FTX seems to be processing withdrawals normally. For the life of me, I can't understand why journalists love to speculate instead of doing a 5-second search on EtherScan.
Upon further inspection, it actually looks like the only transactions they're processing are the ones from their own wallet. The entire TX history looks really suspicious to me.
Nothing wrong with taking a caution first approach.
However to me most articles about FTX seem like "panic first, research after". Yes SBF's investment company might be fucked, but customers funds should be totally separate from that.
I think that “should” is working really hard there.
We only have to look at the other crypto firms that have gone bust to know this space is rife with problems in that area - lies about FDIC protection, cryptocurrency and tokens considered part of company assets and subject to creditor claims, rather than customer deposits etc.
Ftx is quite profitable: Good fee income with little marketing expense. So it has a large intangible value.
I assume most traders on ftx only put enough capital on the exchange to keep their positions open in the short term.
So the intangible value of ftx may well exceed the value of clients assets by a significant margin. Then ftx may well be able to issue new shares should it experience a liquidity crunch.
Are you sure? I come bearing no data at all, but it seems everything I listen to or watch is sponsored by FTX. Didn't they also go huge during Superbowl? I would think FTX is one of the largest marketing spenders in crypto purely based on optics (which, again, may be completely off).
Yeah, to be honest, looking at this from the outside I would say this is highly, highly likely to all come permanently crashing down. First there was the questionable behaviour - SBFs odd deals with various collapsing entities back earlier in the year, then there was the leak of Alameda's balance sheet looking incredibly shakey, and now Binance has seemingly decided they're going to stress test FTX. Most real banks would struggle under this kind of pressure, hard to see how FTX will manage to cope.
It will and there is a very simple reason it is going to happen.
These products are built purely on trust. These things do not have any innate value. More than that, there is nobody that can be trusted that guarantees the value of it.
Now think about long term stability of something that has value built purely on sentiment and the sentiment changes over time in waves thanks to globalisation.
It is just a matter of time until people, for one reason or another, will get themselves into a spiral where the thing losing value will cause people to loose more trust, causing the value to drop. And there is nothing to stop it except large institutions that have power to manipulate market (if you remember Game Stop saga you know what I mean).
A normal, tangible thing like a company that is profitable and has some future will see ups and downs as the sentiment changes, but the shares will always have some value because not all investors are completely irrational and some investors can calculate the value and at some point will say "Fuck all those people selling it, I think they are all mistaken because I can actually calculate the value of it and the shares are now cheaper than they should be so I am buying".
This should be enough for the instrument to weather even very negative but temporary sentiment.
But this is not true for crypto. Crypto does not have innate value and when it goes crashing down it can easily crash to zero.
Over long time, without giant institutional investors propping it up constantly, it is guaranteed that it will happen at some point.
This comment seems to be focused on the viability of any individual crypto, but that _shouldn't_ matter for the value of a company like FTX.
FTX has value because it has customers, growth, and most importantly: revenue.
If any one crypto goes bust then it shouldn't hurt FTX in the long run, unless they were leveraging that crypto to make unscrupulous bets. That very well could be happening via Alemeda.
So you may be right that this is destined to come crashing down, but it doesn't seem like the facts are proven yet
I can't speak about FTX the company, because I just don't know their business.
I am speaking about crypto in general.
From what I have seen a lot of companies popped up that are purely bound to crypto and so almost all of them will fall when crypto falls. Only very small minority have enough business footprint outside of crypto or will be able to pivot in time to avoid demise if it happens.
From CZ
This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com and help cover the liquidity crunch. We will be conducting a full DD in the coming days.
Even if FTX has stopped withdrawals, it does not necessarily mean they are insolvent. But remember, no smoke without fire.
Like all other financial institutions, they can process only certain amount of withdrawals in a time frame, limited by their banking partners and so on. Currently their are under enormous pressure, as their competitor Binance has decided to dump very large amount of $2B FTT token they received as part of the exit from FTX equity round where they were a seed investor. This will put FTT price under pressure and people correlate this price with the integrity of FTX. Also, FTX associated entities have loans collateralised by FTT tokens, so if the collateral value falls too much the loans are liquidated. Based on the FTX user agreement, this should not have effect on user deposits, but might have negative effects on other FTX associated entities like Alameda the quant trading desk.
The fear is causing everyone to withdraw from FTX and this has then clogged their withdrawal capacity.
Generally, if Binance would not have been hostile, they could have dumped their FTT tokens with less effect on the markets. They chose not to do so and telegraphed their dump very openly. This does not reflect well on the crypto industry as general. We will find out very soon.
Note that this kind of issues do not happen on decentralised exchanges (DEXes) where any reserves are transparent and smart contract controlled.
this is the biggest issue. if they are having any kind of technical issues they should be on top of it.
even if everything is fine by tomorrow and withdrawals are working again, this radio silence is unprofessional and at this point it feels like they are trying to avoid saying anything that will be held up in court against them.
>Generally, if Binance would not have been hostile, they could have dumped their FTT tokens with less effect on the markets. They chose not to do so and telegraphed their dump very openly. This does not reflect well on the crypto industry as general. We will find out very soon.
I think this is a good thing. Companies overleveraging themselves like this _should_ be punished or at least have the risk of this happening hanging over them. FTX tried to create an infinite money machine, it didn't work. They aren't innocent victims here
Let's break this down. If you're FTX, you don't have ATMs. You have a digital teller system that is leveraged against your own liquidity. If you fail to go liquid, one of the first things you'll stop doing is liquidating other people's transactions. This is a problem, because it creates an adversarial relationship between the currency-holders and the exchange managing their funds.
Making matters worse, cryptocurrency is not a bank branch. Large transactions can happen on-chain without announcing anything to anyone, the bottleneck only hits once you try liquidating funds you don't own. Maybe you're right, and FTX has fallen on some bad times. Whatever the case may be, this is entirely their problem and one of many hundred issues that crop up when you create custodial crypto systems. I hope they continue to fail and remind everyone how P2P currency is meant to be distributed.
I don't really get what you are talking about. Any sane custodial system has "hot" funds from where customers withdrawals are processed from. When the "hot wallet" drops too low, it is refilled from "cold storage" which is high security offline storage, and usually way slower to get funds out of because humans are involved in the process.
If business is going as usual, customers don't see anything, because hot wallet funds are kept at acceptable levels. Not too high, because you don't want to have too much funds online in a case a hack happens. Not too low, because you want customer withdrawals to function. However, if some kind of panic happens and people start withdrawing a lot at once, then you will always have delays, assuming that you have a sane system.
Moving from cold to hot wallets in an environment with regulatory requirements, redundancy, multiple partial keyholders, and offsite storage could easily take days to weeks and require scheduling access to the physical vault holding the cold storage. You're conflating hot and warm storage - warm can replenish hot but cold requires physical access to somewhere ideally unrelated to where day-to-day operations run.
Xapo, one of the biggest cold wallet firms in the world, has a security feature that you can request where their people fly on a private jet to meet you personally and confirm face to face that you indeed are the one making the request to move funds from their cold wallet.
The problem is that even your "sane" system will consistently fail to be appropriately liquid, even when compared to traditional finance. Exchanges are a liability being thrown into the mix, and since the cold/hot funds aren't regulated they could frankly be spent on anything. Their cold wallet could be tied up in the speculation market or being leveraged against lenders. Every one of these exchanges has every incentive to operate against the user's wishes, at the end of the day.
Exchanges simply don't work. The comparison between them and banks ignores the surrounding regulation and guarantees that banks are obligated to issue you. Are my FTX holdings FDIC insured?
> Every one of these exchanges has every incentive to operate against the user's wishes, at the end of the day.
It's not that simple. Operate enough against the user's and you'll find yourself indicted. Not being regulated doesn't mean it's a free for all and you can just take the money.
> remind everyone how P2P currency is meant to be distributed
Exchanges arose because pure P2P currency distribution is impractical. Crypto's assumptions about whether, how, and why currency should be decentralized are fundamentally at odds with human behavior.
That's not a good analogy at all. FTX doesn't need to load a Brink's truck with physical cash and send it to various accounts, unlike an ATM machine.
This is closer to you writing a check and it bouncing not because you don't have enough money in your account but because your bank doesn't have enough money to settle the transaction.
It is fairly common for exchanges to have (short) pauses in withdrawals. The majority of funds are in a cold storage, and for security reasons it usually takes some time to get the funds out from there "live".
If lot of people are withdrawing at once, it would cause minor inconvenience to any exchange. They have to transfer funds from cold storage, and that takes time. It is almost impossible to determine if an exchange is solvent or not until you know their cold storage addresses.
Seriously? This is kind of incredible. SBF has always seemed like an interesting operator in the space, and his proposals for regulation now appear to have gained him a lot of enemies. I wonder how much of this market pressure is organic vs organized.
Certainly CZ from Binance seems to have planned a squeeze on them.
I'm guessing they sold as much as they could before the announcement, but regardless of the theoretical money value i don't think there was actual hundreds of millions of liquidity so using this stack to wipe out a competitor is probably the most effective way of using it
And I love how you have self-professed specialists that tell you "no this will never happen". Finance is full of over-confident people that don't know enough or have too much at stake.
I wouldn’t consider the crypto universe to be “finance”
The vast majority of finance people have been in the Matt Levine school of thought the entire time - the entire industry is a ponzi and every crypto person who thinks the way traditional finance does things is stupid will end up slowly replicating all the traditional finance structures and norms because it turns out they exist for a reason
I used to work in (trad) finance and while I want to agree with you, there's also a lot of trend following and going to where money is moving, with a belief that if it does go to shit you'll see the writing on the wall first before your winnings turn into losses.
The vast majority of finance people don't give a shit about the value of the product. Their business isn't to take risk or speculate, that is what your money is for. Their job is to give the people what they want, and earn hard-money commission. That is it.
I will say though: I think crypto is here to say, I think normal finance is here to say, they aren't incompatible. What I think was illogical was to suggest that blockchain was a substitute for very efficiently run operations (like custody)...but it could be used elsewhere (for example, having investment funds do transfers on a blockchain is interesting) because it is also true that other parts of the industry are pre-historic (anything retail-facing is usually expensive and poorly-run, the whole retail fund value chain is a joke).
FTX has to be one of the most ubiquitous names in crypto at this point, most recently seen by everyone on the jerseys of umpires in the World Series. I can't even imagine the kind of fallout from this if it keeps heading in this direction.
Wow, that's crazy. FTX was the company that saved a lot of crypto companies that were about to default on their liabilities in the first stages of crypto winter. And now they are the one that are going under. Ironic.
With respect, this isn't "ironic" at all, and I don't mean this as some stupid quibbling about the definition because I mean this for all definitions. Those two facts are quite connected; maybe not completely directly, but they are far from independent events that just happen to be occurring in some unexpected manner. At the very least, it means I interpret the rescue as another level of razzle-dazzle rather than a rescue based on solid fundamentals. This doesn't surprise me too much, your mileage may vary.
What's ironic is that they did this at all. It's like they positioned themselves as the central bank of the crypto world. Only they skipped the "full faith and credit" part and made their contract be "hey, don't worry about it".
I’m not convinced they’re going under. Is Alameda in trouble? Maybe, but FTX is basically having a bank run. Just because things are slow processing doesn’t mean they’re going under. SBF came out and claimed to have all customer deposits.
All of HN knows that Tether is a scam that will implode AnyMomentNow (TM).
However, notice how for the second time in a year an unexpected crypto entity (FTX/Alameda) is the actual one which is in difficulty. The first time being 3AC/Celsius.
In finance, when everybody knows something, it's 95% likely to be false.
The problem with scams and pyramid schemes is that they can survive for a very, very long time limping around - all they have to do is pay off enough angry people that doubts don't explode too much and cause legal trouble, or have enough gullible fools which don't want to sell because of sunk cost fallacy.
Crypto scams/schemes and also legitimate crypto service providers also have another vulnerability: getting hacked or external influences (e.g. economic crises, legislation, sanctions or asset seizures) making their business model impossible to continue.
The problem is: it's sometimes very hard to determine if a crypto service is a scam, a pyramid scheme, a money-laundering operation or a legitimate service. And almost nothing of it (except certain NFTs which have legally bound real world entities tied to them such as [1]) is backed by actual real-world liquid-ish assets.
FTX has been throwing out red flags for the year or two I've been aware of them. I made this comment four months ago (around the time of 3AC) about how they weren't making sense:
https://news.ycombinator.com/item?id=31937498
My hackles go up when I see money suddenly appear from nowhere
Possible interpretations range from (optimistic) a delay in pulling funds from cold storage due to unusually high levels of withdrawals to (pessimistic) FTX collapsing.
There was a post in here warning about just that three or four days ago, there were still people accusing the writer behind the post in question of hunting for a new scoop and such. Looks like he was 100% correct in his assessment.
After the 2008 financial crisis shook my faith in banks, I really hoped it would be replaced by a system of wildcat banks located in offshore tax havens speculating on their own virtual scrip and waging cyber-warfare against each other. Good job.
For other crypto-naive, I found this article useful in explaining what exactly FTX and FTT are:
"But what’s so special about the FTX crypto derivatives exchange? What's the use case of the native FTT coin, and why is the project tipped as one to watch for the future?"
https://etherscan.io/address/0x7abe0ce388281d2acf297cb089cae...
FTX seems to be processing withdrawals normally. For the life of me, I can't understand why journalists love to speculate instead of doing a 5-second search on EtherScan.