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It's totally incredible that Circle, owned in big part by Coinbase, a HN unicorn which always tried to do things legally, ends up probably losing $1bn (about 30
by TacticalCoder 4y ago
It's totally incredible that Circle, owned in big part by Coinbase, a HN unicorn which always tried to do things legally, ends up probably losing $1bn (about 30% of of $3.3 bn) due to good old regular banks doing what they do best: making customers deposits disappear.
Now Circle is sitting on $30 bn in short term US treasuries backing USDC and I don't think they're forced to give the yield back to people holding USDC, so Circle has to be minting something like, what, 1 billion yearly now that rates went up?
So they may be able to get away with eating a $1 bn loss.
Meanwhile the tether/Bitfinex fraud in the Bahamas is continuing to do just fine and its Circle/Coinbase/USDC that happen to be in trouble.
Because of an actual bank unrelated to crypto.
- ursuscamp 4y agoWhy makes Tether a fraud?
- TacticalCoder 4y ago> Why makes Tether a fraud? They've been convicted of fraud. They had hundreds of millions seized from bank account of criminals which they helped launder money for. They cannot operate in NY anymore and the NYAG fined them. I think Canada banned these fraudsters too? They also sold Moonstone bank to SBF/FTX which illegally siphoned money out of the US to the Bahamas. Nothing smells of fraud as much as tether/Bitfinex. Not even Madoff.
- latchkey 4y agoHowever, today, USDT is looking pretty good in comparison.
- TacticalCoder 4y agoI don't know. Centre is publishing the individual short term US treasuries numbers of every single short term US treasury they own. They've got $9.8 bn at various US banks, minus potentially the loss on $3.3bn they may have to take now but even a $1bn loss and that'd still make USDC backed 0.975:1 or something. Not taking into account the insane yeld they're making on the $30 bn of short term US treasuries they have (for their clients, but I think the yields are for them). That compared to a bunch of shady people in the Bahamas, deeply tied to the SBF/FTX fraud... But yup, today, tether looks unaffected.
- latchkey 4y agoCoinbase pays 4% on holding USDC on their site... so at least some portion of that yield is going to their customers.
- firekvz 4y agobased pretty much on the fact that since they are completely free to do whatever they want, they are actually free of risks like this i mean, circle at least shows their reserves, usdt has never done so... it resumes to: since you wont ever see how bad their finances are, you just assume they are good. the perfect crime
- latchkey 4y agoIt doesn't help that they stored some of those reserves in a bank.
- 111111101101 4y agoThat's the thing about frauds. They look really good until all of a sudden, they don't.
- npongratz 4y agoI'd suggest that is not unique to frauds. One could say the same thing about any corporation, or currency, or government, or celebrity.
- loopdoend 4y agoFrauds always go bad
- 111111101101 4y agoI would add one exception - religion. Having the big pay day come after death means that the fraud can never be uncovered.
- lawn 4y agoMadoff looked good for decades.
- latchkey 4y agoRight, but in moments like this, people sitting in USDC have nowhere else to go. Looking at the stablecoin markets right now, there are two choices... USDT or BUSD. Or, BTC/ETH, which explains why those are currently up and everything else is down.
- ursuscamp 4y agoOkay, but how are they a fraud? You've said they helped launder money, which if true is certainly criminal, but how are they fraudulent specifically? Is there some evidence that they are not fully backed?
- _2d30 4y ago> due to good old regular banks doing what they do best: making customers deposits disappear. What would you estimate is the total value of customer deposits that banks have loss in failure over the last say 30yrs?
- TacticalCoder 4y ago> What would you estimate is the total value of customer deposits that banks have loss in failure over the last say 30yrs? Well of course if we consider only those where loss actually happened and not those where the losses have been mutualized by bail-outs, it may not be gigantic. But, I don't know, in Cyprus hair cuts made $8 bn of customers deposits vanish. That's just one I know from the top of my head without needing to google.
- brookst 4y agoBut you seriously believe that banks are generally better at completely losing deposits than keeping them? It’s just hard to see any evidence-based person believing that.
- mirekrusin 4y agohttps://en.wikipedia.org/wiki/List_of_bank_failures_in_the_United_States_(2008%E2%80%93present) https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...
- vkou 4y agoAnd how much money was lost in those failures by depositors? And don't fall back on 'they were bailed out'. They were bailed out by other banks buying their assets + liabilities, and by the insurance payments they were making. They weren't getting a blank check from the treasury. That's the system working. Who bailed out the crypto losses? Some of the losers got made whole, but many, many, many are realized losses.
- 4y ago
- humanizersequel 4y ago>owned in big part by Coinbase How much of Circle is owned by Coinbase?
- TacticalCoder 4y agoI was confused. Circle and Coinbase created Centre and Centre's website say Centre created the USDC stablecoin. Circle and Coinbase each own 50% of Centre. I don't know if Coinbase also owns a part of Circle or not.
- misssocrates 4y agoTether is trading at a premium right now and it hasn't lost anyone's money.
- Grimburger 4y agoTheir banks also have to follow Basel III regulations, unlike SVB. Exempting "small" banks with hundreds of billions of liabilities from globally agreed upon regulations is a uniquely American issue. Yay lobbbying.
- deleted 4y ago[deleted]
- ashwagary 4y agoEthereum transaction fees just did a 10x as people are rushing to move DAI and USDC positions.
- 3np 4y agoOotL: Where do the 30% come from?
- elif 4y agoCurious, why you picked 0.30/$ recovery. Just speculating?
- alchemist1e9 4y agoWouldn’t they have been holding large amounts of treasuries from before rates went up? If so then they would be sitting on large mark to market losses, just like SVB, no?
- itsoktocry 4y ago>Now Circle is sitting on $30 bn in short term US treasuries backing USDC and I don't think they're forced to give the yield back to people holding USDC, so Circle has to be minting something like, what, 1 billion yearly now that rates went up? What makes you think they aren't susceptible to the same type of run? They now own treasuries with higher yield and lower prices.
- shawabawa3 4y agoTheir average yield to maturity is 36 days, not 6 years They haven't lost any money even if marking to market, and worse case just need to hold out a month for maturity
- funstuff007 4y ago> good old regular banks doing what they do best: making customers deposits disappear. One of the more inane comments I've read here.
- SilverBirch 4y agoCoinbase isn't in trouble because of this. Coinbase is in trouble because they're trying to run a legitimate cyrpto exchange, their chances of success are the same as an abstinent whorehouse.