Cryptocurrencies

[Castanza]

17 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. 

 

There is no reasonably informed individual who thinks crypto or blockchain won't be a part of the future. That's a completely different topic then "but the BTC dip". 

 

There is no way to determine any margin of safety with crypto. There is very little oversight and regulation meaning the chance of losing everything in a scam is well above non-zero. 

 

It's a trading vehicle currently and nothing more. 

[TwoCitiesCapital]

8 hours ago, Parsad said:

 

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!

 

But she isn't after the current decline - not anywhere close. You're measuring her from her top. I'm measuring Bitcoin much, much closer to it's bottom. 

 

And separately, BTC has survived multiple 80-90% corrections during that period of time and still went on to be the best performing asset class.  Cathie did not. I think we're comparing apples and oranges here. ARKK seems clear or was a bubble. The behavior of Bitcoin less so since it seems like it matches it's historical pattern of booms and busts pretty closely. 

Edited November 22, 2022 by TwoCitiesCapital

[TwoCitiesCapital]

https://protos.com/defi-protocol-aave-faces-bad-debt-and-centralized-points-of-failure/

 

I've mentioned Aave's strength through the failure of centralized lenders multiple times here, so am shocked to see articles like this. 

 

I feel I'm familiar with the protocol, but maybe someone here is more so?

 

Aren't all of Aave's loans over collateralized and immediately liquidated when debt covenants are breached? I thought that was part of why they survived the prior fallouts was because they auto-liquidated collateral before anyone else could act.  

 

For anyone else that is familiar with the protocol, is this article just total FUD or does Aave actually extend credit on an uncollateralized basis? 

Edited November 22, 2022 by TwoCitiesCapital

[Longnose]

54 minutes ago, TwoCitiesCapital said:

https://protos.com/defi-protocol-aave-faces-bad-debt-and-centralized-points-of-failure/

 

I've mentioned Aave's strength through the failure of centralized lenders multiple times here, so am shocked to see articles like this. 

 

I feel I'm familiar with the protocol, but maybe someone here is more so?

 

Aren't all of Aave's loans over collateralized and immediately liquidated when debt covenants are breached? I thought that was part of why they survived the prior fallouts was because they auto-liquidated collateral before anyone else could act.  

 

For anyone else that is familiar with the protocol, is this article just total FUD or does Aave actually extend credit on an uncollateralized basis? 

First flaw i see that would set off a red flag for me.

 

AAVE currently boasts more than $6 billion in crypto value on its platform. Its so-called ‘V2’ implementation currently has $5.5 billion in Total Value Locked (TVL), a commonly-cited (albeit easy-to-manipulate) measure of DeFi protocols. That TVL includes $5.16 billion in ETH and ETH-based tokens, $669 million in wrapped ether (WETH), and $546 million in wrapped bitcoin (WBTC).

 

Wrapped BTC and Wrapped ETH are not real BTC or ETH. The old saying from the BTC space. Not your keys not your BTC. 

Wrapping it is a way to allow trading of BTC on a different protocol such as ETH or an ETH based subnet. IMO there is a high likely hood that whatever is "wrapped" here is at very high risk of not being there when someone goes looking for it. 

[TwoCitiesCapital]

33 minutes ago, Longnose said:

First flaw i see that would set off a red flag for me.

 

AAVE currently boasts more than $6 billion in crypto value on its platform. Its so-called ‘V2’ implementation currently has $5.5 billion in Total Value Locked (TVL), a commonly-cited (albeit easy-to-manipulate) measure of DeFi protocols. That TVL includes $5.16 billion in ETH and ETH-based tokens, $669 million in wrapped ether (WETH), and $546 million in wrapped bitcoin (WBTC).

 

Wrapped BTC and Wrapped ETH are not real BTC or ETH. The old saying from the BTC space. Not your keys not your BTC. 

Wrapping it is a way to allow trading of BTC on a different protocol such as ETH or an ETH based subnet. IMO there is a high likely hood that whatever is "wrapped" here is at very high risk of not being there when someone goes looking for it. 

wBTC and wETH are controlled by DAOs. Certainly possible that they're misbehaving, but would be very hard to coordinate that misbehavior across a number of independent parties (wBTC protocol has 17 different organizations as DAO members). 

 

Not saying this isn't a potential point of failure, but is an unlikely one IMO and wasn't what the article was alleging

 

Edit: the wBTC DAO website also identifies wallet addresses for the BTC reserves, their balances, and the issuance of wBTC against that so I think we can be relatively confident the BTC does exist since it's verifiable on a public blockchain. They also identify the entire history of redemption and creation so you clearly see people are redeeming for the underlying successfully. Primary concern would be the DAO losing control of the keys to those wallets. 

 

 

 

Edited November 22, 2022 by TwoCitiesCapital

[tooskinneejs]

3 hours ago, Castanza said:

 

There is no reasonably informed individual who thinks crypto or blockchain won't be a part of the future.

I think there are tons of very informed individuals who rightly think cryptocurrencies will be looked back as a "how could anyone have believed in that" moment in financial history.

 

I'm still waiting to hear why cryptocurrencies shouldn't be viewed as anything other than tulip bulb mania without actual tangible tulip bulbs.

[Sweet]

Yes crypto and blockchain aren’t going away, that doesn’t mean any of them, whether it is Bitcoin or Ether, will have any value in 10 years.  I wouldn’t be surprised if both are close to zero, I also wouldn’t be surprised if both were significantly higher.  
 

If you believe significantly higher, it’s a bet that others will bid it up, neither actually produces something tangible.  It’s speculation rather than investing IMO.  Nothing wrong with that of course.

[Sweet]

 

[alxcii]

11 hours ago, TwoCitiesCapital said:

https://protos.com/defi-protocol-aave-faces-bad-debt-and-centralized-points-of-failure/

 

I've mentioned Aave's strength through the failure of centralized lenders multiple times here, so am shocked to see articles like this. 

 

I feel I'm familiar with the protocol, but maybe someone here is more so?

 

Aren't all of Aave's loans over collateralized and immediately liquidated when debt covenants are breached? I thought that was part of why they survived the prior fallouts was because they auto-liquidated collateral before anyone else could act.  

 

For anyone else that is familiar with the protocol, is this article just total FUD or does Aave actually extend credit on an uncollateralized basis? 

 

Just because a protocol is overcollateralized doesn't mean it can't take on bad debt if the liquidation parameters are insufficient. The LTV allowed could be too high, the speed of liquidation could be too slow and the liquidity available to clear the position may not be enough.

 

Aave took USDC collateral for a CRV borrow. Curve pumped on some news they were building a stablecoin. To liquidate, USDC had to be sold for CRV on an AMM, which kept rising as liquidity decreased. There were some other shenanigans (this was part of a more complex attack involving some whales) but basically Aave ended up with bad debt as the USDC was not enough to cover the position. 

 

[SharperDingaan]

11 hours ago, alxcii said:

 

Just because a protocol is overcollateralized doesn't mean it can't take on bad debt if the liquidation parameters are insufficient. The LTV allowed could be too high, the speed of liquidation could be too slow and the liquidity available to clear the position may not be enough.

 

Aave took USDC collateral for a CRV borrow. Curve pumped on some news they were building a stablecoin. To liquidate, USDC had to be sold for CRV on an AMM, which kept rising as liquidity decreased. There were some other shenanigans (this was part of a more complex attack involving some whales) but basically Aave ended up with bad debt as the USDC was not enough to cover the position. 

 

 

Aave also either didn't have a margin agreement with the poster of the USDC collateral, or the poster couldn't maintain the USDC/CRV collateralization rate. Given that Aave had to take a receivable from the poster instead, and immediately write down the value of that receivable - most would think it is the latter.

 

Just another indicator of how lax the financial controls are in this eco-system, outside of the main financial rails. The Stable Coin issuer had a choice of either breaking the peg or taking a write-down - yet chose the write-down (& the hit against their own capital) instead ? Not really rational unless the issuer is being made 'whole' via another mechanism somewhere else ....

 

SD 

Edited November 23, 2022 by SharperDingaan

[Spekulatius]

These "wrappers" are trading sardines. You are not supposed to check what's inside the can.

Edited November 23, 2022 by Spekulatius

[rkbabang]

15 hours ago, Sweet said:

 

 

The only thing she gets wrong is the timeframe.  I'd be very surprised if it was $1M by 2030, but also very surprised if it wasn't $1M by 2045.

 

[Sweet]

Doubts about coinbase now?

 

Edited November 24, 2022 by Sweet

[Parsad]

3 minutes ago, Sweet said:

Doubts about coinbase now?

 

 

Actually was there ever any doubt?  Maybe Binance too!  Cheers!

[Spekulatius]

2 hours ago, Parsad said:

 

Actually was there ever any doubt?  Maybe Binance too!  Cheers!

That CZ / binance guy is throwing a lot‘s stones around, but may be sitting in a glass house. $COIN is a public company and has audited financial statements. Currently more cash than debt, even though the income statement looks terrible.

 

I would guess that Binance probably goes to crypto valhalla before Coinbase does.

Edited November 24, 2022 by Spekulatius

[james22]

13 hours ago, rkbabang said:

 

The only thing she gets wrong is the timeframe.  I'd be very surprised if it was $1M by 2030, but also very surprised if it wasn't $1M by 2045.

 

 

Zero seems less surprising than $1M.

[Dave86ch]

20 hours ago, SharperDingaan said:

 

Aave also either didn't have a margin agreement with the poster of the USDC collateral, or the poster couldn't maintain the USDC/CRV collateralization rate. Given that Aave had to take a receivable from the poster instead, and immediately write down the value of that receivable - most would think it is the latter.

 

Just another indicator of how lax the financial controls are in this eco-system, outside of the main financial rails. The Stable Coin issuer had a choice of either breaking the peg or taking a write-down - yet chose the write-down (& the hit against their own capital) instead ? Not really rational unless the issuer is being made 'whole' via another mechanism somewhere else ....

 

SD 

A money laundering mechanism, for istance?

[SharperDingaan]

4 hours ago, Dave86ch said:

A money laundering mechanism, for istance?

 

Sadly, a lot more realistic than many would care to admit.

The reality is that much of the lower quality stable coin collateral is actually worth zero, and the poster isn't going to put up anything more (more and better quality collateral). Were the stable coin issuer to break the peg, it would trigger similar breaks in their other pegs, and very likely bring on a rapid collapse. So the issuer bites the bullet, puts up their own assets, and prays. 

 

Had the launderer used an entire building as the collateral, the facilitator could at least seize it. Thereafter either collect the rents, or closedown/shut the building entirely if warranted. Or level it entirely, to avoid paying ongoing property tax. Total cost including ongoing transaction fee of maybe 5-7%?; higher the building cost, the lower the % cost. Had the launderer used stable coin collateral, it would have been both quicker/easier and the % cost is maybe 3-5%.

 

Point? Much of the crypto 'capital' isn't going to be available if/when there is a 'run' on the eco-system; and the more private companies in the eco-system the worse it gets. If your counter-party is a private company you have to think they haven't got it, and the bigger they are - the more likely that is. What is worse, is that the bigger they are, the more likely they are also relying on the other big players in the eco-system..... Or  identical to the big name I banks at the start of the GFC - just before Lehman Brothers was allowed to fall .....

 

Back then, the CB's had to step in as the implosion was within the main banking system. Today's crypto eco-system is almost entirely outside of the main banking system .. and much better replacements are waiting in the wings, fully tested and ready to go. Different imperatives.

 

SD

[alxcii]

34 minutes ago, SharperDingaan said:

 

Sadly, a lot more realistic than many would care to admit.

The reality is that much of the lower quality stable coin collateral is actually worth zero, and the poster isn't going to put up anything more (more and better quality collateral). Were the stable coin issuer to break the peg, it would trigger similar breaks in their other pegs, and very likely bring on a rapid collapse. So the issuer bites the bullet, puts up their own assets, and prays. 

 

Had the launderer used an entire building as the collateral, the facilitator could at least seize it. Thereafter either collect the rents, or closedown/shut the building entirely if warranted. Or level it entirely, to avoid paying ongoing property tax. Total cost including ongoing transaction fee of maybe 5-7%?; higher the building cost, the lower the % cost. Had the launderer used stable coin collateral, it would have been both quicker/easier and the % cost is maybe 3-5%.

 

Point? Much of the crypto 'capital' isn't going to be available if/when there is a 'run' on the eco-system; and the more private companies in the eco-system the worse it gets. If your counter-party is a private company you have to think they haven't got it, and the bigger they are - the more likely that is. What is worse, is that the bigger they are, the more likely they are also relying on the other big players in the eco-system..... Or  identical to the big name I banks at the start of the GFC - just before Lehman Brothers was allowed to fall .....

 

Back then, the CB's had to step in as the implosion was within the main banking system. Today's crypto eco-system is almost entirely outside of the main banking system .. and much better replacements are waiting in the wings, fully tested and ready to go. Different imperatives.

 

SD

 

Not sure if we're still talking about the same thing - The AAVE attack had nothing to do with stablecoin depegs or money laundering. Here's some background for those interested:

 

[dealraker]

Precisely what you'd expect - 4 apiece:
 

https://prospect.org/power/congressmembers-tried-to-stop-secs-inquiry-into-ftx/

 

 

 

[UK]

Interesting story about Bahamas: https://www.bloomberg.com/opinion/articles/2022-12-07/ftx-s-bahamas-headquarters-was-the-first-clue

[Parsad]

You knew it was coming!

 

https://finance.yahoo.com/news/ftx-founder-sam-bankman-fried-arrested-bahamas-001141970.html

 

https://www.thestreet.com/investing/cryptocurrency/crypto-problems-grow-binance-might-face-charges?puc=yahoo&cm_ven=YAHOO

 

Cheers!

[Spekulatius]

@Parsad That one may be more relevant:

https://finance.yahoo.com/news/binance-withdrawals-surge-concerns-report-002040397.html
 

Binance is probably toast. The owner seems weird and has been backstabbing other crypto exchanges. Looks right now that it may be his turn now.

Edited December 13, 2022 by Spekulatius

[TwoCitiesCapital]

3 hours ago, Spekulatius said:

@Parsad That one may be more relevant:

https://finance.yahoo.com/news/binance-withdrawals-surge-concerns-report-002040397.html
 

Binance is probably toast. The owner seems weird and has been backstabbing other crypto exchanges. Looks right now that it may be his turn now.

 

At this point, I'm basically leery of anyone that's not Kraken or Coinbase. 

 

These exchanges are all facing runs and it's unclear which ones were commingling funds and can make good good on withdrawals. 

 

Ultimately, I trust Coinbase is regulated and behaving itself and Kraken's CEO has always advocated their clients NOT keep balances on their exchange other than for immediate trading so would be hard for me to imagine him using client funds improperly. 

[dealraker]

For the life of me I'll never understand the chants of "crpto (of some name) will be worth some exponential X (of course in dollars)."  If you are a crypto-ist, a believer, then why in living hell do you ever refer to "dollars" ---   the ancient analog of 99% dead people like Buffett/Munger.  You don't need dollars...right?

 

But they all operate 100% in dollars!  

 

DAMN!

 

And they use QuickBooks to run their businesses.