Cryptocurrencies

[John Hjorth]

1 hour ago, james22 said:

 

 

 

 

James,

 

Sorry, I'm a bit confused ... did I miss out anything here?

[SharperDingaan]

15 hours ago, Gregmal said:

If Grayscale Bitcoin Trust (GBTC)'s parent company Digital Currency Group is unable to raise $1 billion in emergency funding for its Genesis subsidiary and files for bankruptcy, the SEC could require Grayscale to liquidate all of its trustsincluding GBTC which closed today at a new record discount below NAV.

GBTC owns 633,567 Bitcoin or more than 4X the Bitcoin that Mt Gox victims still haven't received back (the Japanese Mt Gox trustee is milking this for as long as possible).

Michael Saylor's MicroStrategy (MSTR) hasn't even been liquidated yet.

Silvergate Capital (SI) is still in business.

Tether (USDT)'s financial statements (proof of reserves) are fake and it's only a matter of time until it becomes insolvent (when Bitcoin falls below $10,000).

 

It  is very, very unlikely that GBTC actually owns 633,567 BTC - far more likely is that the majority of this is just beneficial interest in BTC. A few long-term derivatives with whales transferring beneficial interest for an initial premium plus ongoing MTM settlements, plus a few similar but shorter term derivatives from ransom BTC accounts, a rolling string of in-the-money BTC calls/futures at various strikes, and only a few actual BTC. The reason being that the derivatives/futures/calls come with much more leverage, and none of that leverage shows on the company books; existing calls that go out of the money, are just replaced with new ones deep in money 

 

Problem is, that if there's a run .... those replacement call options &/or futures cost premium, and suck up cash. Some of those underlying BTC derivatives may also have windups if the company credit rating falls below XXX, forcing additional option/futures buys. All those CME derivatives also require daily MTM settlements in cash, whereas the long-term derivative MTM settlements are typically quarterly - and can often be 'negotiated' if needs be. A cash burn baby, burn.

 

If you don't think GBTC makes it to year-end, you try to yank your derivative as soon as possible. If that isn't possible, you start hard-balling as soon as possible - for a deal resembling WEBs bailout of GS. GS are extremely good at their game, GBTC not so much ......

 

It took how many days? for Lehman Bros, Bear Stearns, Morgan Stanley, Merrill Lynch, AIG, etc. to blow up in the sub-prime lending crises that brought on the GFC - despite all the best efforts of the US Fed. Why should I have confidence that GBTC is likely to do better ??

 

It is early days still, but it is pretty hard to see how BTC doesn't fall a lot further.

Good luck to all.

 

SD 

Edited November 19, 2022 by SharperDingaan

[james22]

2 hours ago, John Hjorth said:

James,

 

Sorry, I'm a bit confused ... did I miss out anything here?

 

https://www.gawker.com/money/someone-not-us-is-threatening-to-leak-a-sam-bankman-fried-sex-tape

[Gregmal]

10 minutes ago, SharperDingaan said:

It  is very, very unlikely that GBTC actually owns 633,567 BTC

right on cue

 

 

[UK]

OK so this perhaps answers the question on why not GBTC:)

[Castanza]

[SharperDingaan]

Just to add some technical detail.

 

A public Crypto Proof-Of-Reserve is an on-chain record, plus a 3rd party verification (auditor) that you are indeed the owner of the blockchain account. Good sound bite, but not really practical unless you are using some kind of a centralized ledger, as you would with a CBDC. Derivative beneficial ownership does not appear on a Proof-Of-Reserve, just as anything you have on a lightning network, or in a crypto exchange will not appear either. The BTC IS there - but it appears as a holding of the network and the crypto exchange, NOT as your holding.

 

Proof-Of-Reserve assumes that the proven owner of the token, is also the beneficial owner; you have not transferred beneficial ownership via a derivative, or via some kind of loan arrangement. Obviously, in the real world, this just isn't true.  

 

SD

 

 

 

[james22]

Is this the end of crypto?

 

The collapse of FTX has dealt a catastrophic blow to crypto’s reputation and aspirations

 

As at the end of any mania, the question now is whether crypto can ever be useful for anything other than scams and speculation. The promise was of a technology that could make financial intermediation faster, cheaper and more efficient. Each new scandal that erupts makes it more likely that genuine innovators will be frightened off and the industry will dwindle. Yet a chance remains, diminishing though it is, that some lasting innovation will one day emerge. As crypto falls to Earth, that slim chance should be kept alive.

 

https://www.economist.com/leaders/2022/11/17/is-this-the-end-of-crypto?

[Dave86ch]

 

14 hours ago, james22 said:

Is this the end of crypto?

 

The collapse of FTX has dealt a catastrophic blow to crypto’s reputation and aspirations

 

As at the end of any mania, the question now is whether crypto can ever be useful for anything other than scams and speculation. The promise was of a technology that could make financial intermediation faster, cheaper and more efficient. Each new scandal that erupts makes it more likely that genuine innovators will be frightened off and the industry will dwindle. Yet a chance remains, diminishing though it is, that some lasting innovation will one day emerge. As crypto falls to Earth, that slim chance should be kept alive.

 

https://www.economist.com/leaders/2022/11/17/is-this-the-end-of-crypto?

Ppl can't get the difference between a centralized company which defraud tons of people in order to finance dem and decentralised protocols which are tools.

Time to buy BTC.

[SharperDingaan]

Some might find it worthwhile to step back, and read up on Roubini's recent comments. Keep in mind that much of the hate is because he doesn't sing from the same song book, and he has cost a great many very rich and influential people a great deal of money. Nothing to do with the man's arguments.

 

Post the Mt Gox hack (800,000+ BTC), the price of BTC collapsed by 85%. Should SBF, Genesis, Grayscale, Galaxy, and Gemini go down, the impact will be comparable - BTC falls from the 19,000 pre SBF, to the roughly 2,850 (15% of old value) post collapse. With BTC at 2,850, most would also expect Tether and a few Stable Coin to have joined this bonfire as well. Obviously, not a popular view!   

 

Whatever ones view, most BTC holders will act in one of three ways; (1) hold off on new buying, (2) swing trade if you still like BTC, (3) exit if you do not. Or no new buying, and incentive to simply 'wait it out'.  These names don't just need liquidity to survive the shock - they also need the liquidity to fund aggressive buys at higher prices.

 

Back in the day, this would have been a JPM personally stepping into the pit and aggressively hitting every ask as the price moved up; whereas today, we just have snowflakes;. 'Do you feel lucky?' works much better when a well-known evil bastard is directly asking you the question!

 

SD 

 

 

 

 

Edited November 20, 2022 by SharperDingaan

[Spekulatius]

18 hours ago, james22 said:

Is this the end of crypto?

 

The collapse of FTX has dealt a catastrophic blow to crypto’s reputation and aspirations

 

As at the end of any mania, the question now is whether crypto can ever be useful for anything other than scams and speculation. The promise was of a technology that could make financial intermediation faster, cheaper and more efficient. Each new scandal that erupts makes it more likely that genuine innovators will be frightened off and the industry will dwindle. Yet a chance remains, diminishing though it is, that some lasting innovation will one day emerge. As crypto falls to Earth, that slim chance should be kept alive.

 

https://www.economist.com/leaders/2022/11/17/is-this-the-end-of-crypto?

BTC and other cryptos are useful if your country becomes Venezuela and you want to move your money out. Thats about the only application other than speculation where I think BTC or other crypto currencies are useful.

Other than that, I think BTC is just too clunky and due to complexity makes it vulnerable to scams and it’s too volatile to facility trade. The reason why it’s so volatile is lack of usefulness so the guys holding it are mostly traders. For them volatility is a feature not a bug.

 

The other things like stablecoins and Defi are likely all scams in one way or another. How would the average or even informed person know one way or another? If you can’t know, it’s likely a scam.

[james22]

3 hours ago, Dave86ch said:

Ppl can't get the difference between a centralized company which defraud tons of people in order to finance dem and decentralised protocols which are tools.

Time to buy BTC.

 

It's not "The Death of Equities," but it's the kind of thing I want to see before I buy.

[SharperDingaan]

20 minutes ago, Spekulatius said:

BTC and other cryptos are useful if your country becomes Venezuela and you want to move your money out. Thats about the only application other than speculation where I think BTC or other crypto currencies are useful.

Other than that, I think BTC is just too clunky and due to complexity makes it vulnerable to scams and it’s too volatile to facility trade. The reason why it’s so volatile is lack of usefulness so the guys holding it are mostly traders. For them volatility is a feature not a bug.

 

The other things like stablecoins and Defi are likely all scams in one way or another. How would the average or even informed person know one way or another? If you can’t know, it’s likely a scam.

 

Thing is, a Venezuela is typical of most of the world; and this also applies to countries with capital controls. China, as well as most other western countries from time to time. Same as venereal disease, BTC is not going away!

 

Frankly, the best outcome is a spectacular implosion that enables a western introduction of CBDC shortly thereafter. Crypto made people wealthy on the way up, it will make people wealthy on the way down as well. There is no reason why we all should not be some of them!

 

Different PoV

 

SD 

 

[UK]

 

[TwoCitiesCapital]

On 11/18/2022 at 8:47 PM, SharperDingaan said:

 

It  is very, very unlikely that GBTC actually owns 633,567 BTC - far more likely is that the majority of this is just beneficial interest in BTC. 

 

Wouldn't this be required in their financial disclosures which solely disclosure BTC? Their 10-Q explicitly states that the Trust does NOT invest in derivatives instruments for example. 

 

Given that the assets are custodied by Coinbase and Administrated by BNY Mellon, isn't it unlikely that two publicly traded and SEC regulated companies would both be independently lying about the holdings of said Trust? 

Edited November 21, 2022 by TwoCitiesCapital

[Castanza]

6 minutes ago, TwoCitiesCapital said:

 

Wouldn't this be required in their financial disclosures which solely disclosure BTC? Their 10-Q explicitly states that the Trust does NOT invest in derivatives instruments for example. 

 

Given that the assets are custodied by Coinbase and Administrated by BNY Mellon, isn't it unlikely that two publicly traded and SEC regulated companies would both be independently lying about the holdings of said Trust? 

 

Does SEC regulated mean anything these days?  

[james22]

DIMO collects valuable auto data from data ports in cars. It does so by allowing car owners to mint tokens by capturing data from their own car. The data are valuable for the car owner as well as for auto manufacturers, suppliers, insurers, municipalities, etc.

 

One can envision a two-sided market for DIMO tokens developing over time where data-users buy and burn tokens that are minted by car owners with DIMO data collection devices.

 

While @Tesla can build DIMO’s dataset for its own cars, how can any other automobile company create a similar dataset for their own vehicles that were manufactured before connectivity and data collection became feasible.

 

Furthermore, how can any company create a dataset of all cars on the road today? While all cars made since 1996 have OBD (onboard data) ports, other than DIMO’s token-incentivized model, I can’t envision how a company in a non-crypto world can create real-time access

 

Tokens will have real value when we can all sell our living/shopping data.

[SharperDingaan]

22 hours ago, TwoCitiesCapital said:

 

Wouldn't this be required in their financial disclosures which solely disclosure BTC? Their 10-Q explicitly states that the Trust does NOT invest in derivatives instruments for example. 

 

Given that the assets are custodied by Coinbase and Administrated by BNY Mellon, isn't it unlikely that two publicly traded and SEC regulated companies would both be independently lying about the holdings of said Trust? 

 

No idea if they did this, but the obvious solution is to do it via the (private) parent. Parent/Whale derivative vs Sub/Whale derivative - lots of clever finance/accounting folks can help with the actual mechanics. This is fairly routine, there is nothing wrong with it, and it doesn't violate any disclosures.

 

Our own view is that they probably do have the BTC beneficial interest, but for some reason - are unable to make a more granular disclosure. Simply because were they able to, they would have done so already.  

 

SD

Edited November 22, 2022 by SharperDingaan

[Spekulatius]

No dog in this fight, but GBTC should really hold BTC in their trust or BNY would be in legal trouble:

 

This ETF really should not exist. Looks like they are selling BTC in considerable numbers to keep the lights on:

~9.5M BTC sold in 9month, that's 1.5% dilution or 2% annualized. Just another crypto racket, imo.

.

 

[TwoCitiesCapital]

1 minute ago, Spekulatius said:

No dog in this fight, but GBTC should really hold BTC in their trust or BNY would be in legal trouble:

 

This ETF really should not exist. Looks like they are selling BTC in considerable numbers to keep the lights on:

~9.5M BTC sold in 9month, that's 1.5% dilution or 2% annualized. Just another crypto racket, imo.

.

 

 

That's roughly the annual fee, so you haven't really identified anything troubling about the sales. 1.5-2% fees are high, but when buying at a 40-50% discount to NAV you're being well compensated for them. 

 

And I agree, the physical BTC is very likely held because Coinbase and BNY Mellon have very little to gain and a lot to lose otherwise. 

[Longnose]

16 hours ago, UK said:

 

 

I took a bunch of time to learn how to develop crypto stuff. I strongly agree with ackman here. I see a future of businesses that will create tokens that have lots of interesting applications. Regardless of all the current noise. There will be lots of crypto projects developed in the future that will continue to provide value to businesses of the future. 

[TwoCitiesCapital]

2 hours ago, Longnose said:

 

I took a bunch of time to learn how to develop crypto stuff. I strongly agree with ackman here. I see a future of businesses that will create tokens that have lots of interesting applications. Regardless of all the current noise. There will be lots of crypto projects developed in the future that will continue to provide value to businesses of the future. 

 

+1

 

Tokens are just a different form of capitalization and ownership than stock. 

 

They're a commodity and reflect the value of both being a user and owner of the network. 

 

I'd also argue they better align incentives across as stakeholders as users/network owners are the same group of people versus stock ownership that pits the business owners against other stakeholders in a zero sum game.  It'll be interesting to see what comes out of DAO type organizations, but will definitely take time for the industry to come back from this "bank run". 

[Gregmal]

No dog in the race, but always good for a PSA reminding us of the clown show that can take over narratives at any given point.

 

I called it! I’m vindicated! 
 

 

 

 

[TwoCitiesCapital]

22 minutes ago, Gregmal said:

No dog in the race, but always good for a PSA reminding us of the clown show that can take over narratives at any given point.

 

I called it! I’m vindicated! 
 

 

 

 

 

 

My company recently made a similar point - and was quiet on it still being the best performing asset class over the last decade despite the 80% drop. 

 

These people are missing the forest for the trees. 

[Parsad]

6 hours ago, TwoCitiesCapital said:

 

 

My company recently made a similar point - and was quiet on it still being the best performing asset class over the last decade despite the 80% drop. 

 

These people are missing the forest for the trees. 

 

Cathie Woods was also probably the best performing fund manager during this period.  Doesn't mean she didn't make a mess of ARKK.  Forest for the trees!  Cheers!