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Mass of transactions leaving crypto.com wallets (thechainsaw.com)
281 points by marban 79 days ago | hide | past | favorite | 328 comments

If you’re seeing delays, get out now. Don’t think about it. Pull as much money as possible, out, now.

The exact same thing happened at Gox. I did all kinds of mental rationalizations. Oh, they’re too big. Oh, failure was unlikely.

I managed to siphon out 7 BTC. Then I traded it 2:1 with some fellow from IRC for his BTC locked up in Gox. Woo, I was going to make a 14 BTC payday.

Nope. In fact, trading was still open on the exchange. I took a risk with that goxcoin. When the dust settled, I was left with 7.76 BTC that I couldn’t access. It’s still there. That was almost 10 years ago.

Don’t make my mistake. The very first sign that there was a problem was delays, followed by transactions over a certain amount not processing. People seem to be reporting both.

Sorry that happened to you.

I'd argue the time to get out passed long before delays. The time to get out is when a competitor has delays(if you're so lucky). I remember reading and studying Celsius vs Voyager for about a month before I put low 5 figures into Voyager. Hey, free money right?

Then Celsius hit snags, and people were -still- recommending Voyager. I noped right out and withdrew it all.

What do you know, a couple weeks later Voyager suspends all withdrawals. I believe I have like 9 dollars tied up still with them, because I keep getting weekly updates in their 'plan.'

I do feel for people who lost more than I put in, but at some point you have to expect people to know money isn't free and the gravy train doesn't last forever.

Since all of these systems are negative-sum, in almost all cases, the majority lose more than they put in. That's how these scams work.

I would discourage everyone from developing the apetite for "free money" in these cases, because it isnt free. You were just lucky enough to be early in the pyramid scheme which ends with the vast majority losing everything. It was their cash you withdrew, that's the source of your "free" money.

If people want to know why these scams are so common, its because they work. People early-in, early-out extract money from the rest.

Nevertheless, in almost all cases, by the time you hear about the opportunity, you're too late to scam people. If nothing else, at least presume this.

(which is the anti-dote to FOMO: by the time you feel FOMO it's too late, you'll be the dupe)

Yes, or more bluntly: if you identify something as a Ponzi but are able to get in and out fast enough to profit, that is stolen money and you are as culpable as the original founders.

Ha ha ha! Nice try!

Even if you don't know it's a fraud, you can wind up losing the profit. This famously happened in the Madoff ponzi:


> Investors who profited in good faith from Bernie Madoff’s Ponzi scheme must return millions they received in excess of their principal, the Second Circuit ruled, affirming judgments allowing the firm’s liquidating trustee to claw back the funds.

> Net winners of Madoff’s infamous Ponzi scheme don’t have property or contract rights to profits earned over and above what they invested, even though they were unaware of Madoff’s fraud, the U.S. Court of Appeals for the Second Circuit ruled Thursday.

Wow, that's pretty bad. Not only you take the risk but you are doomed to loose either way.

> Since all of these systems are negative-sum, in almost all cases, the majority lose more than they put in.

This is a solid argument and I'd have made it once. But given how the situation is shaping up it is difficult to avoid the comparison to gold which is also a net-negative system, has been waddling on for several thousand years now and has proven irrepressible as an asset (despite many credible efforts to stamp it out).

The argument about whether crypto as a system can create value has been settled in the affirmative. We've never seen these sort of reliable transaction guarantees before in a monetary system and some people are willing to pay for that. Value is being created. The only question still open is what cost is appropriate. So far the market has been consistently saying "more" but maybe that is an aberration.

Gold is different to Bitcoin/Cryptocurrency in a few keys ways, not least of which:

  - it's a physical object
  - it has use value in jewelry 
  - it has use value in electronics and other industrial applications
Gold storage in itself doesn't create value, but jewelry, electronics etc do.

I anticipate these being common points so here is my quick rebuttal to each:

> it's a physical object

That isn't an argument for or against crypto. Crypto is a virtual object and that is desirable, makes it easier to get past a border. I can't easily get my gold out of the country - this is one of my considerations when I started buying in to Monero. There'd be a lot less interest from inside China if crypto was a physical object.

> it has use value in jewelry

Yep. Think about that deeply. One of its primary functions is looking good, and it isn't do so well at that job compared to coloured glass. The point of gold jewellery is to show off - politely - that someone can afford to own gold. There is nothing happening there that Bitcoin can't do except Bitcoin is even more public about how much someone owns.

> it has use value in electronics and other industrial applications

And they'd be able to afford a lot more of it if the investors would go away. Gold's value has been a thing for literal centuries and electronics have only existed for decades. This isn't driving the value of gold as an investment, gold's corrosion resistance is. Crypto has arguably better, arguably worse properties over long periods of time. Really we are still to find this out, it hasn't been around long enough to know what a decade in crypto looks like (at equilibrium).

> That isn't an argument for or against crypto. Crypto is a virtual object and that is desirable, makes it easier to get past a border.

Crypto is like a family game of monopoly that gets a little out of control. There is this long-running game, and the family are really invested in trying to 'win'. So much so that they were willing to pay with real money to buy monopoly money from one another just to keep playing. As the game progressed, the banker gave out more money as people passed go, but the agreed amount for the monopoly money remained the same.

Neighbours watching the game see the family playing the game and ask to buy some monopoly money seeing it will be more valuable in just a few throws of the dice. This increased demand for a limited supply of monopoly money, which saw the people already holding monopoly money profit more. This further attracted people to the game. Soon the whole neighbourhood is trading in monopoly money, and everyone who does sees a profit.

Off the back of this successful and profitable game of monopoly, others tried to replicate it in a nearby community. Services started popping up where people offered to hold the monopoly money for people, and would allow it to be exchanged for other monopoly monies. Secretly though, the monopoly exchanges were busy trading those people's monopoly money so that they too could invest it further in the game. They justified it to themselves, promising they would return it as soon as they made it back.

Some of these exchange services played way too dangerously, and lost all of their monopoly money. This startled players of the game, and they decided to withdraw their monopoly money investment for real money they trusted before playing the game. This in turn triggered those exchanges that also gambled monopoly money to have to admit that it was no longer there.

Now to current day. More and more people get startled by losses and start pulling out to recover what they can, as promises of returning to the glory days of high value monopoly money never materialize. Most of the exchanges have their liquidity in other monopoly money exchanges, and as these 'assets' diminish, so do their own. Some hold real world liquid assets, but the people running the exchanges quickly pull this out for themselves.

It's the future, and anybody left holding monopoly money once again has a token money for a game people stopped playing a long time ago. They hold onto it because they either couldn't get out before it all imploded, or they delude themselves into thinking everybody will come back to the table and start playing again.

The monopoly game is over, and the family no longer talk to each other. Some of the family are now mega rich, but this was at the cost of the majority of players that joined the game, mostly those with smaller amounts invested and those who turned up late.

> And they'd be able to afford a lot more of it if the investors would go away.

They wouldn't. Gold is super valuable because it has tonnes of special properties, and there isn't much of it.

It also doesn’t require the continuous input of the power requirements of a European nation to keep gold existing.


Gold has kept its value for thousands of years because it's not net-negative. People happily buy gold and "lose" money on the deal, because they value the gold more than the money.

So investors can gain money, buyers can gain gold, and everyone can come out ahead.

Unlike crypto, where one investor's gains come at the expense of another investor who loses, because few people buy crypto for its own sake.

>these systems are negative-sum

that kind of assumes the tokens produced have no value which in the case of stuff like bitcoin seems empirically not to be true. Even after all the crashes etc. you can sell them for >$10k each

And if you say the people paying $10k+ for bitcoins are just mugs, it's all 0s and 1s, it is hard to differentiate from regular currency which is also just bits of paper or 0s or 1s. Both have value because in practice you can exchange them for real stuff.

The whataboutism kinda falls flat since both can be true: fiat currency from a govt and crypto can both have zero real value, propped up only by shared delusions.

However, govt currency is propped up some by it's taxing authority (the govts ability to take value from its residents)

Would this affect exodus? Or I guess they don't really compare.

But Matt Damon told me fortune favors the brave

Am I watching a bank run in real time?

Exchanges cannot get bankrun on. What you're watching is fraud being revealed.

They absolutely can if they operate like banks with a fractional reserve. All of them do, they cannot resist the temptation to "efficiently allocate" the huge amount of money they are sitting on.

That's what the fraud is.

So-called crypto "exchanges" often function as a mix of exchange, broker-deal and bank.

100%. People are being fooled by the word Exchange. It makes them think that this is the same category as NYSE or NASDAQ.

Exchange should be a sort of a reserved word, like bank.

It is. But in the real world there is no compiler to prevent misuse. There is only a very lazy and incomplete runtime checker.

Even compiler is kind of a misused word though...

Runtime checker as in the guys who are eager to correct the terminology? Hahahaha

Of course they can if they're running on fractional reserves AKA fake liquidity. I don't think there is any regulation against them doing that.

In its terms of service, FTX was supposed to hold the customer assets at 1:1 ratio.

Not doing so is fraud, and there's already regulation against fraud.

It's totally illegal and the SEC is chatging everyone they can reach. But most are out of reach, because they are outsdt US and the Presidents refuse to use the military to defend USAns against finacial warfare.

you are seeing a chapter in the history books in real time. like Enron stuff

The closest real world analogy is probably https://en.wikipedia.org/wiki/MF_Global : same story of illegally transferred client funds from what should have been a plain custodial brokerage.

Isn't Mt Gox in the process of paying based on later found coins?

A fraction of that total is is worth several times more than the USD value of BTC at the time.

They will after January 2023.

And yes... bitcoin has gone up a lot in that time. That doesn't mean the creditors are happy about their crypto being stuck on a bankrupt exchange for almost a decade.

I have a small fortune in the civil rehabilitation proceedings. Since mtgox went down, I've since met my wife, got married, had children, started a Masters, finished a Masters, and bought a house. Having access to my crypto at any point during that period would have been really nice.

Maybe losing that crypto taught you a lesson and made you a better person and presented you from losing far more in the intervening years. If you got your crypto back you might have been misled into believing that when you give your keys to a strangers, it's still your crypto.

Come for the free money. Stay for the life lessons!

Do you happen to know if there is any way to apply for this process later?

I had tens of bitcoins when MtGox went down. But I have no proof of the transaction or even a proper memory of my account name, and I missed their stupid deadline for applying for the payback program.

You can try by contacting the official support email (support@mtgox.com), but I believe you have missed all deadlines to register as a creditor.

Thanks, yeah I think so too..

The entire mtgox database was leaked and was googleable, with real names. You should be able to find yourself in it.

I'm not sure you can still get approved as a creditor but have a go.

Thank you, I will check it out. Yeah I think the deadlines are already over, the whole process was quite shady and I did not even realize you can apply, until the deadlines were over.

It is unfortunate and no creditor should be exactly "happy" about the situation or completely satisfied with the outcome.

But everyone early on crypto knew there were some risks involved. And there is a chance you, or other creditors would have, for whatever reason, withdrawn and converted earlier to less USD (or even lost everything). Getting a fraction now can be a win for many. Call it "enforced diamond hands" if you like the meme...

I guess in the average case it is a fair outcome.

If you’re looking for an opportunity that might 2x your investment over a decade, I imagine the good old stock market would be better than gambling your funds on a dying exchange. But what do I know.

I put in $11k at $1,100/coin. I’ll be lucky to walk with 1 BTC after more than a decade. So, not really. And I’ll believe that when the coin is in my wallet. Till then, it’s a mental write-off.

>>I’ll be lucky to walk with 1 BTC after more than a decade.

The payout is clearly stipulated on the MtGox website, assuming you've done the work of registering as a creditor. The minimum you'll be walking away with is roughly ~1.5BTC.

> And I’ll believe that when the coin is in my wallet

In your wallet? 10years of your money trapped and you'd voluntarily choose to leave it dangling it in front of theives as soon as you get it back?

Will this contagion spread further? Without regulation, any crypto company could be doing this.

Is Coinbase at risk?

This is remarkable to watch unfold.

Brian Armstrong from Coinbase was on the latest All-In podcast and talked about this. It sounds like they're not at much risk as they are US based and are regulated to have much higher standards of keeping reserves


Brian Armstrong has to say Coinbase is risk-free... I mean, what else is he going to say?

If what he's saying is true, there isn't really anything to worry about, and coinbase will likely be the winner here with a proven track record.

If they are truly holding customer funds and crypto 1:1, then you cannot do a bank run on them. They will just pay out. Which is what Armstrong says.

Frankly, after all this shit if an exchange can prove they are reliable and reputable, which Coinbase has so far, they are likely to emerge quite well out of all this (unless the entire crypto market loses all credibility or gets regulated into nothing).

> if an exchange can prove they are reliable and reputable, which Coinbase has so far

I have no idea how Coinbase operates, so please forgive my ignorance: How do they prove that they are trustworthy?

They are a public company, they have an actual board, they are also audited by a big 4 accounting firm.

This is MUCH more transparency than some corp in the bahamas.

Obviously it's not complete security, Enron was a public company and audited, but it's still considerably better than FTX or Binance.

> If what he's saying is true, there isn't really anything to worry about

I don't believe that is entirely accurate. Coinbase used to have a pro account with margin trading. Unless they managed to clearly unwind that business there is a risk that something went wrong at one point.

Margin trading is safe for the exchange if it works as usually described in the terms: they just act as a bookmaker reallocating customer funds according to which side wins each peer to peer bet. There's usually rules that describe what happens in gaps, closing the winning side with a win that never exceeds what the losing side put down when opening the bet.

If they steal customer funds, then all is off, but same when there is no margin trading involved.

If the allow margin gambles they probably are not selling the cryptos for cash to save transaction cost and just calculate the balance virtually. With all the cryptocoin volatility I don't see how process margin calls without keeping the actual cryptocoins either, so you can give them back to the lender.

Ah ok, because CEOs never make a public statement and then the next day literally the opposite of what they just said happens. Not saying that this will happen with Coinbase, but I would not believe that Coinbase is not at risk just because their CEO said it isn't.

Would the CEO ever say "Yes we are a ponzi scheme as well"?

FTX pretty much did, 7 months ago :


Though it then, by definition, makes it not a Ponzi (at that specific point), since Ponzi implies deception : banks are also unable to pay everyone at once, yet they typically aren't called "Ponzi".

Banks have a liquidity and term mismatch, but are required to be solvent. Ponzi schemes offer fake balances and are insolvent.

It's not clear at what exact point FTX became insolvent, but I think the CEO writing an $8bn disguised accounting entry for tokens he'd lent to his girlfriend may have been it.

There's also maybe the option of being insolvent but nobody caring because the money is too good..?

Not sure what to call this since I assume this has been regulated to death in normal finance ?

But it wouldn't surprise me if it had happened at some point at FTX, considering all the greed and hype around crypto...

Though I guess it might be a moot point : information doesn't travel instantly, and a judge might still deem you "guilty of Ponzi" (or whatever term is appropriate) if you haven't literally been shouting "We are insolvent !" from the rooftops ? See again : regulation.

"Trading while insolvent" we call it in the UK; the legal obligation is to call in the administrators when you realize you're insolvent. Which they have now done. And insolvent companies generally do themselves, because it's less painful than the alternative.

There will probably be a lengthy argument in court (but which court - Bahamas?) as to whether they should have realized this earlier and whether their accounting was deceptive or incompetent.

(those interested should read "Lying for Money" by Dan Davies, it's an entertaining and escalating history of fraud)

"Trading while insolvent" is called "equity" or "unsecured loan", and it's legal and regulated.

When you are big enough liquidity and solvency are the same thing.

> banks are also unable to pay everyone at once, yet they typically aren't called "Ponzi".

There's a distinction between liquidity and solvency. Banks can run into liquidity issues, but in theory if they do their job right they should stay solvent, and will be backed by insurance / reinsurance and such. Basically a very different world from these yolo crypto outfits running out of offshore tax havens.

I am not sure there is a clear distinction between the two for fractional reserve banking ?

The bank can have done nothing "wrong", yet if the situation is bad enough : bank run + entities it has been lending to going bankrupt + entities that could bail it out going bankrupt too ; then the bank IS going bankrupt, and taking most of the opposite fraction of the money it claimed to "hold" with it...

This is where the "lender of last resort", i.e. the government, comes in. Depositor losses are sufficiently bad for the economy as a whole that it makes sense to prevent them at almost any cost.

The UK ended up owning RBS: https://commonslibrary.parliament.uk/royal-bank-of-scotland-...

Ireland got hit pretty hard: https://www.irishtimes.com/business/financial-services/2022/... but did at least manage to send Sean Quinn to actual jail.

Cyprus had too large and too dodgy a banking sector for its government to cover, so there depositors did incur real losses ("haircut").

>I am not sure there is a clear distinction between the two for fractional reserve banking ?

If your assets are real and not shitcoins, there is a difference. If I have $200 in my bank, the bank takes $100 from me and buys AAPL stock (and adds their own cash); and then I go to withdraw my $200 on Saturday:

1. The bank is illiquid. I want $200 cash, but the bank only has $100 and 1 AAPL stock.

2. The bank is (likely) solvent. Unless AAPL crashes below $100 on Monday morning they are likely good for the money (AAPL, a blue chip stock, is unlikely to crash below $100) on monday morning. In this case a lender of last resort will step in (like the Fed) and bank may pay some premium for an emergency loan.

It's statistical, like everything, and the difference is whether you have a guaranteed valuation for your illiquid assets. If you are backed by the full faith and credit if the US (taxation, IRS, and military), you are 99% solvent. In Brazil, maybe 80%

Still fraud though. Basically the banks convinced the coin makers to issue new money if they become insolvent. It would be the same as FTX being able to call the money printers of each currency to get the needed funds to stay afloat. Amazing this is not considered a criminal enterprise.

The banks are just on a different level of grift when compared to crypto exchanges

No, you're completely missing the distinction between insolvent and liquidity problems, even though it was pointed out in the post you replied to.

A bank with liquidity problems borrows newly printed money from the central bank and repays them with the profit generated from its loans. An insolvent bank that made too many loans that won't be repaid can't repay loans the money printers might offer it and so still gets wiped out. (Its customers get bailed out, but its shareholders don't).

Sure, I can understand there's a difference. But what's not equivalent with what happened in FTX? It's essentially a bank run without the ability to get a lender of last resort. Banks are just more protected in this situations, but in the end they are still playing the same game as the crypto exchanges.

> what's not equivalent with what happened in FTX?

Banks openly lend money to a people who are not the bank's CEO and companies which are not run by the bank's CEO and make a profit on the vast majority of them repaying the money, though typically over a time frame of years, not days. This means the lender of last resort providing funds for those days also expects to get repaid

FTX secretly lent customer funds to a single company run by its CEO to bail it out, and there was no realistic prospect of that money ever being repaid.

If you honestly think that's "equivalent", I'll happily share Paypal details so I can look after some of the money in your bank account in what you consider to be the same way the bank does...

You are completely wrong.

FTX.us was also US based.

I don't really see a reason to be any more trusting in Coinbase than in FTX, since as far as most people were concerned, FTX was a completely reputable company just a month ago. Well, as reputable as crypto companies go anyways.

And now we have reports that FTX had a backdoor to "alter the company's financial records without alerting other people, including external auditors".


Well, for one thing, Coinbase has a board, and FTX did not. They also had no CFO. They were not “completely reputable” by any reasonable standard; it’s just that no one cared at the time.

> Well, for one thing, Coinbase has a board, and FTX did not.

So did Enron.

Just listening to the bossman of FTX in interviews and reading about him was enough to make me swerve anything he touched. Seemed like a shop of cowboys.


Yeah, everything about him screamed "don't trust this man with your funds", and the stuff that has come out since has just reinforced that.

In many ways he reminded me of the MtGox dude.

This Mt Gox dude?


If he is shady, are you implying Gox was an inside job like FTX?

He has gotten a lot shadier since his MtGox days in thebesly days of crypto, when arguably he could have been merely ignorant.

I’ve been seeing him called “Fried Bank Man”.

I think it depends a lot where an exchange is located, if the place has rule of law and proper supervision for financial service providers. Also, if an exchange has properly regulated external audits.

Coinbase would find it much harder to get away with such stuff as a US resident and publicly listed company.

At the very least, coins get devalued more.

Thanks for sharing this. I remember back on IRC when folks were buying and selling mtgox debt accounts.

I never even logged in or filed a claim or took a screenshot or anything- just wrote it off

The problem might be different here, but all the exchanges I have used have ended up dead, and I consider myself very lucky not to have lost everything I had.

First there was MtGox where I happily sold BTC and then waited weeks for a bank transfer that never came. I was lucky to be able to re-purchase some of the BTC (at a loss) and transfer them out. That was just a few weeks before MtGox fell.

Then there was ANX/ANXPro. Everything was fine for a while. Over time, they ceased trading and at some point app and website stopped being functional. I had left some crypto there, at time it wasn't worth much. I panicked once the value shoot up and I couldn't find a way to recover them.

Fortunately, I had chosen ANX because they were local. I went to the listed address there in person, expecting it to be closed. I found the place, it was nondescript, no sign, no-one in sight. I was shaking when I pressed the bell and a guard came to answer. Fortunately, the company was still running in some fashion. There was a counter and I was able to transact my crypto out. Had I not been local, I would have probably lost it all.

Then there was FTX... I traded cautiously last year for a little while, never leaving too much for too long, then decided that crypto was all too nerve-wracking for me and sold everything I had. Probably the best thing I ever did. I have friends who lost big in the FTX debacle and will probably never recover a dime.

The morale of the story is that I wouldn't trust ANY exchange. They move so much money that the temptation is too great not to use it for something else. Despite claims, I don't trust any to have the structure and oversight necessary to avoid misusing funds that don't belong to them.

> The morale of the story is that I wouldn't trust ANY exchange

Or, more generally, don't trust unregulated financial businesses and/or operating in shady offshore countries.

FTX was both unregulated and based in Bahamas.

Nassau is one of the least shady places with over 340 sunny days per year.

A lot of sun means a lot of shade ;)

>all the exchanges I have used have ended up dead,

The fact that MtGox was run by a bozo was obvious from the day Karpeles gave his first interview.

Hinsight is 20/20, but the very same could be said from the FTX crew.

See this for what I mean: https://www.youtube.com/watch?v=zTFhnpf-IE0

I've been using Bitstamp since 2013 ... they're still here and ticking along nicely.

They were hacked once in their entire history and they swallowed the loss and customers were made whole.

Also: in spite of me liking Bitstamp, I've never left any amounts on there, be it cash or crypto for more than a couple of days.

What is the point of owning crypto if you're going to leave it on an exchange?

By doing that, you're basically eliminating the one key characteristic of the medium that no other financial instrument has, save perhaps gold buried in a hole in the forest.

Repeat after me: Not Your Keys, Not Your Coins.

Or, maybe your magic touch makes them go blow up. Consider that *you* might be the problem.. ;)

(Like Robert Lincoln, who witnessed 3 presidential assassinations. I bet he was persona non grata by their successor.)

TradFi says "in the long run, we're all dead"

CryptoFi says "in the short run, we're all dead so exfiltrate the funds before everyone notices"

Can’t you use an exchange, keeping your money offline (eg, in an hardware wallet) and just authorize the required amount out and in, in real time?

Not in "real time": blockchain settlement has to wait for a block. And you incur on-network transaction fees plus whatever fee the exchange imposes for transfers out.

(Besides, many people are "day trading" on these exchanges because it's a form of addictive gambling)

Oh and then there's "staking": https://ftx.com/staking which encourages people to keep tokens on the exchange by pretending to pay them interest rates. And offering various other multi-level-marketing incentives. I see "Free Daily ERC20/ETH Withdrawals : NaN" on that page, which is fun.

You can, but it's impractical (operationally and in tx costs) as it requires a live bot to constantly adjust margin between the exchange and the self-custody wallet, due to the way typical crypto trading products work: at max margin, the chance of liquidation is too high, not so much because of liquidation itself (that can be risk managed and averaged out) but due to the enormous implied fees associated with liquidations. Example pricing: bet 5 at max leverage, lose 2 due to market movements, the account is zeroed aka liquidation fee of 3.

Actually using crypto is ridiculously complicated compared to a SEPA transfer from your bank account or a shares trade in an app.

People like the path of least resistance which is why everyone uses exchanges- it's easier than using your own cold wallet. Exchanges for good or ill has made crypto accessible to the masses.

It is funny that solution to problems of crypto is exactly the thing they were invented to fight against.

Because crypto doesn't work yet (which is OK, it's new and experimental), but people want to pretend is does. Same as as these people people building allegedly quantum computers but where the real work is done by classical computers.

Nope. Crypto does work. Day trading is a problem of the old system that requires the old system tech to work.

Assets should be valued for their properties and for their scarcity (amongst other things), and not by trend waves amplified by day trade and/or even bigger waves of chained margin calls. There are some advantages of day trading, yes, but it is mostly noise and IMO it is very good that "real crypto" can't operate "fast enough" for those who practice it.

It's not new it's nearly fifteen years old.

Why are you still pretending it's new????

The moral of the story is leave when Renaud does.

News that SHIB makes up nearly 20% of their asset reserves[1]

Big asset movements between Crypto.com and Gate just in time for a proof of reserves disclosure[2]

CEO trying increasingly hard to convince everyone not to panic

Can't blame these people, really.

1: https://www.coindesk.com/markets/2022/11/11/cryptocom-prelim...

2: https://twitter.com/shegenerates/status/1591645956767883264

Maybe I'm missing something but is it a problem if SHIB is 20% of their reserves if 20% of what users are keeping on the exchange is SHIB? Of course we don't want what people actually deposited since it's a centralized exchange with no transparency. But by itself this isn't really a red flag...

They have 300x more SHIB than DOGE[1]. Is that realistic reflection of their users preferences?


maybe a significant number of people created accounts for the SHIB trading when SHIB was not supported in slower to adopt exchanges?

They were pushing SHIB hard in their marketing

Yes, it's yet another potentially destabilising factor you can add to the pile though.

How is it destabilizing?

If 20% of depositor funds are SHIB then 20% of reserves should be SHIB.

As far as I am concerned, if they have 90% of their reserves in literal dog shit that is fine IF their liabilities are also in dog shit.

I wouldnt pay $10,000 a turd, but that is my value judgement, if someone else does then their problem.

> How is it destabilizing?

Potentially destabilising is what I said. In a similar fashion to how 20% of my diet consisting of Taco Bell would carry a greater destabilising potential than a the same share of FDA recommended diet conforming home-cooked meals would.

> If 20% of depositor funds are SHIB then 20% of reserves should be SHIB.

You're the one bringing this up, not me. Not refuting it though.

They also deposited a significant money in FTX which they haven't clarified anything on yet.

From the article: "after it was revealed that multiple exchanges may have been “sharing” funds to post ‘Proof of Reserves’."

This is a good time to re-read Tether's "asset assurance consolidated reserves report" for USDT. "The Management of the Company asserts the following as of 31 March 2022 at 11:59 PM UTC: ... The Group’s consolidated assets exceed its consolidated liabilities. The Group’s consolidated reserves held for the digital tokens issued exceeds the amount required to redeem the digital tokens issued. ... The reporting date is limited to a point in time as of 31 March 2022 at 11:59 PM UTC."

So, there was a moment in time when Tether was fully backed. But the accounting firm explicitly states that their opinion applies only to that moment. One wonders what the situation was the next day.

Tether says their reserves, as of that date, included $20,096,579,998 in "commercial paper". But whose commercial paper? It's known that Tether's transactions don't show up in the usual commercial paper markets.

Money is being pulled out of Tether (USDT) in big transactions. US$3 billion in the last 3 days.

None of this is definitive. But it would be a good time to get out of Tether. There's no upside, after all, and there is a downside.

[1] https://assets.ctfassets.net/vyse88cgwfbl/1np5dpcwuHrWJ4AgUg...

Tether's assurances should always be read with this in mind.


> In the face of persistent questions about whether the company actually held sufficient funds, Tether published a self-proclaimed ‘verification’ of its cash reserves, in 2017, that it characterized as “a good faith effort on our behalf to provide an interim analysis of our cash position.” In reality, however, the cash ostensibly backing tethers had only been placed in Tether’s account as of the very morning of the company’s ‘verification.’

> On November 1, 2018, Tether publicized another self-proclaimed ‘verification’ of its cash reserve; this time at Deltec Bank & Trust Ltd. of the Bahamas. The announcement linked to a letter dated November 1, 2018, which stated that tethers were fully backed by cash, at one dollar for every one tether. However, the very next day, on November 2, 2018, Tether began to transfer funds out of its account, ultimately moving hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s accounts. And so, as of November 2, 2018 — one day after their latest ‘verification’ — tethers were again no longer backed one-to-one by U.S. dollars in a Tether bank account.

Tether is now perhaps the biggest fraud in history and anyone who has any doubts about it really needs to read these documents and the history of the players involved.

They’ve been caught lying again and again and again

> Binance is the issuer of USDT

Surely you mean Bitfinex.

Right, sorry. Edited parent post to fix.

Binance is not the issuer of USDT.

(Not necessarily on-topic, but highly-relevant and educational!)

For anyone interested in understanding the dynamics behind bank runs, the Diamond–Dybvig model [1] is worth reading. It describes a very simplified situation where due to banks short-term liabilities and long-term assets, a bank run is a valid Nash equilibrium. I think they won a Nobel prize for this model.

There’s also some very interesting discussion at the end about preventing runs: first if banks can suspend withdrawals, and second through central bank backing. I’ll avoid summarizing it because I’m too dumb — but to quote: “Deposit insurance provided by the government allows bank contracts that can dominate the best that can be offered without insurance and never do worse.”

[1] https://www.bu.edu/econ/files/2012/01/DD83jpe.pdf

The problem with suspending withdrawals for crypto firms is the market interprets it as your exchange is insolvent (as that has usually been the case so far).

This will crash markets (lowering your liquidity even more) and make people want to withdraw even more once you reopen.

The situation is made worse because a lot of exchanges issue their own token: CRO in Crypto.com's case. This token provides extra liquidity to your exchange, sometimes in the billions (on paper at least), that you can borrow against. The moment you mention pausing withdrawals, your custom token will crash to the ground and you'll lose a lot of potential liquidity (See Terra/LUNA & FTC/FTT).

> issue their own token: CRO in Crypto.com's case. This token provides extra liquidity to your exchange

Yeah, this is where the fraud happens.

They're treating the token like a bond when it's just .. a made-up thing? It's not a promise to pay, it doesn't have a claim on anything, it doesn't buy you votes, it's just a shiny Pog that you can trade?

This would be like a casino claiming its chips as assets.

> This would be like a casino claiming its chips as assets.

This phrasing is a great way to get the idea across.

> The problem with suspending withdrawals for crypto firms is the market interprets it as your exchange is insolvent

As it should. Inability to withdraw obviously means they don't have the money. Any limits on withdrawals are and should be major red flags. Exchanges should be punished by the market every single time they pull stunts like that until they learn the lesson.

And to underline the difference: suspending withdrawals can allow a bank's customers to [eventually] get their money back when the bank's creditors get repaid. And the bank never pretended it wasn't making loans in the first place.

If a crypto exchange suspend withdrawals, on the other hand, there's no reason to suspect they're just waiting on a bunch of loans to ordinary people and businesses to come in, especially since it usually means they lied about custody of assets.

Clarification: depositors are considered a banks senior creditors. They get paid before the other creditors.

The reason a bank would suspend withdrawals is so it can be either taken over in an orderly fashion (in the US supervised by the FDIC) or so they can get a liquidity infusion (in the US, depending on their charter, from the fed).

Those regulatory agencies and bankruptcy rules don’t exist for a crypto exchange so there is very little an exchange can be doing when suspending withdrawals that doesn’t end with the exchange going bust.

You can't "punish a market" after everyone stopped putting money in and started taking money out.

CRO crashed yesterday. Crypto.com's ability to raise money from CRO is much much less, and possibly non-existant now...

> The problem with suspending withdrawals for crypto firms is the market interprets it as your exchange is insolvent

That’s a problem with suspending withdrawals, especially by individual institutions, generally, I think, which is one reason why government deposit insurance is the better solution, in practice. Even the 1933 Bank Holiday in the US, a government-declared suspension of banking, probably only succeeded because the government established temporary emergency deposit insurance during the break.

The problem is, Crypto exchanges advertise themeselves as brokers. Bank run should simply not be possible: customers money/crypto should be "there” in the first place and not having be reinvested behind customer’s back. The panick is because delays kind of prove an exchange is fraudulent and the money is potentially gone if the exchanges investments have gone south, simple as that, no need for complex models.

Delays don’t prove an exchange is fraudulent. Small delays happen legitimately due to the hot wallet becoming empty during a period of greater than expected withdrawals.

In a period of normalcy, these small delays are forgotten. However users are extremely nervous right now. Users can interpret small delays as insolvency, which causes a torrent of withdrawals which take even longer to process.

I don’t know if crypto.com is solvent. If you have money on there, you should probably get it out now. But there is also an innocent explanation to all of this.

Crypto.com is a known bad actor, gliding on the dwindling benefit of the doubt. They'be had years to demonstrate a reputation for innocence.

believe this at your own peril.

> There’s also some very interesting discussion at the end about preventing runs: first if banks can suspend withdrawals, and second through central bank backing. I’ll avoid summarizing it because I’m too dumb — but to quote: “Deposit insurance provided by the government allows bank contracts that can dominate the best that can be offered without insurance and never do worse.”

The simplest approach for crypto exchanges to prevent bank runs would be to not lend out or trade with deposits. In fact, that's what some exchanges have always been doing (or at least are claiming to do).

> The simplest approach for crypto exchanges to prevent bank runs would be to not lend out or trade with deposits.

Except the consumer is drawn to the crypto-exchanges with significant "staking" rewards. Like Crypto.com or FTX.

When you're promising free money, you can't just sit on the money. You gotta lend it out to generate those staking rewards.

Now maybe, just _maybe_, the lending out of customer deposits could be a tightly regulated activity. Maybe regulations upon the types of securities that you lend to (ie: to AAA rated corporates), as well as maturity (ex: 1-week expiration or daily expiration).

Oh wait, that's a Money Market Fund. Add on FDIC insurance and you're now at a federally regulated savings account.

> Except the consumer is drawn to the crypto-exchanges with significant "staking" rewards. Like Crypto.com or FTX.

Staking itself wouldn't be a problem. There would be some risk involved in case of technical problems (for example due to Slashing on Ethereum), but in overall that risk should be relatively small. Exchanges could still hold all of the coins, but just use some of the coins for staking (if users owning the coins opt-in to staking).

The problem occurs when exchanges lend out stored coins without the approval of the user: Either to lend them for shorting or to invest them into something that they assume would appreciate faster.

Staking is a problem because it pretends to offer risk-free returns while investing in extremely risky assets. Or just straight up fraud.

None of the staking schemes have adequately explained who's taking the other side of the trade. Who wants to borrow a token for a very high interest rate? So far the only examples are "people putting it into an even bigger fraud" and "people providing soon-to-be-worthless collateral".

We might be talking about two different things here when using the term "staking".

I'm referring to coins that are staked by validators in a proof-of-stake chain. The "other side of the trade" is not someone borrowing the coins, but are the transaction fees on the chain and for some chains also the artificial inflation (due to newly created coins).

There is risk involved, but not traditional counterparty risk (when excluding the exchange itself), as nobody is "borrowing" the coins.

This is just a long winded sarcastic restatement of what parent said.

You may have missed my point then.

If you want a "stablecoin", its called VMFXX. https://investor.vanguard.com/investment-products/mutual-fun...

1 VMFXX has been $1 for decades, never budging, never moving. The regulations and infrastructure to support such a thing already exists and have always existed to anyone who has any clue about banks / finances at all.

So why haven't stablecoins been designed to act like MMFs (like VMFXX) ?? Answer: because the cryptocoin community does not want a MMF. Its the only explanation. The cryptocoin community wants 6%, 10%, 18%+ returns on their "stablecoins". And its impossible to do that with MMFs.

> The cryptocoin community wants 6%, 10%, 18%+ returns on their "stablecoins".

As far as I know the two largest stablecoins (Tether and USDC) do not pay any interest. The interest that some exchanges pay on stablecoin balances is because they lend them out and/or use them as collateral. But that does not have anything to do with the stablecoin itself. If VMFXX was tokenized on the blockchain it would be used in exactly the same way.

> If VMFXX was tokenized on the blockchain it would be used in exactly the same way.

I'm going the opposite direction here.

If Tether / USDC really wished to "prove that they have liquidity reserves", they should go to the US Government and get the "Money Market Fund" / "Money Market Account" stamp of approval. And then invite the banking regulators to come in and count all their reserves.

I don't disagree here. My point was just that the interest that you see on exchanges is not directly related to the stablecoins.

I'm not sure if there are any legal or regulatory issues that would prevent stablecoins from getting those certifications. Tether definitely looks sketchy, but USDC has regular audits with public results.

>”Now maybe, just _maybe_, the lending out of customer deposits could be a tightly regulated activity.”

This is a pet peeve of mine but I can’t stand the smug “maybe, just maybe” trope.

to be specific, it won the "Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2022". It's not affiliated with the nobel prize most people know.

I don't intent this as a dig at economics; there is no Nobel prize for mathematics either. Though I have my doubts about the rigorousness of some economic research, we all stand to benefit from better economics

Not affiliated with the Nobel Prize, except… the Nobel Prize website lists it.

I guess nobody cares about message forum well-actuallys, least of all the Nobel Prize itself.

> It describes a very simplified situation where due to banks short-term liabilities and long-term assets, a bank run is a valid Nash equilibrium.

> There’s also some very interesting discussion at the end about preventing runs: [...]

Did they not consider matching liability and asset duration as a solution?

For banks this often just isn't an option.

If nothing else, the core business of the bank is about borrowing cheaply (hence short term) and making risky, long term loans (hence bringing in interest).

If they want to finance the loans by long term loans themselves, much of the profit goes away and the business isn't sustainable.

It's obviously a sliding scale but that's the starting point.

Well, profit can always be increased by increasing risk. So the question is whether the additional risk incurred due to duration mismatch is worth the increase in profits.

It's obviously worth it to the bank's shareholders if the bank is bailed out by tax payers when things go wrong. But if there's no bailout it may not be worth it for them -- at least not in the long run.

Banks get most of their capital from equity, which is an infinite-term.

Short term loans have higher interest rate, usually, but have transaction fees.

> Did they not consider matching liability and asset duration as a solution?

People would not be keen on 30 year notice deposit accounts to match 30 year mortgages.

I disagree. Pensioners are in need of this exact arrangement, ie. creating an income from their life savings.

But multi-year CD ladders are common, which can provide a runway for adjusting risk.

crypto dot com CEO Kris Marszalek has posted earlier today that his exchange has regularly sent twenty million dollars or more to other exchanges to hedge exposure gained by trading against its customers. crypto dot com CEO Kris Marszalek does not seem to understand that he has confessed to several crimes and that customers who deposit dollars at an exchange expect that they have claims against a boring business that custodies funds and collects fees, not claims against an exciting business that regularly assumes twenty million dollars of directional risk by selling customers tokens they do not physically have and then buying them somewhere else later. Here is crypto dot com CEO Kris Marszalek's confession: https://twitter.com/kris/status/1591928306097868800

crypto dot com CEO Kris Marszalek also does not seem to understand that this is a particularly bad time to tell his customers that he is an incompetent criminal who is constantly trading against them with funds he does not have and misappropriating their deposits because less than a week ago customers of a different exchange lost 10 billion dollars in a similar situation.

Kris Marszalek is in Singapore, which so far has proven lawless with respect to crypto (stealing a $billion is legal, while smoking a joint of marijuana means 10 years in prison) and uncooperative with other counties.

The US has more reason to sanction the rogue dictatorship of Singapore than Cuba.

The Monetary Authority of Singapore is slow, but like the rest of the Singaporean government, it does not fuck around.

Any crypto firm in Singapore is equivalent to the Bahamas, Caymand Islands, Virgin Islands, etc. for me.

> to hedge exposure gained by trading against its customers

This is not how hedging works and he also explains this in a subsequent tweet: https://twitter.com/kris/status/1591928970693726211

It's not "trading against it's customers" and very common practice with basically all exchanges to make sure liquidity is always there

> This is not how hedging works

I read his tweet like eight times, going "wait I don't understand what he's saying, what am I missing?". Then I finally realised he was full of shit. No, that REALLY isn't how hedging works, indeed! :)

If the exchange is not trading against its customers, and it is only custodying customer funds and collecting fees, how does it regularly acquire 20 million dollars of shitcoin exposure?

Here's one way a crypto exchange could work:

- many users deposit coins and fiat

- some of those users are market makers

- the users trade with each other

- the exchange just custodies the coins and fiat and collects fees

- the exchange does not need to send customer funds to another exchange because it is not assuming twenty million dollars of directional risk

Can you explain your understanding of how it should work instead?

Can you explain why people with these roles work at an exchange, an entity that does not engage in systematic trading or take on any nonzero amount of directional risk ever? https://www.linkedin.com/in/chen-x-74a83322/ https://www.linkedin.com/in/wanghan https://www.linkedin.com/in/nicolasbourdrez/ https://www.linkedin.com/in/ronaldyiap/ https://www.linkedin.com/in/ernest-lim-88529b135/ https://www.linkedin.com/in/pravin-pathmanathan/ https://www.linkedin.com/in/jin-marcus-wang/ https://www.linkedin.com/in/calen-zeng-b3324a196/ https://www.linkedin.com/in/zzhuaj/ https://www.linkedin.com/in/yining-liu-763a5041/ https://www.linkedin.com/in/yu-tao-930721/ https://www.linkedin.com/in/tom-chan-812b4090/ https://www.linkedin.com/in/mark-amsellem-71a1a132/ https://www.linkedin.com/in/oliver-jieren-jia-636166b6/

Can you explain why they are hiring for these HFT/systematic trading roles? https://www.linkedin.com/jobs/view/3262469829/ https://www.linkedin.com/jobs/view/3254166615/ https://www.linkedin.com/jobs/view/3104863804/


> Can you explain why they are hiring for these HFT/systematic trading roles?

To front run customer orders and make a profit?

Crypto is unregulated. Why not?

Regardless, what has been happening and pointed out is not even an inconsistency - it's a huge red flag. This week we'll see more players go bankrupt or run away with even more money as the fallout from FTX is yet to propagate everywhere. Truly fascinating to watch from the sidelines.

What is FTX ? First time hear about it.

I only care if bittrex, bitmex or binance got any problem.

> bittrex, bitmex or binance

Yes, the money launderer [1], one whose founder is coming out of house arrest [2] (and is also a money launderer [3]), and one that can’t tell you where your money is [4]. What could go wrong.

[1] https://home.treasury.gov/news/press-releases/jy1006

[2] https://www.reuters.com/legal/government/crypto-exchange-bit...

[3] https://www.coindesk.com/markets/2021/08/10/bitmex-announces...

[4] https://www.coindesk.com/markets/2020/10/29/leaked-docs-reve...

In Binance's defense, they claimed (a) they don't follow their publicly known plans, and (b) they have other, secret plans.

Up to users if they want to trust that.

the solution isn't to use a different company exchange, its to go on-chain directly.....

any company exchange that is not lending customer assets will function completely fine during a bank run even if 100% of assets are withdrawn in quick succession, nobody should have anything to worry about ever, but so far these are mismanaged companies with poor collateral choices for their creditworthiness.

many crypto skeptics only see headlines when things go wrong, but many people that use crypto regularly know that there are plenty of exchanges and services that have had 100% withdrawals just fine, something that would be called a "stress test" on poorly run services or a "black swan" in the traditional banking world. these big ones from the last cycle got hooked on leverage, the ones that didn't will be fine as long as they stick to just running an exchange instead of additional overhead.

> the solution isn't to use a different company exchange, its to go on-chain directly.....

i'm a crypto noob - this is what i've been wondering - isn't the point of crypto that you can participate in these transactions directly without trusting an intermediary? why do people use exchanges?

Because exchanges are the easiest way (by far) to exchange money for crypto, and they also make it as easy to transact as an investment app.

The alternatives, as far as I know, are to find a friend willing to give you some crypto for money, or to buy mining equipment and get crypto from that, or to find some trusted physical exchange to pay cash to and trust they will pay the crypto you bought into your wallet.

Even after you get in, you'll have to create and manage your own wallet for every crypto you want to trade in (though an on-chain DEX could in principle handle that for you, I believe none of the popular ones do, based on previous discussions). There are probably apps that help, depending on how much you want to go trust-less.

All crypto on chain transactions are one leg of a transaction.

When you pay for something, you want the thing you buy to actually arrive, and if that's something off-chain (like real money), you need to trust your counterparty to actually deliver it.

Crypto exchanges also solve the reverse problem: how to trade real money for cryptocurrency. That can't be done on chain.

Exchanges can also cut out blockchain transaction fees and transaction rate limits, and offer all sorts of tempting (but probably fraudulent) financial products.

Because doing on-chain transactions with a known counterparty that gives you their wallet address is completely impractical for trading/speculation/gambling, because you'd lack a way to find the counterparty that's going to give you the best price, and you'd be paying on-chain transaction fees.

And trading/speculation/gambling is 99% of what people do with cryptocurrencies.

> , because you'd lack a way to find the counterparty that's going to give you the best price,

This part can still be done on chain, "automated market maker" is the term to search for for more information about how this part of the problem is usually solved.

*coins have an insane transaction cost and it takes a long time, they are not really suited for gambling in this way.

So you get exchanges that just lets you trade without actually sending things on the networks since they are so useless.

the main point is familiarity, when trading other kinds of assets, the exchange is the destination. you buy it, and keep your assets there. deeeeep down the exchanges keep a hotline for you to ask for your share certificates or physical commodities, but they make it very hard, and when you get them you can't do anything with them easily. with crypto, the exchanges are just part of the journey and your wallet is the destination, it is very easy to get your crypto and there is an ever expanding set of things you can do with your crypto easily. people chose not to get familiar with that because its simply not the same user experience ("hard" wouldn't be the word I would use, just unfamiliar) and because they weren't there to use crypto at all, only attempt to profit from a delta in price differences or managed staking where the company lies about how much they are earning from staked assets and gives a little less to the user.

people chose to learn or lose their funds. pretty simple.

when it comes to "hard" versus unfamiliar, it will just be different people that chose to be crypto natives and self-custody and use on-chain services. its the same with every other advancement, there are still people that don't use ATMs and don't trust them due to the new problems that arise from their existence. there are still people that don't use discount brokerage firms because they are more familiar with calling their broker, computers are hard and they don't trust their money on the internet or services on the internet. its the same with crypto: nobody can stop you from becoming your parents, can't blame the user experience on everything.

That's not right. Brokers and DRS hold shares, not exchanges. If Exchanges held shares, "settlement" delays would not exist.

accurate, making no difference in anything I wrote about the user experience. custody is simulated by the exchange, and demands for self-custody is initiated at the exchange.

This is just crazy: "Crypto.com “Accidentally” Transfers $400M to the Wrong Wallet" [0]. How is that sort of mistake even possible?

[0] https://thechainsaw.com/defi/crypto/crypto-com-accidentally-...

No safety rails. Crypto is an unconfirmed transaction system that does not require confirmation from the recipient. At least in this case they were able to get it back, it's trivial to transfer crypto to a wallet to which nobody has the password and it's forever unrecoverable.

(If I were designing one of these things, which I am not, I would make a transaction payee-initiated, like the issuing of an invoice which the payer signs)

Not defending crypto in any form or this dumb move but that has happened before in traditional banking as well.


Yes, you're right, that's worth pointing out. Both instances are mind boggling.

Accidentally moving money to a wrong account, sure.. mistakes happen. But in this case, it was during a reserve audit.. and the address was of a 'whitelisted' exchange. This brings suspicions crypto wallets are covering their asses, that they share currencies to proof false customer reserves..

Why can't exchanges operate without putting customers funds at risk and leveraging crypto for collateral...

Seems silly buy is there no exchange that is happy to just make a transaction fee?

> Why can't exchanges operate without putting customers funds at risk

In finance, bad actors outcompete good ones absent regulation. The game is one of confidence and compounding. Until the music stops, venues promising higher returns bleed well-run ones dry. Add to that crypto’s Gresham’s law-esque selection for gamblers, and you wind up with little market space for well-run exchanges. (Which have never been exchanges, but quasi broker-banker-money market funds.)

> In finance, bad actors outcompete good ones absent regulation.

Not just in finance. Everywhere.

With crypto we just see all this happening real fast, in real time.

> Not just in finance. Everywhere.

It seems more prevalent in finance. In the real economy, consumers show scepticism. They’re trading money for a good or service they get at or shortly after the point of sale. Financial and insurance products are more difficult to diligence; you don’t know what you’re getting (or not) until long after purchase.

Products can hide all sorts of “bad acting” in the supply/manufacturing chain. Companies that are willing and able to [use indentured servants, etc] will be able to sell a product cheaper than a competitor that holds themselves to higher standards.

The appearance of ethics/morals might be a benefit, but true ethics/morals are often a cost.

That's because finance is virtualized, so it's more efficient to transact in than containers of goods.

Amazon.com shows how the goods market is as bad it can be when transaction costs decrease.

"We're making good money, but we could make MORE money" says crypto exchange operators.

... and Microsoft and Apple incorporating ads into their paid products

... and Google updating Google TV with ads where there were none before

... and laptop companies filling their laptops with bloatware

... and plenty of others

Because everyone in the crypto space is a scammer or a moron.

Coinbase seems to be the exception here

Coinbase has racked up $2 billion in losses for 2022 already, so I’m not sure about the “not morons” part. At this rate a bankruptcy is not out of the question.

That loss is due to R&D and headcount spend though, they're not using customer funds to make crypto bets.

I think the point is that coinbase is struggling to compete when there are tons of exchanges out there offering low/no fees and ludicrous interest payments on coins kept on the exchange. Even if those other 'exchanges' do all seem to be turning out to be ponzi schemes... For whatever reason people keep flocking to the next one.

I have realized that being a ponzi scheme is a feature not a bug in the crypto space. A chicken race to pull out as late as you dare.

There’s still time.

Because they think they are banks and all banks fractionally reserve. Fractionally reserving is not a law of nature, it's a scam that only works because the fed can print money as needed to bail out banks when there's a bank run. If you can't just print money whenever, it always fails.

That's a misconception. Banks don't fraction-reserve out of thin air. They need a collateral (which is why banks require it for a loan).

Credit cards are collateral free. In contrast, when people get medical bills they also owe debt, but the hospital didn't create any money.

I don't think so, the bank will need to collateralize these debts somehow (ie: Lenders). The yield on CC debt is high.

For medical bills, that's a false and yet correct analogy. The hospital did, in theory, create money out of thin air (at least from an accounting perspective). In this case, it is the hospital (ie: The investor) who will go under if the patient does not pay her bill.

And that's fine. Investors are in it for yield which carries risk. This is different from putting money on an exchange or a bank. You are looking here for a store, unless you willingly signed up for some yield thing.

The bank created money because the borrower can use the money to settle other debts. When the creditor that the debtor repays with the credit card deposits those payments in bank accounts they become bank deposits in other banks.

The hospital patient cannot settle debts with his medical care that he received or deposit it in a bank.

Because there's no money to be made in just being a clearinghouse so nobody does that

That was the official plan.

The dexes are fine?

The dexes are scams. Liquidity providers have very little incentive to actually provide liquidity (most just don’t understand their risk profile)

“Impermanent loss” is just losing to arbitrage. It’s a necessary feature of being an LP.

People just don’t notice how much they are losing b/c the prices are so volatile.

The ruse won’t last forever.

0.03% is a ludicrously small amount to make for losing to arbitrageurs. It may work with lots of sideways action but crypto tends to go in one direction for a long time so most LP's lose.

For that matter, though, a lot of people who buy the top lose.

Crypto needs to have more UTILITY. The financial sector in general is just overleveraging the normal economy, this isn't just crypto. Ironically, Bitcoin was started in response to the 2008 financial crisis, where the govt repealed Glass-Steagall and then bailed out the banks. At least here, the government isn't bailing anyone out with taxpayer dollars.

And look... in China it's not much better. Their real estate bubble is very reminiscent of 2006 USA ... Evergrande is just the most well known poster boy.

It's impossible for crypto to have real-world utility because transaction costs are too high.

Said differently: The financial system has trended toward centralization over the past 5+ centuries, because there are obvious advantages to it.

One could argue that there are plenty of downsides to over-centralization (i.e. 'Too big to fail'), but the solution is not to start from scratch, it's to logically think about the kind of financial system we want (given the one we already have) and build that.

Conversely, the answer is not be techno-cowboys who know people with cryptography degrees who re-discover what bank runs are.

The ones that haven't (yet) been hacked, anyway...

Besides, which ones really are decentralized? Can you name one that doesn't have a central control point? Most have an update system, allowing one person to either completely modify the smart contract code or to enable/disable trading.

AFAIK Uniswap doesn't have an upgradeability proxy, they just deploy new versions and the old ones stay up. That's only true if you aren't using a L2 though, all the current L2 implementations are upgradable.

Looks like you're right - Uniswap v1 is still usable, they had 'proxy' contracts that could redirect users to more recent versions, but you can, if you choose, interact directly with the original version - it wasn't turned off. However, since the liquidity all moved into the later versions, there's only about 1/1000th of the trading left in the original. (and you get to keep/be exploited by all the unpatched bugs, yay!)

Uniswap v1 volume: $144k, v2: $111,784k

DEXes, also known as self-paying bug bounties? They won't last for long.

Do any of them operate with dollars or euros?

why can't banks do that? because it can't work, even though economists have convinced the world that it can, and supplicate the losses by stealing taxpayer money or making wars

crypto is supposed to be one bank for every person. don't know how we get there, but we are learning that traditional bank/exchanges should not exist

You have drawn a very incorrect conclusion from this whole process.

and there goes 16k. Probably going back to 3k or lower soon. Why would anyone buy crypto at this point? Stick with index funds, imho . I have never seen anything hyped so much that sucks so much. It's like if someone wanted to invent a way for as many people as possible to lose as much money as possible, that would be crypto. People getting burned by plunging prices, corrupt exchanges, and scams.

Index funds means buying stock in every fraudulent company on the market, and inflating the price of merely decent companies. It's freeloading off of real investors doing intelligent capital allocation, and it's going to come crashing down.

going back to 3k or lower soon. Why would anyone buy crypto at this point?

You’re underestimating people’s 5k fomo ptsd, imo. I definitely have one and will think twice before not buying in again.

I may be a few days early, but I think it's the beginning of the end for crypto. It's going to burn a lot of people. Trust will never be restored.

I think you underestimate how attractive “get rich quick” schemes are, especially to new generations that didn’t experience the fad yet.

Institutional investors are starting to get burned. I think it's over. But yes I agree on your broader point. Money for no work is always attractive.

Institutional investors are ashes now (look at GBTC, trading 30% below BTC price). This is not the first time it happened in tech, market or history. Bubbles and euphoria are older than Crypto.

Bitcoin will be back in a few years in a new bubble. Halving in 2 years...

Market corrections are often a good thing. It'd be good for crypto to realign with the actual value it provides so capital centers on things that actually provide value!

That's the only way it will grow.

Betting on investors risk tolerance for cryptos success is a losers game long-term. At least from a technologist perspective. From a finance perspective there's plenty of money to be made if you aren't left holding the cards.

> It'd be good for crypto to realign with the actual value it provides

It earns nothing so that's near zero. (Not quite zero because apparently you can use it to buy drugs or avoid export controls)

The drug market is estimated at 2 Trillions. I don't know, though, about export controls. That being said, I think the level that crypto is being used for money laundering or drugs is really minimal.

Isn't that what VCs have been doing all the way through Web2?

Now it's just democratized. But at least Web2 led to tech that served a lot of people, until it got commoditized. Crypto doesn't really have great applications yet. (With a few exceptions.)

I seem to remember Softbank propping up companies like WeWork... and spectacularly losing money. Even this year they lost a lot. Uber and many others were basically money-losing unit economics being propped up by ever larger infusions of money until the stocks were dumped on the eager public in an IPO. But at least the corporations serve people.


How were Adam Neumann, Travis Kalanick and Elizabeth Holmes any better than these crypto bros?

The online advertising industry is in a constant race to the bottom. Look at how much Facebook and Google dropped relative to, say, Apple and Verizon.

Throughout all this, the open source community in Web1, Web2, Web3 has been building some amazing stuff, but people like to create business models to dump

Neumann, Kalanick, and Holmes are the same kind of person as these crypto bros.

People still seem to think they're an aberration.

They're not. The entire modern economy is fundamentally scammy. Especially, but not exclusively, the financial industry.

Crypto is just the stinky tip of an iceberg of fraud and predatory exploitation which goes all the way from top to bottom.

Very true. Business used to be about the honest exchange of value. Now almost everything is a scam. I've seen it with my own eyes over the last 30 years. It's horrible.

by that logic, beanie babies should have recovered due to gen-z , obviously it hasn't. Sure, get rich quick schemes will always exist, but the scheme changes.

Beanie babies don't have a history of half a dozen of recoveries after similar events.

To use your metaphor, Bitcoin and Ethereum are more in the [schemes] class, rather than two specific schemes.

Now of course nothing is eternal, but years-shorting crypto is too much of a risk for me.

I agree, I think crypto won't survive for too much longer. Just by looking at BTC price for the last six months it dropped -14,201.80 (47.23%)[1] and just in one day -434.70 (2.67%). I'll take about six more months to one year but BTC will cost below 5k soon :) This is my prediction.

[1] https://www.google.com/search?hl=en&q=btc+price

By just looking at prices, you'd think that tech also won't survive much longer.

So Bitcoin stops processing blocks at 5k USD. I had no idea this could happen.

It doesn’t stop processing blocks, miners just make less money for each one. Some miners will pull out of the market, making it easier for the rest to mine, until the market finds an equilibrium. The cost of attacking the system will go down, but it won’t stop entirely.

Some miners are already spending more on energy & operations cost per coin than the market value, so even if the price holds I expect to see some miners drop out of the market.

-75% in 1 year is a more impressive number.

-0% in 2 years is a less impressive number.

I'm not going to predict any crypto future, but here's a counter point: If crypto has a future (not saying it will) then it's essential to drive bad actors out of the market (which is happening right now).

What if nearly everyone is a bad actor?

Perhaps crypto is just like those ecosystems in Australia that require conflagrations in order for the forest to live through its life cycle.

What if there is no forest?

You underestimate the number of fools involved who will forget this incident

I am very amazed that crypto prices have not plummeted after FTX revelations. That looks like a very big condemnation of the whole system and the market barely moved.

I am not convinced it will end crypto, a lot of people still want to speculate and the system is too extensive to topple easily. Market not moving seems to be proof of that.

Beginning of the end for unregulated centralized exchanges. Possible beginning for DeFi and regulated CEXes. Or possible that regulators fail to distinguish them, and crypto stays flat for some years until a trad banking event revived interest in blockchain.

But really who cares? Smart contracts and stablecoins can continue to work the same no matter market volatility.

> Smart contracts and stablecoins can continue to work the same no matter market volatility.

Even ignoring the constant hacks of smart contracts, work for what purpose?

A lot of the same things that these failing CEXes are doing. Custody of coins, trading, exchanging tokens, long and short positions, borrowing and lending. Most people on FTX are day traders or hodlers.

Or maybe it’s the beginning of the end for centralized exchanges

Then it's also the end of crypto as a consumer product. Centralized exchanges offered a ton of usability and monetary incentives that brought people into crypto.

Trying to rebuild a user base without those things will essentially be impossible. Even during the days of free money in 2021, the full crypto user base wasn't huge. With high interest rates, tons of fraud in the rearview mirror, and enormous obstacles to usage, the community will be a tiny fraction of even its previous tiny fraction of traditional banking customers.

Exchanges are not a problem.

If FTX kept to their ToS they would have all the funds available and there would be no collapse. But they were greedy, decided to use user funds without authorization, then lost them and the whole thing came coming down.

Exchange which is transparent and truly does not trade with customer assets has no risk involved (other than hacking and similar) and should/would be a massive money printing machine.

Is there any real alternative for money (dollars) to make it into and out of the system, at large scale?

$10-100K: You can P2P your way through your local discord channel, paxful or gift cards.

$100K-$1m: At this point, you are looking at a heavily regulated exchange or an OTC trader. Those exists (ie: Gemini).

$1m+: Deal OTC directly with an "exchanger" that has a banking license. (There is one in WY)

At <$100K, what is the %loss due to fraud?


And where do you cash them out? At Tether’s Bahamas office?

(+) Note: must be a non-US person, minimum transaction $101,000

Stablecoins are great. Personally I recommend USD.

How exactly will you turn 1USD into 1USDT or 1USDC or vice-versa without opening an account with a centralized exchange?

Another year, another “the end of crypto” prediction. Oh well.

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