take some of the extra money out of the real economy without having to destroy any traditional business.

groestl 4y ago
Well, the money is not gone. It's just that somebody else has it. Interesting idea though.
- NortySpock 4y ago
  Crypto tokens are in one pocket and US Dollars are in someone else's pocket. Which one retains value in a market crash? My money is on US Dollars, but you are free to disagree with me.
- verelo 4y ago
  Isn’t that generally the case?
- crazygringo 4y ago
  That's incorrect. When asset prices fall, wealth is indeed gone. It's not transferred to someone else, it just vanishes. It's true no matter if you're talking about falling stocks or falling crypto.
  - shafyy 4y ago
    Not sure what you mean. If I buy some cryptocurrency coin for $10 somebody received $10 from me. If now the value of the crypto goes $0, I have lost $10 but the who I gave $10 to still has that money. It has not magically disappeared. Or do you mean something else?

kerblang 4y ago

Dunno if it made it thru HN yet but a Vox reporter aggregated up her recent Twitter conversations with SBF, and it's kinda damning: https://www.vox.com/future-perfect/23462333/sam-bankman-fried-ftx-cryptocurrency-effective-altruism-crypto-bahamas-philanthropy https://www.vox.com/future-perfect/23462333/sam-bankman-frie...

metadat 4y ago
Discussed yesterday: https://news.ycombinator.com/item?id=33630150 https://news.ycombinator.com/item?id=33630150 (336 points, 344 comments)

thedangler 4y ago

Not your wallet, Not your coins. Or Synthetic coins for most of these exchanges.

ceejayoz 4y ago
"Not your wallet, not your coins" is true, but kinda irrelevant here. The coins themselves are sometimes worthless (like FTX's token), or can be frozen (Tether does this: https://www.coindesk.com/business/2022/11/10/tether-freezes-46m-of-usdt-following-law-enforcement-request/ https://www.coindesk.com/business/2022/11/10/tether-freezes-...). It doesn't matter if you hold a collapsed coin in your wallet or an exchange's; it's still not gonna do you any good.
- rufusroflpunch 4y ago
  It matters a bit, as it seemed that FTX had $1+ billion in Bitcoin customer liabilities which have evaporated.
  - thedangler 4y ago
    Because they never bought the coins to begin with. It's marked down in a ledger that this person has this many coins. It only matters when someone wants to transfer coins to another exchange or their own wallet. Then they have to purchase the coins and send them.
    - hanniabu 4y ago
      > Because they never bought the coins to begin with. Users bought it but the exchange didn't have it, which is what the OP was saying. If you don't have the keys, you don't really have the coins.
      - thedangler 4y ago
        Also interesting. Is this the same thing. https://i.redd.it/qofb7x8zmj0a1.jpg https://i.redd.it/qofb7x8zmj0a1.jpg Citadel Securities has in their books securities sold, not yet purchaed. $65 billion. How is this not the same thing ? lol

rchaud 4y ago

Part of the reason crypto's history maps to tradFi's history so precisely is because there aren't that many unique ways to make more money out of an existing pile of money. The debate about whether these tokens meet economic definitions of currency is besides the point; the goal, like tradFi, is to accumulate as many of them as possible and do whatever it takes to protect their price (pump) until you're ready to shift the risk to someone else (dump).

deebosong 4y ago
well said. very simple, clear, and observable in reality. i feel like i've said this in a more roundabout way to friends, fam, and myself (when trying to wrap my head around all of this to explore it or steer clear).
lottin 4y ago
TradFi is built around providing financial services. It's not built around issuing virtual assets and then pumping & dumping them, I don't know where you get this notion from.
- oblio 4y ago
  He said history :-) Traditional finance also had plenty of those, but they're super heavily regulated, so now they're a lot rarer.

gjsman-1000 4y ago

I actually had accounts with Gemini Earn, Celsius Network, and BlockFi, and money in all of them (as a just in case one fails thing). However, after the crypto crash earlier this year, and reading "Not your keys - not your crypto" for the millionth time, I pulled them all out and put them in an Exodus wallet. I calculated the APY loss but decided better safe than sorry - even though, in my head, I thought the odds of any individual one of them failing was extremely low, let alone all of them. Holy !@#$ing cow. Dodged multiple bullets. At least I didn't share my financial plan at the time at the Thanksgiving table last year or it would be really awkward now (thank goodness my uncle took that role in a small capacity)...

chasd00 4y ago
> the odds of any individual one of them failing was extremely low, let alone all of them. that reminds me of the tranches in mortgage backed securities during the 2008/9 financial crisis. See this scene from The Big Short https://www.youtube.com/watch?v=4WUGhteNlzM https://www.youtube.com/watch?v=4WUGhteNlzM
oblio 4y ago
I don't know what your savings plan look like, but I hope your idea of diversification is not to have all of your savings in a varied array of crytocurrencies :-)))
- gjsman-1000 4y ago
  Of course not - I only saw it as a way of diversifying the crypto portion of my diversified investments. But there was a bit of crypto - I'm just glad I didn't recommend others join me.
no_butterscotch 4y ago
> Exodus wallet I've still got everything on just Coinbase, which I assume (?!) is reliable enough to not be at risk. What's the "upsell" for using a wallet? The "not your keys" argument logically makes sense to me but it doesn't seem worth it from a convenience stand-point.

kdragon 4y ago

As a Bitcoin maxi this is fun to watch. It's like the 08' financial collapse all over again, but there's no bailout coming this time around. I think it is glaringly obvious at this point that most of society does not understand how money works, and will fall victim to the same old scams no matter where they manifest. This entire crypto collapse has been a long time coming. You can't simply manufacture money out of nothing, nor can you inflate debt endlessly. Bitcoin as a community has distanced themselves from 'crypto' and these boiler-room pump and dump scams. Bitcoin maxis fight for the simplicity and real-word cost behind proof of work for a reason. Bitcoin may be arbitrary digits in a ledger but it isn't free to make. The supply is capped, yet the work anyone can put into securing the ledger is unbounded. Regardless of where you choose to invest, self custody is king. Get your tokens off exchanges. Not your keys, not your coins.

highwaylights 4y ago
"Don't buy Tony's magic beans. Tony's magic beans are a scam, they're not really magic at all. I buy my magic beans from Frank. Everyone knows that only Frank grows real magic beans."
- kayamon 4y ago
  The beans with the weird pyramid and floating eye logo are definitely the best beans.
  - polygamous_bat 4y ago
    I agree. They even have a whole army to defend that, unlike, uh, a whole room full of dusty old GPUs burning up a rainforest every time someone makes a transaction. /s
  - snapcaster 4y ago
    I know you're being sarcastic but what you said is true. USD is currently the best currency on stability, usage, acceptance, etc.
- rufusroflpunch 4y ago

vishnugupta 4y ago

This is when I get to say “I told you so”. Excerpt from my 9 month old comment [1] A whole bunch of these startups have sprung up; which take up real money (USDT or even USD, INR etc.,) promising very attractive guaranteed returns without locking up customers' fund. Look at these[1] for examples. Anyone who knows anything about banking in the traditional world knows how ridiculous it is. And indeed some of these are beginning to unravel[2]. In Anchor's case there are way more lenders than borrowers so Anchor is resorting to pay those high yields from their reserves. It's cutting close to being a Ponzi scheme at the moment. In a traditional banking world businesses take a loan either to cover for a short-term cashflow crunch (example an invoice that's delayed by their client) or for longer term investment. That money usually goes into economic activities which are expected (hoped?) to bear fruit to repay the loan. In the crypto world however such loans are taken only to be put back into the crypto world; to be swapped into some hot new coin to be staked and what not. The music has got to stop at some point. [1] https://news.ycombinator.com/item?id=30335625 https://news.ycombinator.com/item?id=30335625

hanniabu 4y ago
You're still wrong. The issue here isn't crypto, it's centralized entities which act similar to banks. It also failed because user money was stolen and mismanaged by hugely incompetent 20 year olds, not because it was invested in crypto. It's like someone saying the whole stock market is a scam because of Bernie Madoff.
- TremendousJudge 4y ago
  I'd say the difference with the stock market is that that the bottom of it is composed of companies that produce and sell actual, tangible products: cars, planes, oil, computer software, construction materials, etc. All financial instruments (legitimate or not) are built on top of this. You buy into some index fund under the assumption that, on some level, you're putting money into the production of goods and services. Meanwhile, the "crypto market" deals only in hype all the way down. There are no goods and services produced (unless you count "hype"), only dollars going in one end and coming out the other. If I put my dollars in some "crypto investment", it's only so that some early adopter with 50000 btc can get some dollars out. The rest is misdirection.

spoonjim 4y ago

Hopefully this is the end of this entire dumbfuck historical moment. Absolute fleecing of normal people disguised as some kind of technosocial revolution.

fullshark 4y ago
Nah, it'll happen again. This will spur on regulations for custodial wallets, and the next boom cycle will involve TradFi contagion risk. BTC price isn't moving, no one is liquidating, volatility is lowest its ever been, none of the hodlers have given up yet and probably won't, they are just waiting it out to try again in 2-5 years.
kayamon 4y ago
Do you not want a technosocial revolution?

shakezula 4y ago

> Crypto hedge fund Galois Capital said roughly half its capital is stuck in FTX, according to the Financial Times. This is astounding to me. I would be curious how long they kept their money in an exchange and if that’s common practice among other firms.

DonsDiscountGas 4y ago
I would guess they traded crypto on FTX very frequently.

SevenNation 4y ago

> On Wednesday, the crisis touched a high-profile crypto lender run by the billionaire twins Cameron Winklevoss and Tyler Winklevoss, forcing them to halt withdrawals from their Gemini Earn crypto lending program. ... The Gemini Earn program allowed users to deposit their coins in exchange for regular interest payments — typically at generous rates that could be as high as 8%. The Gemini Earn page appears to redirect to this announcement: > We are aware that Genesis Global Capital, LLC (Genesis) — the lending partner of the Earn program — has paused withdrawals and will not be able to meet customer redemptions within the service-level agreement (SLA) of 5 business days. We are working with the Genesis team to help customers redeem their funds from the Earn program as quickly as possible. We will provide more information in the coming days. https://www.gemini.com/blog/an-important-message-regarding-gemini-earn https://www.gemini.com/blog/an-important-message-regarding-g... The language of this announcement is bizarre. Withdrawals are "paused," not "halted" as reported. In other words, there's a chance that Genesis will cough up the funds. But the biggest red flag is that nothing is said about new deposits. Apparently, Team Gemini is still taking them. This is, unfortunately, par for the course with these schemes going all the way back to Mt Got. "Pause" withdrawals, but continue to allow deposits. The language of the announcement makes this look like a temporary blip that will soon be resolved. It's a tactic with a long history and an almost boringly predictable outcome.

codehalo 4y ago
Gemini hasn't pause withdrawals, Genesis has. Did you read the article you linked to?

BurnGpuBurn 4y ago

I just can't get my head around why SBF and his cronies aren't in jail yet. Guess it might never happen with friends like that.

dehrmann 4y ago
What specific crime are you accusing him of?
- hanniabu 4y ago
  He stole user funds to use in his investment company. He even built a backdoor in the accounting system to move the money without setting off alerts with the security send audit team.
- recursive 4y ago
  "I'm surprised you didn't hit any trees running through that forest with your eyes closed." "Which specific tree do you think I should have hit?"
ceejayoz 4y ago
No criminal fraud prosecution happens that quickly, and the "friends" are only friends when there's millions of donations to throw around. None of the politicians SBF and his co-CEO were purchasing will be returning their calls today.
rufusroflpunch 4y ago
Hopefully it is just a matter of them still trying to figure out the depth and nature of the crimes.
kayamon 4y ago
People in finance don't go to jail.
IfOnlyYouKnew 4y ago
Going bankrupt is not a crime in itself (ask any former president, one has experience and the other is a lawyer)). Yes, there is a lot that looks kinda criminal, but it will take a bit more than a week to put together a criminal prosecution.

majani 4y ago

Dominoes indeed are falling, but the coin prices are staying largely the same. Perhaps we're at a point where most people are already down so much from last year that it makes no sense to sell, no matter what the news says

IanDrake 4y ago

Animats 4y ago

The good news is that the problems seem to be confined to the crypto sector. There are a few hedge funds and pension funds with losses, but so far, nobody in "traditional finance" seems to have huge exposure to crypto. So the real world economy keeps on running normally while the crypto sector gets flushed.

onlyrealcuzzo 4y ago
Starting a few months ago, some major banks were issuing loans using Crypto as collateral: https://www.forbes.com/advisor/personal-loans/crypto-loans/ https://www.forbes.com/advisor/personal-loans/crypto-loans/ Glad it's falling apart now before it sucks the entire economy down with it.
sgloutnikov 4y ago
It's just a blip in a way. The entire global crypto market cap has gone down around $800B, roughly the same market cap that Amazon has lost recently.
- NationalPark 4y ago
  The difference, of course, is that Amazon's market cap has actual assets and cash flows behind it. The liquidation value of all of crypto on the other hand is approximately $0.
ilamont 4y ago
I don't think we've heard the whole story about the exposure of legit orgs and businesses. If a pension fund loses 1%, that's manageable. If it's 10%, that's a crisis for anyone expecting benefit checks every month, and possibly a much wider pool of people/orgs if some kind of rescue or bailout is required.
IfOnlyYouKnew 4y ago
It’s noteworthy that this is not a coincidence (coin-incidence?) but the result of, first among others, the SEC holding steady in the face of a lot of pressure in limiting the financial system‘s exposure.

jokoon 4y ago

Capitalism is at fault here. Unless there are right regulations in a capitalistic system, capitalism will create abuse and problems. We are in 2022 and it's really annoying how we cannot discuss deep changes in how capitalism functions unless an army of trolls brings up the gulag point: "the soviet union failed, thus there is no viable alternative to capitalism". It's already almost difficult to discuss it criticize growth, so socialism is really beyond taboo.

rolobio 4y ago
Many of the things done at FTX are already a crime. The laws simply aren't being enforced for the mega rich.
kspacewalk2 4y ago
Capitalism is not any more at fault here than GPUs or math. Yes, the right regulations are indeed vital for a capitalistic system. Saying "capitalism will create abuse and problems without regulations" is like saying "cars will cause death and destruction without a steering wheel". That's why we don't build them without steering wheels, and a car without a steering wheel is not really a car. A financial market is a market, the very word "market" necessarily implies regulation, like all markets had since the dawn of time (it's why you brought your stuff there, and why the customers came). If a new technology creates a new niche in the financial market, and regulation has not caught up yet, nothing is wrong with the concept of capitalism, the problem is that regulation has not caught up yet. And now it largely has, and these companies are blowing up, and the system works. Not sure what is supposed to make us "discuss deep changes in how capitalism functions" if how modern capitalism functions is fixing the problem.
nyolfen 4y ago
> It's already almost difficult to discuss it criticize growth turning the social meta from positive sum to zero or negative sum is the most disastrous idea conceivable. everything you cherish, including your physical safety, is built on an assumption of shared future rewards. people will seek advantage no matter what; they must have a socially productive avenue or it will be taken from others. if you are so sure an alternative is possible, i encourage you to demonstrate it -- live your life with others in a way that defies market forces. the proof is in the pudding; for now, there is only one game in town.

isitpossible88 4y ago

Does anyone know Coinbase's involvement or reach into FTX?

machinekob 4y ago
15 000 000 usd minimal exposure.

woeirua 4y ago

Tick, tick, tick. The doomsday clock for Tether just moved closer to midnight. When Tether finally depegs, all the exchanges will go under (except maybe Coinbase and a few others that are tightly regulated). Coinbase will probably still go bankrupt because the crypto trading market is going to evaporate. The value of most coins will go to zero. There will be a liquidity crisis the likes of which we haven't seen since the 19th century.

prox 4y ago
Who knew if you made an unregulated market full of sharks that you would get this outcome? /s [0] 0 : https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929 https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929
sroussey 4y ago
I wonder: what will be the last straw that breaks confidence in Tether?
- Animats 4y ago
  Something is happening in stablecoins.[1] Binance and OKX exchanges "temporarily suspended" support for USDC and USDT on the Solana blockchain. Unclear why. [1] https://www.coindesk.com/markets/2022/11/17/crypto-exchanges-binance-and-okx-suspend-support-for-solana-versions-of-usdt-usdc-stablecoins/ https://www.coindesk.com/markets/2022/11/17/crypto-exchanges...
  - gruez 4y ago
    But that's in the wrong direction? They're suspending deposits, not withdraws.
    - Animats 4y ago
      Maybe they don't want to be holding those "stablecoins". If you withdraw USDT or USDC, it's off their books and they have no further risk. If you deposit it, and it's credited as US dollars...

DebtDeflation 4y ago

https://twitter.com/Bitfinexed/status/1593102572151222273 https://twitter.com/Bitfinexed/status/1593102572151222273 Alameda received more Tether ($36.7B) than anyone else in history. Where are they? Did they ever even exist?

friend_and_foe 4y ago

Somewhat off topic but I can't stand axios' format. It's framed as "meat and potatoes" but what it actually is is someone telling you want to think instead of reporting information while avoiding actually including information. The goal seems to be to convince while revealing as little detail as possible. It's awful.

Dig1t 4y ago

What I don't understand is why the New York Times is saying that the guy who created and ran this scheme is a great guy. They wrote an extremely flattering article about him and are even hosting an event where he's a prestigious speaker. He seems like a grifter and responsible for presiding over the loss of a boatload of money for investors. https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankman-fried-crypto-bankruptcy.html https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankma... https://www.nytimes.com/events/dealbook-summit#speakers https://www.nytimes.com/events/dealbook-summit#speakers

polygamous_bat 4y ago
I know for example SEC has, in the past, used a crypto summit in New York to serve a subpoena to another crypto grifter. [0] I would not be surprised if there is government pressure on NYT to pretend everything is fine to lure Sam Bankman-Fried out of his safe haven in the Bahamas. [0] https://nymag.com/intelligencer/2021/09/crypto-conference-jolted-by-rumor-of-sec-serving-subpoena.html https://nymag.com/intelligencer/2021/09/crypto-conference-jo...
- deleted 4y ago
  [deleted]
aksss 4y ago
Wasn't he like the second largest democrat donor in the US this year? $39.7 million to federal races. The soft-glove treatment from the NYT is the least he could expect. Maybe he knew what was coming. https://www.nbcnews.com/meet-the-press/meetthepressblog/sam-bankman-frieds-downfall-deprives-dems-key-donor-rcna57091 https://www.nbcnews.com/meet-the-press/meetthepressblog/sam-...
- ceejayoz 4y ago
  Both co-CEOs of FTX were large donors, one to each party. Neat trick. https://www.bloomberg.com/news/articles/2022-11-08/ftx-crypto-bros-clashing-politics-meet-cz-chaos-on-election-day https://www.bloomberg.com/news/articles/2022-11-08/ftx-crypt... > Bankman-Fried, known as SBF, threw more money at Democrats this cycle than anyone but George Soros, according to OpenSecrets data. One of his top lieutenants, Ryan Salame, has been bankrolling Republicans at almost the same pace as Steve Schwarzman and Peter Thiel. There's a good chart of how the company distributed things at https://www.ft.com/content/428c7800-c72d-4c59-9940-4376fea6e263 https://www.ft.com/content/428c7800-c72d-4c59-9940-4376fea6e... None of those politicians are gonna stay bought; no more money is coming. There's no reason to think FTX can exert further lobbying pressure; they're cooked.

tacker2000 4y ago

For now i think only BTC and ETH will remain, and maybe some coin that is REALLY backed by actual USDs. This is the first big clearout of the shitcoins and fraudcoins. Crypto will never really die in my opinion, its just going through its infancy phase. Real regulation is probably the thing that is the next on the horizon, in order to build up trust that was lost (or never there anyway). Users must be sure that their coins can not all of a sudden be frozen by some shady exchange operating out of the Bahamas or wherever. Crypto has to mature now.

NateEag 4y ago
> Crypto has to mature now. "Mature" ~= "lose the decentralized anti-regulation design that was its entire reason for existing in the first place"
- tacker2000 4y ago
  Well, i get your point, but as we can see this hasnt panned out in a good way. Maybe some hybrid model would work?
  - NateEag 4y ago
    Maybe? I just don't see the point, though. Once you've said "it's gotta be under the watchful eye of the government," well... Fiat currency is a thing, and doesn't require massive computer networks with mindbendingly-complex algorithms to do. I see absolutely no advantage to the cryptocurrency design if it's going to be used and regulated in a centralized manner. Once you go there, it just seems like it's "banks 2.0, but with software that's way harder to get right."

Animats 4y ago

UC Berkeley had a stadium naming deal with FTX.[1] Is there a connection between FTX and Cal? FTX Chief Operating Officer Sina Nader earned his bachelor's degree in humanities from Cal and was a walk-on member of the Golden Bear football team as an undergraduate. He played defensive end from 1999-2001, when he was a teammate of such players as Andre Carter, Tully Banta-Cain and Scott Fujita, and graduated in 2002. Sina's last named at the time was Pyghambarzadeh (he changed it to Nader to make life a lot easier!). Who at Cal was involved in the decision? Members of the athletic department worked with Cal Bears Sports Properties (Cal's multimedia rightsholder and local dedicated LEARFIELD team) to lead the discussions that led to the agreement with FTX. University leadership were informed throughout the process, including Chancellor Carol Christ. The approval for naming FTX Field at California Memorial Stadium came from the Space Assignments and Capital Improvements Committee, chaired by Vice Provost Lisa Alvarez-Cohen, which addresses use and assignment of campus space, capital-projects planning and the development of the capital-improvement program. [1] https://calbears.com/news/2021/8/23/athletics-news-cal-ftx-agreement-faq.aspx https://calbears.com/news/2021/8/23/athletics-news-cal-ftx-a... (Archived at https://archive.ph/wip/MhjHd https://archive.ph/wip/MhjHd)

ShamelessC 4y ago
Hope they feel good about propping this whole scam up a bunch.
- Animats 4y ago
  The FTX logo has already been removed from the field sidelines.
  - ShamelessC 4y ago
    Too little, too late.