If you’re getting 15% returns you better realize you’re exposed to something!

I have a friend who lost about $5k in the Terra crash. So not a lot, but he'd rather have $5k than zero. And when he was telling me about it before putting money in he was talking about the 15% thing and that it seemed like easy money, and I said something like "well unless the whole thing just goes to zero". And you could tell he just didn't see that as a possibility. Like he's not completely blind, he knew he could lose money, although mainly he was thinking about them not paying 15% and him being able to withdraw at any time. But he hadn't given any thought to the whole thing just collapsing.

If your friend only had $5k in total and threw them all in Terra then I guess the lesson he got in the crash is way more valuable than any savings he might have kept. He would have lost them anyway on the next shitcoin.

This was my main lesson. I lost some money on Terra/Luna - thankfully much less than $5k, but still enough to sting. Looking back, I can see that I really had no idea what I was getting myself into and it was mostly just FOMO.

Obviously I'd rather still have the money I lost, but in a sense I feel lucky. If Luna had waited an extra six months to collapse I would have become confident enough to put more money in, i.e. I'd have ended up losing even more. And I'll definitely be putting much, much more thought into any kind of crypto "investments" I make in future. The money I lost was a small price to pay for the lesson I've learned.

yes, I had similar lessons years ago with options, forex etc. (ok, yes... I needed more than one lesson :D) However, since I am a person that likes to "risk" their well-earned money, I think it's good that I have burnt my fingers early when I had less money. Now I have learnt that at the very least I should not put all my money into one bag. That's the biggest lesson: Split your investments. Split your accounts even. It doesn't rescue all your investments in a downturn but at least you'll likely never lose more than 50%.

People are not sufficiently educated about the value of things, vs. pricing, appreciation and so on.

Just the fact that anybody can think that you can get 15% "risk free" over long periods of time means that they are out of touch with reality.

Not to mention people thinking they will get 10x on their investments, without ludicrous amount of risk.

You can easily get (far more than) 15% return over a long period basically risk free by buying the S&P500, so it appears that you are the one who is out of touch with reality.

EDIT: How am I wrong?

The long run return on the S&P500 is more like 8%, not 15%.

And the expected returns going forward from here are meh. Stocks are expensive because they were valued in a 1% interest rate environment and given current inflation that probably won't last.

I probably should have clarified that I meant yearly gains, I can see how that can be confusing to read for someone that doesn't spend time on these topics.

In my experience in interfacing with unsophisticated investors, they aren’t aware of the risk.

Should they do more due diligence? Likely. Should there be regulation to protect the unsophisticated? Also likely. Speedrunning securities regulations, as one does.

Agree that if we’re going to have regulations to protect unsophisticated investors from obscured risk, these nonsense “yield farming” ventures should be at the top of the list.

It is heartbreaking to hear about people’s crypto losses. I was on a plane the other day next to a young lady invested (gambling really) only in crypto, Tesla, and 0DTE options (!!!). While not a financial advisor, and with appropriate disclaimers, I provided them with an Amazon gift link for your basic books about index investing and personal finance, as well as real broker recommendations (versus Robinhood).

The knowledge gap is real and incredibly worrisome, and this is real money these folks are losing. You don’t know what you don’t know.

Trouble is the yield farming stuff is all distributed and outside the ability of any given legal system to ban. Education may be better. Of course you can ban say US based entities from promoting them.

I'd never heard of stablegains before. So it was basically YC-funded fraud?

Ah - I didn't know it was YC but it seems it is https://news.ycombinator.com/item?id=31431224

Though it's not clear that it's fraud more so than selling imaginary internet money like bitcoins for cash is.

Not sure about everyone else but without a business plan or utility that still sounds like defrauding investors to me.

I'm struggling to understand what the added advantage was of depositing on Stablegains, with 15% APY over Anchor with 19% APY, with both having equal risks.

I mean Stablegains sound like grifters who thought they could make easy money (siphoning 3%-4%) by slapping a new UI and marketing the heck out of it.

They'd probably describe it as making a user friendly interface on top of Anchor.

Same with flint.money and seashell.com (did not launch yet) https://twitter.com/FatManTerra/status/1538903392415887361

It's starting to come out that all the crypto lenders were exposed to each other. Celsius was also a feeder to Anchor but they may have pulled out early enough to avoid most of the losses. Three Arrows Capital may have also been in Anchor.

> There are people hit by this who didn't even know they had exposure.

Reminds me of CZ's wild attempt to make clear that if Binance was effected, it was totally not his fault or even his business to know about it.

https://web3isgoinggreat.com/?id=cz-admits-binance-held-luna...

The biggest scam Stablegains pulled was to advertise taking USDC (most trusted stablecoin, backed by real, audited reserves), as to imply they were providing USDC lending yield, when in reality they converted your money to UST funny money.

It’s worth mentioning USDC (Circle) reserves have never been audited, and they don’t even claim to hold dollars anymore (https://archive.today/2021.07.12-223553/https://www.ft.com/c...):

> Until March 2020, the attestations said USDC was backed by dollars, held in government-backed US depository institutions. After that, they said the reserves were held at institutions and in “approved investments”, but did not give precise details about what those investments were. By June, it changed the wording on its website from “backed by US dollars” to “backed by fully reserved assets”.

I always wondered if the USD based stablecoins just hold each other's coins in lieu of cash. It's like an infinite money glitch if it's circular.

This is what is happening to an extent, however the reserve requirements do not allow undercollaterization so you can’t print more value than you put in. A large slice of DAI is USDC.

Or like governments issuing bonds in foreign denominations.

The thing I never understood was why they didn't just invest in treasuries. Yield on the US 10-year is currently north of 3.3%, closer to 2% for a while. That's under inflation, but if you're a small start-up holding 100s of millions or billions of other people's money, that's enough to hit screw-it money in a few years without the constant fear of things going terribly wrong.

> holding 100s of millions or billions of other people's money, that's enough to hit screw-it money in a few years without the constant fear of things going terribly wrong.

so, you can have that honest 2% per year for several years or you can just take it all almost immediately. History as well as crypto today is pretty clear about what humans prefer. Absent the "take it all immediately" option people do though go for the 2% option. So if you see that they can go for such an option and yet haven't - i.e. they think they have a much better option than to earn easy 2% off somebody's billions (what can be better than that?) - that is a clear sign what option they really chose :)

You wouldn’t want to hold 10 year bonds, way too much duration risk. 30 day T-Bills is what they’d want to hold to minimize risk.

They claim most of it’s in T-bills.

This doesn't seem to be true, could you help me see what I'm missing?

USDC has been audited yearly since 2018 as part of Circle's financial statements, with years 2020 and 2021 publicly available with the SEC: https://www.circle.com/blog/how-to-build-trust-usdc-audits-a...

Circle also does monthly attestations - independent, signed reviews by third party accountants - on USDC holdings. Those are available here: https://www.circle.com/en/usdc#transparency

I looked and the April '22 attestation seemed fine.

Even the FT article seems to walk back its claims about changes in the attestations as worrying, seems like their source actually is more concerned about digital currencies in general:

> “The problem to me isn’t the specifics of any one attestation, it’s the fundamental workings of these kinds of systems,” said Grey.

> There are people hit by this who didn't even know they had exposure.

Does it matter?

What's the difference between "I invested in Terra, and I have no idea what that means, and I lost it all" and "I invested in Stablegains, and I have no idea what that means, and I lost it all"?

The Internet crosses national borders, which is kind of cool but also means that anyone in any country can pseudonymously attack people in their home country without any of the normal defenses of borders and local law enforcement / judiciary.

It's actually kind of crazy how physical borders are so heavily patrolled, yet virtual borders have no protection. IMO ISPs and web browsers should be injecting warnings in your packets and UI whenever they transmit data to or from a foreign jurisdiction.