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FTX balance sheet, revealed

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Re: FTX balance sheet, revealed

#251

Post by pigtailgirl »

SnowHill9902 wrote: post #176
pigtailgirl wrote: post #33

"What are President tokens? President tokens are ERC-20 tokens that will be redeemable for either $1 or $0 based on if Trump wins or loses the Presidential election. These markets act as tradeable prediction markets where the market price of TRUMPWIN should be roughly equal to the probability that Trump will win the election and the market price of TRUMPLOSE should be roughly equal to 1 minus that probability. TRUMPW…

That’s actually very useful. It’d allow one to hedge risks with new synthetic derivatives instead of creating weird proxies with stocks.

-- dont have issue with the coin - "jfc smh" FTX was holding it - such a strange bet --

Re: FTX balance sheet, revealed

#252

Post by gruez »

lizknope wrote: post #205
FollowingTheDao wrote: post #175

Earlier quoted context omitted.

Ponzi schemes are not obvious, until they’re totally obvious. That’s why they keep happening. A lot of people will explain to others that it’s a Ponzi scheme, but those people are making so much money that hey don’t want to hear it. Crypto is a Ponzi scheme, and it always was. I’m not just talking about these companies, being Ponzi schemes, I’m talking about the whole ecosystem being a Ponzi scheme. You can either li…

You don't have to listen to me or another expert saying that FTX was a ponzi scheme. Literally just listen to SBF himself. He described his business as a ponzi scheme. If that isn't obvious then I don't know what is. This is Coffeezilla's summary of SBF on the Odd Lots podcast with financial analyst Matt Levine https://www.youtube.com/watch?v=sucxhGOv9ww

> Literally just listen to SBF himself. He described his business as a ponzi scheme

1. you should actually listen to the podcast, or at least skim the transcript[1], rather than trusting some second hand account by some youtuber. In the podcast, he's describing an abstract token that offers no utility, not FTT and certainly not the exchange itself.

2. At least from skimming the whitepaper for FTT, there's at least a plausible business model (eg. through exchange fees). That's not to say it's not a ponzi scheme, because many ponzi schemes claim they have a plausible business model, but that's different than literally describing yourself as a ponzi scheme. That would require you to put out a whitepaper that's like "we fully expect this token/company to make zero money and all profits to earlier investors come from later investors".

[1] https://www.bloomberg.com/news/articles/2022-04-25/odd-lots-...

Re: FTX balance sheet, revealed

#253

Post by oldgradstudent »

catbird wrote: post #226
oldgradstudent wrote: post #119

Earlier quoted context omitted.

> Bank deposits, of course, are >100% backed (by a mix of assets), The reserves are there to provide liquidity for people who want to withdraw their funds in normal times. The assets are mostly loans. The lenders sometimes fail to repay the loan, and the collateral may not be worth as much as initially estimated. The bank has capital requirements, so that if loans are not replayed, the bank shareholders take the hit.…

What does it mean here that “the shareholders will take a hit?” Do the shareholders normally receive some regular payments that would stop (or be reduced) in that situation? I know nothing about finance, but the stories unfolding this week have me interested to learn more about how all this works.

The bank has deposits and capital from its shareholders.

The bank promises to pay the depositors interest, and the bank collects interest from the loans it makes.

If the bank made good loans, the difference between the interest it pays and the interest it collects increases the bank's capital, and at some point it may pay dividends to the shareholders.

If the bank made bad loans, and some of them are not repayed, the losses come out of the bank's capital.

If the capital goes below some regulatory threshold, a corrective action must be taken. The bank can raise more capital, or get acquired. If a corrective action is not taken, the FDIC takes over the bank, and either sells the bank, or closes it and distributes the remaining assets as follows:

First, to cover deposits up to the insured limit, which is $250K per account. Then to deposits above the insured limits, then to creditors according to seniority, and finally, if there's anything left, to shareholders.

In other words, shareholders takes the first hit, then creditors, then deposits above the insured limit, and finally deposits below the insured limit.

If the deposits below the insured limit take a hit, the FDIC covers that from its insurance fund.

This is of course a very simplified version.

Re: FTX balance sheet, revealed

#254

Post by landemva »

greiskul wrote: post #161
igorkraw wrote: post #88

Earlier quoted context omitted.

I wrote a whole post because I misread your first line as "while some people think" and set out to "tell people on the internet they are wrong", but since we seem to actually agree with another, I'll post the below as an agreeing addendum to make the point just how much more stable real economics and finance are than crypto BS. And also because I wrote it already. --- This is not "luckily", it's by design, and there'…

Exactly. People that say that the value of fiat money is fake, never think about taxes. You want to own a house? The government mandates that you acquire and give them a certain amount of US dollars. Even if you did every single transaction in your life with other assets, paying for stuff with gold and chickens, at the end of the day, the tax man will come for you, and the tax man only takes dollars.

> You want to own a house? The government mandates that you acquire and give them a certain amount of US dollars.

I have gone through many county clerk & recorder documents. I regularly see 6 and 7 figure houses change hands via recorded quit claim that says things like: 'love and other valuable consideration' or the frequent 'ten dollars'.

And I have read a lot of State law. While there is shady stuff in law such as "federal IRS lien can be recorded without a hearing nor judgment in State court", I have yet to see law which requires $ to exchange a house. Am interested in seeing a State law reference you may know of.

Re: FTX balance sheet, revealed

#256

Post by landemva »

lottin wrote: post #97
wolpoli wrote: post #47

Earlier quoted context omitted.

> Imagine if JP Morgan Chase's entire value was in JP Morgan Chase stock, and they just reported that as their value in cash. It's like recursive valuation. While I think real world finance is on much more stable ground than crypto, I thought it'll be funny to point out that many of the world's central banks back their liabilities (the currency they issue) with own government's bonds. Luckily, the bonds are denominat…

This is incorrect. Currency issued by a central bank is not a real liability, since its issuance does not entail a future payment obligation. It's a liability only for accounting purposes. The government bonds on a central bank's balance sheet are used to conduct (or the result of) open market operations. They aren't "backing" anything.

In USA, Treasury issues currency and coin. Private organization named Federal Reserve has special privilege to manipulate interest rates through various means.

Re: FTX balance sheet, revealed

#257

Post by landemva »

rvba wrote: post #173
lottin wrote: post #99

Earlier quoted context omitted.

You're probably understanding it wrong. Central banks have little or no debt, and they can "print" reserves at no cost. Reserves is the stuff they pay their debts off with. As a result it's virtually impossible for a central bank to go bankrupt.

A central bank can go bankrupt - it cannot keep printing money forever. When we look at places with hyper-inflation, at some point people lose all their "faith" in a currency (and in the central bank). People no longer want to receive a currency that can be printed at 'no cost', because this currency will only keep losing value due to constant printing. They demand other, "hard" currency, or just use barter. Of cours…

> Zimbabwean ... banknotes and this was one my my best investments ever

Great example of scarcity and price rising via collector demand. They are not making any more of those notes, and collectors are interested similar to collecting scarce baseball cards. Neither have intrinsic use nor utility, but they are scarce and people like to collect them.

Re: FTX balance sheet, revealed

#258

Post by acdha »

FollowingTheDao wrote: post #234
acdha wrote: post #225

Earlier quoted context omitted.

I think your second paragraph is correct but contradicts the first. It’s not that these aren’t obvious so much as some people really wanting to find ways to ignore that so they can get rich without feeling like a scammer.

What I meant by " Ponzi schemes are not obvious, until they’re totally obvious. That’s why they keep happening." Is that they are totally obvious once they fall apart. No contradiction.

I was thinking something like undeniable or incontrovertible might be more apt to convey the period between something being obvious to an objective observer and when even people who are predisposed to want it to work acknowledge that it doesn’t. The magical thinking around blockchains is a good example where the flaws have been exhaustively discussed but there are enough people who don’t like the traditional banks (understandable) and are hoping that it can work if enough people try really hard.

Re: FTX balance sheet, revealed

#259

Post by philippejara »

irusensei wrote: post #105

The whole thing that is bugging me is that they made big political donations to both D and R. They use the money they conjured out of thin air and backed politicians with it. They probably backed the politicians who were most friendly to them. Those politicians might have won and that dirty money might have done a difference. Does that sound moral to you? I think it’s absolutely terrifying. Every candidate that recei…

How is that any different from every other company/individual making political donations?

Re: FTX balance sheet, revealed

#260

Post by funstuff007 »

nroets wrote: post #248
funstuff007 wrote: post #202

Earlier quoted context omitted.

> Imagine if JP Morgan Chase's entire value was in JP Morgan Chase stock, It's way worse. JPM stock pays dividends in dollars. The yield on FTT is more FTT.

A predetermined percentage of FTX fees is used to buy back FTT which is then "burnt". Open market buy backs are equivalent to dividends. So FTT has a yield measured in dollars.

But you never get access to those dollars. You end up owning a scarcer magic bean. And dividends are not equivalent to share buy backs--both from a tax perspective and from a forced diversification perspective.
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