Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Crypto trading firm Alameda Research might be insolvent

dirtybubblemedia.substack.com

Post reply on HN
Print view View original

181–190 of 216 posts

Re: Crypto trading firm Alameda Research might be insolvent

#181

Post by gamblor956 »

dcolkitt wrote: post #179
kennend3 wrote: post #133

Earlier quoted context omitted.

> First very simple point, to become insolvent you have to actually take a loss somewhere. This has absolutely NOTHING to do with being insolvent. "Insolvency In accounting, insolvency is the state of being unable to pay the debts, by a person or company, at maturity; those in a state of insolvency are said to be insolvent. There are two forms: cash-flow insolvency and balance-sheet insolvency. " Insolvency deals wit…

Alice is a trading firm. Alice borrows $1 billion, Alice then uses $1 billion to go out and buy $1 billion of assets. To become insolvent, the value of Alice's assets has to fall below the value of her liabilities. Otherwise, Alice can simply liquidate her assets to repay her debts. The only way this can happen is if the value of Alice's assets falls below the cost basis in which she purchased those assets (plus some…

To put it bluntly: Alice becomes legally and technically insolvent if the market value of the acquired assets falls below $1 billion: the value of the assets is no longer sufficient to pay off the $1 billion loan.

Re: Crypto trading firm Alameda Research might be insolvent

#182

Post by dcolkitt »

janmo wrote: post #171
dcolkitt wrote: post #108

As someone in the industry, it's almost certainly not . First very simple point, to become insolvent you have to actually take a loss somewhere. They may have a lot of junk tokens on their balance sheet, and these tokens may be overmarked, but Alameda's cost basis (most of them were from seed rounds) is still way below their current value. With Three Arrows it was very obvious where the loss was from, they were hyper…

"Most of the liabilities on their balance sheet are probably these token deals, rather than loans made in hard currency." No... We know that they owe $650m USD to Voyager Digital and they haven't repaid it yet, instead after failing to bail out Voyager, SBF is trying to acquire its assets with a VERY shady scheme through FTX. We also know that SBF has spent a lot of effort to bail out BlockFi, and I am confident they…

No. The Voyager loan was denominated in crypto and at current prices represents only $200 million of liabilities (assuming they haven't already repaid).

https://cointelegraph.com/news/alameda-research-happy-to-ret...

Re: Crypto trading firm Alameda Research might be insolvent

#183

Post by dcolkitt »

paulusthe wrote: post #127
dcolkitt wrote: post #108

As someone in the industry, it's almost certainly not . First very simple point, to become insolvent you have to actually take a loss somewhere. They may have a lot of junk tokens on their balance sheet, and these tokens may be overmarked, but Alameda's cost basis (most of them were from seed rounds) is still way below their current value. With Three Arrows it was very obvious where the loss was from, they were hyper…

Sure, but at some point real dollars enter the financial equation, backed by these coins, none of which are probably priced correctly to serve as collateral. The ftt coin is shady as hell though. A 40% trading rebate for holding $1m is insane; that's nothing. And it's not open to anybody touching the US - a blatant attempt to prevent US regulations, which would catch this stuff. It's very weird for exchange owners to…

Why would it be shady? Traditional exchanges like the CME have "seats" that entitle holders to discounts and are sold at hefty prices. FTT is simply a tokenized version of an exchange membership. It makes perfect sense, and is really no different than a Costco membership where paying up front allows you to buy in bulk at a discount.

Re: Crypto trading firm Alameda Research might be insolvent

#184

Post by dcolkitt »

gamblor956 wrote: post #181
dcolkitt wrote: post #179

Earlier quoted context omitted.

Alice is a trading firm. Alice borrows $1 billion, Alice then uses $1 billion to go out and buy $1 billion of assets. To become insolvent, the value of Alice's assets has to fall below the value of her liabilities. Otherwise, Alice can simply liquidate her assets to repay her debts. The only way this can happen is if the value of Alice's assets falls below the cost basis in which she purchased those assets (plus some…

To put it bluntly: Alice becomes legally and technically insolvent if the market value of the acquired assets falls below $1 billion: the value of the assets is no longer sufficient to pay off the $1 billion loan.

So you agree with me? For Alice to become insolvent the price of her assets has to fall below her cost basis.

Alameda's cost basis on Solana is the seed round at approximately ten cents, and it's currently trading at $30. Similar story for all the Solana protocol tokens. I don't know what Alameda's cost basis is on FTT (if it's even holding a significant amount financed with hard currency), but we can almost certainly say it's close to the seed round price because the founder of Alameda is literally the founder of FTX.

To make this story make sense Alameda at one point must have bought some asset that has fallen significantly from its cost basis. What exactly is this supposed asset? Because Alameda certainly isn't known for going out and taken levered long exposure on BTC, ETH or other post-seed liquid tokens.

Re: Crypto trading firm Alameda Research might be insolvent

#185

Post by aaroninsf »

Analysis in this thread supports the conclusion that as in the headline, they MIGHT be insolvent; and it is not irrational to believe that they are.

IMO the important thing is that unwinding the specifics to answer this, e.g. guessing what liquidation of their collateralized debt would mean, and running the numbers of what dogfooded assets are actually worth on the market (specifically should they as the dog not be certain to be able to support valuation...), etc ad nauseum,

is itself so murky (and typical of "difi") as to make a more important assertion,

this industry continues to a clown show grift and bad faith, and even well-intended good-faith participants have little to no chance of ever knowing where they stand or having any security.

One of the few satisfactions of the looming economic apocalypse is going to watch this particular wing of the house of cards fold instantly.

Re: Crypto trading firm Alameda Research might be insolvent

#186

Post by renewiltord »

stephc_int13 wrote: post #177
dcolkitt wrote: post #108

As someone in the industry, it's almost certainly not . First very simple point, to become insolvent you have to actually take a loss somewhere. They may have a lot of junk tokens on their balance sheet, and these tokens may be overmarked, but Alameda's cost basis (most of them were from seed rounds) is still way below their current value. With Three Arrows it was very obvious where the loss was from, they were hyper…

"Market Maker" How is that even legal?

Their job is to make sure that when you go to a market to buy or sell, there's some trade available for you to take. No reason for illegality.

Re: Crypto trading firm Alameda Research might be insolvent

#187

Post by Aaronstotle »

stephc_int13 wrote: post #55

Being an avid HN reader, I've been loosely following the crypto/NFT market with various sentiments oscillating between disbelief and facepalm. The real question would be: is there anything that is not a scam in this market?

I've been in the crypto-sphere for a bit, a majority of projects are scams.

I personally believe in the large projects, and few niche ones.

My buy and hold coins are BTC, ETH, Monero (XMR), MATIC (ETH L2), and Sol. Monero is the truest "crypto-currency" in my view, and I believe there should be a digital cash equivalent if we're moving to a digital world.

ETH has smart contracts and lots of companies are using ETH L2s like Matic to run smart contracts (Instagram is using Matic for NFTs).

Solana looks like a promising ETH alternative, the risk for Sol is that it's tied up to SBF/Alameda, but their chain is very fast (albeit it goes down too frequently, still in beta though)

Please do not take a stranger's advice and do your own research on projects before investing, and don't invest more than you can afford to lose.

I prefer bear markets for crypto, it acts like a forest fire and clears the grift away.

Re: Crypto trading firm Alameda Research might be insolvent

#188

Post by standeven »

cryptoanon wrote: post #8

I really do not like this article and the discourse here for several reasons: 1. The entire Coindesk article lacks meaningful substance. For instance, we have zero idea about what those $7.4 billion of “loans” are. It’s really irresponsible to say that they’re insolvent. If you believe, so, you are applying no more rigor to your understanding of the space than the idiots who say HODL YOLO HFSP. If the liabilities are…

The title of the article is not “Alameda Research is Insolvent!”. Instead it poses the question, “Is Alameda Research Insolvent?”. Depending on the unknown liabilities, it very well could be.

Re: Crypto trading firm Alameda Research might be insolvent

#189

Post by timmaxw »

dcolkitt wrote: post #108

As someone in the industry, it's almost certainly not . First very simple point, to become insolvent you have to actually take a loss somewhere. They may have a lot of junk tokens on their balance sheet, and these tokens may be overmarked, but Alameda's cost basis (most of them were from seed rounds) is still way below their current value. With Three Arrows it was very obvious where the loss was from, they were hyper…

> First very simple point, to become insolvent you have to actually take a loss somewhere. They may have a lot of junk tokens on their balance sheet, and these tokens may be overmarked, but Alameda's cost basis (most of them were from seed rounds) is still way below their current value.

Hypothetical scenario: Alice invests $100M in seed rounds for a bunch of tokens. The token values go way up, and the holdings are nominally worth $14B. Alice borrows $7B in real dollars. Alice loses those real dollars on other bets. The nominal value of the tokens is still $14B, but Alice can't actually liquidate them for $7B in real dollars. So Alice is functionally unable to pay back the loans.

So Alice took a loss somewhere (on the other bets) and is effectively insolvent, but you can't assess that just by looking at the cost basis of the tokens that Alice still holds.

(I don't know if this actually describes Alameda; it's entirely possible that Alameda's loans are token-denominated as you're saying, in which case Alameda would be solvent. I'm just pointing out that it's more complicated than just looking at the cost basis.)

Re: Crypto trading firm Alameda Research might be insolvent

#190

Post by shorthistory »

dcolkitt wrote: post #184
gamblor956 wrote: post #181

Earlier quoted context omitted.

To put it bluntly: Alice becomes legally and technically insolvent if the market value of the acquired assets falls below $1 billion: the value of the assets is no longer sufficient to pay off the $1 billion loan.

So you agree with me? For Alice to become insolvent the price of her assets has to fall below her cost basis. Alameda's cost basis on Solana is the seed round at approximately ten cents, and it's currently trading at $30. Similar story for all the Solana protocol tokens. I don't know what Alameda's cost basis is on FTT (if it's even holding a significant amount financed with hard currency), but we can almost certainl…

Still doesn't explain why they are holding $5.8B FTT
Post reply on HN