Re:Exposing Tether [video]
by ethbr0 on Friday June 18, 2021 @09:44AM
(#27550210)
I think this might be a misreading of 2007/8.
Bad mortgage backed securities were the root risk.
The unregulated leverage piled on top of those MBSs (credit default swaps) ballooned the consequences of that risk.
But what really caused the global meltdown was (1) pervasiveness of exposure & (2) consequently, institutional uncertainty and withdrawal of liquidity.
When the MBSs failed, the CDSs multiplied the dollar impact. Which would have been that, except that these assets underpined large portions of institution's balance sheets. And critically, unknown large portions.
The "music stopping" was the breaking of institutional trust in the solvency of their counterparties, and hence evaporation of liquidity.
The sheer opaqueness of the crypto exchanges might actually be an advantage here, as unlike traditional exchanges and the banking system, they're not used to keeping an eye on their counterparties' balances.
Bad mortgage backed securities were the root risk.
The unregulated leverage piled on top of those MBSs (credit default swaps) ballooned the consequences of that risk.
But what really caused the global meltdown was (1) pervasiveness of exposure & (2) consequently, institutional uncertainty and withdrawal of liquidity.
When the MBSs failed, the CDSs multiplied the dollar impact. Which would have been that, except that these assets underpined large portions of institution's balance sheets. And critically, unknown large portions.
The "music stopping" was the breaking of institutional trust in the solvency of their counterparties, and hence evaporation of liquidity.
The sheer opaqueness of the crypto exchanges might actually be an advantage here, as unlike traditional exchanges and the banking system, they're not used to keeping an eye on their counterparties' balances.