2 ms·
> you will have no one to collect payouts off of. any yet, back in the GFC, people shorted mortgage bonds so much that paying out would've bankrupted the banks
by chii 4y ago
> you will have no one to collect payouts off of.
any yet, back in the GFC, people shorted mortgage bonds so much that paying out would've bankrupted the banks (as they are the counterparty). So why doesn't that apply here? As long as you are the first to collect the short, you will still win.
- polygamous_bat 4y agoBecause the US government doesn't want the US economy to go up in flames, and thus stepped in to make sure the bank's debtors are made (somewhat) whole. Who would be the "lender of last resort" in crypto?
- vkou 4y agoIn the GFC, most people expected the system of rules, trade settlements, and, at last resort, lawsuits to probably make them whole when they trade in a volatile environment against counterparties that they believe are likely to go bust. (There are still ways to guess right, but lose big on a trade, like shorting a company, whose stock collapses, and then gets delisted!) In the crypto world, your counterparties might, quite literally, run off to Singapore, leaving you holding a worthless bag of toxic garbage.
- HWR_14 4y agoUnlike the GFC, the first evidence of any weakness will be your counterparty being bankrupt. With the GFC, it was based on available information that the specific trades were going bad. In this case it will be "redeem for a dollar, redeem for a dollar, I cannot redeem/am broke so obviously your short is now good".
- unicornmama 4y agoIIRC those credit default swaps actually almost became worthless overnight due to an important bank almost failing.