If Alameda lost the billions, then who won the billions? Who was on the other side of those trades?
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In April 2021, a crypto token called MobileCoin — used for payments in the privacy-focused messaging app Signal — suddenly spiked in price from about $6 to almost $70, before crashing back down again almost as quickly.
The wild moves came after a trader on FTX had built an unusually large position in the little-known token. Two people familiar with the matter said that when the price rose, the trader used the position to borrow against it on FTX, potentially a scheme to extract dollars from the exchange.
Alameda was forced to step in and assume the trader’s position to protect FTX. The trading company’s loss on this deal was at least in the hundreds of millions of dollars, the people said, and as high as $1bn, according to one of the people, wiping out a large share of Alameda’s 2021 trading profits.
[end quote]
...So whomever was on the other side of positions like that. Savvy outsider or well-informed insider? Who knows! Maybe it can be reclaimed, or maybe it's long dispersed down a chain of dozens of crypto exchanges, tumblers, offshore fiat accounts, and so forth. I expect we'll learn a lot more over the next few weeks as the federal case ramps up and the bankruptcy executor delivers more findings.
> The wild moves came after a trader on FTX had built an unusually large position in the little-known token. Two people familiar with the matter said that when the price rose, the trader used the position to borrow against it on FTX, potentially a scheme to extract dollars from the exchange.
Makes calling regular currency "fiat" super ironic:
> offshore fiat accounts
It looks like at the end of the day, cryptocurrency is something people "fiat" out of thin air, "fair" algorithms and computers and systems be damned.
>Voyager/BlockFi acquisition: 1.5b
>LUNA exposure: 1b
>KCG-style algo crash: 1b
>FTT/SRM collateral maintenance: 2b
>Venture capital: 2b
>Real estate, branding, other frivolous spending: 2b
>FTT drop from $22 to $4: 4b
>Discretionary longs going bad: 2b
>Total: 15.5 billion
As another example, when Ethereum successfully moved to proof of stake without a hitch (an ultimately impressive and challenging development) the price actually went down.
I don't understand anything in this space.
https://obliviousinvestor.com/what-does-it-mean-for-somethin...
What is the mechanism exactly? It's not like FTX holds a shitload of bitcoin and now suddenly they have to sell it all, driving down the price.
Is the mechanism just some kind of psychological thing, where a centralized criminal enterprise is associated with "crypto", even though it was mostly esoteric shit like FTT and MobileCoin and not bitcoin, but since bitcoin is also "crypto" then people who hold it would sell it because FTX folded?
It's like saying the collapse of Bear Stearns and Lehman Brothers should somehow make US dollars worth less.
2) Bear Stearns and Lehman Brothers were not a total loss that resulted in the founder being arrested and charged with multiple counts of fraud within weeks with multiple reports from the guy who handled the failure of Enron (John J Ray) expressing public incredulity on just how crazy the whole thing was. Failed crypto institutions aren't receiving TARP loans or being absorbed by other institutions. I'm not saying what caused the 2008 financial crisis wasn't criminal but as we all know no one went to jail over it, which if nothing else highlights the differences in terms of public opinion and treatment by regulators.
3) Any comparison between crypto (individual coin or the entire ecosystem) and the world's reserve currency backed by the world's largest economy is dubious at best. The complete collapse of a couple of even the largest banks barely puts a dent in USD in terms of circulating supply, activity, etc. USD has this status because it's backed by what is considered to be the most financially stable institution in the world - the United States. In the minds of many if crypto is "backed" by anything it's people like SBF, the VCs this kid was able to hoodwink, etc.
4) The collapse of FTX has had an incredible ripple effect that has caused at least a dozen other entities (that I've tracked) within crypto to fail.
5) Over the past few weeks there has been increased focus and media attention on the shadiness of Binance, Tether, and virtually every other crypto exchange/institution up to and including Coinbase.
This is all reflected in a survey from a couple of weeks ago that indicates just 8% of Americans have a positive view of cryptocurrencies[0]. I'm sure if they ran that survey again now that number would be even lower.
So yeah, I would expect crypto prices to move downward significantly.
[0] - https://www.cnbc.com/2022/12/07/just-8percent-of-americans-h...
There's a run on the bank, people want out, and the easiest way to get out is to sell your shitcoins and your bitcoin, and wire transfer dollars to your bank account.
With all the selling of bitcoin to raise cash, the price of bitcoin must drop.
And yet the bitcoin price is up six percent in the last seven days, so there must be some other mechanism at work.
I moved to Florida in 2006 and have distinct memories of meeting sleazy and disgusting mortgage brokers from Countrywide, real estate agents, etc flaunting their fast cash while thinking all along "this doesn't seem right". I basically watched "The Big Short" in realtime... Same goes for Theranos (it's been 10 years, where is your product?) and WeWork (wait aren't you just leasing out office space?).
Crypto is 14 years in and absent a few extremely rare use cases like fleeing a dictatorship, dealing with currency destabilization in developing nations, etc no one uses it for anything other than trading on exchanges, which at this point seems like Russian roulette.
It's as though the last remaining "widespread" use case for crypto has now almost been effectively wiped out.
Unrelated funds, and random morons from crypto's equivalent of r/wallstreetbets.
It's very easy to lose a lot of money, really quickly in the markets.