What do you think of adding a low% of crypto allocation

[ATtiny85]

Kraken to lay off 30% of its staff.

release the kraken?

I think it's more of a (cough cough) release from the kraken

kraken night soil, lovely mental image.

I have enjoyed reading all the crypto talk. Until crypto is in mainstream stock index funds, I won't own any, but it is great to read the back and forth.

...

In 2000, tech companies like Amazon, Apple, and Microsoft were destined to create value....

I thought that at the time. Then MSFT went sideways for a decade after the tech crash and with Steve Ballmer doing nothing as CEO.  They were still the operating system in everyone's PC, but had mis-steps in phones and other stuff.

Yeah, but at no time during that decade was there ever a thought that MSFT was not doing "something real", and it was still somewhat obvious that they would continue to create value throughout, right? I bought 50 shares in taxable somewhere around 2002, and they look decent now. (all VTSAX all the time now, but have some old individual stocks like this that will eventually be donated)

[Reynold]

In looking at the Forbes article cited earlier I saw a mention of an earlier June 28 interview with Bankman-Fried, CEO of FTX, where he warns that some "third tier" exchanges are secretly already bankrupt. 

https://www.forbes.com/sites/stevenehrlich/2022/06/28/bankman-fried-some-crypto-exchanges-already-secretly-insolvent/?sh=6ec2134a47f7

The article also mentions FTX as one of the largest exchanges, and Bankman-Fried says that FTX had been profitable for the last 10 quarters.  I hate to think what it would look like now if by some mischance it had been *losing* money. . . :) 

[Scandium]

Crypto comes and goes, but a tournament winning high quality red burn deck is forever.

Last I played a Cursed scroll milling deck was the shits! Is that still the case?

[GuitarStv]

Crypto comes and goes, but a tournament winning high quality red burn deck is forever.

Last I played a Cursed scroll milling deck was the shits! Is that still the case?

I last played MTG in the 90s  . . .  my understanding of the current ruleset is rather limited.

[Telecaster]

In related news, Kevin O'Leary on Twitter shows why it is a called a confidence scam:

I lost millions as an investor in  @FTX and got sandblasted as a paid spokesperson for the firm but after listening to that interview I’m in the @billAckman camp about the kid!

https://twitter.com/kevinolearytv/status/1598123428527017985

He can't admit to himself that he was scammed, and so doubles down on his opinion that SBF is a good guy.   Charles Ponzi reportedly received Christmas Cards in jail from his victims. 

[talltexan]

Crypto comes and goes, but a tournament winning high quality red burn deck is forever.

Seriously, red is the worst color, takes no talent to play. Just bolt to the face, then bolt any critters that come out.

[Psychstache]

Crypto comes and goes, but a tournament winning high quality red burn deck is forever.

Seriously, red is the worst color, takes no talent to play. Just bolt to the face, then bolt any critters that come out.

There's a bit more skill to winning consistently with burn, but any goof can pick it up and do okay with a little luck. I don't know about tournament winning though. If you are not Patrick Sullivan, then you're pretty much 45% to win with burn regardless of format or opponents deck choice.

[Scandium]

Crypto comes and goes, but a tournament winning high quality red burn deck is forever.

Seriously, red is the worst color, takes no talent to play. Just bolt to the face, then bolt any critters that come out.

Agreed! Blue is fun, because it pisses everyone off. Black is cool because it's the most metal.
(I'm glad we can finally get something useful out of this thread)

[achvfi]

It was interesting to see Jamie Dimon say that Bitcoin is not a real market. I wonder if they know/think there is some kind of manipulation going on.

https://www.youtube.com/watch?v=TIJbTsYbHME

CNBC anchors just move on to some other topic.

[Telecaster]

It was interesting to see Jamie Dimon say that Bitcoin is not a real market. I wonder if they know/think there is some kind of manipulation going on.

https://www.youtube.com/watch?v=TIJbTsYbHME

CNBC anchors just move on to some other topic.

The mainstream media has been incredibly soft on crypto.  The space is shot with billions of fraud and market manipulation and there is very little serious press dedicated to it.  Even recent stuff with SBF has been incredibly softball. 

[ChpBstrd]

It was interesting to see Jamie Dimon say that Bitcoin is not a real market. I wonder if they know/think there is some kind of manipulation going on.

https://www.youtube.com/watch?v=TIJbTsYbHME

CNBC anchors just move on to some other topic.

The mainstream media has been incredibly soft on crypto.  The space is shot with billions of fraud and market manipulation and there is very little serious press dedicated to it.  Even recent stuff with SBF has been incredibly softball.

Yep. The media / social media been complicit and given crypto-scams lots of free publicity. Similarly, the government has refused to investigate all but the most obvious frauds if cryptocurrency or NFTs are involved. Wouldn't want to anger the apes.

Losing thousands of dollars on cryptocurrency scams like FTX or rug-pulls is going to be a generational experience for younger men in this era. How will they respond? Probably with more distrust of the mainstream media and more distrust of their government.

[GuitarStv]

Losing thousands of dollars on cryptocurrency scams like FTX or rug-pulls is going to be a generational experience for younger men in this era. How will they respond? Probably with more distrust of the mainstream media and more distrust of their government.

Ironically, the same couple things that will set them up for the next big scam.

[MustacheAndaHalf]

It was interesting to see Jamie Dimon say that Bitcoin is not a real market. I wonder if they know/think there is some kind of manipulation going on.

https://www.youtube.com/watch?v=TIJbTsYbHME

CNBC anchors just move on to some other topic.

The mainstream media has been incredibly soft on crypto.  The space is shot with billions of fraud and market manipulation and there is very little serious press dedicated to it.  Even recent stuff with SBF has been incredibly softball.

In case you missed the interview with Kraken's new CEO (formerly its COO), he called SBF a "fraudster" and used the word fraud multiple times.  The CNBC host had to state that SBF has not been convicted of fraud or any other charge.  They have to tread carefully in case SBF goes to court and is found innocent, which then turns statements to the contrary into slander.

In the CNBC interview by host Andrew Ross Sorkin, he repeatedly asked SBF about "co-mingling of funds", which SBF claimed was part of FTX's borrowing program that users could agree to.  But the host kept using "co-minging of funds" in every question, regardless of that answer.

The impression I'm gathering is of a two-faced person.  Binance helps FTX get started, and within a few years they learn SBF is badmouthing them to U.S. government regulators.  People claim to have been told about liquidity fears and co-mingling of funds earlier than SBF stated in his interview.  I think we're going to need third party forensic accounting to unravel it, rather than interviews.

[Telecaster]

The impression I'm gathering is of a two-faced person.  Binance helps FTX get started, and within a few years they learn SBF is badmouthing them to U.S. government regulators.  People claim to have been told about liquidity fears and co-mingling of funds earlier than SBF stated in his interview.  I think we're going to need third party forensic accounting to unravel it, rather than interviews.

In a recent interview with Coffeezilla, SBF straight up said FTX was co-mingling funds. 

https://youtu.be/4o_jPzBZSIo

[MustacheAndaHalf]

The impression I'm gathering is of a two-faced person.  Binance helps FTX get started, and within a few years they learn SBF is badmouthing them to U.S. government regulators.  People claim to have been told about liquidity fears and co-mingling of funds earlier than SBF stated in his interview.  I think we're going to need third party forensic accounting to unravel it, rather than interviews.

In a recent interview with Coffeezilla, SBF straight up said FTX was co-mingling funds. 

https://youtu.be/4o_jPzBZSIo

Great video for learning about co-mingling of funds, and for what SBF did.  First, I didn't realize that margin customers and other customers need to have two separate pools of assets.  If you have one big account where margin and non-margin deposits are held, that is co-mingling of assets.

SBF says FTX had one "omni" pool for all customer funds... which means margin customers and spot customers shared the same pool!  Any losses in margin accounts would eat away at accounts which had no margin terms on their accounts.  It sounds like FTX did not use separate pools for margin and non-margin accounts.  And according to the video, that would be fraud.

[FINate]

SEC charges disgraced crypto tycoon Sam Bankman-Fried with defrauding investors.

[GilesMM]

I predict he will plead to lesser charges and serve about 8 years. Complex case.

[ChpBstrd]

I'm still waiting for the street riots that would occur if an actual dollar-bank pulled something like this and lost their depositors' money. The silence is deafening, which suggests depositors were (a) largely comprised of criminals, or (b) fully aware they were participating in a greater-fool gamble and had already accepted the possibility of losing their entire investment.

At this point, after a decade of suspicious hacks, rug pulls, pump-and-dumps, and outright fraud, is it still reasonable to think by default that ANY company strictly in this space is legitimate? Or is it more rational to assume they are not legitimate until proven otherwise (and IDK how you'd prove legitimacy because all records can be falsified).

[GuitarStv]

HODL HODL HODL!

[Glenstache]

I'm still waiting for the street riots that would occur if an actual dollar-bank pulled something like this and lost their depositors' money. The silence is deafening, which suggests depositors were (a) largely comprised of criminals, or (b) fully aware they were participating in a greater-fool gamble and had already accepted the possibility of losing their entire investment.

At this point, after a decade of suspicious hacks, rug pulls, pump-and-dumps, and outright fraud, is it still reasonable to think by default that ANY company strictly in this space is legitimate? Or is it more rational to assume they are not legitimate until proven otherwise (and IDK how you'd prove legitimacy because all records can be falsified).

Well, I think it is rational to think that there is a high risk profile associated with crypto unless there is a greater degree of control on it. But, that greater degree of control is regulation, which crypto has been allergic to almost by definition and intent.

[maizefolk]

I'm still waiting for the street riots that would occur if an actual dollar-bank pulled something like this and lost their depositors' money. The silence is deafening, which suggests depositors were (a) largely comprised of criminals, or (b) fully aware they were participating in a greater-fool gamble and had already accepted the possibility of losing their entire investment.

What reaction to the fall of FTX do you feel would have painted the people who used it in a positive light? I feel like you're setting up a no-win scenario here:

If people complain that they lost money, they're idiots who have been conned.
If people accepted the risk and so don't complain, they're clearly criminals or conmen themselves.

If any possible outcome results in the same conclusion I'm not sure you're actually learning anything.

[Travis]

SEC charges disgraced crypto tycoon Sam Bankman-Fried with defrauding investors.

The report to Congress from the current FTX CEO was certainly entertaining. Amongst other managerial oddities, what little accounting FTX actually did was done on Quickbooks.

[MustacheAndaHalf]

I'm still waiting for the street riots that would occur if an actual dollar-bank pulled something like this and lost their depositors' money. The silence is deafening, which suggests depositors were (a) largely comprised of criminals, or (b) fully aware they were participating in a greater-fool gamble and had already accepted the possibility of losing their entire investment.

Weeks ago an FTX investor cursed on air he was so pissed off, and more recently Kraken's new CEO called Mr Bankman-Fried a "fraudster".  If you don't listen, that isn't silence.

[BicycleB]

I'm still waiting for the street riots that would occur if an actual dollar-bank pulled something like this and lost their depositors' money. The silence is deafening, which suggests depositors were (a) largely comprised of criminals, or (b) fully aware they were participating in a greater-fool gamble and had already accepted the possibility of losing their entire investment.

At this point, after a decade of suspicious hacks, rug pulls, pump-and-dumps, and outright fraud, is it still reasonable to think by default that ANY company strictly in this space is legitimate? Or is it more rational to assume they are not legitimate until proven otherwise (and IDK how you'd prove legitimacy because all records can be falsified).

Well, I think it is rational to think that there is a high risk profile associated with crypto unless there is a greater degree of control on it. But, that greater degree of control is regulation, which crypto has been allergic to almost by definition and intent.

Good point, @Glenstache!

Fwiw - recently an article appeared in my email from a source I don't recall seeing before. It alleges that despite crypto community efforts, US regulators have been on the case, primarily due to current SEC chair Gary Gensler who as professor studied crypto before the SEC job. The effect, it says, has been a huge regulatory success story in that SEC blocked crypto from fatally infecting the wider financial system.

Details:

1. Like you said, crypto has largely sought to avoid and minimize regulation
2. Bankman-Fried lobbied for light regulation to avoid heavier regulation
3. SEC under Gensler has, with increasing detail and success, repeatedly asserted that:

a. crypto is securities, therefore under SEC jurisdiction
b. crypto exchanges need to conform to securities law
c. crypto "banks" need to follow securities law (and I assume banking laws) but should not receive bank-like assistance from government

4. Additionally, and consequentially, accounting standards have been updated to require banks that accept crypto to detail those holdings and hold sufficient cash to redeem in dollars any crypto received

Results include:
5. 3a above is increasingly if not universally accepted
6. 3b above is increasingly accepted as a principle; implementation varies but is in process and has had some positive effect (effect is implied by the article, not directly stated)
7. due to 3c above, the number of crypto banks is limited and normally they have not received bank-like assistance
8. due to 4 above and other factors, several crypto companies tried to get stock listings but basically were stymied, preventing additional crypto acceptance that could have led to greater danger
9. overall, the SEC's actions walled off the bulk of the conventional financial system from cypto effectively enough the keep the financial system safe

https://www.economicliberties.us/our-work/gary-gensler-got-it-right/?emci=ce3aec84-ff7a-ed11-819c-000d3a9eb474&emdi=e52317f0-097b-ed11-819c-000d3a9eb474&ceid=25082919

TL;DR - look! crypto is collapsing but conventional finance isn't! (not due to crypto, anyway) and it could have, but government blocked the infection from wounding the system and that's a regulatory success. 

[bwall]

I'm still waiting for the street riots that would occur if an actual dollar-bank pulled something like this and lost their depositors' money. The silence is deafening, which suggests depositors were (a) largely comprised of criminals, or (b) fully aware they were participating in a greater-fool gamble and had already accepted the possibility of losing their entire investment.

Weeks ago an FTX investor cursed on air he was so pissed off, and more recently Kraken's new CEO called Mr Bankman-Fried a "fraudster".  If you don't listen, that isn't silence.

I've also heard a couple of people complain about losses. However, not to the degree to be expected for multi-billion losses.

Perhaps those suffering loss are overseas and harder to find and report on? Wasn't FTX-Bahamas for ex-USA (offshore) account holders whereas the FTX-USA exchange was for the much smaller pool of USA based holders? Not sure.

Perhaps there are other reasons why we haven't heard much from loss-holders. Perhaps they participated in large run-ups and view their losses as paper losses? Perhaps they held *hitcoins? Perhaps they don't know that they're losers (i.e. they didn't send coins to FTX but their current exchange operator did and hasn't notified them--I'm looking at you, Gemini)

edited: or, perhaps the reason is as outlined by @BicycleB . Crypto was walled off from the financial system and thus the damages were retained within the crypto ecosystem.

[Glenstache]

SEC charges disgraced crypto tycoon Sam Bankman-Fried with defrauding investors.

The report to Congress from the current FTX CEO was certainly entertaining. Amongst other managerial oddities, what little accounting FTX actually did was done on Quickbooks.

Quickbooks! They also apparently handled invoices, etc through Slack.

[Glenstache]

I'm still waiting for the street riots that would occur if an actual dollar-bank pulled something like this and lost their depositors' money. The silence is deafening, which suggests depositors were (a) largely comprised of criminals, or (b) fully aware they were participating in a greater-fool gamble and had already accepted the possibility of losing their entire investment.

Weeks ago an FTX investor cursed on air he was so pissed off, and more recently Kraken's new CEO called Mr Bankman-Fried a "fraudster".  If you don't listen, that isn't silence.

I've also heard a couple of people complain about losses. However, not to the degree to be expected for multi-billion losses.

Perhaps those suffering loss are overseas and harder to find and report on? Wasn't FTX-Bahamas for ex-USA (offshore) account holders whereas the FTX-USA exchange was for the much smaller pool of USA based holders? Not sure.

Perhaps there are other reasons why we haven't heard much from loss-holders. Perhaps they participated in large run-ups and view their losses as paper losses? Perhaps they held *hitcoins? Perhaps they don't know that they're losers (i.e. they didn't send coins to FTX but their current exchange operator did and hasn't notified them--I'm looking at you, Gemini)

edited: or, perhaps the reason is as outlined by @BicycleB . Crypto was walled off from the financial system and thus the damages were retained within the crypto ecosystem.

Or maybe the big holders/losers are simply speaking through court filings.

On a parallel note, the SEC filing is an interesting read. It is striking how many tweets are included in the filing to illustrate points.
https://www.sec.gov/litigation/complaints/2022/comp-pr2022-219.pdf

[MustacheAndaHalf]

From the Nov 2021 peak to the start of Nov 2022, Bitcoin (BTC) lost 57% of its value (68,789.63 to 20,494.90).  After the FTX collapse, it fell roughly 20%.  If the FTX collapse is catastrophic as some claim, why only a 20% drop?
https://finance.yahoo.com/quote/BTC-USD/

It's also not clear why the loss of $84 billion of BTC market cap would put the financial system at risk, when the Fed removes that much money from the bond markets every month (QT).

[LateStarter]

I'm still waiting for the street riots that would occur if an actual dollar-bank pulled something like this and lost their depositors' money.

Remember the 'street riots' that followed the regulated-dollar-Madoff shitshow ? No, me neither.

The silence is deafening, which suggests depositors were (a) largely comprised of criminals, or (b) fully aware they were participating in a greater-fool gamble and had already accepted the possibility of losing their entire investment.

or (c) embarrassed about leaving themselves exposed to such risk by holding significant funds on an unregulated exchange in a wild west sector, and taken it on the chin as a hard lesson.
This would certainly be me if I'd been caught up in it.

At this point, after a decade of suspicious hacks, rug pulls, pump-and-dumps, and outright fraud, is it still reasonable to think by default that ANY company strictly in this space is legitimate? Or is it more rational to assume they are not legitimate until proven otherwise (and IDK how you'd prove legitimacy because all records can be falsified).

It's very clear (to me, at least) that most of crypto is pretty scammy and fraudy. Caveat Emptor - and the further from regulation and the further into the weeds you venture, the moreso.

[ChpBstrd]

I'm still waiting for the street riots that would occur if an actual dollar-bank pulled something like this and lost their depositors' money. The silence is deafening, which suggests depositors were (a) largely comprised of criminals, or (b) fully aware they were participating in a greater-fool gamble and had already accepted the possibility of losing their entire investment.

At this point, after a decade of suspicious hacks, rug pulls, pump-and-dumps, and outright fraud, is it still reasonable to think by default that ANY company strictly in this space is legitimate? Or is it more rational to assume they are not legitimate until proven otherwise (and IDK how you'd prove legitimacy because all records can be falsified).

Well, I think it is rational to think that there is a high risk profile associated with crypto unless there is a greater degree of control on it. But, that greater degree of control is regulation, which crypto has been allergic to almost by definition and intent.

Good point, @Glenstache!

Fwiw - recently an article appeared in my email from a source I don't recall seeing before. It alleges that despite crypto community efforts, US regulators have been on the case, primarily due to current SEC chair Gary Gensler who as professor studied crypto before the SEC job. The effect, it says, has been a huge regulatory success story in that SEC blocked crypto from fatally infecting the wider financial system.

Details:

1. Like you said, crypto has largely sought to avoid and minimize regulation
2. Bankman-Fried lobbied for light regulation to avoid heavier regulation
3. SEC under Gensler has, with increasing detail and success, repeatedly asserted that:

a. crypto is securities, therefore under SEC jurisdiction
b. crypto exchanges need to conform to securities law
c. crypto "banks" need to follow securities law (and I assume banking laws) but should not receive bank-like assistance from government

4. Additionally, and consequentially, accounting standards have been updated to require banks that accept crypto to detail those holdings and hold sufficient cash to redeem in dollars any crypto received

Results include:
5. 3a above is increasingly if not universally accepted
6. 3b above is increasingly accepted as a principle; implementation varies but is in process and has had some positive effect (effect is implied by the article, not directly stated)
7. due to 3c above, the number of crypto banks is limited and normally they have not received bank-like assistance
8. due to 4 above and other factors, several crypto companies tried to get stock listings but basically were stymied, preventing additional crypto acceptance that could have led to greater danger
9. overall, the SEC's actions walled off the bulk of the conventional financial system from cypto effectively enough the keep the financial system safe

https://www.economicliberties.us/our-work/gary-gensler-got-it-right/?emci=ce3aec84-ff7a-ed11-819c-000d3a9eb474&emdi=e52317f0-097b-ed11-819c-000d3a9eb474&ceid=25082919

TL;DR - look! crypto is collapsing but conventional finance isn't! (not due to crypto, anyway) and it could have, but government blocked the infection from wounding the system and that's a regulatory success.

These are very good points. We have to keep in mind that multiple members of Congress have received "donations" from the crypto industry, including FTX, and in return they've opposed all meaningful regulation of the sector and tried to get crypto-assets de-regulated under a "commodities" label.
https://www.washingtonpost.com/business/2022/12/01/senate-agriculture-ftx-hearing-crypto/

Eight of our illustrious lawmakers sent Gensler a letter in March telling Gensler he had no authority to investigate crypto exchanges like FTX (an investigation was already ongoing at that time).
https://onlysky.media/mclark/bankman-fried-arrested-now-whats-to-be-done-about-ponzinomics/?__vfz=medium%3Dtray_notification#vf-7630696c-a3c5-43a8-91d2-6cc5ca23a22f

So Gensler was politically constrained from going too hard after fraud at FTX, but what he could do is wall off the dollar-based banking system so that the coming implosion would not become contagious. Perhaps he is due our gratitude for running megabanks out of the space, despite not being able to stop the scam itself. Gensler is about to be hauled before Congress and it will be an interesting dynamic as members of Congress like Tom Emmer who tried to undercut his investigation of FTX will no doubt boldly blame him for not doing enough.

[BicycleB]

It's also not clear why the loss of $84 billion of BTC market cap would put the financial system at risk, when the Fed removes that much money from the bond markets every month (QT).

What is the $84 billion figure from? I agree with you that $84B seems small compared to the overall financial system. YCharts today asserts BTC market cap is down about $580B since a year ago. Presumably the total including other coins is larger. For discussing systemic risk, wouldn't the right number be the systemic one?

https://ycharts.com/indicators/bitcoin_market_cap#:~:text=Basic%20Info,65.17%25%20from%20one%20year%20ago.

Regardless of the number, personally I've been imagining that the issue is not the dollar amount, but instead one or more of the following (yes, some of them overlap):

1. Normal banks are backstopped by the govt to fully replace losses; if this guarantee were applied to crypto, the resulting increase in confidence might have allowed much larger dollar amounts to be at risk
2. BTC market cap and crypto cap generally are to some extent notional; no one paid full price for all the coins. But if banks were backstopped on the losses, suddenly "real" money in the broader financial system is at stake.
3. On some level, point 2 implies that the non-crypto-buying public would pay for the losses of crypto buyers
4. To the extent that creation and loss of nominal crypto are potentially unlimited, a rational observer could conclude that a crypto collapse would be potentially unlimited, therefore more capable of causing systemic collapse
5. However you slice it, putting the govt on the hook for crypto means potential systemic risk because it's an additional risk factor
6. Any factor can cause a panic, but since crypto is risky, both allowing its spread and putting the govt on the hook to repay it would logically increase the risk of panic

Prior this, prior to buying any crypto, I had considered the question of systemic risk and also how big could crypto get and tried to assess them by comparing crypto "cap" to measurements of other financial quantities, such as dollar value of gold in existence, gold used as bullion (if it's "digital gold", which is bigger?), dollars of paper currency, dollars in bank accounts, notional value of derivative contracts, market cap of stocks in US market, market cap of global stock market. Using $2T as rough peak for crypto, it seemed that the number is large relative to gold, smallish but potentially material compared to US stocks (less than 10%), small compared to total dollars in accounts, very small compared to estimated derivatives.

From the above paragraph's comparisons, I then supposed that if crypto were to crash the system, it would be due to becoming a totem of panic or by triggering a chain of derivative contract defaults, not probably as a direct result of crypto value itself disappearing. It seemed to be that crypto had absorbed speculative energy that might instead have gone to gold or the stock market, but had not created a value amount similar to or larger than the rest of the system, as happened with tulips in the tulip mania if I understand correctly. A 10x increase would put crypto close the US stock market in value and represent a much larger risk, including likely large distortions of investment instead of the relatively small ones to date. So far it mostly was soaking up uninformed speculation, a perpetual part of the system, without expanding the quantity of the system's apparent speculative energy to some extraordinary level. So I figured greed could ramp up another 10x of crypto increases before reaching tulip levels, and maybe 3x or 5x before even being likely to trigger panic except at a symbolic level - unless it triggered chains of derivative defaults, a possibility that I couldn't estimate and which could already be in play.

With all that said, it's the qualitative aspects that seemed powerful in the article, so I quoted it. Personally, I felt the significance wasn't so much about crypto per se as it was to inform readers that a govt agency has been doing its job to limit risks. I don't know if the author's implication that Gensler really saved the system is correct but I think it's important he did the kind of things he was supposed to be doing.

[MustacheAndaHalf]

It's also not clear why the loss of $84 billion of BTC market cap would put the financial system at risk, when the Fed removes that much money from the bond markets every month (QT).

What is the $84 billion figure from? YCharts today asserts BTC market cap is down about $580B since a year ago. Presumably the total including other coins is larger. For discussing systemic risk, wouldn't the right number be the systemic one?

You dropped the first paragraph of my post, which held my main point:

From the Nov 2021 peak to the start of Nov 2022, Bitcoin (BTC) lost 57% of its value (68,789.63 to 20,494.90).  After the FTX collapse, it fell roughly 20%.  If the FTX collapse is catastrophic as some claim, why only a 20% drop?
https://finance.yahoo.com/quote/BTC-USD/

My post was responding to those who point to the FTX collapse as a systemic problem, which means the recent 20% drop (now 12%) in BTC, and not the 57% drop before FTX collapsed.

I divided the market cap of BTC by the current price to get the number of Bitcoins (21,014,822), and then multiplied that by the price drop ($20.5k to $16.5k = $4,000 drop roughly).  From before the FTX collapse to afterwards was a loss of $84 billion to BTC's market cap, roughly.
https://coinmarketcap.com/currencies/bitcoin/

The recent discussions all centered on FTX, not events before that.  The $84 billion of BTC market cap loss from FTX is less than the $95 billion the Fed is withdrawing from the bond markets (quantitative tightening) every month.
https://www.bloomberg.com/news/articles/2022-08-29/qt-to-hit-full-stride-with-fed-shrinking-9-trillion-portfolio

[BicycleB]

It's also not clear why the loss of $84 billion of BTC market cap would put the financial system at risk, when the Fed removes that much money from the bond markets every month (QT).

What is the $84 billion figure from? YCharts today asserts BTC market cap is down about $580B since a year ago. Presumably the total including other coins is larger. For discussing systemic risk, wouldn't the right number be the systemic one?

You dropped the first paragraph of my post, which held my main point:

From the Nov 2021 peak to the start of Nov 2022, Bitcoin (BTC) lost 57% of its value (68,789.63 to 20,494.90).  After the FTX collapse, it fell roughly 20%.  If the FTX collapse is catastrophic as some claim, why only a 20% drop?
https://finance.yahoo.com/quote/BTC-USD/

My post was responding to those who point to the FTX collapse as a systemic problem, which means the recent 20% drop (now 12%) in BTC, and not the 57% drop before FTX collapsed.

I divided the market cap of BTC by the current price to get the number of Bitcoins (21,014,822), and then multiplied that by the price drop ($20.5k to $16.5k = $4,000 drop roughly).  From before the FTX collapse to afterwards was a loss of $84 billion to BTC's market cap, roughly.
https://coinmarketcap.com/currencies/bitcoin/

The recent discussions all centered on FTX, not events before that.  The $84 billion of BTC market cap loss from FTX is less than the $95 billion the Fed is withdrawing from the bond markets (quantitative tightening) every month.
https://www.bloomberg.com/news/articles/2022-08-29/qt-to-hit-full-stride-with-fed-shrinking-9-trillion-portfolio

I dropped the first paragraph of your post because it didn't raise any questions in my mind that felt useful to address, and I think it can stand just fine. No disrespect intended.

Thanks for the explanation of the $84B. It clarifies to me that we are (or seem to be) thinking of different things as "the system", which I didn't realize at first; my apology. You're focused on BTX and its effect on BTC, if I understand you. And your calculation seems very logical.

My line of comment took as the main context a different commenter's remark that crypto has been generally regulation averse (commenter used different words). Thus when I address systemic risk, I mean risk to the broader financial system. Sorry for not making myself clear.

Fwiw, I think your BTC point re FTX is cogent. I myself have been quite intrigued by the relative stability of both BTC and ETH since FTX's fall. Is its stability evidence that exchanges have little influence on BTC or ETH prices, and investors of those coins should now have little to fear? Are other exchanges propping up the prices, but they will fall after after other exchange collapses? Is some other factor propping up the prices, and if so, will they collapse or have they bottomed?

[maizefolk]

Fwiw, I think your BTC point re FTX is cogent. I myself have been quite intrigued by the relative stability of both BTC and ETH since FTX's fall. Is its stability evidence that exchanges have little influence on BTC or ETH prices, and investors of those coins should now have little to fear? Are other exchanges propping up the prices, but they will fall after after other exchange collapses? Is some other factor propping up the prices, and if so, will they collapse or have they bottomed?

An argument that I don't agree with, but which I've seen discussion and so bring up for the sake of completeness is that the price of BTC and ETH is primarily not set by trades for USD directly but instead by trades for stable coins pegged to the dollar. USDT/USDC/BUSD etc. Assuming all of those really do maintain 1:1 reserves that distinction is largely moot.

But if one or more of the big stable coins is issuing extra units not backed by reserves it would push up the price of BTC and ETH, analogously to how the fed's quantitative easing pushed up the valuations of stocks and pushed down the yields of bonds.

Again, not arguing that this is the case, just adding to the list of potential explanations I've seen proposed or discussed.

[Telecaster]

Fwiw, I think your BTC point re FTX is cogent. I myself have been quite intrigued by the relative stability of both BTC and ETH since FTX's fall. Is its stability evidence that exchanges have little influence on BTC or ETH prices, and investors of those coins should now have little to fear? Are other exchanges propping up the prices, but they will fall after after other exchange collapses? Is some other factor propping up the prices, and if so, will they collapse or have they bottomed?

The cynical, but in my opinion most likely explanation is that the price is being supported by wash sales. 

https://www.banklesstimes.com/news/2022/10/05/51percent-of-daily-bitcoin-volume-in-2022-is-fake/

The remaining exchanges have an existential interest in keeping the price high, so there is plenty of motivation.  If you look at the chart, there was a clear peg at $30K, then $20K and now $17K.   It sure appears as if the bots are doing a lot of trading. 

[LateStarter]

Fwiw, I think your BTC point re FTX is cogent. I myself have been quite intrigued by the relative stability of both BTC and ETH since FTX's fall. Is its stability evidence that exchanges have little influence on BTC or ETH prices, and investors of those coins should now have little to fear? Are other exchanges propping up the prices, but they will fall after after other exchange collapses? Is some other factor propping up the prices, and if so, will they collapse or have they bottomed?

Why would you expect the FTX fiasco to detrimentally affect Bitcoin ?

At heart, from what we know so far, the FTX fraud revolved largely around 2 things:

1. Abuse of investors' trust in a 3rd party custodian (FTX)
2. The lamest type of 'shitcoin' (FTT) that can be created/inflated at will, at zero cost, by a single controlling party

Bitcoin was developed precisely to address the problems inherent in trusting 3rd parties and the centralised control of an easily inflated 'currency'. FTX has only emphasised the values of the Bitcoin project.

Some spillover contagion is to be expected but, from a broader perspective, this clear-out of rubbish is good for Bitcoin.

[StashingAway]

Bitcoin was developed precisely to address the problems inherent in trusting 3rd parties and the centralised control of an easily inflated 'currency'. FTX has only emphasised the values of the Bitcoin project.

FTX has also demonstrated that widespread adoption of those goals are not practical. Centralization is inherent to any process of smoothing out the transaction process. Something which has tons of oversight, history, and more equal wealth distribution with our current money system.

The only way that has been demonstrated to use bitcoin in ways that reflect the Bitcoin Project values is for each individual to be incredibly vigilant, knowledgeable, and lucky when managing their coins. It's something that even tech enthusiasts have to spend a good deal of effort on. To keep people from tracking your public wallet(s) and tracing your purchasing patters you essential have to launder your own money. Anything easier is less secure, and anything more secure just isn't viable economically.

[ChpBstrd]

Bitcoin was developed precisely to address the problems inherent in trusting 3rd parties and the centralised control of an easily inflated 'currency'. FTX has only emphasised the values of the Bitcoin project.

Some spillover contagion is to be expected but, from a broader perspective, this clear-out of rubbish is good for Bitcoin.

If people walk away with the reasonable impression that 3rd party helpers in the crypto space are untrustworthy, it does not follow that adoption of cryptocurrencies will ever occur or that investor interest will increase. 99% of people need a 3rd party helper with an intuitive user interface in order to trade, hold, or use crypto. When those 99% walk away after being scammed a dozen ways, it's the end.

[the_gastropod]

Fwiw, I think your BTC point re FTX is cogent. I myself have been quite intrigued by the relative stability of both BTC and ETH since FTX's fall. Is its stability evidence that exchanges have little influence on BTC or ETH prices, and investors of those coins should now have little to fear? Are other exchanges propping up the prices, but they will fall after after other exchange collapses? Is some other factor propping up the prices, and if so, will they collapse or have they bottomed?

Why would you expect the FTX fiasco to detrimentally affect Bitcoin ?

At heart, from what we know so far, the FTX fraud revolved largely around 2 things:

1. Abuse of investors' trust in a 3rd party custodian (FTX)
2. The lamest type of 'shitcoin' (FTT) that can be created/inflated at will, at zero cost, by a single controlling party

Bitcoin was developed precisely to address the problems inherent in trusting 3rd parties and the centralised control of an easily inflated 'currency'. FTX has only emphasised the values of the Bitcoin project.

Some spillover contagion is to be expected but, from a broader perspective, this clear-out of rubbish is good for Bitcoin.

What do you think affects Bitcoin's price? Can you think of any other 'shitcoins' that can be created/inflated at will, at zero cost, by a single controlling party that are widely used to buy/sell Bitcoin (and whose biggest customer was SBF's Alameda)?

I think there are two competing narratives that are inherently at odds. 1. Bitcoin is an investment vehicle to turn $1 into many dollars in the future. I think it's pretty self-evident, the lion's share of Bitcoin (and "crypto" generally) participants believe this. And 2. That Bitcoin is a peer to peer network for transferring value in a decentralized way.

I find 2 to be pretty undeniably true. It's neat in its mechanics. Kind of cute as a proof of concept. But wholly uninteresting as more than a toy project some clever person (people?) made 10+ years ago.

Regardless of what I believe about the investment thing, it *clearly* matters a great deal what popular opinion is about crypto as an investment vehicle. I hope I'm not sticking my neck out too far to suggest: FTX's collapse isn't a trust-building event for the space, generally. Millions of people lost money in this. And Binance's future is looking fairly uncertain right now, as the US Dept of Justice is preparing charges against them for, among other things, money laundering. Binance's own defense attorneys response to the DoJ was basically "Prosecute us and the crypto industry will collapse".

From: https://www.reuters.com/markets/us/us-justice-dept-is-split-over-charging-binance-crypto-world-falters-sources-2022-12-12/

Binance's defense attorneys at U.S. law firm Gibson Dunn have held meetings in recent months with Justice Department officials, the four people said. Among Binance's arguments: A criminal prosecution would wreak havoc on a crypto market already in a prolonged downturn. The discussions included potential plea deals, according to three of the sources.

I predict Bitcoin's price will just continues to drop—maybe quickly, maybe slowly—from here out. The mania is over. Enough truth has been revealed to hopefully prevent any further massive thoughtless buy-ins into the space.

[harvestbook]

Binance's own defense attorneys response to the DoJ was basically "Prosecute us and the crypto industry will collapse".

From: https://www.reuters.com/markets/us/us-justice-dept-is-split-over-charging-binance-crypto-world-falters-sources-2022-12-12/

I don't really care one way or another, but my one concern over the bubble was it would get "too big too fail" and we'd arrive at the surreal position of governments bailing out the industry with taxpayer money. I just hope it collapses before too many Wall Street firms bet their futures on it.

[ChpBstrd]

https://www.newyorker.com/humor/borowitz-report/world-shocked-that-man-running-business-based-on-imaginary-money-might-be-fraud

[MustacheAndaHalf]

The cynical, but in my opinion most likely explanation is that the price is being supported by wash sales. 

https://www.banklesstimes.com/news/2022/10/05/51percent-of-daily-bitcoin-volume-in-2022-is-fake/

The remaining exchanges have an existential interest in keeping the price high, so there is plenty of motivation.  If you look at the chart, there was a clear peg at $30K, then $20K and now $17K.   It sure appears as if the bots are doing a lot of trading.

In this context, Bitcoin wash sales are a simultaneous buy and sell at the same price.  Bitcoin's price is not "being supported" by wash sales, because wash sales do not impact the price.  They inflate trading volume, but not price.  To increase the price of Bitcoin, you need a seller asking a higher price and a willing buyer paying that price.

In markets so far today I see the following price changes:
S&P 500 ("SPY")  ...  -1.51%
Nasdaq 100 ("QQQ") ... -1.16%
Bitcoin futures ("BITO") ... -3.86%

If you search for "TQQQ ETF" and click (Compare) and enter "BITO", you will see 3x Nasdaq compared to Bitcoin, and they are a close match.  This is how I view Bitcoin futures - as a very risky market that is first to be sold when risk surfaces in the markets - like today.

The 3x Nasdaq ETF ("TQQQ") lost 3.59% while Bitcoin futures fell 3.86%.  To me, that is Bitcoin still behaving like the riskiest asset.  If the price was being faked, it shouldn't respond to risky financial conditions by falling in price.

[Telecaster]

Bitcoin was developed precisely to address the problems inherent in trusting 3rd parties and the centralised control of an easily inflated 'currency'. FTX has only emphasised the values of the Bitcoin project.

Some spillover contagion is to be expected but, from a broader perspective, this clear-out of rubbish is good for Bitcoin.

I think it is worthwhile to look at why so many people used the exchanges in the first place, especially given their extremely sketchy outward appearance.  One reason is that on some level you need some sort of brokerage to match up buyers and sellers.   On the next level, if you routinely buy or sell it is a lot easier of the crypto is kept on the exchange, just like a bank holds your regular money or a stock broker holds your stocks.   And finally, some people simply don't have the knowledge or skills to self-custody. 

So I don't see how not having functional exchanges is good for Bitcoin because it just makes adoption that much harder.  And while it is good they are locking up the most blatant criminals, there is nothing to prevent them from being replaced by other criminals. 

[joemandadman189]

The Coinbase exchange is a publicly traded company in the US. They are audited and hold reserves 1:1, or at least they say that. They make money by charging fees at the time of purchase and sale, kinda like a credit card transaction fee.

[Telecaster]

I don't really care one way or another, but my one concern over the bubble was it would get "too big too fail" and we'd arrive at the surreal position of governments bailing out the industry with taxpayer money. I just hope it collapses before too many Wall Street firms bet their futures on it.

I don't think there is much risk of that.   The traditional financial system is is pretty disconnected from crypto.  Individuals might be greatly impacted (and have been) but the mainstream economy doesn't rely on crypto for anything important. 

In this context, Bitcoin wash sales are a simultaneous buy and sell at the same price.  Bitcoin's price is not "being supported" by wash sales, because wash sales do not impact the price.  They inflate trading volume, but not price.  To increase the price of Bitcoin, you need a seller asking a higher price and a willing buyer paying that price.

That's not what I'm talking about.  Maybe a better way to put it would be wash trade instead of wash sale.   In this context, the selling asking a higher price and the buyer will to pay that price are the same person.   

[achvfi]

I don't really care one way or another, but my one concern over the bubble was it would get "too big too fail" and we'd arrive at the surreal position of governments bailing out the industry with taxpayer money. I just hope it collapses before too many Wall Street firms bet their futures on it.

I don't think there is much risk of that.   The traditional financial system is is pretty disconnected from crypto.  Individuals might be greatly impacted (and have been) but the mainstream economy doesn't rely on crypto for anything important. 

In this context, Bitcoin wash sales are a simultaneous buy and sell at the same price.  Bitcoin's price is not "being supported" by wash sales, because wash sales do not impact the price.  They inflate trading volume, but not price.  To increase the price of Bitcoin, you need a seller asking a higher price and a willing buyer paying that price.

That's not what I'm talking about.  Maybe a better way to put it would be wash trade instead of wash sale.   In this context, the selling asking a higher price and the buyer will to pay that price are the same person.

Wowza! That kind price manipulation can explain explosion in crypto values.

[Glenstache]

I don't really care one way or another, but my one concern over the bubble was it would get "too big too fail" and we'd arrive at the surreal position of governments bailing out the industry with taxpayer money. I just hope it collapses before too many Wall Street firms bet their futures on it.

I don't think there is much risk of that.   The traditional financial system is is pretty disconnected from crypto.  Individuals might be greatly impacted (and have been) but the mainstream economy doesn't rely on crypto for anything important. 

In this context, Bitcoin wash sales are a simultaneous buy and sell at the same price.  Bitcoin's price is not "being supported" by wash sales, because wash sales do not impact the price.  They inflate trading volume, but not price.  To increase the price of Bitcoin, you need a seller asking a higher price and a willing buyer paying that price.

That's not what I'm talking about.  Maybe a better way to put it would be wash trade instead of wash sale.   In this context, the selling asking a higher price and the buyer will to pay that price are the same person.

Couldn't that just be money laundering? /s (but also, yes)

[ChpBstrd]

In this context, Bitcoin wash sales are a simultaneous buy and sell at the same price.  Bitcoin's price is not "being supported" by wash sales, because wash sales do not impact the price.  They inflate trading volume, but not price.  To increase the price of Bitcoin, you need a seller asking a higher price and a willing buyer paying that price.

Suppose I am ShadyExchange.com. I can have either, or both, of the following goals: I want to inflate my trading volume so that I look more legitimate and attract more accounts. I also want to pump up the value of a coin, set of coins, or the exchange rate between two coins.

Using the simplest example, suppose I mint a ShitCoin. I want my ShitCoin (SC) to increase in value against the USD. So I set up two puppet accounts on my own exchange and execute the following trades.

Account 1                                 Account 2
Start with 10k SC                      Start with $100
Sell 10k SC at $0.01                  Buy 10k SC at $0.01
Buy 5k SC for $100                    Sell 5k SC at $0.02
End with 5k SC                          End with $100 and 5k SC

As you can see, I've doubled the "market" price, and yet the sum of the assets in my two accounts is the same as what I started with. These transactions are free to me. I can simply reverse the direction of the sales periodically and this process can go on forever.

Now suppose I programmed a bot to make this trade many times every day? A coin going up in price is going to attract attention. Eventually I will pull in someone to pay me $0.05 each for my 10k SC because that looks like the established fair market price to them. Now I received $500 for something I paid $100 for, or perhaps invented out of thin air, and I still have my original $100. But then maybe they play the same game?

Now suppose all the exchanges do this, and that the cumulative effect is that even the most liquid "coins" show a steady appreciation in price over months and years. The only thing that could break is if the target audience figures out the game and stops putting new money into the system.

[LateStarter]

Bitcoin was developed precisely to address the problems inherent in trusting 3rd parties and the centralised control of an easily inflated 'currency'. FTX has only emphasised the values of the Bitcoin project.

FTX has also demonstrated that widespread adoption of those goals are not practical. Centralization is inherent to any process of smoothing out the transaction process. Something which has tons of oversight, history, and more equal wealth distribution with our current money system.

Eh ? FTX is simply not decentralised. That does not demonstrate that decentralisation is impractical.
That said, I'm not really against centralised exchanges/brokers. The decentralisation point was directed at the 'currency'.

The only way that has been demonstrated to use bitcoin in ways that reflect the Bitcoin Project values is for each individual to be incredibly vigilant, knowledgeable, and lucky when managing their coins.

Yeah, self-custody is not straightforward, but it's easier than it used to be, and I have every confidence that it will get progressively easier in the future.
Also, whilst self-custody is a bit tricky, I doubt there are many people that are interested in crypto AND smart enough to open an exchange account AND not smart enough to self-custody.

To keep people from tracking your public wallet(s) and tracing your purchasing patters you essential have to launder your own money. Anything easier is less secure, and anything more secure just isn't viable economically.

I don't know that tracking is a major concern for most - it's not currently a great concern of mine. There's also a lot of ongoing dev in this area and I'm quite sure that, should I feel the need(?), it will be easy to 'launder' my Bitcoin in the future.

[LateStarter]

Bitcoin was developed precisely to address the problems inherent in trusting 3rd parties and the centralised control of an easily inflated 'currency'. FTX has only emphasised the values of the Bitcoin project.

Some spillover contagion is to be expected but, from a broader perspective, this clear-out of rubbish is good for Bitcoin.

If people walk away with the reasonable impression that 3rd party helpers in the crypto space are untrustworthy, it does not follow that adoption of cryptocurrencies will ever occur or that investor interest will increase. 99% of people need a 3rd party helper with an intuitive user interface in order to trade, hold, or use crypto. When those 99% walk away after being scammed a dozen ways, it's the end.

I firmly believe that offshore/unregulated exchanges ARE untrustworthy. It's not necessarily that they're all crooks - it's just that aren't any good reasons to trust them. The lessons are 1. find the best exchange/broker you can, and 2. don't leave funds on an exchange any longer than necessary.

My expectation is that there is PLENTY more similar pain to come as scammy exchanges and scammy coins unravel. There will be a lot of gnashing of teeth but, hopefully, the rubbish will get weeded out and people will wise up.