If you’re seeing delays, get out now. Don’t think about it. Pull as much money as possible, out, now.
The exact same thing happened at Gox. I did all kinds of mental rationalizations. Oh, they’re too big. Oh, failure was unlikely.
I managed to siphon out 7 BTC. Then I traded it 2:1 with some fellow from IRC for his BTC locked up in Gox. Woo, I was going to make a 14 BTC payday.
Nope. In fact, trading was still open on the exchange. I took a risk with that goxcoin. When the dust settled, I was left with 7.76 BTC that I couldn’t access. It’s still there. That was almost 10 years ago.
Don’t make my mistake. The very first sign that there was a problem was delays, followed by transactions over a certain amount not processing. People seem to be reporting both.
I'd argue the time to get out passed long before delays. The time to get out is when a competitor has delays(if you're so lucky). I remember reading and studying Celsius vs Voyager for about a month before I put low 5 figures into Voyager. Hey, free money right?
Then Celsius hit snags, and people were -still- recommending Voyager. I noped right out and withdrew it all.
What do you know, a couple weeks later Voyager suspends all withdrawals. I believe I have like 9 dollars tied up still with them, because I keep getting weekly updates in their 'plan.'
I do feel for people who lost more than I put in, but at some point you have to expect people to know money isn't free and the gravy train doesn't last forever.
Since all of these systems are negative-sum, in almost all cases, the majority lose more than they put in. That's how these scams work.
I would discourage everyone from developing the apetite for "free money" in these cases, because it isnt free. You were just lucky enough to be early in the pyramid scheme which ends with the vast majority losing everything. It was their cash you withdrew, that's the source of your "free" money.
If people want to know why these scams are so common, its because they work. People early-in, early-out extract money from the rest.
Nevertheless, in almost all cases, by the time you hear about the opportunity, you're too late to scam people. If nothing else, at least presume this.
(which is the anti-dote to FOMO: by the time you feel FOMO it's too late, you'll be the dupe)
Yes, or more bluntly: if you identify something as a Ponzi but are able to get in and out fast enough to profit, that is stolen money and you are as culpable as the original founders.
> Investors who profited in good faith from Bernie Madoff’s Ponzi scheme must return millions they received in excess of their principal, the Second Circuit ruled, affirming judgments allowing the firm’s liquidating trustee to claw back the funds.
> Net winners of Madoff’s infamous Ponzi scheme don’t have property or contract rights to profits earned over and above what they invested, even though they were unaware of Madoff’s fraud, the U.S. Court of Appeals for the Second Circuit ruled Thursday.
> Since all of these systems are negative-sum, in almost all cases, the majority lose more than they put in.
This is a solid argument and I'd have made it once. But given how the situation is shaping up it is difficult to avoid the comparison to gold which is also a net-negative system, has been waddling on for several thousand years now and has proven irrepressible as an asset (despite many credible efforts to stamp it out).
The argument about whether crypto as a system can create value has been settled in the affirmative. We've never seen these sort of reliable transaction guarantees before in a monetary system and some people are willing to pay for that. Value is being created. The only question still open is what cost is appropriate. So far the market has been consistently saying "more" but maybe that is an aberration.
I anticipate these being common points so here is my quick rebuttal to each:
> it's a physical object
That isn't an argument for or against crypto. Crypto is a virtual object and that is desirable, makes it easier to get past a border. I can't easily get my gold out of the country - this is one of my considerations when I started buying in to Monero. There'd be a lot less interest from inside China if crypto was a physical object.
> it has use value in jewelry
Yep. Think about that deeply. One of its primary functions is looking good, and it isn't do so well at that job compared to coloured glass. The point of gold jewellery is to show off - politely - that someone can afford to own gold. There is nothing happening there that Bitcoin can't do except Bitcoin is even more public about how much someone owns.
> it has use value in electronics and other industrial applications
And they'd be able to afford a lot more of it if the investors would go away. Gold's value has been a thing for literal centuries and electronics have only existed for decades. This isn't driving the value of gold as an investment, gold's corrosion resistance is. Crypto has arguably better, arguably worse properties over long periods of time. Really we are still to find this out, it hasn't been around long enough to know what a decade in crypto looks like (at equilibrium).
> That isn't an argument for or against crypto. Crypto is a virtual object and that is desirable, makes it easier to get past a border.
Crypto is like a family game of monopoly that gets a little out of control. There is this long-running game, and the family are really invested in trying to 'win'. So much so that they were willing to pay with real money to buy monopoly money from one another just to keep playing. As the game progressed, the banker gave out more money as people passed go, but the agreed amount for the monopoly money remained the same.
Neighbours watching the game see the family playing the game and ask to buy some monopoly money seeing it will be more valuable in just a few throws of the dice. This increased demand for a limited supply of monopoly money, which saw the people already holding monopoly money profit more. This further attracted people to the game. Soon the whole neighbourhood is trading in monopoly money, and everyone who does sees a profit.
Off the back of this successful and profitable game of monopoly, others tried to replicate it in a nearby community. Services started popping up where people offered to hold the monopoly money for people, and would allow it to be exchanged for other monopoly monies. Secretly though, the monopoly exchanges were busy trading those people's monopoly money so that they too could invest it further in the game. They justified it to themselves, promising they would return it as soon as they made it back.
Some of these exchange services played way too dangerously, and lost all of their monopoly money. This startled players of the game, and they decided to withdraw their monopoly money investment for real money they trusted before playing the game. This in turn triggered those exchanges that also gambled monopoly money to have to admit that it was no longer there.
Now to current day. More and more people get startled by losses and start pulling out to recover what they can, as promises of returning to the glory days of high value monopoly money never materialize. Most of the exchanges have their liquidity in other monopoly money exchanges, and as these 'assets' diminish, so do their own. Some hold real world liquid assets, but the people running the exchanges quickly pull this out for themselves.
It's the future, and anybody left holding monopoly money once again has a token money for a game people stopped playing a long time ago. They hold onto it because they either couldn't get out before it all imploded, or they delude themselves into thinking everybody will come back to the table and start playing again.
The monopoly game is over, and the family no longer talk to each other. Some of the family are now mega rich, but this was at the cost of the majority of players that joined the game, mostly those with smaller amounts invested and those who turned up late.
> And they'd be able to afford a lot more of it if the investors would go away.
They wouldn't. Gold is super valuable because it has tonnes of special properties, and there isn't much of it.
Gold has kept its value for thousands of years because it's not net-negative. People happily buy gold and "lose" money on the deal, because they value the gold more than the money.
So investors can gain money, buyers can gain gold, and everyone can come out ahead.
Unlike crypto, where one investor's gains come at the expense of another investor who loses, because few people buy crypto for its own sake.
that kind of assumes the tokens produced have no value which in the case of stuff like bitcoin seems empirically not to be true. Even after all the crashes etc. you can sell them for >$10k each
And if you say the people paying $10k+ for bitcoins are just mugs, it's all 0s and 1s, it is hard to differentiate from regular currency which is also just bits of paper or 0s or 1s. Both have value because in practice you can exchange them for real stuff.
The whataboutism kinda falls flat since both can be true: fiat currency from a govt and crypto can both have zero real value, propped up only by shared delusions.
However, govt currency is propped up some by it's taxing authority (the govts ability to take value from its residents)
They absolutely can if they operate like banks with a fractional reserve. All of them do, they cannot resist the temptation to "efficiently allocate" the huge amount of money they are sitting on.
It's totally illegal and the SEC is chatging everyone they can reach. But most are out of reach, because they are outsdt US and the Presidents refuse to use the military to defend USAns against finacial warfare.
The closest real world analogy is probably https://en.wikipedia.org/wiki/MF_Global : same story of illegally transferred client funds from what should have been a plain custodial brokerage.
And yes... bitcoin has gone up a lot in that time. That doesn't mean the creditors are happy about their crypto being stuck on a bankrupt exchange for almost a decade.
I have a small fortune in the civil rehabilitation proceedings. Since mtgox went down, I've since met my wife, got married, had children, started a Masters, finished a Masters, and bought a house. Having access to my crypto at any point during that period would have been really nice.
Maybe losing that crypto taught you a lesson and made you a better person and presented you from losing far more in the intervening years. If you got your crypto back you might have been misled into believing that when you give your keys to a strangers, it's still your crypto.
Do you happen to know if there is any way to apply for this process later?
I had tens of bitcoins when MtGox went down. But I have no proof of the transaction or even a proper memory of my account name, and I missed their stupid deadline for applying for the payback program.
Thank you, I will check it out.
Yeah I think the deadlines are already over, the whole process was quite shady and I did not even realize you can apply, until the deadlines were over.
It is unfortunate and no creditor should be exactly "happy" about the situation or completely satisfied with the outcome.
But everyone early on crypto knew there were some risks involved. And there is a chance you, or other creditors would have, for whatever reason, withdrawn and converted earlier to less USD (or even lost everything). Getting a fraction now can be a win for many. Call it "enforced diamond hands" if you like the meme...
If you’re looking for an opportunity that might 2x your investment over a decade, I imagine the good old stock market would be better than gambling your funds on a dying exchange. But what do I know.
I put in $11k at $1,100/coin. I’ll be lucky to walk with 1 BTC after more than a decade. So, not really. And I’ll believe that when the coin is in my wallet. Till then, it’s a mental write-off.
>>I’ll be lucky to walk with 1 BTC after more than a decade.
The payout is clearly stipulated on the MtGox website, assuming you've done the work of registering as a creditor. The minimum you'll be walking away with is roughly ~1.5BTC.
Brian Armstrong from Coinbase was on the latest All-In podcast and talked about this. It sounds like they're not at much risk as they are US based and are regulated to have much higher standards of keeping reserves
If what he's saying is true, there isn't really anything to worry about, and coinbase will likely be the winner here with a proven track record.
If they are truly holding customer funds and crypto 1:1, then you cannot do a bank run on them. They will just pay out. Which is what Armstrong says.
Frankly, after all this shit if an exchange can prove they are reliable and reputable, which Coinbase has so far, they are likely to emerge quite well out of all this (unless the entire crypto market loses all credibility or gets regulated into nothing).
> If what he's saying is true, there isn't really anything to worry about
I don't believe that is entirely accurate. Coinbase used to have a pro account with margin trading. Unless they managed to clearly unwind that business there is a risk that something went wrong at one point.
Margin trading is safe for the exchange if it works as usually described in the terms: they just act as a bookmaker reallocating customer funds according to which side wins each peer to peer bet. There's usually rules that describe what happens in gaps, closing the winning side with a win that never exceeds what the losing side put down when opening the bet.
If they steal customer funds, then all is off, but same when there is no margin trading involved.
If the allow margin gambles they probably are not selling the cryptos for cash to save transaction cost and just calculate the balance virtually. With all the cryptocoin volatility I don't see how process margin calls without keeping the actual cryptocoins either, so you can give them back to the lender.
Ah ok, because CEOs never make a public statement and then the next day literally the opposite of what they just said happens. Not saying that this will happen with Coinbase, but I would not believe that Coinbase is not at risk just because their CEO said it isn't.
Though it then, by definition, makes it not a Ponzi (at that specific point), since Ponzi implies deception : banks are also unable to pay everyone at once, yet they typically aren't called "Ponzi".
Banks have a liquidity and term mismatch, but are required to be solvent. Ponzi schemes offer fake balances and are insolvent.
It's not clear at what exact point FTX became insolvent, but I think the CEO writing an $8bn disguised accounting entry for tokens he'd lent to his girlfriend may have been it.
There's also maybe the option of being insolvent but nobody caring because the money is too good..?
Not sure what to call this since I assume this has been regulated to death in normal finance ?
But it wouldn't surprise me if it had happened at some point at FTX, considering all the greed and hype around crypto...
Though I guess it might be a moot point : information doesn't travel instantly, and a judge might still deem you "guilty of Ponzi" (or whatever term is appropriate) if you haven't literally been shouting "We are insolvent !" from the rooftops ? See again : regulation.
"Trading while insolvent" we call it in the UK; the legal obligation is to call in the administrators when you realize you're insolvent. Which they have now done. And insolvent companies generally do themselves, because it's less painful than the alternative.
There will probably be a lengthy argument in court (but which court - Bahamas?) as to whether they should have realized this earlier and whether their accounting was deceptive or incompetent.
(those interested should read "Lying for Money" by Dan Davies, it's an entertaining and escalating history of fraud)
> banks are also unable to pay everyone at once, yet they typically aren't called "Ponzi".
There's a distinction between liquidity and solvency. Banks can run into liquidity issues, but in theory if they do their job right they should stay solvent, and will be backed by insurance / reinsurance and such. Basically a very different world from these yolo crypto outfits running out of offshore tax havens.
I am not sure there is a clear distinction between the two for fractional reserve banking ?
The bank can have done nothing "wrong", yet if the situation is bad enough : bank run + entities it has been lending to going bankrupt + entities that could bail it out going bankrupt too ; then the bank IS going bankrupt, and taking most of the opposite fraction of the money it claimed to "hold" with it...
This is where the "lender of last resort", i.e. the government, comes in. Depositor losses are sufficiently bad for the economy as a whole that it makes sense to prevent them at almost any cost.
>I am not sure there is a clear distinction between the two for fractional reserve banking ?
If your assets are real and not shitcoins, there is a difference. If I have $200 in my bank, the bank takes $100 from me and buys AAPL stock (and adds their own cash); and then I go to withdraw my $200 on Saturday:
1. The bank is illiquid. I want $200 cash, but the bank only has $100 and 1 AAPL stock.
2. The bank is (likely) solvent. Unless AAPL crashes below $100 on Monday morning they are likely good for the money (AAPL, a blue chip stock, is unlikely to crash below $100) on monday morning. In this case a lender of last resort will step in (like the Fed) and bank may pay some premium for an emergency loan.
It's statistical, like everything, and the difference is whether you have a guaranteed valuation for your illiquid assets. If you are backed by the full faith and credit if the US (taxation, IRS, and military), you are 99% solvent. In Brazil, maybe 80%
Still fraud though. Basically the banks convinced the coin makers to issue new money if they become insolvent. It would be the same as FTX being able to call the
money printers of each currency to get the needed funds to stay afloat. Amazing this is not considered a criminal enterprise.
The banks are just on a different level of grift when compared to crypto exchanges
No, you're completely missing the distinction between insolvent and liquidity problems, even though it was pointed out in the post you replied to.
A bank with liquidity problems borrows newly printed money from the central bank and repays them with the profit generated from its loans. An insolvent bank that made too many loans that won't be repaid can't repay loans the money printers might offer it and so still gets wiped out. (Its customers get bailed out, but its shareholders don't).
Sure, I can understand there's a difference. But what's not equivalent with what happened in FTX? It's essentially a bank run without the ability to get a lender of last resort. Banks are just more protected in this situations, but in the end they are still playing the same game as the crypto exchanges.
> what's not equivalent with what happened in FTX?
Banks openly lend money to a people who are not the bank's CEO and companies which are not run by the bank's CEO and make a profit on the vast majority of them repaying the money, though typically over a time frame of years, not days. This means the lender of last resort providing funds for those days also expects to get repaid
FTX secretly lent customer funds to a single company run by its CEO to bail it out, and there was no realistic prospect of that money ever being repaid.
If you honestly think that's "equivalent", I'll happily share Paypal details so I can look after some of the money in your bank account in what you consider to be the same way the bank does...
I don't really see a reason to be any more trusting in Coinbase than in FTX, since as far as most people were concerned, FTX was a completely reputable company just a month ago. Well, as reputable as crypto companies go anyways.
And now we have reports that FTX had a backdoor to "alter the company's financial records without alerting other people, including external auditors".
Well, for one thing, Coinbase has a board, and FTX did not. They also had no CFO. They were not “completely reputable” by any reasonable standard; it’s just that no one cared at the time.
Just listening to the bossman of FTX in interviews and reading about him was enough to make me swerve anything he touched. Seemed like a shop of cowboys.
I think it depends a lot where an exchange is located, if the place has rule of law and proper supervision for financial service providers. Also, if an exchange has properly regulated external audits.
The problem might be different here, but all the exchanges I have used have ended up dead, and I consider myself very lucky not to have lost everything I had.
First there was MtGox where I happily sold BTC and then waited weeks for a bank transfer that never came.
I was lucky to be able to re-purchase some of the BTC (at a loss) and transfer them out. That was just a few weeks before MtGox fell.
Then there was ANX/ANXPro. Everything was fine for a while. Over time, they ceased trading and at some point app and website stopped being functional. I had left some crypto there, at time it wasn't worth much. I panicked once the value shoot up and I couldn't find a way to recover them.
Fortunately, I had chosen ANX because they were local. I went to the listed address there in person, expecting it to be closed.
I found the place, it was nondescript, no sign, no-one in sight. I was shaking when I pressed the bell and a guard came to answer.
Fortunately, the company was still running in some fashion. There was a counter and I was able to transact my crypto out.
Had I not been local, I would have probably lost it all.
Then there was FTX... I traded cautiously last year for a little while, never leaving too much for too long, then decided that crypto was all too nerve-wracking for me and sold everything I had.
Probably the best thing I ever did. I have friends who lost big in the FTX debacle and will probably never recover a dime.
The morale of the story is that I wouldn't trust ANY exchange. They move so much money that the temptation is too great not to use it for something else. Despite claims, I don't trust any to have the structure and oversight necessary to avoid misusing funds that don't belong to them.
I've been using Bitstamp since 2013 ... they're still here and ticking along nicely.
They were hacked once in their entire history and they swallowed the loss and customers were made whole.
Also: in spite of me liking Bitstamp, I've never left any amounts on there, be it cash or crypto for more than a couple of days.
What is the point of owning crypto if you're going to leave it on an exchange?
By doing that, you're basically eliminating the one key characteristic of the medium that no other financial instrument has, save perhaps gold buried in a hole in the forest.
Not in "real time": blockchain settlement has to wait for a block. And you incur on-network transaction fees plus whatever fee the exchange imposes for transfers out.
(Besides, many people are "day trading" on these exchanges because it's a form of addictive gambling)
Oh and then there's "staking": https://ftx.com/staking which encourages people to keep tokens on the exchange by pretending to pay them interest rates. And offering various other multi-level-marketing incentives. I see "Free Daily ERC20/ETH Withdrawals : NaN" on that page, which is fun.
You can, but it's impractical (operationally and in tx costs) as it requires a live bot to constantly adjust margin between the exchange and the self-custody wallet, due to the way typical crypto trading products work: at max margin, the chance of liquidation is too high, not so much because of liquidation itself (that can be risk managed and averaged out) but due to the enormous implied fees associated with liquidations. Example pricing: bet 5 at max leverage, lose 2 due to market movements, the account is zeroed aka liquidation fee of 3.
Actually using crypto is ridiculously complicated compared to a SEPA transfer from your bank account or a shares trade in an app.
People like the path of least resistance which is why everyone uses exchanges- it's easier than using your own cold wallet.
Exchanges for good or ill has made crypto accessible to the masses.
Because crypto doesn't work yet (which is OK, it's new and experimental), but people want to pretend is does. Same as as these people people building allegedly quantum computers but where the real work is done by classical computers.
Nope. Crypto does work. Day trading is a problem of the old system that requires the old system tech to work.
Assets should be valued for their properties and for their scarcity (amongst other things), and not by trend waves amplified by day trade and/or even bigger waves of chained margin calls. There are some advantages of day trading, yes, but it is mostly noise and IMO it is very good that "real crypto" can't operate "fast enough" for those who practice it.
Maybe I'm missing something but is it a problem if SHIB is 20% of their reserves if 20% of what users are keeping on the exchange is SHIB? Of course we don't want what people actually deposited since it's a centralized exchange with no transparency. But by itself this isn't really a red flag...
Potentially destabilising is what I said. In a similar fashion to how 20% of my diet consisting of Taco Bell would carry a greater destabilising potential than a the same share of FDA recommended diet conforming home-cooked meals would.
> If 20% of depositor funds are SHIB then 20% of reserves should be SHIB.
You're the one bringing this up, not me. Not refuting it though.
From the article: "after it was revealed that multiple exchanges may have been “sharing” funds to post ‘Proof of Reserves’."
This is a good time to re-read Tether's "asset assurance consolidated reserves report" for USDT. "The Management of the Company asserts the following as of 31 March 2022 at 11:59
PM UTC: ... The Group’s consolidated assets exceed its consolidated liabilities. The Group’s consolidated reserves held for the digital tokens issued exceeds the
amount required to redeem the digital tokens issued. ... The reporting date is limited to a point in time as of 31 March 2022 at 11:59 PM UTC."
So, there was a moment in time when Tether was fully backed. But the accounting firm explicitly states that their opinion applies only to that moment. One wonders what the situation was the next day.
Tether says their reserves, as of that date, included $20,096,579,998 in "commercial paper". But whose commercial paper? It's known that Tether's transactions don't show up in the usual commercial paper markets.
Money is being pulled out of Tether (USDT) in big transactions. US$3 billion in the last 3 days.
None of this is definitive. But it would be a good time to get out of Tether. There's no upside, after all, and there is a downside.
> In the face of persistent questions about whether the company actually held sufficient funds, Tether published a self-proclaimed ‘verification’ of its cash reserves, in 2017, that it characterized as “a good faith effort on our behalf to provide an interim analysis of our cash position.” In reality, however, the cash ostensibly backing tethers had only been placed in Tether’s account as of the very morning of the company’s ‘verification.’
> On November 1, 2018, Tether publicized another self-proclaimed ‘verification’ of its cash reserve; this time at Deltec Bank & Trust Ltd. of the Bahamas. The announcement linked to a letter dated November 1, 2018, which stated that tethers were fully backed by cash, at one dollar for every one tether. However, the very next day, on November 2, 2018, Tether began to transfer funds out of its account, ultimately moving hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s accounts. And so, as of November 2, 2018 — one day after their latest ‘verification’ — tethers were again no longer backed one-to-one by U.S. dollars in a Tether bank account.
Tether is now perhaps the biggest fraud in history and anyone who has any doubts about it really needs to read these documents and the history of the players involved.
They’ve been caught lying again and again and again
(Not necessarily on-topic, but highly-relevant and educational!)
For anyone interested in understanding the dynamics behind bank runs, the Diamond–Dybvig model [1] is worth reading. It describes a very simplified situation where due to banks short-term liabilities and long-term assets, a bank run is a valid Nash equilibrium. I think they won a Nobel prize for this model.
There’s also some very interesting discussion at the end about preventing runs: first if banks can suspend withdrawals, and second through central bank backing. I’ll avoid summarizing it because I’m too dumb — but to quote: “Deposit insurance provided by the government allows bank contracts that can dominate the best that can be offered without insurance and never do worse.”
The problem with suspending withdrawals for crypto firms is the market interprets it as your exchange is insolvent (as that has usually been the case so far).
This will crash markets (lowering your liquidity even more) and make people want to withdraw even more once you reopen.
The situation is made worse because a lot of exchanges issue their own token: CRO in Crypto.com's case. This token provides extra liquidity to your exchange, sometimes in the billions (on paper at least), that you can borrow against. The moment you mention pausing withdrawals, your custom token will crash to the ground and you'll lose a lot of potential liquidity (See Terra/LUNA & FTC/FTT).
> issue their own token: CRO in Crypto.com's case. This token provides extra liquidity to your exchange
Yeah, this is where the fraud happens.
They're treating the token like a bond when it's just .. a made-up thing? It's not a promise to pay, it doesn't have a claim on anything, it doesn't buy you votes, it's just a shiny Pog that you can trade?
This would be like a casino claiming its chips as assets.
> The problem with suspending withdrawals for crypto firms is the market interprets it as your exchange is insolvent
As it should. Inability to withdraw obviously means they don't have the money. Any limits on withdrawals are and should be major red flags. Exchanges should be punished by the market every single time they pull stunts like that until they learn the lesson.
And to underline the difference: suspending withdrawals can allow a bank's customers to [eventually] get their money back when the bank's creditors get repaid. And the bank never pretended it wasn't making loans in the first place.
If a crypto exchange suspend withdrawals, on the other hand, there's no reason to suspect they're just waiting on a bunch of loans to ordinary people and businesses to come in, especially since it usually means they lied about custody of assets.
Clarification: depositors are considered a banks senior creditors. They get paid before the other creditors.
The reason a bank would suspend withdrawals is so it can be either taken over in an orderly fashion (in the US supervised by the FDIC) or so they can get a liquidity infusion (in the US, depending on their charter, from the fed).
Those regulatory agencies and bankruptcy rules don’t exist for a crypto exchange so there is very little an exchange can be doing when suspending withdrawals that doesn’t end with the exchange going bust.
> The problem with suspending withdrawals for crypto firms is the market interprets it as your exchange is insolvent
That’s a problem with suspending withdrawals, especially by individual institutions, generally, I think, which is one reason why government deposit insurance is the better solution, in practice. Even the 1933 Bank Holiday in the US, a government-declared suspension of banking, probably only succeeded because the government established temporary emergency deposit insurance during the break.
The problem is, Crypto exchanges advertise themeselves as brokers. Bank run should simply not be possible: customers money/crypto should be "there” in the first place and not having be reinvested behind customer’s back. The panick is because delays kind of prove an exchange is fraudulent and the money is potentially gone if the exchanges investments have gone south, simple as that, no need for complex models.
Delays don’t prove an exchange is fraudulent. Small delays happen legitimately due to the hot wallet becoming empty during a period of greater than expected withdrawals.
In a period of normalcy, these small delays are forgotten. However users are extremely nervous right now. Users can interpret small delays as insolvency, which causes a torrent of withdrawals which take even longer to process.
I don’t know if crypto.com is solvent. If you have money on there, you should probably get it out now. But there is also an innocent explanation to all of this.
> There’s also some very interesting discussion at the end about preventing runs: first if banks can suspend withdrawals, and second through central bank backing. I’ll avoid summarizing it because I’m too dumb — but to quote: “Deposit insurance provided by the government allows bank contracts that can dominate the best that can be offered without insurance and never do worse.”
The simplest approach for crypto exchanges to prevent bank runs would be to not lend out or trade with deposits. In fact, that's what some exchanges have always been doing (or at least are claiming to do).
> The simplest approach for crypto exchanges to prevent bank runs would be to not lend out or trade with deposits.
Except the consumer is drawn to the crypto-exchanges with significant "staking" rewards. Like Crypto.com or FTX.
When you're promising free money, you can't just sit on the money. You gotta lend it out to generate those staking rewards.
Now maybe, just _maybe_, the lending out of customer deposits could be a tightly regulated activity. Maybe regulations upon the types of securities that you lend to (ie: to AAA rated corporates), as well as maturity (ex: 1-week expiration or daily expiration).
Oh wait, that's a Money Market Fund. Add on FDIC insurance and you're now at a federally regulated savings account.
> Except the consumer is drawn to the crypto-exchanges with significant "staking" rewards. Like Crypto.com or FTX.
Staking itself wouldn't be a problem. There would be some risk involved in case of technical problems (for example due to Slashing on Ethereum), but in overall that risk should be relatively small. Exchanges could still hold all of the coins, but just use some of the coins for staking (if users owning the coins opt-in to staking).
The problem occurs when exchanges lend out stored coins without the approval of the user: Either to lend them for shorting or to invest them into something that they assume would appreciate faster.
Staking is a problem because it pretends to offer risk-free returns while investing in extremely risky assets. Or just straight up fraud.
None of the staking schemes have adequately explained who's taking the other side of the trade. Who wants to borrow a token for a very high interest rate? So far the only examples are "people putting it into an even bigger fraud" and "people providing soon-to-be-worthless collateral".
We might be talking about two different things here when using the term "staking".
I'm referring to coins that are staked by validators in a proof-of-stake chain. The "other side of the trade" is not someone borrowing the coins, but are the transaction fees on the chain and for some chains also the artificial inflation (due to newly created coins).
There is risk involved, but not traditional counterparty risk (when excluding the exchange itself), as nobody is "borrowing" the coins.
1 VMFXX has been $1 for decades, never budging, never moving. The regulations and infrastructure to support such a thing already exists and have always existed to anyone who has any clue about banks / finances at all.
So why haven't stablecoins been designed to act like MMFs (like VMFXX) ?? Answer: because the cryptocoin community does not want a MMF. Its the only explanation. The cryptocoin community wants 6%, 10%, 18%+ returns on their "stablecoins". And its impossible to do that with MMFs.
> The cryptocoin community wants 6%, 10%, 18%+ returns on their "stablecoins".
As far as I know the two largest stablecoins (Tether and USDC) do not pay any interest. The interest that some exchanges pay on stablecoin balances is because they lend them out and/or use them as collateral. But that does not have anything to do with the stablecoin itself. If VMFXX was tokenized on the blockchain it would be used in exactly the same way.
> If VMFXX was tokenized on the blockchain it would be used in exactly the same way.
I'm going the opposite direction here.
If Tether / USDC really wished to "prove that they have liquidity reserves", they should go to the US Government and get the "Money Market Fund" / "Money Market Account" stamp of approval. And then invite the banking regulators to come in and count all their reserves.
I don't disagree here. My point was just that the interest that you see on exchanges is not directly related to the stablecoins.
I'm not sure if there are any legal or regulatory issues that would prevent stablecoins from getting those certifications. Tether definitely looks sketchy, but USDC has regular audits with public results.
to be specific, it won the "Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2022". It's not affiliated with the nobel prize most people know.
I don't intent this as a dig at economics; there is no Nobel prize for mathematics either. Though I have my doubts about the rigorousness of some economic research, we all stand to benefit from better economics
If nothing else, the core business of the bank is about borrowing cheaply (hence short term) and making risky, long term loans (hence bringing in interest).
If they want to finance the loans by long term loans themselves, much of the profit goes away and the business isn't sustainable.
It's obviously a sliding scale but that's the starting point.
Well, profit can always be increased by increasing risk. So the question is whether the additional risk incurred due to duration mismatch is worth the increase in profits.
It's obviously worth it to the bank's shareholders if the bank is bailed out by tax payers when things go wrong. But if there's no bailout it may not be worth it for them -- at least not in the long run.
crypto dot com CEO Kris Marszalek has posted earlier today that his exchange has regularly sent twenty million dollars or more to other exchanges to hedge exposure gained by trading against its customers. crypto dot com CEO Kris Marszalek does not seem to understand that he has confessed to several crimes and that customers who deposit dollars at an exchange expect that they have claims against a boring business that custodies funds and collects fees, not claims against an exciting business that regularly assumes twenty million dollars of directional risk by selling customers tokens they do not physically have and then buying them somewhere else later. Here is crypto dot com CEO Kris Marszalek's confession: https://twitter.com/kris/status/1591928306097868800
crypto dot com CEO Kris Marszalek also does not seem to understand that this is a particularly bad time to tell his customers that he is an incompetent criminal who is constantly trading against them with funds he does not have and misappropriating their deposits because less than a week ago customers of a different exchange lost 10 billion dollars in a similar situation.
Kris Marszalek is in Singapore, which so far has proven lawless with respect to crypto (stealing a $billion is legal, while smoking a joint of marijuana means 10 years in prison) and uncooperative with other counties.
The US has more reason to sanction the rogue dictatorship of Singapore than Cuba.
I read his tweet like eight times, going "wait I don't understand what he's saying, what am I missing?". Then I finally realised he was full of shit. No, that REALLY isn't how hedging works, indeed! :)
If the exchange is not trading against its customers, and it is only custodying customer funds and collecting fees, how does it regularly acquire 20 million dollars of shitcoin exposure?
Here's one way a crypto exchange could work:
- many users deposit coins and fiat
- some of those users are market makers
- the users trade with each other
- the exchange just custodies the coins and fiat and collects fees
- the exchange does not need to send customer funds to another exchange because it is not assuming twenty million dollars of directional risk
Can you explain your understanding of how it should work instead?
Regardless, what has been happening and pointed out is not even an inconsistency - it's a huge red flag. This week we'll see more players go bankrupt or run away with even more money as the fallout from FTX is yet to propagate everywhere. Truly fascinating to watch from the sidelines.
Yes, the money launderer [1], one whose founder is coming out of house arrest [2] (and is also a money launderer [3]), and one that can’t tell you where your money is [4]. What could go wrong.
I’ll put aside ethical and legal arguments. If the employees of the business face constant risk of arrest, and the business constant risk of massive fines and even sanctions, do you not see how that is de-stabilising?
If CZ is arrested or disappears and Binance’s dollars and euros frozen, do you think its users get their money back? Now what happens if even that rumour takes root?
Quite clearly not, since the party creating the risk has agreed to reimburse you. If regulators blow up a bank, depositors are its problem. If they blow up a crypto thing, users own that risk.
> the point is here, just accept it
No, the opposite. Acknowledge and manage it. If you want to do crypto, hold your own keys.
So, you enter a casino. Exchange your money for casino's chips. You gamble and win more chips. When you want to cash out, casino says: “Sorry, we won't give you money for those chips.”
the solution isn't to use a different company exchange, its to go on-chain directly.....
any company exchange that is not lending customer assets will function completely fine during a bank run even if 100% of assets are withdrawn in quick succession, nobody should have anything to worry about ever, but so far these are mismanaged companies with poor collateral choices for their creditworthiness.
many crypto skeptics only see headlines when things go wrong, but many people that use crypto regularly know that there are plenty of exchanges and services that have had 100% withdrawals just fine, something that would be called a "stress test" on poorly run services or a "black swan" in the traditional banking world. these big ones from the last cycle got hooked on leverage, the ones that didn't will be fine as long as they stick to just running an exchange instead of additional overhead.
> the solution isn't to use a different company exchange, its to go on-chain directly.....
i'm a crypto noob - this is what i've been wondering - isn't the point of crypto that you can participate in these transactions directly without trusting an intermediary? why do people use exchanges?
Because exchanges are the easiest way (by far) to exchange money for crypto, and they also make it as easy to transact as an investment app.
The alternatives, as far as I know, are to find a friend willing to give you some crypto for money, or to buy mining equipment and get crypto from that, or to find some trusted physical exchange to pay cash to and trust they will pay the crypto you bought into your wallet.
Even after you get in, you'll have to create and manage your own wallet for every crypto you want to trade in (though an on-chain DEX could in principle handle that for you, I believe none of the popular ones do, based on previous discussions). There are probably apps that help, depending on how much you want to go trust-less.
All crypto on chain transactions are one leg of a transaction.
When you pay for something, you want the thing you buy to actually arrive, and if that's something off-chain (like real money), you need to trust your counterparty to actually deliver it.
Crypto exchanges also solve the reverse problem: how to trade real money for cryptocurrency. That can't be done on chain.
Exchanges can also cut out blockchain transaction fees and transaction rate limits, and offer all sorts of tempting (but probably fraudulent) financial products.
Because doing on-chain transactions with a known counterparty that gives you their wallet address is completely impractical for trading/speculation/gambling, because you'd lack a way to find the counterparty that's going to give you the best price, and you'd be paying on-chain transaction fees.
And trading/speculation/gambling is 99% of what people do with cryptocurrencies.
> , because you'd lack a way to find the counterparty that's going to give you the best price,
This part can still be done on chain, "automated market maker" is the term to search for for more information about how this part of the problem is usually solved.
the main point is familiarity, when trading other kinds of assets, the exchange is the destination. you buy it, and keep your assets there. deeeeep down the exchanges keep a hotline for you to ask for your share certificates or physical commodities, but they make it very hard, and when you get them you can't do anything with them easily. with crypto, the exchanges are just part of the journey and your wallet is the destination, it is very easy to get your crypto and there is an ever expanding set of things you can do with your crypto easily. people chose not to get familiar with that because its simply not the same user experience ("hard" wouldn't be the word I would use, just unfamiliar) and because they weren't there to use crypto at all, only attempt to profit from a delta in price differences or managed staking where the company lies about how much they are earning from staked assets and gives a little less to the user.
people chose to learn or lose their funds. pretty simple.
when it comes to "hard" versus unfamiliar, it will just be different people that chose to be crypto natives and self-custody and use on-chain services. its the same with every other advancement, there are still people that don't use ATMs and don't trust them due to the new problems that arise from their existence. there are still people that don't use discount brokerage firms because they are more familiar with calling their broker, computers are hard and they don't trust their money on the internet or services on the internet. its the same with crypto: nobody can stop you from becoming your parents, can't blame the user experience on everything.
accurate, making no difference in anything I wrote about the user experience. custody is simulated by the exchange, and demands for self-custody is initiated at the exchange.
No safety rails. Crypto is an unconfirmed transaction system that does not require confirmation from the recipient. At least in this case they were able to get it back, it's trivial to transfer crypto to a wallet to which nobody has the password and it's forever unrecoverable.
(If I were designing one of these things, which I am not, I would make a transaction payee-initiated, like the issuing of an invoice which the payer signs)
Accidentally moving money to a wrong account, sure.. mistakes happen. But in this case, it was during a reserve audit.. and the address was of a 'whitelisted' exchange. This brings suspicions crypto wallets are covering their asses, that they share currencies to proof false customer reserves..
> Why can't exchanges operate without putting customers funds at risk
In finance, bad actors outcompete good ones absent regulation. The game is one of confidence and compounding. Until the music stops, venues promising higher returns bleed well-run ones dry. Add to that crypto’s Gresham’s law-esque selection for gamblers, and you wind up with little market space for well-run exchanges. (Which have never been exchanges, but quasi broker-banker-money market funds.)
It seems more prevalent in finance. In the real economy, consumers show scepticism. They’re trading money for a good or service they get at or shortly after the point of sale. Financial and insurance products are more difficult to diligence; you don’t know what you’re getting (or not) until long after purchase.
Products can hide all sorts of “bad acting” in the supply/manufacturing chain. Companies that are willing and able to [use indentured servants, etc] will be able to sell a product cheaper than a competitor that holds themselves to higher standards.
The appearance of ethics/morals might be a benefit, but true ethics/morals are often a cost.
Coinbase has racked up $2 billion in losses for 2022 already, so I’m not sure about the “not morons” part. At this rate a bankruptcy is not out of the question.
I think the point is that coinbase is struggling to compete when there are tons of exchanges out there offering low/no fees and ludicrous interest payments on coins kept on the exchange. Even if those other 'exchanges' do all seem to be turning out to be ponzi schemes... For whatever reason people keep flocking to the next one.
Because they think they are banks and all banks fractionally reserve. Fractionally reserving is not a law of nature, it's a scam that only works because the fed can print money as needed to bail out banks when there's a bank run. If you can't just print money whenever, it always fails.
I don't think so, the bank will need to collateralize these debts somehow (ie: Lenders). The yield on CC debt is high.
For medical bills, that's a false and yet correct analogy. The hospital did, in theory, create money out of thin air (at least from an accounting perspective). In this case, it is the hospital (ie: The investor) who will go under if the patient does not pay her bill.
And that's fine. Investors are in it for yield which carries risk. This is different from putting money on an exchange or a bank. You are looking here for a store, unless you willingly signed up for some yield thing.
The bank created money because the borrower can use the money to settle other debts. When the creditor that the debtor repays with the credit card deposits those payments in bank accounts they become bank deposits in other banks.
The hospital patient cannot settle debts with his medical care that he received or deposit it in a bank.
0.03% is a ludicrously small amount to make for losing to arbitrageurs. It may work with lots of sideways action but crypto tends to go in one direction for a long time so most LP's lose.
For that matter, though, a lot of people who buy the top lose.
Crypto needs to have more UTILITY. The financial sector in general is just overleveraging the normal economy, this isn't just crypto. Ironically, Bitcoin was started in response to the 2008 financial crisis, where the govt repealed Glass-Steagall and then bailed out the banks. At least here, the government isn't bailing anyone out with taxpayer dollars.
And look... in China it's not much better. Their real estate bubble is very reminiscent of 2006 USA ... Evergrande is just the most well known poster boy.
Said differently: The financial system has trended toward centralization over the past 5+ centuries, because there are obvious advantages to it.
One could argue that there are plenty of downsides to over-centralization (i.e. 'Too big to fail'), but the solution is not to start from scratch, it's to logically think about the kind of financial system we want (given the one we already have) and build that.
Conversely, the answer is not be techno-cowboys who know people with cryptography degrees who re-discover what bank runs are.
The ones that haven't (yet) been hacked, anyway...
Besides, which ones really are decentralized? Can you name one that doesn't have a central control point? Most have an update system, allowing one person to either completely modify the smart contract code or to enable/disable trading.
AFAIK Uniswap doesn't have an upgradeability proxy, they just deploy new versions and the old ones stay up. That's only true if you aren't using a L2 though, all the current L2 implementations are upgradable.
Looks like you're right - Uniswap v1 is still usable, they had 'proxy' contracts that could redirect users to more recent versions, but you can, if you choose, interact directly with the original version - it wasn't turned off. However, since the liquidity all moved into the later versions, there's only about 1/1000th of the trading left in the original. (and you get to keep/be exploited by all the unpatched bugs, yay!)
why can't banks do that? because it can't work, even though economists have convinced the world that it can, and supplicate the losses by stealing taxpayer money or making wars
crypto is supposed to be one bank for every person. don't know how we get there, but we are learning that traditional bank/exchanges should not exist
and there goes 16k. Probably going back to 3k or lower soon. Why would anyone buy crypto at this point? Stick with index funds, imho . I have never seen anything hyped so much that sucks so much. It's like if someone wanted to invent a way for as many people as possible to lose as much money as possible, that would be crypto. People getting burned by plunging prices, corrupt exchanges, and scams.
Index funds means buying stock in every fraudulent company on the market, and inflating the price of merely decent companies. It's freeloading off of real investors doing intelligent capital allocation, and it's going to come crashing down.
Institutional investors are ashes now (look at GBTC, trading 30% below BTC price). This is not the first time it happened in tech, market or history. Bubbles and euphoria are older than Crypto.
Bitcoin will be back in a few years in a new bubble. Halving in 2 years...
Market corrections are often a good thing. It'd be good for crypto to realign with the actual value it provides so capital centers on things that actually provide value!
That's the only way it will grow.
Betting on investors risk tolerance for cryptos success is a losers game long-term. At least from a technologist perspective. From a finance perspective there's plenty of money to be made if you aren't left holding the cards.
The drug market is estimated at 2 Trillions. I don't know, though, about export controls. That being said, I think the level that crypto is being used for money laundering or drugs is really minimal.
Isn't that what VCs have been doing all the way through Web2?
Now it's just democratized. But at least Web2 led to tech that served a lot of people, until it got commoditized. Crypto doesn't really have great applications yet. (With a few exceptions.)
I seem to remember Softbank propping up companies like WeWork... and spectacularly losing money. Even this year they lost a lot. Uber and many others were basically money-losing unit economics being propped up by ever larger infusions of money until the stocks were dumped on the eager public in an IPO. But at least the corporations serve people.
How were Adam Neumann, Travis Kalanick and Elizabeth Holmes any better than these crypto bros?
The online advertising industry is in a constant race to the bottom. Look at how much Facebook and Google dropped relative to, say, Apple and Verizon.
Throughout all this, the open source community in Web1, Web2, Web3 has been building some amazing stuff, but people like to create business models to dump
Very true. Business used to be about the honest exchange of value. Now almost everything is a scam. I've seen it with my own eyes over the last 30 years. It's horrible.
by that logic, beanie babies should have recovered due to gen-z , obviously it hasn't. Sure, get rich quick schemes will always exist, but the scheme changes.
I agree, I think crypto won't survive for too much longer. Just by looking at BTC price for the last six months it dropped -14,201.80 (47.23%)[1] and just in one day -434.70 (2.67%). I'll take about six more months to one year but BTC will cost below 5k soon :) This is my prediction.
It doesn’t stop processing blocks, miners just make less money for each one. Some miners will pull out of the market, making it easier for the rest to mine, until the market finds an equilibrium. The cost of attacking the system will go down, but it won’t stop entirely.
Some miners are already spending more on energy & operations cost per coin than the market value, so even if the price holds I expect to see some miners drop out of the market.
I'm not going to predict any crypto future, but here's a counter point: If crypto has a future (not saying it will) then it's essential to drive bad actors out of the market (which is happening right now).
I am very amazed that crypto prices have not plummeted after FTX revelations. That looks like a very big condemnation of the whole system and the market barely moved.
I am not convinced it will end crypto, a lot of people still want to speculate and the system is too extensive to topple easily. Market not moving seems to be proof of that.
Beginning of the end for unregulated centralized exchanges. Possible beginning for DeFi and regulated CEXes. Or possible that regulators fail to distinguish them, and crypto stays flat for some years until a trad banking event revived interest in blockchain.
But really who cares? Smart contracts and stablecoins can continue to work the same no matter market volatility.
A lot of the same things that these failing CEXes are doing. Custody of coins, trading, exchanging tokens, long and short positions, borrowing and lending. Most people on FTX are day traders or hodlers.
Then it's also the end of crypto as a consumer product. Centralized exchanges offered a ton of usability and monetary incentives that brought people into crypto.
Trying to rebuild a user base without those things will essentially be impossible. Even during the days of free money in 2021, the full crypto user base wasn't huge. With high interest rates, tons of fraud in the rearview mirror, and enormous obstacles to usage, the community will be a tiny fraction of even its previous tiny fraction of traditional banking customers.
If FTX kept to their ToS they would have all the funds available and there would be no collapse. But they were greedy, decided to use user funds without authorization, then lost them and the whole thing came coming down.
Exchange which is transparent and truly does not trade with customer assets has no risk involved (other than hacking and similar) and should/would be a massive money printing machine.
A lot of users on Twitter and Reddit are reporting delays of 6-8 hours when processing withdrawals. But it looks like some/most? are eventually processed.
The CEO of Crypto.com has been doing damage control all day on Twitter. He's doing a livestream AMA on Youtube at 2AM EST.
one of the hot wallets keeps running out of ether gas to send the transactions, people are sending it ether and withdrawals are processed automatically
I mean thats current money too, banks are expected to not have enough on hand to pay out all at once
Crypto exchanges operate on a cold storage concept, how fast they can get their cold storage to their hot wallet is always a mystery
each wallet having many kinds of assets, instead of just a single asset (your local currency), instead of man hours to move those esoteric assets they just need a little transaction fee
there are a lot of ways to improve this operational experience, that this exchange just didn’t do, so even as a joke it relies on perpetuating ignorance to discredit an entire concept
FDIC has procedures for that type of bank run - company called WDTC has armored semis ready to go, FDIC can ring them up and they can move truckloads of literal cash to banks across the country.
Last time they were activated was in 2008 - supposedly there’s video somewhere.
Isn't it the case that as long as these exchanges keep acting so bank-like (holding on to people's keys, possibly using them for trading or fractional trading or what you would call it) they will keep having these problems since crypto is so prone to "bank"-runs. There are no real reason for any of their customers to keep their money with them as soon as there is even a hint of suspicion of illiquidity or insolvency. In real banking you a lot of the time atleast need to go and take your money out but in the crypto currency world that can be automated.
I feel like the only real way they could be run while avoiding this to only work as a broker to make dealto purchase coins available to users and possibly also sell a wallet software or something that is mostly a frontend and no keys/money is kept with them. Then they are only ever able to trade on the exchange fees and purchase money for the wallets they get. But I guess such a reasonable way to run a buisness is no way to get filthy rich...
> Crypto.com currently have around US$2.5 billion in reserve on the platform, with more than 20% of that number being comprised by Shiba Inu token (SHIB).
Geez, isn’t that a dogecoin knockoff meme coin? Guess you can now become a crypto billionaire on the back of a knockoff of a meme. What a strange world we live in.
And Dogecoin itself was created as a joke, the developer stated that took him about 2 hours, including the logo, throw together. its literally nothing more than a copy-paste of another coin (itself a 95% identical copy of bitcoin) with a few irrelevant cosmetic changes and a deliberately absurd emission rate setting.
The point of Dogecoin was to mock how ridiculous the "sound money" narrative of cryptocurrency is by showing how easily more - infinitely more - of it could be created with almost zero efforr, and nobody seemed to care to do the least bit of common sense research before ithrowing real money into it.
>The point of Dogecoin was to mock how ridiculous the "sound money" narrative of cryptocurrency is by showing how easily more - infinitely more - of it could be created with almost zero efforr, and nobody seemed to care to do the least bit of common sense research before ithrowing real money into it.
I am no fan of crypto but that is non different then any fiat money no? In fact dodge at least has some sort of rate limit where fait system have non.
That’s the point it makes. That crypto is not limited because anyone can make a new coin any time they want. While crypto zealots will insist that bitcoin is inherently valuable because you can’t create more.
Central banks, indirectly, can force people to use their currency (e.g. for taxes) and actively make decisions to try to follow a deliberate financial policy.
Their states command economic, diplomatic or military power which they often use to protect and develop their economies and the associated currencies. Often the decision makers are accountable in the form of elections and rule of law.
Crypto on the other hand is purely market driven and free floating. It's very easy for bad actors to manipulate the currency itself rapidly, something that does not happen to Dollars or Euros.
Cryptobros and others disagree whether anything outside of fully unregulated market forces is a good thing.
> developer stated that took him about 2 hours, including the logo, throw together. its literally nothing more than a copy-paste of another coin (itself a 95% identical copy of bitcoin) with a few irrelevant cosmetic changes and a deliberately absurd emission rate setting.
ha-ha-ha-ha-ha, and what do you think 10 pounds note is? Take 5 pounds note, throw some logo around, add Queen face and voila
The developers failed badly; their attempted joke turned out to be quite serious. And with more predictable emission rates than the clowns at the Fed, we might note. There are some real jokers out there.
There is a lesson here about how the developer doesn't have any influence over the crypto once a community gets involved. At least, not in their capacity as a developer.
Crypto made me understand how much money are laying around. Now only if I could build a product people wanted...there is literarily money growing on trees.
Well I don't favor fraud, but crypto fraud has shown there is plenty of disposable income and it would appear greed. The very people that scream greed at capitalism don't seem to mind scamming other people if they are promised high returns.
My point tho is that people have a lot money laying around.
My point tho is that people have a lot money laying around.
They don't. The taxi drivers, hairdressers, and hotel doormen that got caught up in crypto are going to lose a significant chunk of their life savings if these exchanges blow up. There's 2-3 trillion dollars in crypto at this point, how much of that is from unsophisticated retail investors? A quarter? Half? Nobody knows.
> There's 2-3 trillion dollars in crypto at this point...
No, there's not.
Issuing a trillion CJCOINs and selling one for $1 gives me a trillion dollar market cap, by cryptocurrency valuation standards. There's not actually a trillion dollars invested into the CJCOIN ecosystem.
I'm not sure it's accurate to characterize everything going into crypto "disposable income". The Celsius Network collapse yielded some pretty devastating appeals[0] to the bankruptcy court for the return of people's life savings.
what is the benefit to leaving crypto in a wallet held by another party. I guess they could lower the transition fees when transferring from one wallet to another on their platform. and if you forget your password, they may make it easier to recover. but is that all the benefit?
The really easy observation to make is that crypto.com is operating at a massive deficit.
Their advertising budget is absurdly large, and then they pay some hefty interests to their customers.
Is there any part of the business that actually make money for them? Because it seems like all they do is loan more money to keep the Ponzi scheme going.
Has anyone managed to get their/any BTC off Crypto.com in the last few hours? I got my ETH and some other tokens off easily enough but I've been waiting ~18 hours now for the BTC to arrive :s.
I switched BTC and other coins to ETH and then pulled ETH to Coinbase. Probably lost some on the trades but wanted to get out as efficiently as possible. It took about 6 hours to settle.
I do think there has been lots of FUD about crypto.com such as moving money into their own wallet and back, but do feel I would sleep better at night with funds in Coinbase.
Dogecoin (DOGE) was created in 2013 as a joke. It has occasionally seen its price surge as a result of memes and Elon Musk pumping it.
Shiba Inu (SHIB) was created in mid-2020 as a lookalike cash grab on the then-surging Dogecoin. It was shilled heavily on Twitter and across social media. Ads attempted to confuse would-be investors looking to buy Dogecoin. For some reason or another it maintains a modest market cap.
The success of Shib spawned countless more lookalikes, eg. Baby Shiba Inu, etc.
At this point I am convinced this is just mass hysteria, and picking on CDC is the trend of the day. The amount of FUD is through the roof, everyone is scared of losing money, which makes sense and it's definitely the smart move to withdraw and wait until the dust settles.
Personally, I reckon they'll be fine. Crypto.com has been playing nicely with regulations and did the right business decisions (downsizing, reducing of rewards) at the right time. They are in my eyes one of the most regulated and "playing by the books" exchange out there, but yes time will tell.
So far I've not seen any arguments of them actually doing anything wrong, just the echo chamber about "funds are leaving Crypto.com, so you should do too", including in this thread here. If the proof of reserves that they published holds up, this should be no problem for them to overcome.
RE: the constant argument that 20% of their asset reserves are in SHIB - this is not CDC making investments in SHIB, but users buying SHIB and having it in their wallet. Says more about the userbase as a whole than it does about CDC who only enables it
It's not a snark. If your opinion was as strong as it sounded, you would have done the investment. Instead you are not doing it because you do not believe in what you just said yourself.
Obviously that wasn't so great and I'm not happy with that either
What Kris said in the AMA was something along the lines: Whitelisted addresses where funds can get sent to are heavily controlled, and no matter where it went by accident, all whitelisted addresses are at places that can be 100% retrieved again
So NYKNYC unless the company you send your crypto to is on some magical “whitelist”.
I know it’s a harsh take because when crypto companies aren’t failing and crypto is pumping no one notices or panics about all the liquidity issues occurring.
Still with all the dominoes that have fallen recently who knows how healthy/secure the companies on the whitelist are.
I think they're implying they should've learned that lesson much earlier with much smaller amounts, and that if they haven't by now, you should assume they won't ever.
This exact thing happened back when banks less regulated: all the crappy banks folding caused people to not know which banks were crappy, causing suspicion to fall on the entire sector.
The exact same thing happened at Gox. I did all kinds of mental rationalizations. Oh, they’re too big. Oh, failure was unlikely.
I managed to siphon out 7 BTC. Then I traded it 2:1 with some fellow from IRC for his BTC locked up in Gox. Woo, I was going to make a 14 BTC payday.
Nope. In fact, trading was still open on the exchange. I took a risk with that goxcoin. When the dust settled, I was left with 7.76 BTC that I couldn’t access. It’s still there. That was almost 10 years ago.
Don’t make my mistake. The very first sign that there was a problem was delays, followed by transactions over a certain amount not processing. People seem to be reporting both.