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Battered Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout

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Re: Battered Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout

#31

Post by rawoke083600 »

blitzar wrote: post #12
polynomial wrote: post #5

Earlier quoted context omitted.

Can you explain what you mean by crypto's forced liquidation rules? Not familiar with how that works at all.

DeFi - Contracts are code. TradFi - Your word is your bond.

This ! The "idea" of Defi was that w wouldn't need "regulations and rules" since we could 'just' look at the actual deployed code(eth contract for example) to see if you going to get screwed.

Of course few ppl actually look at the code, or sometimes the code is just bad and you get bad actors willing to exploit this.

That being said: In practice and real life there are a bunch of dodgy companies and badly written eth-contracts(code).

Re: Battered Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout

#32

Post by chollida1 »

dcolkitt wrote: post #18
chollida1 wrote: post #2

The crypto community continues to speed run the history of traditional finance. This weeks lesson is that in an up market its leverage that makes you money and in a down market its the unwinding of leverage that kills you. They are also learning that interconnectedness will hurt more in a downturn. You can be perfectly delta hedged( don't care which way the market moves) and its the counter party risk that will sink…

> Crypto has tried to solve this by strict liquidation rules that tend to make things worse by turning firms into forced sellers This is literally how traditional finance works as well. If you have a leveraged position at a futures or options exchange, you absolutely will be liquidated as soon as your position gets close to being in the red. I 100% guarantee you that the CME or Goldman will not let you "ride things o…

Not really true, collateral is decided at the end of the day and not mid day.

You aren't liquidated immediately the moment your needs more liquidity.

We wait till the end of the day short of absolute emergencies.

I know Amaranth well being in Canada and Calgary specifically at the time:)

And for tradfi a typical hedge fund gets a call and is told to post more collateral and they make real efforts to allow the fund to post collateral. There is almost never an immediate liquidation as this tends to cause more trouble than it fixes, even on the CME or CBOE:)

Re: Battered Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout

#33

Post by lottin »

logicchains wrote: post #28
charles_kaw wrote: post #22

Earlier quoted context omitted.

Unfortunately, large defi institutions have been advertising to retail investors. Many of whom have not just had a haircut, but their whole head shaved. Government regulation of retail finance is a feature, not a bug.

>Government regulation of retail finance is a feature, not a bug. It's not a bug unless you believe adults should be treated like children and not be able to take the risks they desire or face the consequences of those risks. Anyone investing in DeFi should absolutely have known the risks; it doesn't justify giving the government even more power over people's finances.

What about driving licenses? Are you against those too? Is there any regulation at all that can't be criticised under the grounds that adults should not be treated like children?

Re: Battered Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout

#34

Post by gst »

toomuchtodo wrote: post #8
polynomial wrote: post #5

Earlier quoted context omitted.

Can you explain what you mean by crypto's forced liquidation rules? Not familiar with how that works at all.

When you get margin called in traditional/centralized finance, humans intervene and liquidation is not immediate (except Interactive Brokers, who are closer to how crypto manages margin, and will liquidate you without a margin call). Maybe you put up more collateral, maybe you borrow from a line of credit, there is a buffer. As an individual, you work with your broker. As a larger participant, you work with the clear…

> In crypto, there is no buffer. Auto liquidation of undercollateralized positions occurs. All of those humans in the loop, “unfair rules”, and settlement delays crypto proponents complain about are the very things that make traditional finance stable.

Is auto-liquidation a bad thing? It leads to more volatility in the short-term, but it seems that there might be long-term benefits of ensuring that players with unresponsible business practices will be forced out of the market.

"Traditional" crypto holders will be affected too (the value of their investment goes down while people are forced to sell), but this looks more like a temporary impact. As long as they don't trade on margin they won't be forced to sell and as long as they hold their own keys they are unaffected if exchanges are crashing.

From a "price" perspective the current events might be bad for the crypto ecosystem, but from a "health" perspective I think that they could be positive, as only the responsible players with healthy business practices are going to survive.

Re: Battered Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout

#35

Post by bombcar »

archerabi wrote: post #23
djbebs wrote: post #16

Earlier quoted context omitted.

That no different from any margin loan

Somewhat, look at toomuchtodo's comment. In tradfi, there are humans involved and you might be able to avert liquidation.

To be clear, there are humans involved if the amounts are large enough - if you're playing with stocks and margin in your brokerage account it'll probably liquidate automatically, but even when I got a "margin call" by accident they gave me three days to resolve it before liquidation would happen.

Part of it depends on what the margin is used for - margin for VTX is going to be handled differently than forex margin.

Re: Battered Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout

#36

Post by [deleted] »

logicchains wrote: post #28
charles_kaw wrote: post #22

Earlier quoted context omitted.

Unfortunately, large defi institutions have been advertising to retail investors. Many of whom have not just had a haircut, but their whole head shaved. Government regulation of retail finance is a feature, not a bug.

>Government regulation of retail finance is a feature, not a bug. It's not a bug unless you believe adults should be treated like children and not be able to take the risks they desire or face the consequences of those risks. Anyone investing in DeFi should absolutely have known the risks; it doesn't justify giving the government even more power over people's finances.

[deleted]

Re: Battered Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout

#37

Post by UncleMeat »

gst wrote: post #34
toomuchtodo wrote: post #8

Earlier quoted context omitted.

When you get margin called in traditional/centralized finance, humans intervene and liquidation is not immediate (except Interactive Brokers, who are closer to how crypto manages margin, and will liquidate you without a margin call). Maybe you put up more collateral, maybe you borrow from a line of credit, there is a buffer. As an individual, you work with your broker. As a larger participant, you work with the clear…

> In crypto, there is no buffer. Auto liquidation of undercollateralized positions occurs. All of those humans in the loop, “unfair rules”, and settlement delays crypto proponents complain about are the very things that make traditional finance stable. Is auto-liquidation a bad thing? It leads to more volatility in the short-term, but it seems that there might be long-term benefits of ensuring that players with unres…

The concern is propagation. If margin calls blow up individual organizations or institutions, that's bad but not a fundamental threat. The issue is that things are connected.

Re: Battered Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout

#38

Post by [deleted] »

UncleMeat wrote: post #37
gst wrote: post #34

Earlier quoted context omitted.

> In crypto, there is no buffer. Auto liquidation of undercollateralized positions occurs. All of those humans in the loop, “unfair rules”, and settlement delays crypto proponents complain about are the very things that make traditional finance stable. Is auto-liquidation a bad thing? It leads to more volatility in the short-term, but it seems that there might be long-term benefits of ensuring that players with unres…

The concern is propagation. If margin calls blow up individual organizations or institutions, that's bad but not a fundamental threat. The issue is that things are connected.

[deleted]

Re: Battered Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout

#39

Post by [deleted] »

dcolkitt wrote: post #18
chollida1 wrote: post #2

The crypto community continues to speed run the history of traditional finance. This weeks lesson is that in an up market its leverage that makes you money and in a down market its the unwinding of leverage that kills you. They are also learning that interconnectedness will hurt more in a downturn. You can be perfectly delta hedged( don't care which way the market moves) and its the counter party risk that will sink…

> Crypto has tried to solve this by strict liquidation rules that tend to make things worse by turning firms into forced sellers This is literally how traditional finance works as well. If you have a leveraged position at a futures or options exchange, you absolutely will be liquidated as soon as your position gets close to being in the red. I 100% guarantee you that the CME or Goldman will not let you "ride things o…

[deleted]

Re: Battered Crypto Hedge Fund Three Arrows Capital Considers Asset Sales, Bailout

#40

Post by chollida1 »

leishman wrote: post #25
chollida1 wrote: post #2

The crypto community continues to speed run the history of traditional finance. This weeks lesson is that in an up market its leverage that makes you money and in a down market its the unwinding of leverage that kills you. They are also learning that interconnectedness will hurt more in a downturn. You can be perfectly delta hedged( don't care which way the market moves) and its the counter party risk that will sink…

There are plenty of firms that run full reserve and are not subject to this contagion.

Good to know,

Who are these fully capitalized crypto firms?

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