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

Binance to acquire FTX

bloomberg.com

Post reply on HN
Print view View original

621–630 of 790 posts

Re: Binance to acquire FTX

#621

Post by fshbbdssbbgdd »

kristjansson wrote: post #574
fshbbdssbbgdd wrote: post #399

Earlier quoted context omitted.

Running a reserve ratio So the question you should be asking is: if there is a solvent crypto exchange, how would I ever find out about it?

Presumably transaction fees, market data fees, etc. would provide enough revenue to fund advertisements?

Advertising is a market, you see ads for whoever is willing to bid the highest. It seems like Coinbase had to raise money to get big. FTX arrived to the scene later. It would be hard to compete by bootstrapping from organic growth.

Re: Binance to acquire FTX

#622

Post by vkou »

ww520 wrote: post #598
sytelus wrote: post #514

Earlier quoted context omitted.

FTX should never been in this position. They are an exchange . Nobody should be able to obliterate them by playing around with their crypto.

They are an exchange that allows future trading and margin trading which require borrowing money/assets/coins. The FTT tokens were probably put up as collateral for loans. The drop of the FTT value probably triggers calls on those loans. Thus the liquidity crisis.

Your margin account should be immediately liquidated and your positions closed if the value of your collateral drops below your outstanding obligations.

Re: Binance to acquire FTX

#623

Post by zeven7 »

barry-cotter wrote: post #617
STRML wrote: post #612

Earlier quoted context omitted.

It shouldn't work this way. Customer funds should be segregated from whatever prop trading the rest of the business is doing. The only way this happens is if the prop trading business is over-leveraged somehow and the exchange bailed it out with FTT. Customer deposits should meet liabilities 1:1. If they don't, somebody is lying.

> Customer deposits should meet liabilities 1:1. If they don't, somebody is lying. That’s not how banking works. You hold illiquid assets. Sometimes they move in price. If they move enough in price you’re insolvent. Limiting bank runs is a genuinely hard problem.

Exchanges aren't banks, and crypto exchanges especially shouldn't be banks. Crypto is liquid and can be redeemed in its own denomination instantly if you hold it in a simple wallet. That's what exchanges should be doing. They shouldn't be doing fractional reserve banking, and a run shouldn't be possible. Preventing runs on a crypto exchange is exceedingly easy if the operators aren't taking risks with client funds.

Re: Binance to acquire FTX

#624

Post by csomar »

> If you are a crypto exchange and you have a liquidity crunch and you cannot process withdrawals, and you don’t get a bailout, then your future equity value is basically zero. If you tweet to all your customers “sorry we’re out of money for a bit so no more trading and we’re going to hang on to your money, but things will get better,” they will not get better.

This is incorrect and coming from Levine, it's surprising. Especially, that the crypto ecosystem had an exchange that had just that (Bitfinex) and convinced users to take up the loss and carry operations (I was one of them). The exchange is still operating and one of the major exchanges in crypto.

> You don’t have a ton of time to negotiate, and they don’t have a ton of time to do due diligence. How does the buyer know that there are no huge disasters lurking on your balance sheet? They don’t, and they don’t have much time to find out, and your liquidity crunch is not an encouraging sign. You are having a disaster now!

They probably have a good idea. Crypto balances, at least the two largest, are public. And Binance is a large (largest?) exchange, so they probably can make a good guess of their balance sheets.

> A lot of FTX’s business is in perpetual futures, a leveraged product, sometimes levered 20 to 1. If you are an exchange and you are in this sort of business, you will need to come up with the extra $100 to lend to your customer. Presumably that doesn’t come from your equity: You are doing some sort of borrowing, perhaps from other customers, 2 perhaps from outside financing sources, perhaps from your affiliated hedge fund, etc.

This is also incorrect. There is no borrowing in derivative futures. The writer didn't really do his research.

This is a case of cascading margin calls, but for very big guys. FTX tried to bail out some smaller guys but ended up getting margin called itself. Now Binance is picking the trade which carries itself a risk for getting margin called (ie: A liquidity crisis inside Binance).

This will be the most optimistic scenario for Crypto, as it'll wipe out the largest exchange that it is enabling this scam industry and also changing the crypto culture (no-KYC, Decentralized, Trust-less, Permission-less etc...)

Re: Binance to acquire FTX

#625

Post by csomar »

microtherion wrote: post #497
kuratkull wrote: post #119

Binance was threatening to dump a huge amount of FTT tokens on the market. FTX has a big+vulnerable position in FTT. FTX asked Binance to sell them the tokens for a fixed price, so as not to crash the FTT token price. Binance declined - this was yesterday/today. Of course the price of FTT crashed today. And now Binance buys FTX to help them out... smells like Binance played 4D chess all along. https://decrypt.co/1136…

> Binance was threatening to dump a huge amount of FTT tokens on the market. FTX has a big+vulnerable position in FTT. FTX asked Binance to sell them the tokens for a fixed price, so as not to crash the FTT token price. Binance declined This makes absolutely no sense and is not how markets work. If FTX was actually willing to buy unlimited FTT at a given price, Binance could not have "crashed the price" by selling be…

I think what happened is that the probably wanted to buy it with their balance sheet rather than $$ which explains why this is a liquidity crisis. Say they have a $2bn in value (crypto, company assets, etc...); they can't place market orders to buy the FTT on the open-market; but they can make an off-market deal with Binance to swap these assets.

Re: Binance to acquire FTX

#626

Post by MacsHeadroom »

Eisenstein wrote: post #596
MacsHeadroom wrote: post #581

Earlier quoted context omitted.

Notably, the internet was widely thought to be a fad for the first ~20 years.

Notably, according to crypto evangelists. No one thought the internet was a fad. It had a time when it was novel and therefore people who didn't know how to use it would make fun of it, but absolutely no one who used it thought it was a 'fad'. As soon as the first web browser became accessible to consumers the dot com era exploded. There is a difference between 'didn't hit mass adoption due to massive infrastructure…

> No one thought the internet was a fad.

Wrong.

[0] 1995 Wired Magazine "Most things that succeed don’t require retraining 250 million people."

[1] 1995 NewsWeek "The Internet is a fad" https://www.peterlundell.com/the-internet-is-a-fad/

[2] 2000 Daily Mail "Internet may be just a passing fad as millions give up on it." https://regia-marinho.medium.com/internet-may-be-just-a-pass...

etc. etc.

Anyone who was a nerd in the 80s and early 90s knows that we spent the better part of two decades being told that the internet was no more revolutionary than fax machines and that most people would never use it.

Re: Binance to acquire FTX

#627

Post by mekster »

kuratkull wrote: post #119

Binance was threatening to dump a huge amount of FTT tokens on the market. FTX has a big+vulnerable position in FTT. FTX asked Binance to sell them the tokens for a fixed price, so as not to crash the FTT token price. Binance declined - this was yesterday/today. Of course the price of FTT crashed today. And now Binance buys FTX to help them out... smells like Binance played 4D chess all along. https://decrypt.co/1136…

Conspiracy theory was expected but Alameda was spotted to have smoke up a week earlier.

https://www.coindesk.com/business/2022/11/02/divisions-in-sa...

CZ sounds smart to withdraw quickly not to be the one in a sinking boat and it did sink quickly.

Re: Binance to acquire FTX

#628

Post by eunos »

thr0wawayf00 wrote: post #614
IG_Semmelweiss wrote: post #491

Earlier quoted context omitted.

I don't think this is correct. The FED was created in 1913 for a very specific reason - to counter the Panic of 1907 by creating a banker of last resort. It did nothing to curb the banker speculation that led to the panic of 1907 Witness LTCM, Web bubble, Subprime crisis, all fueled by banks willing to lend and overextend themselves beyond margin. The 1913 ACT did not change that one bit except make the speculators n…

> Witness LTCM, Web bubble, Subprime crisis, all fueled by banks willing to lend and overextend themselves beyond margin. This was addressed under Glass Steagall by creating the FDIC and ushering in the fractional banking system, which kept commercial and investment banking separate and imposing liquidity requirements and a review system on banks. This legislation was later repealed during the Clinton administration…

> This legislation was later repealed during the Clinton administration

Repealed by congress which was controlled by GOP at that time.

Re: Binance to acquire FTX

#629

Post by mekster »

TravelTechGuy wrote: post #201

Some more background: the companies were engaged in fighting over regulations, and on a personal basis between the 2 CEOs. It went down to really childish levels at some point. But one thing is undeniable: SBF (FTX CEO) was trying to weaponize US regulation against his biggest rival CZ (Binance CEO). CZ retaliated by selling the FTT token, exposed the fact FTX was over-leveraged, and took over. This is, as the kids o…

Why are people trying to make up their own stories without the reason of how CZ was trying to sell FTT?

Alameda's balance sheet was already looking wrong in the first place.

https://www.coindesk.com/business/2022/11/02/divisions-in-sa...

Re: Binance to acquire FTX

#630

Post by prottog »

stefan_ wrote: post #493
googlryas wrote: post #430

Earlier quoted context omitted.

Are you just assuming his dad paid for his school? Do you know if he received any scholarships? Do you know the finances of his mother/mother's side of the family?

A scholarship? People from Nigeria can't even get a visa into the US.

That's not even true in September 2022[0], let alone throughout the whole immigration history from Nigeria to the US.

There are a quarter of a million immigrants from Nigeria in the US.

[0]: https://travel.state.gov/content/dam/visas/Statistics/Immigr...

Post reply on HN