Bitcoin

[NoirAvlaa]

This feels more like the collapse of an industry than the collapse of a market

"industry"

[Keckers]

If advertising gets to call itself an industry I'm happy to extend that tag to an elaborate online currency scam

[Lief Siddhe]

[Lallante]

Which is what people have said every bear market

every other asset to which the term "bear market" has been applied has some underlying value more than de-minimis. There was no recovery for Tulips which is what bitcoin is. Keckers is right, but its less industry and more the slow crash of a ponzi scheme.

[Maximillian]

It's looking more like an ANCAP version of the GFC. Like the banks and the hedge funds the various Crypto exchanges were lending money between themselves. But unlike the banks and hedge funds there are no Central Banks to step in when a run causes a liquidity crisis.

So the collapse of one exchange leads to the collapse of another. And so on.

[Mashie Saldana]

It's looking more like an ANCAP version of the GFC. Like the banks and the hedge funds the various Crypto exchanges were lending money between themselves. But unlike the banks and hedge funds there are no Central Banks to step in when a run causes a liquidity crisis.

So the collapse of one exchange leads to the collapse of another. And so on.

And in the end nothing of value was lost.

[Overspark]

It's looking more like an ANCAP version of the GFC. Like the banks and the hedge funds the various Crypto exchanges were lending money between themselves. But unlike the banks and hedge funds there are no Central Banks to step in when a run causes a liquidity crisis.

So the collapse of one exchange leads to the collapse of another. And so on.

Not necessarily, the exchanges that operate above board just keep all the crypto they're supposed to have and can survive any bank run ever. There's no need to expose yourself to that kind of risk as an exchange, but since it's not a very tightly regulated market yet the temptation for greedy people to use all that money for their own agenda's is apparently too big to resist. IMHO that's not a problem that has anything to do with crypto itself, but a lack of regulation and oversight for exchanges (and probably a lot of other corporations doing crypto things). All the recent shenanigans have been greedy corporations doing things they really shouldn't have done. The only crypto crash this year that was inherently linked to crypto itself was the Terra/LUNA crash where the concept of an algorithmic stablecoin was pretty much proven to be wishful thinking.

[Nordstern]

All the recent shenanigans have been greedy corporations doing things they really shouldn't have done.

Like allowing firms to act as traditional banking services and receive deposits, then turn around and speculate with those deposits? Something that was literally banned by Glass-Steagall? An act that, when repealed, led to a bubble and the GFC?

[Overspark]

All the recent shenanigans have been greedy corporations doing things they really shouldn't have done.

Like allowing firms to act as traditional banking services and receive deposits, then turn around and speculate with those deposits? Something that was literally banned by Glass-Steagall? An act that, when repealed, led to a bubble and the GFC?

That seems to be the worst bit, yes. But I'd argue that conducting business in such a way that the failure of a single other company means the failure of your own company is pretty stupid too, although probably not as evil as the bit you pointed out.

[Dee Jiensai]

It's looking more like an ANCAP version of the GFC. Like the banks and the hedge funds the various Crypto exchanges were lending money between themselves. But unlike the banks and hedge funds there are no Central Banks to step in when a run causes a liquidity crisis.

So the collapse of one exchange leads to the collapse of another. And so on.

And in the end nothing of value was lost.

That, unfortunately is not true. Someone is going to "hold the bag" at the end, and as usual its going to be the ordinary people who listened to Matt Damon or whose pension fund had a crypto-bro manager/trader.

[Itiken]

So the collapse of one exchange leads to the collapse of another. And so on.

And in the end nothing of value was lost.

That, unfortunately is not true.

Also, sadly:

Coachella partnered with FTX to sell a collection of NFTs in February, ultimately raking in around $1.5*million. The NFTs were paired with physical items—Coachella passes, art prints, and photo books—and the NFT owners had the option to "redeem" their NFT to receive the item. However, all of this was done through FTX, and with FTX no longer fully operational, redemptions are no longer possible. The FTX server storing the artwork for the NFTs was also intermittently available, so holders reported seeing broken images when going to view their NFT.

Ten of the NFTs in the collection came with lifetime passes to Coachella, and sold for six figures. Each year, the NFT holder has to go through the redemption process to obtain their festival pass.

Many of the token owners bought their NFTs with FTX and simply left them in their accounts on the platform. Some were able to transfer their tokens before FTX's NFT platform stopped operating, but many did not.

[depili]

It's looking more like an ANCAP version of the GFC. Like the banks and the hedge funds the various Crypto exchanges were lending money between themselves. But unlike the banks and hedge funds there are no Central Banks to step in when a run causes a liquidity crisis.

So the collapse of one exchange leads to the collapse of another. And so on.

Not necessarily, the exchanges that operate above board just keep all the crypto they're supposed to have and can survive any bank run ever. There's no need to expose yourself to that kind of risk as an exchange, but since it's not a very tightly regulated market yet the temptation for greedy people to use all that money for their own agenda's is apparently too big to resist. IMHO that's not a problem that has anything to do with crypto itself, but a lack of regulation and oversight for exchanges (and probably a lot of other corporations doing crypto things). All the recent shenanigans have been greedy corporations doing things they really shouldn't have done. The only crypto crash this year that was inherently linked to crypto itself was the Terra/LUNA crash where the concept of an algorithmic stablecoin was pretty much proven to be wishful thinking.

The exchanges might still be holding the worthless tokens when the collapse happens, but you can't pay your payroll, landlord or taxes with the worthless tokens, so when the token collapses even the rare unicorn above board exchanges will go tits up.

[Lallante]

Decentralisation works great guys!

[depili]

More like unregulated financial instruments draw the kind of operators that want to do things forbidden by regulation and run all kinds of shady stuff.

[Nordstern]

Decentralisation works great guys!

Morgan Freeman voice: "It was, in fact, very centralized."

[Overspark]

It's looking more like an ANCAP version of the GFC. Like the banks and the hedge funds the various Crypto exchanges were lending money between themselves. But unlike the banks and hedge funds there are no Central Banks to step in when a run causes a liquidity crisis.

So the collapse of one exchange leads to the collapse of another. And so on.

Not necessarily, the exchanges that operate above board just keep all the crypto they're supposed to have and can survive any bank run ever. There's no need to expose yourself to that kind of risk as an exchange, but since it's not a very tightly regulated market yet the temptation for greedy people to use all that money for their own agenda's is apparently too big to resist. IMHO that's not a problem that has anything to do with crypto itself, but a lack of regulation and oversight for exchanges (and probably a lot of other corporations doing crypto things). All the recent shenanigans have been greedy corporations doing things they really shouldn't have done. The only crypto crash this year that was inherently linked to crypto itself was the Terra/LUNA crash where the concept of an algorithmic stablecoin was pretty much proven to be wishful thinking.

The exchanges might still be holding the worthless tokens when the collapse happens, but you can't pay your payroll, landlord or taxes with the worthless tokens, so when the token collapses even the rare unicorn above board exchanges will go tits up.

Again, that's not how it works. Exchanges earn fees on every transaction made on their platform, and they can (and should) easily cash out those fees to fiat currency. They need to do so to keep their exposure to risk under control. The biggest actual concern an exchange should have is that they're sitting on a huge pile of fiat currency and crypto, and as such they're a very obvious target for people wanting to steal some (or all) of that. So, stuff that happens to exchanges that operate as they should is stealing employees, stealing hackers and stealing foreign governmental hackers (North Korea). Oh, and human error by your employees. In order to survive stuff like that it's crucial that you safely store a large part of your gains somewhere else, which you can use for any tough times that might or might not happen.

Also, if the worth of tokens they're holding completely collapses, all that does is lower the income on fees. But this only means their profits go down, not that they're losing any money. Remember, it's not their tokens, they're just holding them for their clients, so the worth of the tokens is (largely) not their worth.

[Maximillian]

That's not how it works.

This is how a Crypto exchange works at a basic level.

Buyer - pays RL money to exchange to purchase crypto. Exchange sells crypto from their holdings, takes a fee.

Seller - exchange pays RL money to seller and adds that crypto to their holdings, takes a fee.

On top of that you have all kinds of systems for holding client crypto, investment arms, ties into NFTs, etc.

But at its base that is how it works.

Yes an exchange should have RL cash reserves kept with outside entities but they have expenses like any business, and many exchanges took crypto not RL cash as fees.

Because when the bubble is inflating anyone can make money. Buyers push up the price, RL cash floods into the exchanges, sellers cash in, everyone wins.

When the bubble deflates is when the problem starts.

Suddenly everyone is looking at selling, but few want to buy. This quickly runs down the exchanges RL cash holdings. If the fall is short-term no problem. If the run continues then suddenly the exchanges all have a problem. Rumours or delays caused by a lack of cash to pay sellers only fuels the collapse.

So now the exchange has no RL cash and its crypto holdings are losing value at speed if they can sell them. This quickly leads to a firesale scenario unfolding where the exchange is itself pushing down the price of crypto. The exchange may be sitting on large crypto holdings but it can't get RL cash to pay its costs. Bankruptcy begins.

I can't remember who said it but bankruptcy starts slowly then happens all at once.

[Maximillian]

Some interesting stuff is slowly coming out.

An Australian exchange Mine Digital went into administration after it was used by scammers to move stolen funds offshore. The apointment of administrators caught out people who were in the process of buying or selling crypto or had lodged their crypto holdings with the exchange.

Of course these people want their crypto back. The problem is that it is proving very difficult to prove ownership of any particular coin or partial coin.

It also appears that many who thought they were buying crypto were actually buying investment products linked to crypto meaning they have no direct ownership of any particular coin.

So the exchange is still sitting on an amount of crypto, but who owns that crypto is disputed and it may take years to resolve.

This is interesting because of how share transactions are handled.

I am old enough to remember actual share certificates. Companies maintained share registers and when ownership was transferred a nice certificate on bond stock complete with the Company Seal was sent to the new owner. This system took time and cost a lot of money to run.

So now everything is digital. Exchanges hold a company's shares in trust and it processes changes in ownership and issues statements to the owners. This means an owner never recieves an actual certificate, just a statement saying they hold x shares with the exchange.

No one has thought through what could happen if one of these exchanges collapsed. The assumption is that companies, the Stock Exchanges and Governments would step in, but potentially a company's share register could be frozen indefinitely as legal battles over ownership are resolved.

Note that the same is occuring now with property titles - no longer do you get a physical title document as all titles are held in trust by an electronic exchange.

God forbid hackers ever manage to fuck with these systems.

[Overspark]

That's not how it works.

This is how a Crypto exchange works at a basic level.

Buyer - pays RL money to exchange to purchase crypto. Exchange sells crypto from their holdings, takes a fee.

Seller - exchange pays RL money to seller and adds that crypto to their holdings, takes a fee.

No, when you are buying crypto on an exchange you are almost always buying it from a sell order from another customer on the exchange. The same goes when you are selling, it's to a buy order from another customer on the exchange. Only very rarely are you actually making a transaction with the exchange itself. Buying BNB from Binance is an example where you might do a transaction with the exchange itself, because it's their own coin. But even then it's far more often with other customers as that sets the market price. All my other transactions ever have been with other customers, or with an intermediary which buys/sells crypto on your behalf when you put in the order, but not before (so no need to keep any significant holdings themselves).

[teds :D]

also when you are buying crypto on an exchange you are almost always a sex offender.