If I read it correctly it's more like a 1.8 bn hole.
They are counting 600m of their own token, which already had only 170m or whatever of market cap, which presumably now is absolutely worthless.
I don't mean worthless in a conceptual sense like all crypto, but this specific brand of made up money is based on the trust of a bankrupt lender. Nobody is buying that and counting it as 600m of asset is absurd.
It's like writing yourself a bunch of IOUs and claiming it gives you wealth.
Don't forget about the $720M in "Mining Assets". I wouldn't be surprised if the true value were much lower than this, now that crypto prices have crashed.
If only 3% of hardware owned by miners and dedicated to mining is put towards Bitcoin, doesn't that make it super-likely that a 50% attack will happen any day? Bitcoin is still "mainstream" (within crypto) and easy to trade so a double-spend could be very lucrative?
The whole security of proof-of-work depends on "you can't beat the network", but when such a small fraction of available hardware is left in that particular network, what security does it have?
1) newer generations of bitcoin mining hardware are orders of magnitude more efficient so 3% of hardware isn't 3% of total SHA 256 computational capacity
2) 3% of hardware owned by miners is probably a GPU number. Eth is mined by GPUs, not ASICs.
So you're saying there's not that much mining power that could "switch over" to Bitcoin or ETH, because hardware is optimized for a specific network and would lose significant efficiency if switched to a different network?
I think they are claiming they can mine something like 10k bitcoin/year (https://twitter.com/ThePrivatier/status/1547613977231798272) going forward but I have no idea what the COGS/cost between labor/maintenance and electricity is to mine that. If it's say 50%, then those "mining assets" will pay back in 7 years.
Seems like people are going to take a large haircut on whatever they deposited and then maybe get back some incremental cash over time.
1) The block rewards are going to halve twice during those 7 years
2) the hardware is going to become obsolete well b4fore 7 years (although I wonder how the semiconductor shortage is holding back custom mining hardware design and manufacturing? Maybe in 2029 people will still be using today's hardware? I seriously doubt that.)
3) I'm reasonably sure arbitrage pushes the cost of mining asymptotically close to the price of electricity to run it, so the margins are almost all whatever temporary, fraudulent, or criminal steps you can take to reduce your cost (or outright steal) the electricity.
In 3) s/arbitrage/competition, and apparently it is not only the electricity, but also the capital cost of the mining gear that you have to take into account.
Who in his right mind puts 'Other' with a 270 millions $ figure next to it ?
It reads like Tether attestations. It's pretty amazing (or rather depressing) that Mashinsky is still not in jail. Hopefully, this will open the eyes of some crypto naive fans.
Terra classic is still trading... at $0.00009 https://coinmarketcap.com/currencies/terra-luna/ It had a big jump when Terra 2.0 was launched. (That coin is, inexplicably, still trading in the $2 range, by people who are looking to add a lot of excitement to their life.)
The markets don't have to make sense right away, but eventually they do. There's alot of corruption involved first. The old mantra of the market can stay irratiional longer than you can stay solvent is true only if you make a big bet. Make small bets that you believe in.
For instance, shorting LUNA's stable coin once it slightly deppegged was a smart financial decision. Since it could only 'rePeg' back to $1.00, your downside was marginal but the upside was 99.9%. Jump capital (their biggest investor) and a ton of people at the Terra Luna foundation took that trade and made a killing.
Similiarly with twitter when it was at like 50 something and the acquisition was 54.20. Minor downside, high upside if the deal doesn't go through.
Also short - the insiders have probably sold a lot of CEL for real US$ and are now in a position to buy some CEL to prop the price up. But eventually it's probably going down.
I don't understand how that contradicts what I said. CEL token holders are not entitled to any of Celsius' assets, like shareholders or bondholders would be.
That's a separate issue from Celsius owing their depositors CEL as a debt. Those CEL creditors are entitled to Celsius' assets through the bankruptcy process, if Celsius cannot otherwise make good on that CEL-denominated debt.
Now I'm wondering if the Hertz thing would have played out differently in the current 2nd hand car market insanity? Could an asset stripper have liquidated the entire Hertz rental fleet at above new car prices?
> I don't mean worthless in a conceptual sense like all crypto
As a Bitcoin Maximalist, I agree with your statement almost wholeheartedly. These platforms offer nothing valuable except for the life lesson at the end not to gamble away your life savings in shady investment vehicles that offer unsustainable yields without a transparent earnings model.
I’d have thought CEL would have gone to zero, but it still seems to be hover around ~0.75. Tho there’s only 2m in volume. So it’s unrealistic that Celsius would be able to offload 600m worth.
But why would anyone be buying it now?
The hope that a) Celsius comes out of bankruptcy and b) they continue to honour their existing CEL token, seems a bit far fetched.
It's crazy to think this is all because of Terra. Terra crashed, tanking the entire crypto sector -> 3AC defaults as they lost $$$$ on Luna -> Celsius, who already had a dubious "diversification" strategy, emerges as a big bagholder.
I'm short CEL token and it's taking it's time to collapse but I agree with you there's not much value there. (You can short on FTX futures in case anyone is inspired - not investment advice).
Literally all forms of money ever invented are based on faith. Even the importance of debt (which existed before money) is based on faith.
You can't eat gold, you can't grow food with the wasted energy underlying Bitcoin. You need faith that in the long term people will give you something you want in exchange for your monetary tokens, and that the prices of goods will not grow or shrink too quickly so as to make those transactions untenable.
Sovereign nations have several levers to ensure their national currency continues to fulfil these requirements so as to encourage faith in their currency. Magic internet money does not.
How poignant of an image: you're holding your dollars, "the military" is standing in front of you...and the rest of the world is just walking in the other direction.
One thing to note is that while Celsius, a centralized and opaque yield platform, collapsed, not a single major DeFi protocol failed during a period of enormous stress. MakerDAO, Aave, Uniswap, Curve, Lido and Compound all had perfect 24/7 uptime with zero losses due to unrecoverable debt.
This pretty clearly strengthens the case for pure and transparent DeFi, where anybody can inspect the health of the protocol or the rules of the immutable code. In contrast Celsius failed because it was an opaque black box that primarily lent to other opaque black boxes like Three Arrows Capital.
For a long-time a lot of people just getting into crypto felt like the CeDeFi platforms like Celsius or BlockFi were "safer" than the pure on-chain protocols like Aave or Curve because they didn't have to worry about managing their own keys, there were humans in charge, and a nice corporate entity standing behind it their deposits. As it turns out, decentralized autonomous protocols were substantially safer.
Celsius seems to have been either a ponzi scheme, or a group of morons doing dumb speculative investment on margin, or (most likely) both, but I'd like to point out that MakerDAO is down 70% YTD, Aave is down 60%, Uniswap is down 60%, etc, etc.
You'd have been better off just buying bitcoin on margin (Since BTC is only down 53% YTD).
The point of this post is that you can't make something out of nothing. None of these tokens/firms/etc have any idea of how they can make money in the crypto space, because there is no way to make money in the crypto space - because it doesn't produce anything. It's all just negative-sum speculation, and shitcoins investing into other shitcoins, and it all evaporates as soon as the Fed tightens its purse-strings.
Miners make money, people selling shovels make money, everyone else is just trading baseball cards around.
Their tokens are down, but you don't have to buy them to use the platform, they're basically like shares in a company. I constantly use all those platforms without ever buying their tokens.
AMZN being down 30% in the last 6 months has no impact on how useful Amazon or AWS are as products.
Some people want USDC, some people want non fungible assets, some people want ETH, some people want an ERC20 that backs an idea or organization. DeFi let’s these users manage these assets without placing them in the hands of a single actor.
Saying nobody wants ETH or USDC is like saying nobody wants AMZN or AAPL shares. What you really mean is that you are not interested in those assets.
> but I'd like to point out that MakerDAO is down 70% YTD, Aave is down 60%, Uniswap is down 60%, etc, etc.
The health of the protocols is only very marginally connected to the value of the tokens that govern them. Even if the $UNI token went to zero, the liquidity pools and swap contracts would still work fine. $MKR and $AAVE are a little more complicated because if the governance tokens got too cheap, the protocols could be hijacked and some of the lending parameters could be set to 'broken' values, resulting in liquidations that didn't need to happen. But as of now, the protocols are still working as designed.
That's wonderful. But what are all these loans used for? Arbitrage? Trading other coins around? It's turtles all the way down - there's nothing that generates value at the bottom.
I've yet to have success explaining that very ex nihilo problem to crypto people* - even if you build out all of the last 100 years worth of financial system innovation, at the very bottom all it's doing is very efficient price discovery of people's Pogs collection. It will all fold as such.
* anecdotal, but there seems to a strong inverse correlation between crypto enthusiasm and education in economics or finance. Mostly libertarian leaning tech bros in my sample set.
Actually not quite - dollars themselves are worth nothing, same way meters, or liters are worth nothing. They purely a convenience unit of measurement, so that a baker selling bread to a plumber doesn't first have to find flour mill that needs plumbing services to make the transaction.
Crypto is by design made artificially scarce, largely because people don't understand the first point. This is also why no one besides dark web ehm "shoppers" actually transacts with crypto.
All currency is worth nothing until it is worth something, and even that will change over human history. Crypto is as artificially scarce as any currency, except the scarcity is baked into clear rules in the protocol that cannot be arbitrarily changed by a single centralized actor. Some people actually like this model.
We could easily put real economic assets and loans on-chain. The legal frameworks exist On-chain yields are now low enough and “real-world” interest rates high enough that there’d be demand. Delaware courts can and have enforced corporate entities governed by software.
The problem is that all of this is currently illegal, because The SEC and Gary Gensler have made zero effort to build a regulatory framework for securities as tokens.
We could, and we could also build cars that run on peanut butter. We don't, because there is no point to it, because it costs too much, and because it solves problems that have already been solved.
It's not going to magically make inflation or interest rates go away. You are correct that the legal system would still be around, and will still be able to do pretty much everything that it's doing now.
It's not illegal, because it's not actually in the realm of the SEC. What you describe - the background implementation of finance isn't an investment, it's just boring clerical work. [1] If there were a better way to do it with blockchains, people would adopt it. Unfortunately, blockchains do not solve the hard problems in this space, but they do make the easy problems both hard and expensive.
[1] Yes, it's regulated, but the regulation allows for improvements. The regulation isn't the problem - getting everyone's workflows that are accustomed to how this clerical work is done is the problem! Nobody will switch to a system that's not better, and blockchains are not a better system for this [2].
[2] And if they were, no currently existing blockchain would be a better system for this. If stock clearing or whatever would somehow work better through a blockchain[3], there's no reason to do it on a blockchain that has already been pre-mined, and is being traded around by speculators. Why pay them a first-movers tax, when you can just fork and spin up your own? The hashing power of anything but BTC and maybe the ETH networks isn't sufficient to prevent attacks on something as important as this - so the existing coin ecosystems have zero value for this usecase. The organizations adopting this would have to control the hashing power, as well - and at that point, why pay third-parties for it?
> You'd have been better off just buying bitcoin on margin (Since BTC is only down 53% YTD).
It's also funny to note that you'd have been better off just buying Turkish Lyra, which is "only" down ~29%. Most fiats, at least in Europe, are down waaaaaay less than that, of course.
Sure, I'll take it a step further. Any storage of your money that doesn't involve you fully controlling your own keys is stupid because it is literally antithetical to the entire purpose of crypto. If you want to let someone else hold on to your money for yield, great. Use something already established, ensured, and proven. But not crypto.
Not your keys, not your crypto. How many times must it be said?
This only works if you use crypto as a store of value and even then it doesn't scale to any significant fraction of the population, for most coins. BTC and Eth, at least, are simply too slow for everyone to have their own wallet and do their own on-chain transactions, even if rarely, if we imagine they will ever reach some significant portion of the population.
And LN doesn't solve this in any way, before anyone claims otherwise.
This flavor of criticism is odd to me, it seems to have a very rigid definition of "how many people" using as a measure of success and perhaps more perplexingly, presumes "the network will always be too slow," as if tech improvements on these networks isn't likely. It may not be BTC or ETH, but given fungibility (and perhaps, clever airdrops) it seems at least plausible, if not likely, that people will come up with "a fast enough network to get stuff done."
There may be one in the works now, I do have literal money on Pulsechain/PRC-20.
The thing is - the network being too slow is not a technical problem. We already have much much much faster networks, which is why VISA is used by so many more people than BTC for their money.
Also, unlike other technologies that can sit very comfortably in their niches, payment & more generally monetary technology needs to be used by the vast majority of people in order to be useful. I was pointing out that BTC or ETH will never be successful as a monetary technology, the way gold or fiat are, because they are impossible to access by the vast majority of people by their very design.
Can there be other designs of cryptocurrency that can solve this? Perhaps - time will tell.
Layer 2's do solve it, and will reach 14M TPS by 2030 [0], which is more than enough for the world. He has explanations of how the different components work in different posts on the site.
The problem is that you need at the very least 1 on-chain transaction for every human participant, to get money into one wallet that they control. But BTC barely manages 5 TPS and ETH maybe 20. This means that BTC would need about 115 days to add 50M new people onto the block chain, and ETH could manage it in a month - only to have 1 wallet with some amount of coins in it (of course, assuming nothing else whatsoever is happening on the block chain in that time).
Only after you get past this hurdle do you even have access to a L2. Of course, you then need extra transactions on the L1 chain to gain access to the L2 - with LN at least, this scales even worse, as you need some fraction of the number of pairs of people to communicate - so some fraction of (50M)² transactions - which fraction depending on how centralized the network will be.
Then of course, L2s offer little in terms of guarantees for your money unless you can quickly and often close the channel and get the L1 guarantee.
So no, BTC and ETH fundamentally can't scale to a large number of people using them, regardless of how many trillions of transactions per second L2s can do. They are failed technologies for anything similar to their original goals.
It's barely even worth mentionibg that with 1 wallet per real person, you get worse privacy for your transactions than VISA offers you - as many have shown, for any kind of practical privacy you need many temporary wallets, bringing the total number of transactions required just to have a single Satoshi in those wallets to many times more.
I am not sure any of this is accurate since you can directly on-ramp to L2s and also purchase L1 and L2 assets off-chain.
An L2 like zk-rollup - assuming the protocol is implemented correctly - has same security guarantees as Ethereum since the validity proof is posted to L1. Most of them include an escape hatch, a L1 function that lets users withdraw funds in a permissionless way.
Ethereum can certainly theoretically scale to millions of users and a far higher order of magnitude than VISA. It presents an open source, verifiable, and permissionless alternative with better programmability and cryptographic primitives. Regarding privacy: see zk proof based L2s such as Aztec.
To be fair, I've only really looked at Lightning Network in the L2 space, and you can't on-board directly on LN while controlling your own keys.
Also, not sure what the point about off-chain assets is. I can buy cheese off-chain, even denominated in BTC maybe, but that doesn't mean I'm using BTC or LN when giving the seller 10,000 sat worth of cash.
> An L2 like zk-rollup - assuming the protocol is implemented correctly - has same security guarantees as Ethereum since the validity proof is posted to L1.
zk-rollup seems to be a technology, not a specific L2 implementation as far as I could find, so I couldn't see more details. How would you transact with it without an ETH wallet? If it's posting to L1, how does it avoid L1's slowness.
> Ethereum can certainly theoretically scale to millions of users and a far higher order of magnitude than VISA.
I'll believe it when it's a little closer. Currently, the difference is so huge this seems like a comical statement.
Yea the lightning network is terrible technology and Bitcoin maximalists proclaiming it's the future are doing a disservice to the whole industry.
It is only state channels - peer to peer links, and then making it work requires clients to figure out routes over those links themselves, which won't scale beyond a few million users.
Ethereum L2s are their own network and usually EVM compatible so work exactly the same as Ethereum. They use the same wallet, tooling etc. Then every N minutes they post a proof of what happened + compressed transactions needed to reproduce what happened to Ethereum L1. It's easiest to think of them like zipping a bunch of transactions to post them to Ethereum. Currently they are about 10x as performant as Ethereum so cost 1/10th as much while still being fully secured by Ethereum. They are still super new only coming out less than a year ago.
Optimism and Arbitrum are the biggest and currently they only have one sequencer which orders the transactions and posts batches to L1. Because there is only one sequencer transactions are basically instant and then are secured by Ethereum when the next batch of transactions is posted to it. Most of the major exchanges let you and ETH or stablecoins directly onto Optimism and Arbitrum.
Zk-rollups are next gen tech where they post a zk proof of what happened to the layer 1 + compressed transaction data. They are more efficient than current L2s and more secure. The biggest ones coming soon are zkSync, Starknet, and Scroll.
Once Ethereum has data shards and nodes mostly store large blobs of L2 transaction data + check proofs instead of running all transactions this will be 100x - 1000x more efficient than today.
That's true, it's a inherent risk when you deal with "programmable money" in a open and decentralized ecosystem.
While it is a risk, major platforms (like the ones mentioned in parent comment [except Compound]) haven't actually had any exploits of that scope (yet?).
rekt.news is probably one of the best sources of news when it comes to exploits in both "pure" defi and also centralized "defi" (which, doesn't even make sense but I digress) like Celsius. Only Compound has been mentioned there.
Overall, the platforms have been running for a long time, during ups and down, and seem relatively stable at this point, if you're fine with the overall risk cryptocurrencies present.
Incorrect. Bancor, the first DeFi protocol and ICO, is in deficit (liabilities exceed assets).
They offered 100% impermanent loss protection. Now, liquidity providers like me who deposited ETH are down 50%.
It's only about a $18 million hole, but the Switzerland "non-profit" Bancor Foundation that has raised hundreds of thousands of ETH in ICO is nowhere to be seen.
They were a DeFi ponzi chain which was obviously going to fail to anyone who spent time looking into it. They were printing a stablecoin backed by nothing.
Far different from the blue chip DeFi apps on Ethereum that the OP listed, which process billions of dollars per day without issue.
DeFi makes things more transparent, but it doesn't make them risk free.
I personally profited off the collapse because of the transparency. Couldn't do the same with Celsius or traditional finance.
Calling "pilot error" in response to a service interruption of your least favorite token is like saying "sure, our perl CGI gateway was down, but that doesn't count as downtime since our caddy frontend and deno server is still up."
If a token permanently loses 99.9% of its value, or if a major lender freezes withdrawals, I'd call that a service interruption because almost all users lost the value they held in the system.
Lumping all DeFi together is as dumb as lumping all "tech companies" together. If Enron fails does that make Microsoft and Google bad companies? They are totally different things.
What non-crypto economic activity are these billions of dollars involved in? That’s a lot of cash so I’m curious if it’s facilitating anything that isn’t other crypto stuff.
The fact that the entire crypto market simply followed the public markets in the downturn, rather than being a haven for wealth that people flocked to for safety, means that "Crypto" is unambiguously just another speculative asset like Art (but worse).
Show me the IRL crypto party that rivals Art Basel.
Speculation is one part of the art market, but at this point I really don’t think it’s as important as status. Plus, some of the art is really good as, you know, Art.
I’m confused what the alternative is. If it’s valuable and people lose value somewhere in their life, they will exchange their valuable thing to make up for it.
Like stocks, don't confuse short term volatility with long term performance. The fed is expert at manipulating short term valuations, but their manipulations only hold for so long before they have to lower or raise rates again.
Cryptocurrency has explicitly and repeatedly been touted as un or anti-correlated to the wider financial ecosystem, fiat currencies and the stock market, and has been loudly, noisily and never-endingly sold as a great hedge against these things, absent any evidence.
The evidence is in now, and those theories are a bust.
There are many theories about everything. Sorry the ones you bought into didn’t work out. Most of us aren’t surprised that when the dollar is manipulated that other asset classes’ dollar values change as well.
I didn't buy into them, nor was I the slightest bit surprised. The point is that like most theories about cryptocurrency value that originate with cryptocurrency proponents, they have been shown to be wrong when exposed to the real world.
To turn it back on you - I'm not sure why you're upset that a central bank currency is being manipulated, that's entirely the point of such a system, to allow manipulation by steering committees to attempt to smooth out the bumps and judders in the economy and keep things on an even keel. It's a good thing!
DailyMail is like Wikipedia — a great first spot to spin off and read a dozen sources you probably haven't seen yet. All linked and just waiting for you.
I wish you luck on your reading-less journey through this topic.
I'm not upset either. The dollar is a stable because of manipulation though unfortunately over the long term it does lose value. The cost of stability. Crypto on the other hand I do expect to go up over the long term while being short term volatile. Let's check back in five years and see if that's the case.
We can do that, and I'm not sure I would like to make a prediction about the price of any particular cryptocurrency asset that far ahead.
But I'm also not sure what that has to do with my posts further up, which are saying that another claim about cryptocurrency, that it's a hedge against the stock market and the wider financial system, is wrong. If you're trying to say "Well it might work out, longer term!" then I'm not really sure it qualifies as hedge at that point, you're just talking about another investment which it turns out is quite strongly correlated to the general financial markets.
Except it's not, it's literally just shown that when the stock market takes a dive and times generally get tighter, it crashes worse than everything else.
The notion that the volatility of crypto currencies are due to the value of the dollar being manipulated (rather than the "value" of the crypto) is absurd. You can trivially compare the value of a dollar to a basket of currencies (e.g. the U.S. Dollar Index/Dixie), or a basket of goods (like the consumer price index), and it is fairly stable, and definitely not as wild as the gyrations of crypto prices.
Just as companies like Celsius offered a high interest rate on Bitcoin, and lots of people moved their money into Bitcoin; the government can do the same by changing interest rates which incentivize people to move their money to/from dollars.
Feels like all the crypto marketing has been saying you should get crypto to avoid government manipulation. And yet the government manipulation is just as effective.
The government can short term manipulate the dollar and as a result the dollar value of various assets. That's what causes the short term volatility. Long term though the value of assets resistant to manipulation will go up, while the value of the dollar will steadily go down as it always does.
It's pretty simple, all the Bitcoin 'manipulation' you see is simply buying/selling open market coins. Not selling massive quantities of newly minted coins. The government on the other and has minted and spent trillions of dollars in stimulus which has resulted in permanent inflation.
The point is, Bitcoin will bounce back, the dollar will not.
> It's pretty simple, all the Bitcoin 'manipulation' you see is simply buying/selling open market coins.
LOL. And every tether is backed by a US Dollar in a bank account, right? Nobody could possibly (say) fake buy pressure to put the prices up?
> The point is, Bitcoin will bounce back, the dollar will not.
What point? For what purpose will bitcoin "bounce back" that the dollar will not?
As the dollar is not an investment, but a means of exchange, it doesn't seem particularly important whether the dollar 'bounces back', because nobody is trying to sell you dollars to stick under the mattress as a get-rich-quick scheme.
Savings accounts are for short-term liquid ... savings. You only keep in those what you need in the forseeable.
None of these is "investing in dollars" though. You're not just holding dollars and hoping the value will go up, because literally nobody does that. By design. If you want money to grow you invest it in productive assets. Unless you're into cryptocurrency when you gamble it on group psychology and dickbutt jpegs like 3AC did.
There is plenty of other manipulation, like constructing ponzi schemes that require BTC/ETH to get into, or "stable coins" backed by other crypto, or selling "art" like NFTs.
These all sooner or later crash down, and bring the value of ETH and BTC down with them. Already billions of dollars have left the crypto space, and are unlikely to ever come back.
It of course isn't impossible that BTC will bounce back, but there is also no guarantee of it. Perhaps Gamestop will bounce back as well, or the Venezuelan Dollar.
I very much doubt that people who have bought BTC at $60k, or the people cashing out of USDT while they still can, will want (or be able to) bring their money back into this crazy ecosystem.
Especially so as the price of energy increases and global warming becomes ever more apparent, keeping many afraid of investing in such energy wasteful endeavors.
USDT is no longer trusted — but still swapped around due to now-legacy exchanges denominating in it.
Your other points are not true for many cryptocurrencies, and for the ones it is, there are plenty of players who don't hold your concerns — right, wrong, or indifferent, they exist.
You say it's not trusted and yet the most volume in crypto (around 46 billion) is being traded every day it. Are you sure you're not just in your own thought bubble?
Most of the money minted and spent goes to dropping bombs on brown people and guarding Arab oil investments. And while the average American got a small check, giant companies got massive interest free loans. Again.
For every seller there is a buyer, and many are buying stocks and crypto right now at low prices. And why wouldn't they? The fed is manipulating the market with interest rates, just as they did during Corona. History proves in the long run holding dollars is good for short term stability, but it's a long term loser.
"For every seller there is a buyer" is the kind of meaningless statement one can make any time there is a major downturn or collapse in a market.
1929-1932, the Dow drops 90%. "For every seller there is a buyer, and many are buying stocks [...] right now at low prices." Some people eventually did great, so it's all wonderful, so long as you ignore the staggering pain of the Great Depression.
> History proves in the long run holding dollars is good for short term stability, but it's a long term loser.
Right. That's why one should not hold huge quantities of money for long times, but invest in debt and equity. 10 yr real rates even on treasuries have been almost always positive [1], though shorter riskless real rates have gone negative [2].
Currently paused due to "extreme market conditions". What conditions exactly? BTC is down from all-time high, but still worth about twice as much as it was only two years ago. Ethereum is worth over 4x as much. Is a two-year average appreciation rate of 40-100% per year so witheringly horrible that the Celsius business model couldn't survive it? Did crypto have to basically 2x every year without fail for Celsius to survive?
Celsius told their customers they were accruing Bitcoin and then Celsius didn’t buy the Bitcoin to deposit into their accounts, instead using the money to buy their CEL token that their ceo was dumping on exchange.
Their business model was fine. What wasn’t fine was not following it. Abra, Nexo, Gemini, and lots of other companies are business as usual with the same model right now.
How in God's name are there so many of these crypto companies? This post has 3 that I've never heard of, and the rest of this thread probably has a dozen more. Is the startup cost of these things near zero or something?
This is informative, but I'm not sure how illuminating it is to say that a business's business model was great, except they didn't follow it, they followed a completely different business model that was terrible? Isn't the actual business model of a business... the business model that they actually followed?
If I build you a model of a building that's fine, and then I build a building that isn't like the model, I think it's reasonable to still say that the model was fine.
That depends on what you're doing. If I put my life's savings into the S&P 500 at 2x leverage in 2008, I'd be wiped out in 2009. But that would be an extremely dumb thing to do.
The site is not actively accepting deposits. Did you assume that it was, based on something you saw there?
Read this passage from Alex Mashinsky's bankruptcy affidavit:
> Importantly, however, shortly after the Pause Date, on June 18, 2022, Celsius made the necessary changes to the Celsius App to prevent any new users from generating a deposit address and thus being able to deposit cryptocurrency on the Celsius platform. Moreover, as of the Petition Date, new users are prevented from even registering for a Celsius Account.
Celsius can't prevent people from sending crypto to addresses that Celsius controls, but that's a whole different story from "continuing to accept deposits."
If Celsius is accepting deposits on existing addresses, they are continuing to accept deposits that they know their customers can't access. Celsius designed the system without an off switch because DeFi systems generally view that as an anti-feature, but that means that they probably aren't able to be compliant with the bankruptcy affidavit.
You yourself wrote that they "can't prevent" deposits for existing accounts. It's very pertinent.
> If Celsius is accepting deposits on existing addresses, they are continuing to accept deposits that they know their customers can't access.
Did you read the affidavit? Your argument is specifically pre-empted and refuted:
> It is important to understand that users transfer their digital assets from external “wallets” to the Celsius platform by recording such transactions on the blockchain. These transfers are entirely user driven with no ability for Celsius to “approve” or “deny” a transfer to its platform. This is a feature of the underlying blockchain infrastructure and cannot be technically changed or otherwise prevented.
It is impossible to create, for example, a Bitcoin address that has an "off switch" that will prevent people from sending additional bitcoins to it. It's a feature that most blockchains simply do not support.
In other words, Celsius did not "design the system without an off switch." Satoshi Nakamoto designed Bitcoin without an off switch.
People were still buying hertz stock even though they were going through bankruptcy. They even tried to do secondary offering. Retail investors don’t operate with enough information to make financially sound decisions.
I used to pay to run a few TOR exit nodes located in Iceland that I didn't want tied to me because I didn't want the hassle. It was marginally easier to use bitcoin than it was to get a prepaid credit cards with cash each time.
I actually think there are other use cases for crypto, but this isn't one (anymore, bitcoin may have been more anonymity-preserving in the past)
Unless you mined the BTC yourself from a VPN that doesn't keep logs, or acquired it directly from someone else who didn't know you, the BTC would be traceable to you now (though it may still require coordination of multiple state-level interests which is typically reserved for very high-interest targets)
I paid cash to a dude that I met in-person on localbitcoins and we met in a place that lacked cameras. I wore a hat and sunglasses (because it was bright in palo alto). This was back when one bitcoin was under $100 however. I even remembered to use a burner phone.
Opsec was still weak in terms of nation state actors but I was doing something legal, I just wanted to minimize the chance of random hassle.
Just because you come from a place of great financial privilege and a liberal society does not mean others have no use for a censorship resistant form of money.
But all three of them also accept USD or your local currency. So the use case remains... evading the authorities? That's not a compelling use case for the general population.
Is everyone who is using cash also evading authorities?
Unfortunately most internet companies don’t accept cash, therefore I’m trying to use something which gets as close as possible to cash in regard to its privacy aspects.
I just don’t want to use shitty paypal which locks money of vendors for 180 days, or mastercard who randomly allege companies of child porn without providing any evidence (see pornhub).
I don’t like these companies and will try to not use them at all. Yes, I’m paying a price for it, but imo it’s worth it.
Well, purportedly BTC is a high-yield investment asset, so paying for things in it instead of regular money, which is purportedly a negative yield (e.g inflation) asset, makes way less financial sense.
Though this does highlight one of the things that's never made sense to me about this entire ecosystem. Something that's a high-yield asset is a terrible currency because you're basically punishing your future self for spending it on mundane stuff.
While other treat bitcoin as an investment, I treat it as a way to send money without getting censored and without supporting PayPal and VISA/MasterCard. It’s an idealistic thing (which is probably the reason why I only pay products worth 100-200$/month in BTC. I obviously don’t pay my rent, my car etc in BTC).
For me it’s just an alternative to cash, which I also use for smaller purchases — cash is „gelebte Freiheit“.
Honestly, I’d also prefer to use GNU Taler instead of bitcoin, but unfortunately GNU Taler never gained any traction.
Never liked the one way privacy of it, and it’s not a coin. It also adds nothing you don’t get already in the underlying cryptocurrencies.
It’s a payment protocol for arbitrary assets. You can pay in Bitcoin via Taler. I don’t think it will gain traction. The best payment protocol for Bitcoin today is Lightning Network, and is as open, and more sophisticated than GNU Taler ever was.
Yes, I ack that BTC is pubkeyhash and scripthash pseudononymous are not private.
High Yield? No way. Bitcoin can only be mined. It returns nothing. It’s a boring rock that can be transmitted over a communication channel. You have the same number of Bitcoins today, next half, next generation (provided you don’t lend or sell them).
Other PoS shitcoins could be considered high yield, in fact the yield is algorithmic and is independent of market value (which is an odd concept, as other reg high yield products will return capital explicitly to satisfy a yield.)
Taken further, yield may well be the “scam”. Bitcoin provides none of this.
IPFS has some cool use-cases, like anti-censorship webhosting. I'm with you on waiting to see actual money use cases that crypto is better at than real dollars/credit cards. It's not even good for money laundering since the blockchain leaves a very public trail that lasts forever.
There are features of cryptocurrencies that would actually be useful in today's financial services.
The main one would be near instant settlement. If I make a transaction on Bitcoin, that transaction is completely settled and verified and approved over a hundred thousands times within an hour.
All parties can trust that the transaction happened and everyone has their money. That's not possible in today's financial systems. We don't even have settlements on weekends.
If you sell a stock on Friday, you aren't going to get your money until Wednesday at the earliest. We don't even have T+1 settlement in the US yet lol.
Why do business days exist in todays financial system. If I transfer money from my brokerage on Friday why can I get access to that money right away instead of waiting over the weekend.
Then look at _why_ you don't have it in today's financial services. Is it because there is some technology lacking that only blockchain and cryptocurrencies can solve?
No, it's because in the years of financial market experience, people realise the risks don't outweigh the rewards.
Cryptocurrencies and block chain isn't solving a problem, it's just spruiking the pro's side of a pro's and con's decision.
I never said blockchain was a solution. I literally just said there are features of cryptocurrencies that are useful.
There are features of cryptocurrencies that would actually be useful in today's financial services.
The main one would be near instant settlement.
PayPal makes billions offering this service, when it could be a feature of the financial system.
You seem to be doing this weird thing where you're trying to imply cryptocurrency is solving a problem, but still wanting to have take backs when people say "cryptocurrency doesn't solve this problem".
If your position is that instant transfer would be useful, there is no reason we don't have that already at a technical level. It's purely a financial system construct that we wait and have settlement periods for the ability to reverse transactions, have added security, etc.
If your position is that cryptocurrency somehow solves a technical problem, I'd be interested to hear what you think that technical problem is.
Taking Bitcoin as an example...it's an open and free alternative to those private systems.
Sure it has limitations, but the base network layer is there and functioning (with 100% uptime) for anyone to use without needing to ask for permission. That's the value.
I think even crypto cryptic should take some time to actually try out on-chain applications. It's really hard to convey just how much more frictionless it is than the normal financial system.
For example the other week I wanted to buy some Series I savings bonds. This involved first freeing up some capital by selling some index funds. I put the order in Friday night and had to wait until Monday morning for the trade to be executed. Then I had to wait until Wednesday for the cash to become available in the brokerage account. I transfer the cash to my checking account, and the ACH doesn't clear until Friday morning. I finally go to make the purchase on Treasury Direct, and it tells me the order won't go through until the next business day (Tuesday because Monday is a holiday). All told it took me 11 days and countless time fumbling around the outdated and laggy web applications of three different financial institutions.
In contrast the other day I unstaked some USDC I had earning yield in Curve, bridged it from Ethereum to the Polygon, converted it to MATIC tokens using Uniswap, then staked those tokens to earn yield in Lido. The entire chain of transactions took no more than 5 minutes. Didn't have to create an account or login into any of those platforms. Everything went through Metamask connected to an ultra secure hardware wallet.
I'd draw the analogy of how a lot of people from the older generation missed the explosion of mobile convenience apps tens years ago. I can recall my parents asking "why do you need an app to make a restaurant reservation, what's the big deal with just calling the restaurant." And I think the point is that consumers often treat frictions as a given until they actually have an experience where those frictions are removed. Then they have a really hard time going back to the old way.
Yes, making small improvements to the existing system is much easier than getting every single financial institution in your country to switch to a blockchain.
For blockchains to be a useful product, it is not a prerequisite for "every single financial institution in your country" to switch over to using them.
How about when you sell shares? Still a 2 day minimum almost everywhere in the world, takes me about a week from sale to money in my bank account.
Have you ever attempted to send shares overseas? 2 weeks minimum, up to 3 months in some of my cases, and endless paperwork and emails. On blockchains it takes less than a minute.
All of finance should be fast and globally accessible, money is only the most basic use case.
This is based on a common misunderstanding of Blockchain. Yes transactions are immutable, but reversing is not necessary. All fiat backed stablecoins run on decentralized infrastructure but they also operate on smart contracts that give the creators the ability to mint and burn coins at will in order to credit fiat deposits and burn tokens for fiat withdrawals. The fact that it runs on an immutable Blockchain just means transactions themselves aren't reversible but it doesn't mean new transactions can't be made to rectify a problem with loss or stolen funds.
Sure, you can make new transactions that do whatever you want, but can you force the recipient (edit: or smart contract author) to create a transaction that returns the tokens or do you have to hope they'll do it on request?
First, you are conflating settlement of securities with money transfers, two different things.
Next, I can transfer money in Europe (SEPA) settling immediately, for a tiny fee ($0.30 or so).
Finally, I've had BTC transactions in the mempool for 16 hours or more, hanging in there without any confirm. They might just drop out, or they might eventually be included in a block - who knows. Not exactly a predictable and reliable money transfer.
By default, no. If you’re an idiot and put yourself in a place where you need instantaneous settlement, you can get it. Hilariously, their extravagant cost was apparently too low. Post crypto, they index to crypto trading fees. These are at least quadruple their historic spreads. I don’t believe anyone but the crypto bros demand it in real markets.
You can get if the business offers it. Which they are just a loaning you their money while they wait for your money to settle in their bank account.
If their was no demand, then why does PayPal, Square, and other FinTech companies make billions a year offer you to instant deposit money into your bank account lol.
If the US banking system had instant settlement Venmo, Cash App and other apps wouldn't be in business because you could just send the money through your bank for free instead of using Mastercard or Visa.
> they are just a loaning you their money while they wait for your money to settle in their bank account
Nope. No loans. You can demand physical settlement on stocks, end of day. Naked shorters (MMs) have to do this from time to time. It’s now more expensive because: idiots. Which suits Wall Street just fine.
> why does PayPal, Square, and other FinTech companies make billions a year offer you to instant deposit money into your bank account
They’re lending you money. No “lol” needed. (Am I misinterpreting this?)
> other apps wouldn't be in business because you could just send the money through your bank for free instead of using Mastercard or Visa
Trusted versus untrusted counterparty. I’m not wiring my hotel because I want AmEx behind me.
> You wouldn't be wiring your hotel. You would be wiring your hotel's bank.
Sure. Yes. Fine. A worthless difference. But yet. I won’t wire my hotel’s bank.
I will wire my lawyer or accountant. (Sorry, their banks.) Wires which process instantly and for free. But virtually irreversibly, and so at higher risk for me. (Also, AmEx gives me goodies. Same reason I don’t swipe my debit card.)
I would like to make quick (<30 min) transactions of large amounts. I can do that with BTC, but it would be nice to do this with USD. Currently, this involves finding a bank, go during the right time, proper account numbers, etc.
>Still waiting to see even one single useful use case for cryptocurrency
Sending funds to people outside of the country without being reliant on gatekeepers is extremely useful. This is especially true if you want to send funds to people and/or organizations being blackballed by the US financial establishment (either because of their function, such as Wikileaks, or their location, for living in a frowned upon country).
I still find it somewhat astounding that people, especially techies, can't see the extreme utility in this function. But, unfortunately, ideology often trumps logic.
Interbank nightly balance settlements between large institutions. A distributed cryptographic ledger would be great for this kind of thing. A private “coin” between mostly trusted partners with provisions for reversing transactions as needed.
Useful because it would have lower administration overhead than one bank maintaining a service for exchanging funds, no concerns about downtime, and all sorts of guarantees about the correctness of balances. Lots of back end software that just doesn’t need to be written or maintained.
Lots of similar usecases where small mostly trusted groups need to keep track of asset transfers or trade between them.
> Interbank nightly balance settlements between large institutions. A distributed cryptographic ledger would be great for this kind of thing. A private “coin” between mostly trusted partners with provisions for reversing transactions as needed.
But they’re already trusted partners who already have a functioning settlement mechanism that already has provisions for reversing transactions. Jamming a blockchain on top of this solves nothing not already solved.
The claim that this would reduce maintenance overhead is hogwash – we’ve seen an unending litany of unexpected bugs in blockchain protocols and smart contracts, while the existing transfer mechanisms are already debugged. Trustless mechanisms are harder to get right than trust-based ones, not easier.
> All I’m talking about is a simple ledger, not the fancy smart contact nonsense.
You wrote:
> > A private “coin” between mostly trusted partners with provisions for reversing transactions as needed.
Either you’re doing that with a smart contract, or you’re just plain trusting the other people to reverse it when asked, in which case there’s zero reason to be using a blockchain to begin with.
You don’t want or need trustless ledgers to interact with trusted parties - that’s a big increase in complexity for zero gain.
edit: Suggesting that the interbank system move to crypto on a thread about a massive failed crypto project is a huge failure on reading the room. It's like trying to convince people to buy Titanic II tickets at the funeral for the Titanic I victims or trying to sell a Model 38 to Jacqueline Kennedy on November 23, 1963.
People significantly underestimate how much cost there is at certain points in the chain.
Interbank transfers are very cheap. A lot of central banks have invested heavily in payments systems too (the BoE is one, Faster is very good). But at certain other points, this technology could be very valuable. Two examples that occur to me immediately are pensions and fund administration.
Obviously, Ethereum goes beyond that with a more generalized VM. From what I have seen, this is a ludicrously inefficient way to perform computations. If that is wrong, then maybe there is more. But just blockchain alone will have a huge impact (if you look at back/middle-offices in banks/fund managers/pensions/insurance, I remember working in this area and going to one of the largest pension admins in my country...I remember vividly opening the door to the pig pen, and it was just a sea of people, 95% just responding to very basic customer queries/doing incredibly basic computation work and costing huge amounts of money...because, of course, there is no cost pressure from "customers"...a parallel that more people understand is US healthcare admin, huge inefficiencies, pension admin is like that).
We are not even at day one with this trend. I am sure people will find other applications after, but applying blockchain/distributed storage/distributed computing/whatever to back/middle office in finance will be huge. It also isn't really a question about whether it is going to happen...it will.
> I remember vividly opening the door to the pig pen, and it was just a sea of people, 95% just responding to very basic customer queries/doing incredibly basic computation work and costing huge amounts of money...because, of course, there is no cost pressure from "customers"...a parallel that more people understand is US healthcare admin, huge inefficiencies, pension admin is like that
How does blockchain solve this?
There are always people pushing generalized "it will be good for this" statements, yet they can never seem to give concrete examples of where blockchain would be a better solution than the current implementation.
Because all of the operations that these people perform can be performed computationally (and the reason why they aren't now is not necessarily technological, all the technology exists to do this today but blockchain forces everyone to change all at once).
Blockchain solves it by making it so that all that goes away. In return if something fucks it up...well look at every crypto project that has ever crashed. I'm not being glib. That's the solution.
This is why you don't understand...the "customer" for pensions/fund managers is not the end-user, it is financial intermediaries (in most countries anyway, the level of disintermediation varies, some do market themselves to individuals i.e. Vanguard but most do not, the commission does not go to the customer).
All of the technology to do away with this exists now and existed before blockchain. But most of these companies haven't implemented because they aren't native tech companies (I don't think people understand on here, these places don't have any software engineers, they hire consultants, their idea of a "tech guy" is the guy who sorts out the Microsoft licences) and the cost saving is only realised if everyone adopts it.
With blockchain, it allows you to decentralise a whole set of computational logic that was previously performed by hand, and you change how people interact with that.
It all seems totally puzzling...because most people assume that these businesses are already using technology, when they aren't. Blockchain incentivizes business transformation across the supply chain, which allows you to remove cost from almost every level.
The question of actual customer support is not going away, it will never go away. That is what financial advisers are for, they are actual customer support.
Classic HN though, a bunch of people who don't work in an industry pontificating about how that industry works...genius.
There's nothing to support. The block chains immutability means no takebacks. The phone line can just have a message on repeat "Sorry, nothing can be done. The Blockchain is the source of truth." Customers can then just hang up knowing that it's the real world that is wrong and not a thing on chain. This is blockchain realism at its finest.
Fucking lol. I can just imagine a company sending a package to the wrong address. The customer rings the company to ask what's going on. "Sorry the blockchain is immutable, we can't change where your package is going, deal with it".
Yes, blockchain totally solves all these problems...
If banks distrust each other enough to want a blockchain to handle nightly settlements, then they are massively exposed to transaction rollback shenanigans. Interbank settlements can be very, very large, and I have trouble imagining, even in the wildest cryptocurrency fantasy land, that banks could arrange for all their different types of settlements to be on the same blockchain.
No problem having dozens of specific purpose blockchains.
It’s just a ledger, it doesn’t matter at all how big the numbers are. It’s not real money just a record of balances.
I’m not talking about a cryptocurrency, just a blockchain as a replacement for a database table, essentially a different api that ran distributed instead of on some ancient mainframe.
Suppose you and I are large institutions. I owe you $10bn today. You owe me 10bn EUR today. I owe you some currencies tomorrow, and you owe me some tomorrow, etc. (I may also owe you a bunch of future corn, you may owe me some shares of Coinbase, etc.).
The practicalities we need to attend to include, at least:
I actually owe you those dollars, and a business decision was made to keep that debt payable today. So I have to convey the dollars to you. Similarly, you need to convey those Euros to me. We can do this by actually transferring them via central bank mechanisms, or I suppose we could have a custodian that operates a blockchain and use that blockchain. I’m unclear how that helps. But keep reading…
There is a risk that one of us will default. If I default before any transactions take place, it’s not a huge deal — I still have my Euros, you still have your dollars, no one is out a huge amount of money, and the lawyers and courts can pick up the pieces later.
But there is also a risk that only one transaction goes through. (Look up Herstatt Bank.) If this happens, then one of us is out $10bn until the law does its thing. That is a big deal. This can be mitigated by atomic multi-currency transactions or maybe by a hypothetical blockchain handling USD and EUR (and Coinbase shares and everything else), but that seems every bit as hard as getting the central banks to use the same database, if not harder. [0]. Or they can use an escrow service like CLS, which works without a blockchain.
[0] Blockchains perform spectacularly poorly in the event of a network partition. Does anyone really think it would be wise for, say, the central banks of the US and Russia to allow currency to move in the same blockchain or, for that matter, on a POW or PoS blockchain?
If we need dozens of specific purpose ledgers between banks, what's wrong with database tables running on ancient mainframes, and how would dozens of different blockchains solve that specific problem?
This is called the ACH network and there's no way to trace, undue, or recall transactions. It has been used in bank robberies [1] and numerous financial institutions and payment processors who are not banks use it, not all of whom are trustworthy.
Parent didn't ask for "groundbreaking", they asked for "even one single useful use case". The bar wasn't high.
More charitably you could call them 1. micropayments and 2. disrupting rent-seeking incumbent banks. You use a currency to pay for things, so yeah, the use cases will tend to circle around payments and transferring money. What did you expect, a cure for cancer?
>2. Transferring money internationally as groundbreaking uses for crypto? Seriously?
You are confusing, "groundbreaking" with, "useful and convenient". It is much cheaper, faster and easier to send small international payments via crypto than it is via any legacy financial service - this is beyond dispute.
> It is much cheaper, faster and easier to send small international payments via crypto than it is via any legacy financial service - this is beyond dispute.
Let me dispute it then. Try Wise (formerly Transferwise). It is cheap, fast, and easy.
FWIW, I know many people working abroad (from expats to domestic helpers), and none of them use crypto for remittances, as far as I know.
>Let me dispute it then. Try Wise (formerly Transferwise). It is cheap, fast, and easy.
Just checked it out, sending $5 costs at least 13% (they receive $4.33) and doesn't transfer until tomorrow. Some currencies cost far more. Sending $5 to my friend in Brazil would cost a whopping 28% (they receive $3.54). Some currencies don't allow you to send $5, but have minimums that are higher.
Sending $5 of litecoin costs me about .75% (they receive $4.96) and takes anywhere from 10 to 30 minutes.
And although I haven't tried the service, I'm sure they block payments to people and organizations frowned upon by the banking system and the US government. Would my payment to Wikileaks go through? Or the Julian Assange defense fund? I find it highly unlikely.
Finally, individuals like myself who in the past played online poker are blocked from using transfer services like Moneygram and Western Union for engaging in blacklisted behavior. Why would I struggle to enter the walled garden when it is cheaper, faster and easier to use crypto?
>FWIW, I know many people working abroad (from expats to domestic helpers), and none of them use crypto for remittances, as far as I know.
I know dozens of people who work here in New York who use crypto for remittances. In fact, although I don't use it, there is a nearby laundromat with a bitcoin machine that is almost entirely frequented by migrants from South and Central America. Search for "bitcoin machine" in the NY metro area and you will find a huge number of them are located in landromats and bodegas frequented by immigrants who use these machines to send and receive funds.
How does that work? Does I transfer a bunch of "ill gotten" ethereum to someone who agreed to buy my 5k goofy ape NFT for 1 million bucks and now I've made 995k that I can pay taxes on and use as laundered money? There's still a transaction chain of eth so it wouldn't be impossible to figure out what I just tried to do.
You start a ransomware group, you take the country of Belize for a million in etherium.
You also start a NFT collective, you post a bunch of pictures you have for sale. In a fit of 'we're gonna blow this money', the ransomware group, which is you, buys a bunch of NFTs from a few NFT sellers, including the NFT group you setup. The group posts the JPGs on their twitter to show what they "wasted" their money on for lols.
Can the country of Belize claw back their money? It depends where you live, where your NFT collective lives, and the treaties between the countries. If you chose your countries correctly to ransomware. If Eth is fungible currency, then you can claim that just because the 'money' someone stole ended up with you, for a legitimate sale, its not a 'stolen good'.
Crypto is our generation’s write off. The cost of a free market economy. We’ll have people with stranded skill sets. They deserve compassion; though based on precedent, they will find none.
Maybe in a hundred years we’ll realise they were ahead of their time. When some UN blockchain extends across the solar system. Like how we remember N. Tesla and the 90s’ satellite internet folk. Financially ruined. But cute in their own way.
There are a lot of boomers recapitulating their 90s in crypto. They’re fine. They’re gambling. I have a lot more sympathy for the young people wrapped up in the whirlwind. They’re making me wealthy. But oof, do I wish they’d widen up.
> Maybe in a hundred years we’ll realise they were ahead of their time. When some UN blockchain extends across the solar system.
I doubt it. Crypto reached the superbowl and it's incredibly mainstream. If it's trillion dollar use hasn't been found yet (beyond just doing what already exists slightly better / worse) then I doubt it will ever come.
They weren't really scamming, but got scammed along with several other companies that were trying to be legit. They made large loans to three arrows capital because on the surface it seemed like a legit serious business hedge fund, but it turned out it making tons of high risk bets in the crypto scene that fell apart when the market crashed.
Was three arrows a scam or just acting like a hedgefund? It’s well known hedgefunds can go bust like LTCM. Especially if you’re doing arbitrage and your thesis is two disparate assets are price linked.
The whole 3AC story hasn't come out yet, but the rumor is that they were able to use the same collateral with different lenders. On top of that, they offered to "manage" portions of their vc investment treasuries.
In what way did it seem like a "legit serious business hedge fund"? I'm unclear how Celsius got scammed making loans to a hedge fund that is on record as investing exclusively in crypto since 2018 [1] - did the hedge fund lie about their positions?
Celsius got huge deposits based on unsustainable yield guarantees (17% I think), they took that crypto and used it as collateral on defi protocols, then took the loans they got and gave it to funds like 3ac, who made money on leveraged carry trades that eventually worked up to Luna which was offering an absurd 20% apy through anchor which was completely unsustainable but basically kept afloat by Luna itself dumping money into it.
Everyone could see they were running out of money which would eventually cause them to blow up, which caused people to eventually jump ship, which caused Luna to implode because it was fundamentally flawed but people were either too greedy or didn't do their due diligence to avoid it, which caused all of their assets to vaporize as they tried to defend their stablecoin peg. With 3ac insolvent, nobody that lent to them could get their capital back, which meant they could no longer repay their defi loans which caused them to be liquidated as prices dropped and they couldn't post additional collateral. With their funds locked or liquidated, they had nothing to return to depositors who wanted their stuff back.
To be charitable you could say they weren't outright scamming people, but anyone with a nose should have smelled the enormous stench of death coming from the entire thing.
What's sad is that some pension funds have exposure to Celcius. Imagine teaching for decades only to find your retirement pension is reduced because the manager thought it was a good idea to put your money into a ponzi scheme
I am not sympathetic to teachers or pension funds whatsoever. Teachers should take control of their investments like everyone else: either invest it yourself or make your pension managers invest it properly. Pension funds do all sorts of stupid things: they played a role in 2008, they invest in big oil and other anti-ESG stocks, and now this. They're huge pools of poorly governed funds, it's inevitable that they get abused.
"wrapped bitcoin (wBTC) and a type of staked ether derivative (stETH)." Wtf is all if this crap? Feels like 2008 with piles of CDOs and weird derivatives
Creating cool derivatives is one of the purposes of DeFi.
BTC only exists on the Bitcoin blockchain but since Bitcoin doesn't really have smart contracts people "wrap" it into wBTC on Ethereum. I guess this is akin to a eurodollar.
stETH is like a bond or certificate of deposit where you can lend ETH to be staked and receive a liquid claim against it.
> To the author that talked about writing yourself a bunch of IOUs and claiming it gives you wealth, that's essentially what the US Government does, but at a different scale. They write debt denominated in their own currency.
This is such a bad take. Government-issued money in itself is not equivalent to private debt, and has never been. It is an academically heterodox and often politically charged view of what money really is.
Is the difference that you can use gov-issued money to pay taxes but not private debt? I.e. government money printing is different to crypto printing in that the gov IOUs are legally acceptable by the government.
If so, they seem similar enough for the parent take to be accurate. The gov Bond has to be paid back eventually, so it's exactly like an IOU, even if the Fed can print money and buy shitloads of these bonds.
Then why did you leave off the clear reason that easily refutes the misconception? Were you just depending on the status signals to carry your refutation?
Seriously, I don’t get why people proclaim such confident views and then neglect to share their knowledge and insights. “Fake it till you make it”?
the government backs its currency by having _different rights_ than private companies. E.g. the ability to levy taxes and field an army. We the citizens have given them those rights specifically so that they are the highest authority.
This is why a currency that derives from them is better than a currency that derives from anonymous scammers on the internet.
Did you mean to reply to the grandparent of my comment, to which that would be responsive? I was asking why the parent of my comment “contributed” with an argument from “that’s a low status belief” rather than a comment more like yours.
Agreed. “The government does it, why can’t we?” is just being deliberately naive. In the hands of the U.S. government it’s monetary policy - in mine it’s literally a scam.
There’s a fascinating lesson and wake-call in monetary theory and philosophy somewhere here for us, but I’m not sure anybody wants to learn it.
That's what I meant by different scale; not in terms of total valuation. Their celsius bucks clearly do not carry the backing of taxation, land, government, or military.
I believe Celsius was lending out staked crypto and paying in their Celsius tokens as a form of "interest" though its unclear what if anything was backing the Celsius token (or if new tokens were simply minted).
The leant stake crypto paid interest and they then used 20% of the returns to fund their R&D and 80% to pay back stake owners. It seems if you accepted Celsius tokens rather than other denominations the payout would be higher.
It's not clear what caused their bankruptcy though; I can only imagine that they had counterparty risk in the people they had leant their tokens to.
It would have been really interesting if any of these crypto companies bought a bunch of tanks when times were good. That sounds like a good sci-fi novel and an interesting ending.
But seriously, there are lots of ways to invest in a private military capability that are legal and miles more efficient than tanks. Guarantee you that's happening.
Have you heard about PMCs (private military company)? Some of them own tanks. Generally you do not have to be sovereign to buy tank - you just need friendly government.
They are counting 600m of their own token, which already had only 170m or whatever of market cap, which presumably now is absolutely worthless.
I don't mean worthless in a conceptual sense like all crypto, but this specific brand of made up money is based on the trust of a bankrupt lender. Nobody is buying that and counting it as 600m of asset is absurd.
It's like writing yourself a bunch of IOUs and claiming it gives you wealth.