> The size of the asset balance is probably used to obtain loans and liquidity.

1) Lenders don’t care about the liability side?

2) How does “liquidity” differ from “loans” here? That is, when would they do this to achieve one but not the other?

1. We don't know what the lending basis for FTT from FTX vs the claimed value of FTT on Alameda's book. FTX lent FTT at $10 to Alameda and then FTT inflated to $50 would mean Alameda has $50 asset vs $10 liability.

It's reported that Alameda Research has $14.6 billion in assets and $8 billion in liabilities. Some claim that Alameda's assets are "entirely illiquid." Nobody knows how bad things are. The only thing is that FTX has stopped the withdraws.

2. Loans for long term and liquidity for short term? Like overnight lending.

Edit: add more info.

1) What is that replying to? I was asking why the borrowed FTT would make them more capable of getting loans if it came with a corresponding liability. That would only make sense if lenders didn't care about the liability balance sheet, which is ... non standard.

Edit: That is, you said the "size of the asset balance" is used to obtain loans. That makes it sound like merely increasing assets -- even if they come with liabilities, makes them more capable of getting loans.

There are DeFi protocols where you can lock-up crypto assets (eg FTT) and use those locked assets as collateral to borrow another crypto asset (eg ETH). That all happens "on chain" and there is no way for the protocol to know if there are corresponding balance sheet liabilities.

I don't know what the OP was referring to, and I don't know if this is what they were doing, but something like this could happen.

Right, but those are generally going to be on worse terms than you can get in a negotiated loan from someone who knows your entire business. So it doesn’t make much sense to negotiate an FTT loan and then use that as collateral for a less-informed loan from a smart contract.

It would be like getting a personal loan from a bank, buying jewelry with it, and then using the jewelry to get a pawn loan — a dubious strategy, since the terms on the first loan are going to be much better.

> FTX issues FTT tokens (print money) => lends to Alameda to put under the asset balance => Alameda borrows money from outside against its assets or uses the asset/coins to invest in others => win with thin air!

The Federal Reserve issues US dollars (print money) => US Treasury borrows money from The Federal Reserve, Japan, China and the UK against its assets or uses the asset/coins to invest in others => win with thin air!

Yeah but the US can destroy you diplomatically, militarily, and economically if you try anything funny.

Of course! That's why it's so important for the US to encourage the use of the USD on a global basis, and also spend billions on the US Navy.

> The Federal Reserve issues US dollars (print money) => US Treasury borrows money from The Federal Reserve, Japan, China and the UK against its assets or uses the asset/coins to invest in others => win with thin air!

Win with the largest military in the world and all tangible assets and influence the US has.

This is actually... extremely apt. It is commonly referred to technically as the dollars exhorbitant privilege. It would seem FTX managed to exploit this phenomenon on a micro scale. Until it didn't of course lol

Ultimately the fiscal operations of the U.S. government are backed by the total assets of the U.S. (public and private), which are far larger.

> Of the $14.6 billion assets Alameda manages, almost $6 billion is FTT based.

When that info was seemingly accidentally revealed, the spicy little nugget in there that made people sit up & notice was that the entire market cap of FTT tokens was well below the reported asset value of the tokens on the balance sheet.