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How the fuck is this the subtitle? The firm's founders saying they believe this is evidence of nothing. A responsible journalist would not include it at all. It is journalistic malpractice to make it the subtitle.
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…
The private sector will have to arrange any acquisition of distressed assets or they will fail and people will get hurt. Lenders will harden and be better equipped for the future. This IMO is a good thing - there is no one to save anyone and the market will deal with the consequences. I don't care about the impact on prices. Drive the weak players out and let the strong survive.
what firms are going to survive this, seems like everyone is being hit hard
Earlier quoted context omitted.
> 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…
Also generally the amount of collateral that needs to be posted is in the millions of USD so people tend to understand that isn't instant, especially if those funds are currently in money market funds or bonds held elsewhere.
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…
Would love to see a citation on this.
We go, "Wow, that's pretty interesting. Hope it doesn't happen" and we continue to eat our soup.
I enjoy reading stuff like this without the need for them to publish a study.
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.
So, the only reasonable move for an individual is, simply don't participate in the system in the first place, keep your money in the mattress. (Crypto equivalent: hold your own coins).
The problem is, credit actually creates real economic growth. A society that encourages credit via regulation will outcompete a society that leaves it to an unregulated marketplace (and thus disincentivizes individuals from participating).
Good riddance.
PS: don't really think 3ac behavior is representative of crypto trading firms as a whole (Wintermute, Jump etc). A lot of them are highly professional and responsible operations who have weathered the storm just fine and in many cases, have generated nice pnl during this event.
Earlier quoted context omitted.
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.
But it's only an issues for other connected entities when they are using risky business practices themselves. A stablecoin that backs its assets in the currency that the stablecoin issues (for example a USD-based stablecoin that is backed by US treasuries) won't be affected by any disruption in the market. An exchange that is fully backed and does not allow margin trading won't be affected either. Regular holders who…
I think that's the thrust of the argument. We're about to find out how many DeFi companies are utilizing bad business practices.
"TradFi" at least has a real floor because "real" money (as in: currency that can be exchanged for goods and services) and "real" investments (as in: shares of companies that provide goods/services) do actually exist. Even if significant portions of the market are driven by speculation.
Are we reaching the point where people trading crypto get bored and just... stop?
Is this mostly caused by people coming to grips with the fact that "crypto" is entirely speculative with no actual value? "TradFi" at least has a real floor because "real" money (as in: currency that can be exchanged for goods and services) and "real" investments (as in: shares of companies that provide goods/services) do actually exist. Even if significant portions of the market are driven by speculation. Are we rea…