Yeah, yeah, I know he’s apparently the most successful person in the space, but that doesn’t change my contempt for him.
This won’t be a long post, it is mainly just an additional follow up on a comment made in the post I did last week:
To which I responded:
“As I said, this is essentially a liquidity crisis within crypto – honestly not that too far removed from what happened in 2008…. In the 2008 crash the market was ‘saved’ by the liquidity providers i.e. Reserve Banks (mainly the Fed) coming in and saving the system, and to be frank imho that is the only thing that will stop the Doom loop in crypto – liquidity providers coming in and saving the system.
Who are the liquidity providers in crypto? Alameda Research (FTX and Sam) and Cumberland Capital (a group started by a trader who had been banned and fined by the SEC in US markets), neither of which are confidence inspiring in the best of circumstances….given the redemptions occurring in Tether and their hesitation or incapability of turning the printers back on, it is highly doubtful imho that Alameda or Cumberland will be spending $1 of fiat to defend the crypto complex.
There might be some more crypto chicanery and financial engineering to hold off the collapse off for a little while, but imho it will only slow or slightly delay the inevitable. Without the Tether printers being turned back on, I see BTC below $5k before I see it going above $50k.”
Three Arrows Capital and the implosion of crypto
So in that vein Sam Bankman-Fried and his extensions Alameda and Solana, have indeed stepped up to the crease and have been extending “liquidity” into the system…
…although the liquidity he provided is exactly the liquidity I expected – more crypto IOUs i.e. Tether loan, etc and not one dollar of actual fiat. Basically all the efforts imho are simply designed to prolong the merry-go-round for a little longer, so that what little real liquidity that actually remains in the system can continue to be used by insiders to exit instead of panicked retail rubes.
In respect of the other qualification of efforts being done to stabilize the system, re financial chicanery, I give you Solends “Solend DOA” a rushed, clipped together Decentralized Automated Organisation. The most informative summary of what took place was an article that I read by Amy Castor, a freelance journalist reporting in the sector (and an ardent no-coiner).
The TLDR summary? Basically Solana’s lending platform, Solend, is facing exactly the same problems as other lending platforms i.e. a liquidity crisis. In Solend’s case it has been driven by one single whale, who borrowed around $100m of stable coins USDT and USDC by staking around $170m of Solana, withdrawing the borrowed coins then simply vanished… basically the trader was prepared to take a 40% haircut simply to get out of Solana.
If the price of Solana fell to $22 (at the time it was hovering around $35) then the Solana that they’d stake would be sold to cover the borrowings in USDC and USDT, but because there is fuck all real liquidity in any of these crypto ecosystems it would have driven the price of Solana all the way down to zero, as it caused a stop loss cascade of other traders got liquidated.
To avoid this fate Solend drew up hasty plans to save their platform (i.e. the crypto chicanery) whereby they had a “Vote” in their PoS network to take control of the whales account and then perform a OTC (off market) trade, presumably organized through FTX, to stop the problem. The funny thing is that this proposal was approved, in an apparently decentralised distributed network, because a single account holder (Sam Bankman-Fried) voted for the proposal:
Anyhow, if you are interested in the story then I recommend having a read of Amy’s article:
And that was the last anyone at Solend ever saw of that whale….
Postscript: For good measure, here is a couple other links that are worthwhile reading on the subject:
its absolutely exhausting following these ponzi schemes that sprout up from each other
Yeah. I just take the view that if it looks like a ponzi at first glance, don’t risk capital. Every time I did have a look at the space it seemed full of autists, too. That would normally appeal, but there are autists and then there are autists that are borderline retarded. Too many of the latter were popping up.
i’ve wasted hours of my life looking into some new coin or DeFi because someone I know has assured me that this its brilliant, and not a ponzi
Only realising, after spending time digging down into the turgid dross that they publish, that it is indeed a ponzi
Every single time
Yeah – I’ve been pretty much convinced that the entire crypto space is nothing but a series of inter-related, liquidity constrained ponzi’s pretty much since the last crash in 2019.
The thing I find fascinating about the space and keep coming back to, is just the multitude of ingenious ways that people disguise their true intent and actions through a shell game of structures, or how they miss identify and miss-classify certain financial risks. As in the Torah
…and so it is in crypto. This occurs in the regular Financial space as well, e.g. Enron, Metallgesellschaft or Orange County, but in general thanks to operating in regulated markets, the blow ups are more exceptions than the rule.
So yeah, I would agree with you that virtually every scheme within Crypto is either an outright fraud or ponzi, or completely dependent on a fraud or ponzi happening at arms length to their own activities.
anything can come up as a ponzi, it is the hype that makes some things spiral out of control (by design perhaps?)
Look at the decent but nothing new overpriced 20+ buck Grill’d burgers shacks sprouting at a faster rate than mushrooms on a sunny day after rain. The hype is there, the need for a quick buck is there, investors are sucked in and in absence of earth terminal it becomes an electrical hazard machine which can run forever as long as no one touches it and gets electrocuted.But where there’s honey there are bears.
the world is in the capitalism final phase where vast majority is either seeking a quick buck or a connection to a .gov (goggle, Tesla, pharma, MIC etc).
I am of the view that each and every ponzi has strong players in the background whom can affect the ecosystem to become cloudy or sunny and whom always end up positive from every ponzi. Because many can still make money on ponzi, the creation of new ponzi is left for commoners to obscure the real dividend beneficiaries. This is a nice and slow transfer of wealth similar to Lotto – where a few win on the national television but millions lose every day.
there will be more and more ponzi and less solid capitalism investment in the future, particularly in the Westworld. 2000 yrs later we are at the same crossroads, once again, and that song.
looking at above, that is a lot of 2ç
Hopefully no longer I have to read about people who bought crypto to “make their money work harder”
I received a targeted ad for some Tether scheme, I obviously only skimmed it as I had no interest but the gist was that I could earn a massive 4% return lending out any Tether I bought. Wow!
If you cant trust a man named Bankman-Fried with your money,
I don’t know who you can trust.
That is why you should entrust International Bink with all your Binking needs.
This is a terrific story – worthy of hollywood.
While no doubt ponzis abound in crypto, the idea of decentralised money that isn’t gold has value. The bottom may not be in, but it isn’t zero.
The bottom probably is zero for a lot of the late entrants. It has the stench of the .com boom. A whole lot of people trying to cash in on the latest fad with any idea or scam they can come up with.
Something called CoinFLEX is shitting the bed.
https://coinflex.com/blog/coinflex-update-on-withdrawals/
What was these guys supposed business model?
I think it was staking/yield farming. Lend them your coins and get paid. I think. Stew would know more.
Well, if that’s it, I lay it all at the door of the Fed & their partners in crime everywhere.
nobody would’ve been chasing a “tasty 4% yield” if cash hasn’t been made to yield 0….
4% tasty? is that sarcasm? lol. Pretty sure lot of these people were advertising 10% plus at some point. Judobank has year term deps at 3.05% paid monthly.
Not long ago banks were paying 0.1%, so 4% was tasty. Relatively.
of course, risk was mispriced there….
I suspect it could be due to their stable coin FlexUSD. They say it has nothing to do with 3AC or UST, but really this is the issue that I point out with the whole of Crypto in my Christmas article on the topic:
And it has all pretty much come to pass – BTC is down from $65k before Christmas to $20k, down near 70% so far and the financial plumbing is becoming clogged.
I expect this to continue as more and more dead bodies start floating to the surface, there will be multiple exchanges that imho will be found out to have passed or loaned funds out to these staking platforms, thinking they are earning yield when in reality all they are doing is providing exit liquidity.
In regards to CoinFlex in particular. It has some pretty dubious numbers, citing turnover equivalent to an exchange of Kraken’s size, but with much higher daily volume per weekly visit per user – it’s customers generate about $4k of volume vs $50 at Kraken. This might be because it is a boutique firm with lots of wealthy Asian traders.
Frankly I wouldn’t currently be parking any significant amounts of crypto on any exchange, even in well regulated markets I would be pulling back what I was hold there – either cash out or moving to non-hosted wallets. When these firms fall over all your funds held with them goes into unsecured creditors – well down the line of who gets their money, if any, back first.