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Ftx.com Has Probably Collapsed

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Re: Ftx.com Has Probably Collapsed

#161

Post by graeme »

RC_ITR wrote: post #156
graeme wrote: post #133

Earlier quoted context omitted.

> They have zero risk of this kind of insolvency, their only risk is people stop using them to trade. US regulated companies can, in fact, go bankrupt, and frequently do. They can also misuse funds or make foolish decisions that cause them to to under even if customers keep using them. There is even have a system for scoring this risk, called the Altman Z score. A good score is above 3. A grey zone score is 1.8-3.0.…

I don’t want to cite Dunning-Kruger, but Coinbase’s core business model (if you looked at their balance sheet as I suggested) leads to them segregating customer assets from everything else (there’s a special line with a footnote and everything). Those assets line up exactly with the liability line for deposits. If you’re even a little bit familiar with bankruptcy law, you know that those depositors are the top of the…

Coinbase has those assets listed nice and separately but that is unlikely to hold up in bankruptcy court.

SEC specifically forced Coinbase to disclose the following:

“ "Because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors”

“Deposits” legally are a banking term and coinbase is not a bank.

The money given to Coinbase is more akin to a gift card balance. Starbucks segregates customer gift balances on its balance sheet but if they go bankrupt gift card holders are in line with other unsecured creditors.

Re: Ftx.com Has Probably Collapsed

#162

Post by eru »

daveguy wrote: post #24
outside1234 wrote: post #20

Earlier quoted context omitted.

Drugs, Money Laundering, Money Hiding, etc. etc. There is utility in a black currency for all sorts of illegal things

But bitcoin is the absolute worst black currency. Every single transaction has a permanent public record.

Still somewhat useful for ransom ware.

Re: Ftx.com Has Probably Collapsed

#164

Post by ETH_start »

maxbond wrote: post #124
ETH_start wrote: post #87

Earlier quoted context omitted.

>>If that sounds ridiculous, it's because it is. Based on how you described it, I don't see what's ridiculous about it.

It is utter hubris to put the lives of fictional future people, mere characters in a story you've invented, over the lives of real people alive today. It can justify virtually any action. The future is unknowable, so we can spin a new yarn every time we want to justify a new ethical compromise.

In principle, a greater number of future lives matter more than a lesser number of present lives. The principle itself seems sound to me.

The problem is you can't actually be certain those future lives will come to exist. One assuming they will, and being so confident in their assumption that they deprioritize the lives of the currently living based on it, is hubris, but only because it over-estimates one's powers of prognostication.

Re: Ftx.com Has Probably Collapsed

#165

Post by RC_ITR »

graeme wrote: post #161
RC_ITR wrote: post #156

Earlier quoted context omitted.

I don’t want to cite Dunning-Kruger, but Coinbase’s core business model (if you looked at their balance sheet as I suggested) leads to them segregating customer assets from everything else (there’s a special line with a footnote and everything). Those assets line up exactly with the liability line for deposits. If you’re even a little bit familiar with bankruptcy law, you know that those depositors are the top of the…

Coinbase has those assets listed nice and separately but that is unlikely to hold up in bankruptcy court. SEC specifically forced Coinbase to disclose the following: “ "Because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such custo…

1) I love the energy of taking a risk disclosure at more than face value (they are clearly speculating and write that because it is free to do so and it covers their asses, not because the SEC “forced” them).

Show me the precedent where bankruptcy courts considered depositors as general creditors, since you are so sure that’s what will happen.

2) Will you please please please read the balance sheet.

As a favor to me?

In it you will see that of Coinbase’s $105bn in liabilities, $101bn of it is owed to depositors. That is offset by $101bn of depositor assets.

So even in your worst case scenario, depositors get what, a I’d love to see the number of FTX depositors who’d take that deal rn…

EDIT: Maybe this will help. What’s special about Coinbase isn’t the fact that deposits are a line item on their balance sheet (FTX did the same), it’s that Coinbase actually keeps the assets.

So whereas FTX not only lost solvency in its core business, it also lost solvency in deposits, Coinbase can only lose solvency on its core business, which is minuscule relative to the scale of deposits.

Re: Ftx.com Has Probably Collapsed

#166

Post by Ambolia »

Many young people had the hopes of maybe getting rich through crypto when all other avenues to a comfortable life that were available to boomers had disappeared. Now this will be a bucket of cold water to those hopes.

Re: Ftx.com Has Probably Collapsed

#167

Post by colinmhayes »

RC_ITR wrote: post #157
colinmhayes wrote: post #131

Earlier quoted context omitted.

Coin base doesn’t offer margin loans?

They stopped in 2020. Like I said, the model is sort of stupid and weird but it’s less stupid than FTX’s at the moment!

I mean really it seems like FTX’s issue is that it got raided to serve as a hedge funds piggy bank. They’re not stupid, they wouldn’t accept such a massive amount of collateral in their own token if it wasn’t mostly owned by their hedge fund that they want to funnel assets too.

Re: Ftx.com Has Probably Collapsed

#168

Post by adam_arthur »

eru wrote: post #160
adam_arthur wrote: post #25

Earlier quoted context omitted.

Fortunately for investors in public companies, you can mostly sort out the crazy people ahead of time By inspecting the growth mechanism of the company. Amount of leverage, yield on investments relative to risks, assumptions about future growth, management commentary etc. Unfortunately for investors in FTX, they had no visibility or regulations/protections against their deposits being stolen

> Fortunately for investors in public companies, you can mostly sort out the crazy people ahead of time > By inspecting the growth mechanism of the company. Amount of leverage, yield on investments relative to risks, assumptions about future growth, management commentary etc. Why waste your time like that? Just buy an index fund. > Unfortunately for investors in FTX, they had no visibility or regulations/protections…

Index funds are only as good as their constituents.

Why buy index funds that hold many overvalued companies, like Chipotle at 50x PE (2% yield), or Costco at 40x (2.5% yield) when 10y at 4%. To name just a few of many

Also certain sectors and companies will do better than others in this macro environment.

Would rather buy things that are fairly valued. But to each their own

Re: Ftx.com Has Probably Collapsed

#169

Post by wruza »

dghlsakjg wrote: post #146
wruza wrote: post #44

Earlier quoted context omitted.

You seem to imply something here, what it is?

If you do crimes you shouldn’t take notes on it. Let alone record it in a public traceable ledger that the authorities actively track.

But why do you think so? They track it, so what exactly? Last time I’ve seen a ransomware it demanded ETH, not something else.

Edit: not bitcoin, eth actually, but it makes no difference here

Re: Ftx.com Has Probably Collapsed

#170

Post by rich_sasha »

sillysaurusx wrote: post #23

Does anyone know how Coinbase avoided this fate? I really thought it would be them to fall, but they proved everyone wrong. There’s some key difference between Coinbase and an exchange like FTX. Is it because FTX had a token, and then leveraged themselves using their own token? Binance has a token too. Are they in similar danger? It would be an interesting contrast to know why one exchange is safe vs another. Here’s…

It sounds like FTX wasn't unfortunate but fraudulent. The business model of running an exchange is pretty solid, and reasonably risk-free financially. Crypto exchanges could be hacked, there are technology risks, counterparty risks against individual traders etc. but in general an exchange takes very little financial risk. Exchanges merely facilitate the shuffling if money and assets between people, risk-free for them (mostly). Same as bookmakers, who mostly match off people betting on opposite sides.

In the bookmaker analogy, it sounds like FTX took the betted cash and spunked it away to prop up Alameda. Nominally this was a loan backed by the FTT token, but at best this was a risky asset, and FTX could no longer promise they can pay out all the bettors - because FTT could, and did, drop in value.

Note that at no point during the various crises of past 15 years has any fiat exchange been under financial pressure. Banks, funds and insurers, yes, but they take outright financial risks. But not a single exchange.

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