[Merged] Bitcoin - Part 3 - Page 71

Brainster · 12th November 2022, 08:39 AM

Originally Posted by Chanakya

Woof. Just saw this bit of news, elsewhere. Came back here to see if there's any interesting insights posted on this.

Saw this thing referred to as perhaps the biggest destruction of wealth ever, in terms of how much was lost in how little time. Most of it this guy Bankman-Fried's apparently, poor guy.

One mustn't generalize from single instances to the entire class of assets, of course, but this seems very similar to gambling. When the going's good, boom, you go from hundreds or maybe low thousands to the tens of thousands. Then you put together all kinds of strategies, some of which seem to work to an extent. And then, boom again, something like this happens, and you realize it was all just ...tissue thin illusion, all along.

One of the big problems seems to be with these exchanges. It's risky to hold your bitcoins personally; we've all read the stories about bitcoin fortunes lost when a hard drive crashed or was thrown out. So you store it with someone else, but now you're susceptible to theft if the exchange is run by a crook (as this one was), or it's hacked as in the famous Mt Gox case.

marting · 12th November 2022, 09:40 AM

Originally Posted by Brainster

One of the big problems seems to be with these exchanges. It's risky to hold your bitcoins personally; we've all read the stories about bitcoin fortunes lost when a hard drive crashed or was thrown out. So you store it with someone else, but now you're susceptible to theft if the exchange is run by a crook (as this one was), or it's hacked as in the famous Mt Gox case.

If you store crypto in a cold wallet it's safe from exchange, counterparty risk.

Until a week or so ago, FTX touted itself as the best of the best in terms or low risk. What I didn't know is that FTX, and likely most others, use deposited customer funds to create "other opportunities." This is unlike stock brokerages that are required to segregate customer funds in separate accounts that they cannot pledge as collateral for "other opportunities." Brokerages make money by taking a small commission from buys/sells. Crypto exchanges should do the same. Apparently that wasn't enough for FTX.

Chanakya · 12th November 2022, 10:13 AM

Originally Posted by Brainster

One of the big problems seems to be with these exchanges. It's risky to hold your bitcoins personally; we've all read the stories about bitcoin fortunes lost when a hard drive crashed or was thrown out. So you store it with someone else, but now you're susceptible to theft if the exchange is run by a crook (as this one was), or it's hacked as in the famous Mt Gox case.

Originally Posted by marting

If you store crypto in a cold wallet it's safe from exchange, counterparty risk.

Until a week or so ago, FTX touted itself as the best of the best in terms or low risk. What I didn't know is that FTX, and likely most others, use deposited customer funds to create "other opportunities." This is unlike stock brokerages that are required to segregate customer funds in separate accounts that they cannot pledge as collateral for "other opportunities." Brokerages make money by taking a small commission from buys/sells. Crypto exchanges should do the same. Apparently that wasn't enough for FTX.

Oh, the FTX promoter was a crook, was he? I hadn't caught on to that, in my admittedly superficial reading of this bit of news. All I saw was that all this wealth is wiped out, and in this case it is the billionaire founder that took most of the hit; and I actually felt kind of bad for the poor guy (although I realize that, even wiped out, he's probably way richer than I am, given that he must have squirreled away some parts of that fortune for a rainy day such as this).

But if the exchange used depositors' money to play around like this, then they must have been either crooked to the extent of being outright thieves, scheming to just disappear with the money; or else they must be completely stupid. A child would know that it is stupid to play around with others' money, given that crypto is very volatile. I mean, the one word, the one descriptor, that first pops to mind when you say the word "crypto", is: "Volatile!", right? So what kind of idiot plays the super-high-risk game of playing around with this highly volatile thing that others have deposited with them? That's crazy stupid, unless like I said the intention had all along been to simply disappear with the money --- which somehow seems unlikely, given how high-profile this guy, whatsisname, let me look it up again, yes, Bankman Fried --- haha, juvenile cryptic clue for FTX, man playing at bank gets fried! --- was.

pzkpfw · 12th November 2022, 02:39 PM

According to something I read (and maybe didn't understand) at CNN: https://edition.cnn.com/2022/11/12/b...usiness_ribbon

Quote:

The exchange’s founder Sam Bankman-Fried secretly transferred $10 billion of customer funds from FTX to Bankman-Fried’s trading company Alameda Research, the people told Reuters.

A large portion of that total has since disappeared, they said. One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion.

gnome · 13th November 2022, 01:16 PM

Originally Posted by Brainster

One of the big problems seems to be with these exchanges. It's risky to hold your bitcoins personally; we've all read the stories about bitcoin fortunes lost when a hard drive crashed or was thrown out. So you store it with someone else, but now you're susceptible to theft if the exchange is run by a crook (as this one was), or it's hacked as in the famous Mt Gox case.

Almost makes you wish for some kind of deposit insurance.

catsmate · 14th November 2022, 12:21 PM

Originally Posted by gnome

Almost makes you wish for some kind of deposit insurance.

Government involvement? That's socialism.....

psionl0 · 14th November 2022, 05:26 PM

Originally Posted by catsmate

Government involvement? That's socialism.....

Not if a private carrier is willing to insure your holdings (but getting them to insure against your negligence such as losing your thumb drive might be tricky).

marting · 14th November 2022, 06:56 PM

Michael Lewis, author of "The Big Short,' "Liar's Poker," "Moneyball" and such turns out to have been at the right place at the right time. He has been tied to the hip with Bankman-Fried for the last 6 months.*

https://gizmodo.com/ftx-michael-lewi...sbf-1849778463
https://www.marketwatch.com/story/th...rt-11668457317

*IIRC, his daughter recently died tragicly in an auto accident.

Brainster · 14th November 2022, 10:55 PM

Best article yet on the problems with FTX; get this part:

Quote:

And then the basic question is, how bad is the mismatch. Like, $16 billion of dollar liabilities and $16 billion of liquid dollar-denominated assets? Sure, great. $16 billion of dollar liabilities and $16 billion worth of Bitcoin assets? Not ideal, incredibly risky, but in some broad sense understandable. $16 billion of dollar liabilities and assets consisting entirely of some magic beans that you bought in the market for $16 billion? Very bad. $16 billion of dollar liabilities and assets consisting mostly of some magic beans that you invented yourself and acquired for zero dollars? WHAT? Never mind the valuation of the beans; where did the money go? What happened to the $16 billion? Spending $5 billion of customer money on Serum would have been horrible, but FTX didn’t do that, and couldn’t have, because there wasn’t $5 billion of Serum available to buy. FTX shot its customer money into some still-unexplained reaches of the astral plane and was like “well we do have $5 billion of this Serum token we made up, that’s something?” No it isn’t!

As someone who stares at balance sheets all day, that was quite enjoyable to read.

gnome · 15th November 2022, 09:19 AM

Originally Posted by psionl0

Not if a private carrier is willing to insure your holdings (but getting them to insure against your negligence such as losing your thumb drive might be tricky).

Wouldn't using a private carrier just kick the can from potential failure of exchanges to potential failure of the private carrier? The benefit of federal deposit insurance is the extreme unlikelihood of default.

Suddenly · 15th November 2022, 10:14 AM

Originally Posted by gnome

Wouldn't using a private carrier just kick the can from potential failure of exchanges to potential failure of the private carrier? The benefit of federal deposit insurance is the extreme unlikelihood of default.

You could maybe get your insurance insured.

It's sort of amusing how many new internet innovations are mostly an exercise in why regulations exist.

psionl0 · 15th November 2022, 04:29 PM

Originally Posted by gnome

Wouldn't using a private carrier just kick the can from potential failure of exchanges to potential failure of the private carrier? The benefit of federal deposit insurance is the extreme unlikelihood of default.

I don't understand the question.

Puppycow · 15th November 2022, 08:21 PM

Vox has this article:

Sam Bankman-Fried, the disgraced boy king of crypto, explained

Quote:

The downfall of FTX isn’t a typical story of crypto’s volatility or investor risk-taking; it didn’t crumble due to bad luck, but what now appears to be unsustainable layers of deception.

psionl0 · 15th November 2022, 08:44 PM

Originally Posted by psionl0

I don't understand the question.

Now I get it. You are worried about a private insurance carrier going broke before you can make a claim.

This is no bigger a worry than home/auto/health insurance. It can happen but it seems that the risk is less than that of a crypto exchange biting the dust.

Puppycow · 15th November 2022, 08:54 PM

Originally Posted by Brainster

Best article yet on the problems with FTX; get this part:

As someone who stares at balance sheets all day, that was quite enjoyable to read.

I like this bit:

Quote:

If you try to calculate the equity of a balance sheet with an entry for HIDDEN POORLY INTERNALLY LABELED ACCOUNT, Microsoft Clippy will appear before you in the flesh, bloodshot and staggering, with a knife in his little paper-clip hand, saying “just what do you think you’re doing Dave?”

gnome · 15th November 2022, 09:38 PM

Originally Posted by psionl0

Now I get it. You are worried about a private insurance carrier going broke before you can make a claim.

This is no bigger a worry than home/auto/health insurance. It can happen but it seems that the risk is less than that of a crypto exchange biting the dust.

I'm not sure. A big crypto exchange failing, millions in claims... it might take out the insurance carrier too. The risk is vastly greater than something like FDIC defaulting.

psionl0 · 15th November 2022, 09:41 PM

Originally Posted by gnome

I'm not sure. A big crypto exchange failing, millions in claims... it might take out the insurance carrier too. The risk is vastly greater than something like FDIC defaulting.

You are assuming that everybody has their holdings insured (with the same carrier) and that the carrier didn't calculate their premiums correctly.

Puppycow · 16th November 2022, 09:11 AM

Apparently bitcoin is worth 25% of what it was a year ago. Should I buy the dip?

Haha.

In my humble opinion the bitcoin has no inherent value.

At least the US dollar has an army, a navy, an air force and nuclear weapons to back it up. Does bitcoin?

wareyin · 16th November 2022, 09:38 AM

Originally Posted by Puppycow

Apparently bitcoin is worth 25% of what it was a year ago. Should I buy the dip?

Haha.

In my humble opinion the bitcoin has no inherent value.

At least the US dollar has an army, a navy, an air force and nuclear weapons to back it up. Does bitcoin?

They have an army^* of online fanboys. Does that count?

^* well, an army of accounts claiming to be individual fanboys, anyway

catsmate · 16th November 2022, 01:10 PM

The FTX litigation begins....
https://www.theguardian.com/business...ebrity-backers

gnome · 16th November 2022, 01:53 PM

Originally Posted by psionl0

You are assuming that everybody has their holdings insured (with the same carrier) and that the carrier didn't calculate their premiums correctly.

I don't think so especially. A large event can test the solvency of multiple carriers. And as far as risk calculations--the risk analysis can be perfect, and that doesn't mean the finances are set up correctly to reflect it. In the end there's a DIFFERENT risk analysis: for the shareholders of this hypothetical insurance carrier, whether the personal consequences of defaulting would be outweighed by the benefits of overpromising.

Samson · 16th November 2022, 02:09 PM

I am curious
Crypto is marked to market around 775 billion.
How much of this is fiat currency invested?
How should the purchase of electricity play into the figures?

pzkpfw · 16th November 2022, 02:19 PM

https://english.elpais.com/internati...-salvador.html

Quote:

It is not known with any certainty how much Bukele has invested in bitcoin, but based on his own announcements on social media, it is estimated that losses could be in the range of $70 million, according to Ricardo Castaneda, an economist at the Central American Institute of Fiscal Studies (ICEFI). “This has a very high opportunity cost for a country like El Salvador, because it represents, for example, almost the entire budget of the Ministry of Agriculture in a country where half the population suffers from food insecurity,” said the economist in a telephone interview from San Salvador.

From something I read earlier, a large driver in going bitcoin was that El Salvador gets a lot of its money from ex-pats sending money home, and Bitcoin allowed them to avoid fees on money transfers.

Sounds good, but there's no free lunch.

psionl0 · 16th November 2022, 04:47 PM

Originally Posted by Puppycow

Apparently bitcoin is worth 25% of what it was a year ago. Should I buy the dip?

Haha.

Everybody who has ever bought bitcoin has eventually seen a profit if they held on to them. Of course, you might be waiting years for a profit and you will see some wild swings in the mean time. Don't you already know this?

Originally Posted by Puppycow

In my humble opinion the bitcoin has no inherent value.

What is this "inherent value" that you speak of?

Originally Posted by Puppycow

At least the US dollar has an army, a navy, an air force and nuclear weapons to back it up. Does bitcoin?

How does that work? Do you tell a vendor that you will have his shop nuked if he doesn't accept USD?

Puppycow · 16th November 2022, 06:36 PM

Originally Posted by catsmate

The FTX litigation begins....
https://www.theguardian.com/business...ebrity-backers

It says that they also named celebrities and athletes who endorsed FTX as co-defendants. That seems like a stretch. They were paid to promote the brand, I don't think they had any knowledge or control over the dirty dealings that were happening behind the scenes.

Puppycow · 16th November 2022, 06:52 PM

Originally Posted by psionl0

Everybody who has ever bought bitcoin has eventually seen a profit if they held on to them.

Everybody? How could you possibly know that? I'm pretty certain that's wrong, too because some people have lost their bitcoin wallets and others have had their bitcoin stolen. Just off the top of my head, there was Mt. Gox, and now FTX. Are you quite certain that everybody is still going to profit from this? Also, people don't live forever, so I'm guessing some people have died before making a profit. And it remains to be seen whether the current all-time high will ever be surpassed again.

Quote:

Of course, you might be waiting years for a profit and you will see some wild swings in the mean time. Don't you already know this?

And there's no guarantee that you will ever necessarily profit.

Quote:

What is this "inherent value" that you speak of?

How does that work? Do you tell a vendor that you will have his shop nuked if he doesn't accept USD?

No need. It's probably the most widely accepted currency in the world. It's the world's reserve currency as they say. It would probably take a book to explain it all in detail. But I don't think it's a coincidence that the world's reserve currency is issued by the world's largest military power.

Puppycow · 16th November 2022, 07:37 PM

Originally Posted by pzkpfw

https://english.elpais.com/internati...-salvador.html

From something I read earlier, a large driver in going bitcoin was that El Salvador gets a lot of its money from ex-pats sending money home, and Bitcoin allowed them to avoid fees on money transfers.

Sounds good, but there's no free lunch.

Harsh. According to the story, the president of El Salvador, a poor country with per capita GDP of less than $5,000 invested a significant amount of public money in bitcoin, and that investment has lost 67% of its value. Not good.

psionl0 · 16th November 2022, 09:03 PM

Originally Posted by Puppycow

Everybody?

Yes. Everybody who has ever bought bitcoin has eventually seen a profit if they held on to them. I don't ignore that it is possible to lose your bitcoins but nobody who has held onto them long enough had to sell at a loss (and many made huge profits).

Originally Posted by Puppycow

And there's no guarantee that you will ever necessarily profit.

Yes, past performance is no indicator of future performance. But everybody who has ever said "the price will never recover" has ended up with egg on their face. This thread is littered with the corpses of failed prophets. Are you going to be one of them?

Originally Posted by Puppycow

No need. It's probably the most widely accepted currency in the world. It's the world's reserve currency as they say. It would probably take a book to explain it all in detail. But I don't think it's a coincidence that the world's reserve currency is issued by the world's largest military power.

Totally irrelevant. And your inability to explain the nexus between the US military might and the USD as a reserve currency is noted.

Brainster · 16th November 2022, 10:57 PM

Originally Posted by Puppycow

Apparently bitcoin is worth 25% of what it was a year ago. Should I buy the dip?

Haha.

In my humble opinion the bitcoin has no inherent value.

In finance the term we use is intrinsic value, which is something I (used to) bring up with students when they talk about investing in crypto. Reading the stories about FTX and JBF it becomes clear that they were holding tons of the crypto that they had themselves created, just waiting for the price to go up. This is like the oldtime scam where someone would buy a mine for, say $50,000 and sell 5,000 shares to the general public for $10 a share and then turn around and sell another 50,000 shares to his relatives for a penny a share.

As was pointed out in the article, this allowed FTX to claim insane values on crypto that would have crashed to zero if they had ever tried to dump their tokens on the market.

marting · 16th November 2022, 10:59 PM

Molly White (crypto - web3 researcher, skeptic) gives her view of what happened to FTX. Interesting background in Fried's lobbying efforts.

https://newsletter.mollywhite.net/p/ftx-explainer

novaphile · 16th November 2022, 11:07 PM

Originally Posted by psionl0

Yes. Everybody who has ever bought bitcoin has eventually seen a profit if they held on to them. I don't ignore that it is possible to lose your bitcoins but nobody who has held onto them long enough had to sell at a loss (and many made huge profits).

I'm sorry but this just doesn't make sense.

There are lots of people who have bought bitcoin that haven't made a profit, a cursory glance of the bitcoin price graph shows that.

If they have made a profit, that means that they have sold their bitcoin, and that means that they have not held on to those coins.

There is probably a very large cohort of people that bought high that are desperately waiting/hoping for the price to rise again so that they can sell.

I think you are trying to say that it possible that all the people who bought high may eventually make a profit if they hold on long enough...

novaphile · 16th November 2022, 11:19 PM

Placed here for reference

novaphile · 16th November 2022, 11:20 PM

Sucks to be you if you bought at $60k or more I guess...

Susheel · 17th November 2022, 12:19 AM

From the looks of it...even at 40K.

psionl0 · 17th November 2022, 01:51 AM

Originally Posted by Brainster

In finance the term we use is intrinsic value, which is something I (used to) bring up with students when they talk about investing in crypto. Reading the stories about FTX and JBF it becomes clear that they were holding tons of the crypto that they had themselves created, just waiting for the price to go up. This is like the oldtime scam where someone would buy a mine for, say $50,000 and sell 5,000 shares to the general public for $10 a share and then turn around and sell another 50,000 shares to his relatives for a penny a share.

As was pointed out in the article, this allowed FTX to claim insane values on crypto that would have crashed to zero if they had ever tried to dump their tokens on the market.

So, not bitcoin then.

jeremyp · 17th November 2022, 03:02 AM

Originally Posted by psionl0

Everybody who has ever bought bitcoin has eventually seen a profit if they held on to them.

That isn't true. It cannot be true. There are a large number of Bitcoin holders who bought at around $60k and are therefore now under water. You could speculate that the price will go above $60k again one day, but who knows.

Furthermore, the only way to make a profit on Bitcoin is to find somebody who is willing to pay you more for your BTC than you paid. That supply of bigger fools is going to run out eventually (perhaps, this time, it already has). It's just not possible for everybody to make a profit on Bitcoin. Some people haver to make losses because there's no way to generate new value with Bitcoin.

Samson · 17th November 2022, 03:03 AM

Meanwhile the technical picture for crypto is bleak.
Wall Street is guaranteed to slump tomorrow, dragging crypto south. There is no floor visible to the trained eye.

psionl0 · 17th November 2022, 03:25 AM

Originally Posted by jeremyp

That isn't true. It cannot be true. There are a large number of Bitcoin holders who bought at around $60k and are therefore now under water. You could speculate that the price will go above $60k again one day, but who knows.

Furthermore, the only way to make a profit on Bitcoin is to find somebody who is willing to pay you more for your BTC than you paid. That supply of bigger fools is going to run out eventually (perhaps, this time, it already has). It's just not possible for everybody to make a profit on Bitcoin. Some people haver to make losses because there's no way to generate new value with Bitcoin.

This "bigger fool theory" is just crap. Bitcoin is traded on the open market just like any other commodity or collectable. Further more, unlike collectables (like used stamps), bitcoin has utility.

Sure lots of people have lost on bitcoin because they bought high then panicked when the price started falling. This is a common strategy for lots of amateur investors.

catsmate · 17th November 2022, 04:36 AM

Originally Posted by Puppycow

It says that they also named celebrities and athletes who endorsed FTX as co-defendants. That seems like a stretch. They were paid to promote the brand, I don't think they had any knowledge or control over the dirty dealings that were happening behind the scenes.

I suspect the lawyers will play to the jury.

catsmate · 17th November 2022, 04:39 AM

Originally Posted by novaphile

Sucks to be you if you bought at $60k or more I guess...

Originally Posted by Susheel

From the looks of it...even at 40K.

Or 20k. In fact if you bought in roughly the last two years and have held on to your Dunning-Krugerands you have lost.

12th November 2022, 08:39 AM	#2801
Brainster Penultimate Amazing Join Date: May 2006 Posts: 19,688	Originally Posted by Chanakya Woof. Just saw this bit of news, elsewhere. Came back here to see if there's any interesting insights posted on this. Saw this thing referred to as perhaps the biggest destruction of wealth ever, in terms of how much was lost in how little time. Most of it this guy Bankman-Fried's apparently, poor guy. One mustn't generalize from single instances to the entire class of assets, of course, but this seems very similar to gambling. When the going's good, boom, you go from hundreds or maybe low thousands to the tens of thousands. Then you put together all kinds of strategies, some of which seem to work to an extent. And then, boom again, something like this happens, and you realize it was all just ...tissue thin illusion, all along. One of the big problems seems to be with these exchanges. It's risky to hold your bitcoins personally; we've all read the stories about bitcoin fortunes lost when a hard drive crashed or was thrown out. So you store it with someone else, but now you're susceptible to theft if the exchange is run by a crook (as this one was), or it's hacked as in the famous Mt Gox case.
	__________________ My new blog: Recent Reads. 1960s Comic Book Nostalgia Visit the Screw Loose Change blog.

12th November 2022, 09:40 AM	#2802
marting Illuminator Join Date: Sep 2003 Posts: 3,688	Originally Posted by Brainster One of the big problems seems to be with these exchanges. It's risky to hold your bitcoins personally; we've all read the stories about bitcoin fortunes lost when a hard drive crashed or was thrown out. So you store it with someone else, but now you're susceptible to theft if the exchange is run by a crook (as this one was), or it's hacked as in the famous Mt Gox case. If you store crypto in a cold wallet it's safe from exchange, counterparty risk. Until a week or so ago, FTX touted itself as the best of the best in terms or low risk. What I didn't know is that FTX, and likely most others, use deposited customer funds to create "other opportunities." This is unlike stock brokerages that are required to segregate customer funds in separate accounts that they cannot pledge as collateral for "other opportunities." Brokerages make money by taking a small commission from buys/sells. Crypto exchanges should do the same. Apparently that wasn't enough for FTX.
marting Illuminator Join Date: Sep 2003 Posts: 3,688	__________________ Flying's easy. Walking on water, now that's cool.

12th November 2022, 10:13 AM	#2803
Chanakya Join Date: Apr 2015 Posts: 4,075	Originally Posted by Brainster One of the big problems seems to be with these exchanges. It's risky to hold your bitcoins personally; we've all read the stories about bitcoin fortunes lost when a hard drive crashed or was thrown out. So you store it with someone else, but now you're susceptible to theft if the exchange is run by a crook (as this one was), or it's hacked as in the famous Mt Gox case. Originally Posted by marting If you store crypto in a cold wallet it's safe from exchange, counterparty risk. Until a week or so ago, FTX touted itself as the best of the best in terms or low risk. What I didn't know is that FTX, and likely most others, use deposited customer funds to create "other opportunities." This is unlike stock brokerages that are required to segregate customer funds in separate accounts that they cannot pledge as collateral for "other opportunities." Brokerages make money by taking a small commission from buys/sells. Crypto exchanges should do the same. Apparently that wasn't enough for FTX. Oh, the FTX promoter was a crook, was he? I hadn't caught on to that, in my admittedly superficial reading of this bit of news. All I saw was that all this wealth is wiped out, and in this case it is the billionaire founder that took most of the hit; and I actually felt kind of bad for the poor guy (although I realize that, even wiped out, he's probably way richer than I am, given that he must have squirreled away some parts of that fortune for a rainy day such as this). But if the exchange used depositors' money to play around like this, then they must have been either crooked to the extent of being outright thieves, scheming to just disappear with the money; or else they must be completely stupid. A child would know that it is stupid to play around with others' money, given that crypto is very volatile. I mean, the one word, the one descriptor, that first pops to mind when you say the word "crypto", is: "Volatile!", right? So what kind of idiot plays the super-high-risk game of playing around with this highly volatile thing that others have deposited with them? That's crazy stupid, unless like I said the intention had all along been to simply disappear with the money --- which somehow seems unlikely, given how high-profile this guy, whatsisname, let me look it up again, yes, Bankman Fried --- haha, juvenile cryptic clue for FTX, man playing at bank gets fried! --- was.
Chanakya Join Date: Apr 2015 Posts: 4,075	Last edited by Chanakya; 12th November 2022 at 10:16 AM.

12th November 2022, 02:39 PM	#2804
pzkpfw Thinker Join Date: Sep 2011 Posts: 161	According to something I read (and maybe didn't understand) at CNN: https://edition.cnn.com/2022/11/12/b...usiness_ribbon Quote: The exchange’s founder Sam Bankman-Fried secretly transferred $10 billion of customer funds from FTX to Bankman-Fried’s trading company Alameda Research, the people told Reuters. A large portion of that total has since disappeared, they said. One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion.
pzkpfw Thinker Join Date: Sep 2011 Posts: 161

13th November 2022, 01:16 PM	#2805
gnome Penultimate Amazing Join Date: Aug 2001 Posts: 13,570	Originally Posted by Brainster One of the big problems seems to be with these exchanges. It's risky to hold your bitcoins personally; we've all read the stories about bitcoin fortunes lost when a hard drive crashed or was thrown out. So you store it with someone else, but now you're susceptible to theft if the exchange is run by a crook (as this one was), or it's hacked as in the famous Mt Gox case. Almost makes you wish for some kind of deposit insurance.
	__________________

14th November 2022, 12:21 PM	#2806
catsmate No longer the 1 Join Date: Apr 2007 Posts: 28,082	Originally Posted by gnome Almost makes you wish for some kind of deposit insurance. Government involvement? That's socialism.....
	__________________ As human right is always something given, it always in reality reduces to the right which men give, "concede," to each other. If the right to existence is conceded to new-born children, then they have the right; if it is not conceded to them, as was the case among the Spartans and ancient Romans, then they do not have it. For only society can give or concede it to them; they themselves cannot take it, or give it to themselves.

14th November 2022, 05:26 PM	#2807
psionl0 Skeptical about skeptics Join Date: Sep 2010 Location: 31°57'S 115°57'E Posts: 19,922	Originally Posted by catsmate Government involvement? That's socialism..... Not if a private carrier is willing to insure your holdings (but getting them to insure against your negligence such as losing your thumb drive might be tricky).
	__________________ "The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975

14th November 2022, 06:56 PM	#2808
marting Illuminator Join Date: Sep 2003 Posts: 3,688	Michael Lewis, author of "The Big Short,' "Liar's Poker," "Moneyball" and such turns out to have been at the right place at the right time. He has been tied to the hip with Bankman-Fried for the last 6 months.* https://gizmodo.com/ftx-michael-lewi...sbf-1849778463 https://www.marketwatch.com/story/th...rt-11668457317 *IIRC, his daughter recently died tragicly in an auto accident.
marting Illuminator Join Date: Sep 2003 Posts: 3,688	__________________ Flying's easy. Walking on water, now that's cool.

14th November 2022, 10:55 PM	#2809
Brainster Penultimate Amazing Join Date: May 2006 Posts: 19,688	Best article yet on the problems with FTX; get this part: Quote: And then the basic question is, how bad is the mismatch. Like, $16 billion of dollar liabilities and $16 billion of liquid dollar-denominated assets? Sure, great. $16 billion of dollar liabilities and $16 billion worth of Bitcoin assets? Not ideal, incredibly risky, but in some broad sense understandable. $16 billion of dollar liabilities and assets consisting entirely of some magic beans that you bought in the market for $16 billion? Very bad. $16 billion of dollar liabilities and assets consisting mostly of some magic beans that you invented yourself and acquired for zero dollars? WHAT? Never mind the valuation of the beans; where did the money go? What happened to the $16 billion? Spending $5 billion of customer money on Serum would have been horrible, but FTX didn’t do that, and couldn’t have, because there wasn’t $5 billion of Serum available to buy. FTX shot its customer money into some still-unexplained reaches of the astral plane and was like “well we do have $5 billion of this Serum token we made up, that’s something?” No it isn’t! As someone who stares at balance sheets all day, that was quite enjoyable to read.
	__________________ My new blog: Recent Reads. 1960s Comic Book Nostalgia Visit the Screw Loose Change blog.

15th November 2022, 09:19 AM	#2810
gnome Penultimate Amazing Join Date: Aug 2001 Posts: 13,570	Originally Posted by psionl0 Not if a private carrier is willing to insure your holdings (but getting them to insure against your negligence such as losing your thumb drive might be tricky). Wouldn't using a private carrier just kick the can from potential failure of exchanges to potential failure of the private carrier? The benefit of federal deposit insurance is the extreme unlikelihood of default.
	__________________

15th November 2022, 10:14 AM	#2811
Suddenly No Punting Join Date: Jan 2005 Location: Not In Follansbee Posts: 5,444	Originally Posted by gnome Wouldn't using a private carrier just kick the can from potential failure of exchanges to potential failure of the private carrier? The benefit of federal deposit insurance is the extreme unlikelihood of default. You could maybe get your insurance insured. It's sort of amusing how many new internet innovations are mostly an exercise in why regulations exist.

15th November 2022, 04:29 PM	#2812
psionl0 Skeptical about skeptics Join Date: Sep 2010 Location: 31°57'S 115°57'E Posts: 19,922	Originally Posted by gnome Wouldn't using a private carrier just kick the can from potential failure of exchanges to potential failure of the private carrier? The benefit of federal deposit insurance is the extreme unlikelihood of default. I don't understand the question.
	__________________ "The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975

15th November 2022, 08:21 PM	#2813
Puppycow Penultimate Amazing Join Date: Jan 2003 Location: Yokohama, Japan Posts: 27,884	Vox has this article: Sam Bankman-Fried, the disgraced boy king of crypto, explained Quote: The downfall of FTX isn’t a typical story of crypto’s volatility or investor risk-taking; it didn’t crumble due to bad luck, but what now appears to be unsustainable layers of deception.
	__________________ A fool thinks himself to be wise, but a wise man knows himself to be a fool. William Shakespeare

15th November 2022, 08:44 PM	#2814
psionl0 Skeptical about skeptics Join Date: Sep 2010 Location: 31°57'S 115°57'E Posts: 19,922	Originally Posted by psionl0 I don't understand the question. Now I get it. You are worried about a private insurance carrier going broke before you can make a claim. This is no bigger a worry than home/auto/health insurance. It can happen but it seems that the risk is less than that of a crypto exchange biting the dust.
	__________________ "The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975

15th November 2022, 08:54 PM	#2815
Puppycow Penultimate Amazing Join Date: Jan 2003 Location: Yokohama, Japan Posts: 27,884	Originally Posted by Brainster Best article yet on the problems with FTX; get this part: As someone who stares at balance sheets all day, that was quite enjoyable to read. I like this bit: Quote: If you try to calculate the equity of a balance sheet with an entry for HIDDEN POORLY INTERNALLY LABELED ACCOUNT, Microsoft Clippy will appear before you in the flesh, bloodshot and staggering, with a knife in his little paper-clip hand, saying “just what do you think you’re doing Dave?”
	__________________ A fool thinks himself to be wise, but a wise man knows himself to be a fool. William Shakespeare

15th November 2022, 09:38 PM	#2816
gnome Penultimate Amazing Join Date: Aug 2001 Posts: 13,570	Originally Posted by psionl0 Now I get it. You are worried about a private insurance carrier going broke before you can make a claim. This is no bigger a worry than home/auto/health insurance. It can happen but it seems that the risk is less than that of a crypto exchange biting the dust. I'm not sure. A big crypto exchange failing, millions in claims... it might take out the insurance carrier too. The risk is vastly greater than something like FDIC defaulting.
	__________________

15th November 2022, 09:41 PM	#2817
psionl0 Skeptical about skeptics Join Date: Sep 2010 Location: 31°57'S 115°57'E Posts: 19,922	Originally Posted by gnome I'm not sure. A big crypto exchange failing, millions in claims... it might take out the insurance carrier too. The risk is vastly greater than something like FDIC defaulting. You are assuming that everybody has their holdings insured (with the same carrier) and that the carrier didn't calculate their premiums correctly.
	__________________ "The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975

16th November 2022, 09:11 AM	#2818
Puppycow Penultimate Amazing Join Date: Jan 2003 Location: Yokohama, Japan Posts: 27,884	Apparently bitcoin is worth 25% of what it was a year ago. Should I buy the dip? Haha. In my humble opinion the bitcoin has no inherent value. At least the US dollar has an army, a navy, an air force and nuclear weapons to back it up. Does bitcoin?
	__________________ A fool thinks himself to be wise, but a wise man knows himself to be a fool. William Shakespeare

16th November 2022, 09:38 AM	#2819
wareyin Penultimate Amazing Join Date: Oct 2013 Location: Georgia, USA Posts: 11,351	Originally Posted by Puppycow Apparently bitcoin is worth 25% of what it was a year ago. Should I buy the dip? Haha. In my humble opinion the bitcoin has no inherent value. At least the US dollar has an army, a navy, an air force and nuclear weapons to back it up. Does bitcoin? They have an army^* of online fanboys. Does that count? ^* well, an army of accounts claiming to be individual fanboys, anyway

16th November 2022, 01:10 PM	#2820
catsmate No longer the 1 Join Date: Apr 2007 Posts: 28,082	The FTX litigation begins.... https://www.theguardian.com/business...ebrity-backers
	__________________ As human right is always something given, it always in reality reduces to the right which men give, "concede," to each other. If the right to existence is conceded to new-born children, then they have the right; if it is not conceded to them, as was the case among the Spartans and ancient Romans, then they do not have it. For only society can give or concede it to them; they themselves cannot take it, or give it to themselves.

16th November 2022, 01:53 PM	#2821
gnome Penultimate Amazing Join Date: Aug 2001 Posts: 13,570	Originally Posted by psionl0 You are assuming that everybody has their holdings insured (with the same carrier) and that the carrier didn't calculate their premiums correctly. I don't think so especially. A large event can test the solvency of multiple carriers. And as far as risk calculations--the risk analysis can be perfect, and that doesn't mean the finances are set up correctly to reflect it. In the end there's a DIFFERENT risk analysis: for the shareholders of this hypothetical insurance carrier, whether the personal consequences of defaulting would be outweighed by the benefits of overpromising.
	__________________ Last edited by gnome; 16th November 2022 at 01:55 PM.

16th November 2022, 02:09 PM	#2822
Samson Penultimate Amazing Join Date: Oct 2013 Posts: 10,357	I am curious Crypto is marked to market around 775 billion. How much of this is fiat currency invested? How should the purchase of electricity play into the figures?

16th November 2022, 02:19 PM	#2823
pzkpfw Thinker Join Date: Sep 2011 Posts: 161	https://english.elpais.com/internati...-salvador.html Quote: It is not known with any certainty how much Bukele has invested in bitcoin, but based on his own announcements on social media, it is estimated that losses could be in the range of $70 million, according to Ricardo Castaneda, an economist at the Central American Institute of Fiscal Studies (ICEFI). “This has a very high opportunity cost for a country like El Salvador, because it represents, for example, almost the entire budget of the Ministry of Agriculture in a country where half the population suffers from food insecurity,” said the economist in a telephone interview from San Salvador. From something I read earlier, a large driver in going bitcoin was that El Salvador gets a lot of its money from ex-pats sending money home, and Bitcoin allowed them to avoid fees on money transfers. Sounds good, but there's no free lunch.
pzkpfw Thinker Join Date: Sep 2011 Posts: 161

16th November 2022, 04:47 PM	#2824
psionl0 Skeptical about skeptics Join Date: Sep 2010 Location: 31°57'S 115°57'E Posts: 19,922	Originally Posted by Puppycow Apparently bitcoin is worth 25% of what it was a year ago. Should I buy the dip? Haha. Everybody who has ever bought bitcoin has eventually seen a profit if they held on to them. Of course, you might be waiting years for a profit and you will see some wild swings in the mean time. Don't you already know this? Originally Posted by Puppycow In my humble opinion the bitcoin has no inherent value. What is this "inherent value" that you speak of? Originally Posted by Puppycow At least the US dollar has an army, a navy, an air force and nuclear weapons to back it up. Does bitcoin? How does that work? Do you tell a vendor that you will have his shop nuked if he doesn't accept USD?
	__________________ "The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975

16th November 2022, 06:36 PM	#2825
Puppycow Penultimate Amazing Join Date: Jan 2003 Location: Yokohama, Japan Posts: 27,884	Originally Posted by catsmate The FTX litigation begins.... https://www.theguardian.com/business...ebrity-backers It says that they also named celebrities and athletes who endorsed FTX as co-defendants. That seems like a stretch. They were paid to promote the brand, I don't think they had any knowledge or control over the dirty dealings that were happening behind the scenes.
	__________________ A fool thinks himself to be wise, but a wise man knows himself to be a fool. William Shakespeare

16th November 2022, 06:52 PM	#2826
Puppycow Penultimate Amazing Join Date: Jan 2003 Location: Yokohama, Japan Posts: 27,884	Originally Posted by psionl0 Everybody who has ever bought bitcoin has eventually seen a profit if they held on to them. Everybody? How could you possibly know that? I'm pretty certain that's wrong, too because some people have lost their bitcoin wallets and others have had their bitcoin stolen. Just off the top of my head, there was Mt. Gox, and now FTX. Are you quite certain that everybody is still going to profit from this? Also, people don't live forever, so I'm guessing some people have died before making a profit. And it remains to be seen whether the current all-time high will ever be surpassed again. Quote: Of course, you might be waiting years for a profit and you will see some wild swings in the mean time. Don't you already know this? And there's no guarantee that you will ever necessarily profit. Quote: What is this "inherent value" that you speak of? How does that work? Do you tell a vendor that you will have his shop nuked if he doesn't accept USD? No need. It's probably the most widely accepted currency in the world. It's the world's reserve currency as they say. It would probably take a book to explain it all in detail. But I don't think it's a coincidence that the world's reserve currency is issued by the world's largest military power.
	__________________ A fool thinks himself to be wise, but a wise man knows himself to be a fool. William Shakespeare

16th November 2022, 07:37 PM	#2827
Puppycow Penultimate Amazing Join Date: Jan 2003 Location: Yokohama, Japan Posts: 27,884	Originally Posted by pzkpfw https://english.elpais.com/internati...-salvador.html From something I read earlier, a large driver in going bitcoin was that El Salvador gets a lot of its money from ex-pats sending money home, and Bitcoin allowed them to avoid fees on money transfers. Sounds good, but there's no free lunch. Harsh. According to the story, the president of El Salvador, a poor country with per capita GDP of less than $5,000 invested a significant amount of public money in bitcoin, and that investment has lost 67% of its value. Not good.
	__________________ A fool thinks himself to be wise, but a wise man knows himself to be a fool. William Shakespeare

16th November 2022, 09:03 PM	#2828
psionl0 Skeptical about skeptics Join Date: Sep 2010 Location: 31°57'S 115°57'E Posts: 19,922	Originally Posted by Puppycow Everybody? Yes. Everybody who has ever bought bitcoin has eventually seen a profit if they held on to them. I don't ignore that it is possible to lose your bitcoins but nobody who has held onto them long enough had to sell at a loss (and many made huge profits). Originally Posted by Puppycow And there's no guarantee that you will ever necessarily profit. Yes, past performance is no indicator of future performance. But everybody who has ever said "the price will never recover" has ended up with egg on their face. This thread is littered with the corpses of failed prophets. Are you going to be one of them? Originally Posted by Puppycow No need. It's probably the most widely accepted currency in the world. It's the world's reserve currency as they say. It would probably take a book to explain it all in detail. But I don't think it's a coincidence that the world's reserve currency is issued by the world's largest military power. Totally irrelevant. And your inability to explain the nexus between the US military might and the USD as a reserve currency is noted.
	__________________ "The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975

16th November 2022, 10:57 PM	#2829
Brainster Penultimate Amazing Join Date: May 2006 Posts: 19,688	Originally Posted by Puppycow Apparently bitcoin is worth 25% of what it was a year ago. Should I buy the dip? Haha. In my humble opinion the bitcoin has no inherent value. In finance the term we use is intrinsic value, which is something I (used to) bring up with students when they talk about investing in crypto. Reading the stories about FTX and JBF it becomes clear that they were holding tons of the crypto that they had themselves created, just waiting for the price to go up. This is like the oldtime scam where someone would buy a mine for, say $50,000 and sell 5,000 shares to the general public for $10 a share and then turn around and sell another 50,000 shares to his relatives for a penny a share. As was pointed out in the article, this allowed FTX to claim insane values on crypto that would have crashed to zero if they had ever tried to dump their tokens on the market.
	__________________ My new blog: Recent Reads. 1960s Comic Book Nostalgia Visit the Screw Loose Change blog.

16th November 2022, 10:59 PM	#2830
marting Illuminator Join Date: Sep 2003 Posts: 3,688	Molly White (crypto - web3 researcher, skeptic) gives her view of what happened to FTX. Interesting background in Fried's lobbying efforts. https://newsletter.mollywhite.net/p/ftx-explainer
marting Illuminator Join Date: Sep 2003 Posts: 3,688	__________________ Flying's easy. Walking on water, now that's cool.

16th November 2022, 11:07 PM	#2831
novaphile Quester of Doglets Join Date: Dec 2009 Location: Sunny South Australia Posts: 4,387	Originally Posted by psionl0 Yes. Everybody who has ever bought bitcoin has eventually seen a profit if they held on to them. I don't ignore that it is possible to lose your bitcoins but nobody who has held onto them long enough had to sell at a loss (and many made huge profits). I'm sorry but this just doesn't make sense. There are lots of people who have bought bitcoin that haven't made a profit, a cursory glance of the bitcoin price graph shows that. If they have made a profit, that means that they have sold their bitcoin, and that means that they have not held on to those coins. There is probably a very large cohort of people that bought high that are desperately waiting/hoping for the price to rise again so that they can sell. I think you are trying to say that it possible that all the people who bought high may eventually make a profit if they hold on long enough...
	__________________ We would be better, and braver, to engage in enquiry, rather than indulge in the idle fancy, that we already know -- Plato.

16th November 2022, 11:19 PM	#2832
novaphile Quester of Doglets Join Date: Dec 2009 Location: Sunny South Australia Posts: 4,387	Placed here for reference
	__________________ We would be better, and braver, to engage in enquiry, rather than indulge in the idle fancy, that we already know -- Plato.

16th November 2022, 11:20 PM	#2833
novaphile Quester of Doglets Join Date: Dec 2009 Location: Sunny South Australia Posts: 4,387	Sucks to be you if you bought at $60k or more I guess...
	__________________ We would be better, and braver, to engage in enquiry, rather than indulge in the idle fancy, that we already know -- Plato.

17th November 2022, 12:19 AM	#2834
Susheel Illuminator Join Date: Nov 2005 Location: Hyderabad, India Posts: 3,085	From the looks of it...even at 40K.
	__________________ I've got to get to a library...fast Robert Langdon

17th November 2022, 01:51 AM	#2835
psionl0 Skeptical about skeptics Join Date: Sep 2010 Location: 31°57'S 115°57'E Posts: 19,922	Originally Posted by Brainster In finance the term we use is intrinsic value, which is something I (used to) bring up with students when they talk about investing in crypto. Reading the stories about FTX and JBF it becomes clear that they were holding tons of the crypto that they had themselves created, just waiting for the price to go up. This is like the oldtime scam where someone would buy a mine for, say $50,000 and sell 5,000 shares to the general public for $10 a share and then turn around and sell another 50,000 shares to his relatives for a penny a share. As was pointed out in the article, this allowed FTX to claim insane values on crypto that would have crashed to zero if they had ever tried to dump their tokens on the market. So, not bitcoin then.
	__________________ "The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." - Galbraith, 1975