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2022-11-12 07:00 by Karl Denninger
in Corruption , 768 references Ignore this thread
On FTX And Crypto Generally
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It's really not very complicated when you get down to it.

First, all items in an economy respond to supply and demand.  If there is zero demand there will be zero supply and thus no price.  But for any amount of demand above zero there is a price, and to the extent demand exceeds supply price rises until equilibrium is established, either by it simply costing more or additional supply showing up as there's incentive to provide it.  The opposite is also true.

The problem with so-called cryptocurrencies is that they have zero inherent value of any sort.  That is, the fact that I can solve a mathematical problem and prove I did through a cryptographic signature doesn't have value; there is no utility, per-se, in doing that.  Leaving aside that all such designs are inherently and intentionally ponzi schemes (that is, the "founders" always get the first of whatever it is at zero cost or nearly zero, then sell them to others at ever-higher prices) if anyone can use leverage without prior disclosure and thus become an emitter of credit into the stream they can move the price in either direction on command.

Of course their benefit and thus, for most, their motivation, is to move it higher.

But what if there the alleged "dollar" exchanged and thus which set the demand level doesn't actually exist?

If I can take a customer's "funds" and blow them on something else then until and unless I am forced to immediately remove that from the so-called "cryptomarket" where it was I have in fact emitted more dollars in the context of the cryptocurrency.  The problem at its core is that I had no legitimate way to do that and thus the alleged "demand" -- and price response to it -- is a fraud.  In the United States banks have an allegedly limited license to do this, that is, it is legitimate, and so does Congress through deficit spending.

Nobody else, however, holds the power to do so in a legal fashion yet the common theme is that it keeps being exposed.

You must therefore assume that all of the alleged "value" of said crypto "assets" is in fact nothing more than smoke.

Why?

Because if it was possible to make a reasonable return running an exchange without doing this -- that is, the fees charged for the service covered costs plus a profit -- then those doing it legitimately would be VERY interested in finding and outing every scam immediately.  The reason for that is obvious: The scammer operates with what amounts to a digital printing press and the non-scammer does not; ergo the honest operator cannot compete in such a market as they will always lose to the scammer.

The facts, however, are that the so-called "mainstream" exchanges are not diligently looking for and exposing the frauds and the reason why not is transparent: They profit from it too even if they don't personally engage in it.

But if you profit from a scam even if you don't engage in it then you must expect that there will always be said scam and worse, since during the time it is unexposed there's nobody interested in stopping it there is no pushback to put a stop to it and in fact that takes over as the largest, if not the only mechanism by which price actually moves.

In other words ex the scamming the "value" of said "token" is, for all intents and purposes, zero.

Oops.

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Cmoledor 1k posts, incept 2021-04-13
2022-11-12 07:28:12

I never really understood crypto. But what I do know, is that if it takes more than 30 seconds to explain how something worked, chances are that its a fucking scam. I suppose my skepticism worked for me there. Funny how skepticism is ruling my world anymore. Good day all. Cheers!

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The whole world is one big fucking scam
Why are you giving a vulgarity warning here? Our genial host is an advocate of both skullfucking and sodomy via rusty chainsaw. Credit to Rollformer

Reason: Retarded grammar
Ewtnewbie2 218 posts, incept 2021-09-13
2022-11-12 07:28:23

At least Beanie Babies and tulips were actual physical items that had some utility value to prevent a $0 valuation. Garage sale value of 10 cents to a quarter on the former, whatever market value at the garden store for the latter. Only the human mind can rationalize extraordinary values for common items, and even MORE extraordinary values for uncommon items.
The re-establishment of value to humans of the basics of life needs is going to be painful. Buckle up Buttercup.
Njca 249 posts, incept 2018-10-16
2022-11-12 07:30:25

Liqudity sink.
Dingleberry 566 posts, incept 2011-11-06
2022-11-12 07:44:58

Crypto is the millennial Beanie Baby. The crypto bros will never learn, except the hard way. Anyone who tells them otherwise is "just being a boomer".

The crypto scams seem to be coming in more fast and furious these days. The most recent (FTX) managed to take out some heavy celebs like the Brady bunch, and institutional money like Black Rock.

The crypto bros remind me of the day traders back in the late 90s. Kids playing with fire. Since retail "investors" typically are the last to join the party, I suspect most crypto bros are down big. BTC went from $70k down to $17K, and there seems to be a new shit coin coming out daily to attract the thieves and fools. There are over 100 now. These bros just want to get rich quick, they don't want to work. Degenerate gamblers all.

This FTX scam is probably the most entertaining. A classic ponzi. The guy running it (a 30 year old slob) and a girl that looks and talks like she is a pre-teen managed their hedge fund of $10 billion plus. And they managed to bribe Dems in the SEC and elsewhere. Rubbed elbows with the likes of Clinton and Blair. Maybe that's why the scam lasted as long as it did. Hollywood could make an entertaining movie out of this.

Ironically, the crypto bros will tell you the best thing about crypto is anonymity and safety, and they certainly don't have the latter when they use a crypto exchange. How many have gone under now? As for anonymity, anything on the web can be traced, and with the massive frauds coming out on the regular, Congress is now looking at regulating this entire shit show. You know what that means. Gotta protect the kids from themselves! Besides, they actually think that governments and central banks would permit a true competitor to their fiat currencies? Bless their hearts!

Invisiblesun 600 posts, incept 2020-04-08
2022-11-12 07:50:09

The value narrative of crypto, like so much of modern philosophy, is a thesis that rests on a clever lie. The lie of crypto being that because it is crowd sourced it is "better" than government backed fiat currency.

Hate the government all you want. But an American dollar is extremely useful. I can use that dollar to spend, save, gift and invest. Not only am I confident what that dollar is worth now and later, I am confident my ownership of that dollar is well established and if that ownership is disputed, there are legal and regulatory means to prove my claim.

Crypto? It is all fun and games until the coin and and / or the exchange blows up. And then there are only tears. History proves over and over the insecurity of crypto. Any who go to that well have no one to blame but themselves when their wealth vanishes.

Tickerguy 190k posts, incept 2007-06-26
2022-11-12 07:49:34

It was never worth a goddamned thing and there's no innovation there either.

Cryptographic signatures are not something they 'invented' and signing a signed thing isn't novel either. It is a negative-sum activity all-in with no counterbalance. People try to compare it to fiat government currencies but that's bullshit too and those who do so deserve a baseball bat to the face.

Why?

Because a fiat currency, while also a negative-sum game, is funded by the government's capacity to assess taxes and compel their payment in the fiat currency in question. It thus has an energy source that is connected to authority of said government and productive output of the citizens of the nation in question. No cryptoscam does and every single one of the "promoters" knows this.

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The difference between "kill" and "murder" is that murder, as a subset of kill, is undeserved by the deceased.
Cluelessinfl 287 posts, incept 2011-01-08
2022-11-12 07:55:16

I haven't been following this, hell I can't even spell FTX. I found this summary:

https://twitter.com/JG_Nuke/status/15910....


And this:

[[Gallery image missing or removed]]

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The difference between Americans and Europeans is our ancestors threw off the yoke of tyranny, theirs embraced it.
Dingleberry 566 posts, incept 2011-11-06
2022-11-12 08:21:16

The hits seems to keep on coming for the crypto bros:

https://beincrypto.com/ftx-suffers-400m-....

Seems like the last bit of money that FTX had got "stolen", most likely an inside job.

Very confidence inspiring!
Early_retirement 4k posts, incept 2007-06-26
2022-11-12 08:21:23

Now they are saying there was a hack that siphoned off a shit ton off money Friday, likely internal.
Tonythetiger 754 posts, incept 2019-01-27
2022-11-12 08:26:40


A few of the young guns at the office are into the Klepto-religion. When I point out that "numbers on a computer" have no real value they always have a response equivalent to calling me a Boomer. It's amusing to see them talk on and on about the squiggles up and down, and what klepto-expert's blog they follow.

You would think a 72% drop from $65,000 to under $17,700 in one year would wise them up, but apparently my Boomer-ness doesn't realize what a value the current price represents. It's only a "squiggle down", soon to be followed by a "squiggle up", as it's always done before.

I suppose I don't "get it". Maybe so, but I DO understand this aspect of the klepto-paradigm: smiley

I can only assume that 1) they're slow learners or 2) they've got so much money that they can afford to set some of it on fire. I'll have to see what the latest take on the FTX meltdown is at the water cooler, and whether it brings any recognition of reality to the discussions.










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"War is when the Government tells you who the bad guy is. Revolution is when you decide that for yourself." - Benjamin Franklin
Disgusted 468 posts, incept 2021-07-20
2022-11-12 08:32:28

Another massive failure of the Feral Government. They used to investigate and shut down Ponzi and Pyramid schemes. Now they just talk about "regulating" them. It's also another "this time it's different" bullshit. It's high tech, tied to the internet, blockchain technology, blah, blah, blah. Of course the government is the original "con game" assholes with their fiat system. Deficit spend to the moon and devalue everyone's savings through fraud. Is it any wonder people are constantly looking for the get rich quick scheme? "Gotta stay ahead of the government and their inflation fraud". That's also why I have several friends that are gold bugs. At least you can hold it in your hands they say. It can't go poof, like some fake currency on the internet. Of course the government can just declare that illegal to use whenever they want. Everything is a scam.
Crosslakejohn 7 posts, incept 2018-09-28
2022-11-12 08:37:22

The crypto space has several Achilles Heels, and the one that no one writes about is the activity of borrowing/shorting. Worldwide, there are dozens of exchanges for trading crypto that one might find acceptable or reasonable, and dozens more that a reasonable person would avoid. Those exchanges do not always have uniform pricing at any given moment, and there is a vast industry out there that has set up to arbitrage across exchanges. In order to do this, the arb player needs a borrow in order to short on the overpriced exchange. There is no regulatory oversight to this, no transparency or reporting, and no governing authority, unlike e.g. borrowing and shorting US equities as a US entity on a US exchange.
The foolish customer can keep her/his crypto in an exchange wallet (just an IOU backed by the exchange), or she/he can move the crypto into an off-exchange cold wallet (which is the correct action to take). The exchanges have access to customer crypto assets that are in exchange wallets, and in some cases, these assets are lent out to borrowers who want to short. Some exchanges pay customers an interest rate in order to entice them to keep the assets in an exchange wallet. A significant problem arises when enough customers want to sell the crypto held in exchange wallets -- if the exchange has lent the crypto from these exchange wallets, the exchange either has to call the crypto back from the borrower (which doesn't happen), or the exchange has to buy the crypto in the market using its own capital. The latter is why we see exchanges freeze/stop customer withdrawals from time to time -- they cannot risk their own insolvency (use their own cash) in order to deliver the crypto to the customers who put in sell orders, so the exchanges just suspend withdrawals until they can find a solution to their liquidity problems. It is a very unethical game, indeed I would argue that it is a very dirty game.
Do you want your Luxemburg-based exchange to lend out your exchange wallet assets to a player in Kazakhstan in order to facilitate the latter's shorting activities without your knowledge? Reminder -- the exchange gets paid a handsome borrow fee for the borrow. What happens if the Kazakhstan entity disappears? How does your exchange get your crypto back for you (hint: they don't)?
This is a sort of 40,000 feet view of borrowing/shorting in the crypto markets, and for brevity I have generalized a few things. Sophisticated readers who understand stock loan and shorting in regulated equities markets can fill in the blanks.
If you own crypto, get it out of the exchange wallets and into private wallets. Private wallets are a pain, but then and only then do you really own your crypto independent of any exchange.
Radiosity 1k posts, incept 2009-03-05
2022-11-12 08:56:05

Crypto is most likely nothing more than yet another WEF-backed scheme, this time to get people accustomed to the idea of CDBCs, which all of our governments are working towards (UK gov wants it implemented by 2027, for example).

Cash is king, which is why it needs to be destroyed.
Tickerguy 190k posts, incept 2007-06-26
2022-11-12 08:55:59

Quote:
The exchanges have access to customer crypto assets that are in exchange wallets, and in some cases, these assets are lent out to borrowers who want to short. Some exchanges pay customers an interest rate in order to entice them to keep the assets in an exchange wallet. A significant problem arises when enough customers want to sell the crypto held in exchange wallets -- if the exchange has lent the crypto from these exchange wallets, the exchange either has to call the crypto back from the borrower (which doesn't happen), or the exchange has to buy the crypto in the market using its own capital. The latter is why we see exchanges freeze/stop customer withdrawals from time to time -- they cannot risk their own insolvency (use their own cash) in order to deliver the crypto to the customers who put in sell orders, so the exchanges just suspend withdrawals until they can find a solution to their liquidity problems. It is a very unethical game, indeed I would argue that it is a very dirty game.

Its illegal for an exchange to do this unless it can back up what was lent.

People like to compare this to stock in "street name" at a brokerage but it isn't. If I own stock at a conventional brokerage then yes, the brokerage will lend that out if I have a margin account to others who wish to short it. Fine. Except that if I want my shares back (in order to sell them) they can and will be bought in against whoever has them short, and the brokerage knows who they lent them to. If they can't find someone ELSE who is willing to lend the shares out when I want to sell them the person short is forced to buy them back at whatever price they currently transact at.

This is one of the risks of BEING short something in an honest world; you CAN be bought in, forcibly so, and if you are, well, you're fucked. Margin supervision is enforced for this exact reason and every brokerage keeps an up-to-the-minute tabulation of exactly how far into the hole your positions might be in this regard for that exact reason, because if your account threatens to have a negative balance (and thus if you are bought in you can't cover it) they will eat it and that could mean they fail and wind up fucking other people -- their customers.

The bottom line problem with these so-called "cryptos" is that exactly ZERO of the exchanges give a shit when someone is engaged in this sort of shit without any margin supervision whatsoever, or even worse, when the FIRM is doing it and yet you expect them to supervise THEIR OWN margin? Yes, there have been exceptions in the other trading spaces (e.g. MF Global) but even there ultimately most of the people got all the money back because said supervision, while not entirely perfect, was mostly followed and the parties involved could have the positions forcibly unwound even though it might be wildly against their financial interest to do so.

But in this space it appears that is NEVER followed and the exchanges and promoters love all of it because producing that NON EXISTENT demand means the price goes up and they all have a position in there which benefits from that.

An actual BROKERAGE does not give a fuck at what price Apple stock transacts; their ENTIRE revenue stream is off transaction fees. The process of actually issuing, transaction and such in stock of a corporation is in fact a negative-sum game, always, but the external source of said energy is the operating profit of the corporation. Likewise for a fiat currency the external source of said energy is the taxing authority of the government in question, and the ability to compel paying said taxes in that currency.

There is no such external source for any so-called 'crypto-currency' and thus it is inherently a dwindling-to-zero proposition.

The premise that you can avoid the frauds and yet still be "ok" with "cold" storage is half-true. The other half, which is the part that is the lie, is that but for the scam taking place SOMEWHERE within "your" alleged "asset" base you would have a thing that ultimately WILL carry a zero price because it is a negative-sum game with a required energy input in order to transact and verify, that energy is dissipated and it has no external-to-system means of replacement, and as a result guaranteed by the laws of physics (entropy) it is in fact worth NOTHING.

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The difference between "kill" and "murder" is that murder, as a subset of kill, is undeserved by the deceased.
Captainkidd 2k posts, incept 2010-05-25
2022-11-12 09:27:47

Very good friend of mine has been on the ledge, trying to convince himself to jump into Crypto.....
Just cannot understand why I keep telling him it's a "Zero" waiting to happen.
I ask: What is it? What's it good for? WHY is it valuable?
No answers....
But, he is Continously telling me "If I'd bout it last year..." or 2 years, 3 years, ago...

I was talking to him last week, and mentioned that SWMBO and I were thinking about a trip to Louisiana for a donation trip to the Casino....

His response: "I don't see how you can go to a Casino and make bets where you know the odds are against you....You know you'll probably lose!"

Irony is lost on these people.

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A lawyer with a briefcase can steal more than a thousand men with guns. --Mario Puzo

It is well enough that people of the nation do not understand our banking and monetary system, for if they did,
Nocomment 14 posts, incept 2019-09-04
2022-11-12 09:28:05


In
self - evaluation
it is important to filter
out groups of information that have no bearing.
NC




Dingleberry 566 posts, incept 2011-11-06
2022-11-12 09:28:18

@ Tonythetiger,

My experiences are the same. I got a broke millennial nephew and others who I warned not to fuck with crypto, as we crusty types have seen our share of scams. But it's the only hope (in their minds) they have of getting rich in this life. Like playing a video game...they want the cheat codes.

I have also noticed they tend to believe in other stupidity like globull warming and wokeness. Crypto is just another cult. Every time a scam goes down, many of them think it's a plant by TPTB to destroy the "inexorable" rise of crypto. Bitcoin was around for several years before it got traction and popped once the bros thought they found something "revolutionary" or "transformational".

We old timers just don't understand!

They can't be helped.
Buckeyedoug 23 posts, incept 2021-10-14
2022-11-12 09:28:39

Hal Turner is reporting that the geniuses in Ukraine "invested" the US dollars given to them into - you guessed it - FTX. Buh-bye US tax dollars...
Takewhatyoucan64 85 posts, incept 2022-08-30
2022-11-12 09:28:45

April 25, 2019: Biden announces his presidential campaign.

13 days later, Sam Bankman-Fried, son of Barbara Fried ( Stanford Professor and co-founder of political fundraising organization "Mind-the-Gap), launches #FTX crypto exchange.

The exchange is magically an overnight success. SBF becomes biggest donor to Biden.

Election day, FTX implodes completely.

If you think this scandal is done, it goes even deeper.

-----
Gabe Bankman-Fried, brother to Sam (also a former Jane Street trader), is founder of Guarding Against Pandemics

He was a Legislative Correspondent for the US House of Representatives and an advisor to large political donors in the Democrat party.

The family Aunt Linda Fried is a WEF member on the Global Agenda Council on Aging.

The father, Joseph Bankman is a Stanford professor who has lobbied on behalf of Hedge Fund managers before Congress before (film records exist).


FTX' Head of Ventures & Commercial at FTX Ventures Amy Wu, started with the Clinton Foundation years ago.

Nishad Singh FTX Director of Engineering has spent over 8 million for Dem candidates.

And finally Obama's Commodity Futures Trading Commissioner, Mark Wetjen was literally the head of FTX Policy & Regulation.


Reports were the organization wanted to spend over a billion dollars on the Democratic party for 2024.
-----
Looks like a massive money laundering operation....
Crosslakejohn 7 posts, incept 2018-09-28
2022-11-12 09:29:18

Agreed Karl. "...Its illegal for an exchange to do this unless it can back up what was lent...."
Not in crypto. There are no buy-ins in crypto. The structural issues in crypto exchanges, transactions protocols, tokens, lack of oversight, lack of uniform jurisdictions for governing authority or law, etc mean that these crypto's will be zeroes eventually.
There was a story not long ago about a young couple in the US Pac NW who borrowed approx $100k against their house and invested it in crypto held in an exchange wallet -- the exchange paid them 10%/annum in interest to keep it in an exchange wallet, and the couple thought that this was a terrific interest rate at a time when the Fed was at zero for overnight deposits.
Sadly, the couple lost everything.
44dave 82 posts, incept 2021-09-16
2022-11-12 09:29:52

"dingleberry" wrote..
This FTX scam is probably the most entertaining. A classic ponzi. The guy running it (a 30 year old slob) and a girl that looks and talks like she is a pre-teen managed their hedge fund of $10 billion plus. And they managed to bribe Dems in the SEC and elsewhere. Rubbed elbows with the likes of Clinton and Blair. Maybe that's why the scam lasted as long as it did. Hollywood could make an entertaining movie out of this.

It's all over the chans that the Tribe is in complete control of all this financial malarky. Apparently some African Americans are pointing this out on Twitter, and getting cancelled for that...
Mrbobo 61 posts, incept 2021-12-01
2022-11-12 09:30:20

It's anonymous but a cryptographic ledger. It's decentralized but controlled by a cadre of mining pools and exchanges. It's a mixer not money laundering.

Excluding the ponzi nature, the primary reason shitcoins aren't a currency is the lack of fungibility. The same genius set gives the world NFTs.
Such a waste of electricity and people wasting their time developing ASICs and software.
Erroldo 628 posts, incept 2013-09-12
2022-11-12 09:30:30

So we have the 21st century of a digital tulip bulb unfolding... hahaha!
Ewtnewbie2 218 posts, incept 2021-09-13
2022-11-12 10:31:29

Good thing Slow Joe is ancient, he will not be around for the consequences of this political nightmare pointed out in the comments. I hope all the others young enough to be alive when the truth comes out so the rabble will have a field day with various methods of public torture devices and death machines to send them to Hell.

I do truly want fairness and justice in a trial of these people rather than mob rule or vigilante justice, but as TGuy keeps pointing outuntil Boobus americanus lifts a finger to take back control from the elitewe will continue to get pounded in the ass without lube.

If Ukraine truly did blow our $100B wad of tax dollars in crapto (I am stealing that term, thank you) and the public just accepts itnot sure where we go from there besides into the same dust bin of history Egypt, Rome, and Britain have been tossed into. The US is next up on the Empire implosion listand it will happen FAST!!!!
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