391–400 of 440 posts
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> Binance has become a gold standard in crypto exchange business This was FTX and Alameda like a week ago.
FTX was actually based out of a headquarters and wasn’t on the run from governments.
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Why did anyone trust FTX either? The trust was really based on the credibility of the person running it, and the fact they had bailed out some other failing exchanges. But there were no hard facts. In fact it seemed like all it took was a public quarrel with the founder of another exchange to start the ball rolling toward total collapse -- again, because it was all based on personal credibility.
It's almost as if crypto tokens are intrinsically worthless!
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> the bank does loan you the money out of their own funds Nope. This is the toy model of money and banking taught in high school. When a bank makes a loan, it creates money. The fact that there are stabilising deposits is a fortunate convenience. This is why leveraged finance is inherently unstable. The BoE had a good paper about this.
It's important to understand that banks also destroy money when loans are repaid. Everyone always brings up the fact that banks create money out of thin air when issuing loans. Nobody ever mentions that the inverse happens again at the other side. I'm not sure how much it's because everyone just parrots the factoid that "banks create money" without understanding it, or they are deliberately trying to mislead people i…
It would be amusing if this deliberate attack by Binance also caused other frauds like Tether and eventually Binance to collapse too. People will simply lose faith in crypto entirely and avoid the whole market.
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This isn't a cryptocurrency problem though. It's a cryptocurrency exchange problem. As you noted, they have essentially reinvented centralized fractional reserve banking with none of the benefits and all of the drawbacks. They're all unregulated banks in disguise. Cryptocurrencies were meant to put an end to such things. Ironic how corporations ended up reinventing it all on top of crypto. Exchanges are everything th…
> Exchanges are everything that's wrong with this space. Exchanges are the space. Without them, there's no way for people to buy into the system with real money in the first place!
Exchanges are popular because it's easy, and also it allows you to trade _fast_. And then the exchanges figured out that they could be holding onto your cash and/or crypto, rather than, you know, actually be _just_ a location for which exchanges happen.
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A lot of people have been smoking the copium pipe with crypto. Whenever you rightly make these points there's a flurry of downvotes. The only benefit crypto had, was to early movers. Beyond that it's a waste of effort. I expect in a recessionary environment the pressure for a wider crypto market will be too great for many large operations to sustain. Let's hope all those celebrities who made adds got paid in real cas…
> Let's hope all those celebrities who made adds got paid in real cash! At this point it looks like Tom Brady is going to be playing football well into his 50s.
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Banks inherently gamble with customers deposits, every loan is a gamble. They also can invest in certain types of debt securities, there’s security regulations but that isn’t bad on its own. What FTX did is much worse . They spent their customer’s money on stupid shit like the Miami Heat stadium, political donations, and charity work (which was legitimately really good but not their choice to make), and then replenis…
> Banks inherently gamble with customers deposits, every loan is a gamble While there's a ton of nuance here, in the general case it doesn't work how you've implied. When you take out a mortgage, the bank doesn't take a bunch of money other people have deposited. It's literally created out of thin air and marked as a liability on their balance sheet. This is how the majority of money is created in a fractional reserv…
It seems completely insane to use FTT token as collateral in the way FTX did.
https://www.bloomberg.com/opinion/articles/2022-11-09/bankma...
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Don't you have that backwards? My mortgage is the bank's asset . My checking or savings account is the bank's liability.
When you bring money to a bank, that money is treated as both a liability (to you) and also as collateral against which the bank can lend money to others. When a bank lends money to you, it's net neutral. A $100,000 mortgage creates a -$100,000 position on the bank's liabilities list and a $100,000 deposit in your bank account. They create $100K in new money to fund this loan collateralized by both the reserves on de…
We'll I'll just ask two: Suppose to buy my house the seller wants cash. I take out my cash and give it to the seller. Ok fine, but the bank is creating money out of thin air, where does the cash come from if lots of people do the same?
Follow up: more realistically, I wire money to the seller, what actually happens between the banks? It seems like bank A creates money from nothing and sends it to bank B, what is stopping bank A from sending out an infinite amount of money to other banks?