Cryptocurrency mega-thread

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A transcript from a podcast that Sam Bankman-Fried was on back in Feb where he describes what is happening as putting money into a box, and then when more people add money to the box the box pays dividends to existing holders (aka a ponzi).

That's a pretty big red flag right there, one that everyone seems to have missed or willingly overlooked.
 
And a great summary of the fleecing can be found here on Reddit.

He never made millions unless you count scamming people with shitcoins with 1% free float as "making millions".

SBF/Alameda's initial strategy was arbitraging price differences between US and Korea/Japan. The different crypto exchanges in different countries would have different prices for the same coin. In theory this was possible but in practice it was basically impossible. They lost money in Korea due to capital controls, they made some money in Japan but still lost money overall due to the enormous amounts they had to borrow and the high interest rates they were paying.

The arbitrage strategy wasn't working so they switched to shilling shitcoins. Basically they would create a new token backed by say $5m seed money, put like 1% of the total number of tokens created on the market, then use their own money to pump up the token price by 100x. Since they owned and controlled 99% of the total amount of tokens, this was easy to do. Now their initial $5m is worth $500m, but only on paper because liquidity on these tokens is tiny and if they actually tried to sell it would immediately crash.

Alameda did this in order to get loans using the tokens that they created and pumped as collateral. Then they took the borrowed money to make large directional bets on crypto prices. However it turned out they were bad at trading crypto and took billions in losses and the margin calls started coming in for their loans.

At this point Alameda was stuck, the collateral backing these loans were all shitcoins and if they started selling them the price would crash causing the entire company to go under. Since SBF couldn't meet the margin calls by liquidating the underlying collateral, he and the other founders decided to steal money from customer accounts at FTX to meet the margin calls. Basically they would give Alameda their own FTX token(FTT) and then have FTX loan customer funds to Alameda using the tokens they just gave them as "collateral". It was essentially the same scam as the one they pulled on lenders, only now they're doing it to customers while promising they would never touch customer funds.

Alameda kept losing money and eventually the scheme was discovered and it ended up being they stole something like 2/3 of the customer funds at FTX. Current estimates are at about $10 billion they lost gambling on crypto with customer money. It was a classic case of a gambler kept doubling down and borrowing and stealing until it came crashing down.

This isn't a Ponzi scheme though, they weren't paying old customers with funds from new customers. This is just plain old theft, fraud, gambling, and being really bad at trading crypto.

EDIT: Oh yeah and let's not forget SBF heavily encouraged his own employees to invest their life's savings into the company's shitcoin(FTT) and even paid people in FTT tokens. Those employees also lost everything and one of them probably stole the $600 million in the aftermath.
 
BACCS said:
Ah, that ol' argument, companies that 'do things in the real world'. Are tech companies not 'doing things in the real world'? How do you think banks and construction companies conduct their operations these days, via carrier pigeons? How is Netflix not 'doing things in the real world', are you still watching free to air TV?
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You know what I meant. No, I don't have a TV antenna.

Investing in Crypto is a luxury for people with money to spare for speculation, much like the luxury of Netflix or wasting time on Social Media platforms.
 

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Saint said:
You know what I meant. No, I don't have a TV antenna.

Investing in Crypto is a luxury for people with money to spare for speculation, much like the luxury of Netflix or wasting time on Social Media platforms.
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I actually don't. Netflix/social media platforms etc are offering products used by millions/billions of people across the world, so you can't say they aren't offering 'real world' products any different from a bank or whatever. Of course crypto is a luxury for people to invest in, but that is just like any investment, it's not something all of us have disposable income for.
 
ash_1050 said:
A transcript from a podcast that Sam Bankman-Fried was on back in Feb where he describes what is happening as putting money into a box, and then when more people add money to the box the box pays dividends to existing holders (aka a ponzi).

That's a pretty big red flag right there, one that everyone seems to have missed or willingly overlooked.
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There are a lot of red flags coming out now of things he has said in the past. I've always been cautious with FTX/SBF based on what I knew from discussions in my Merit Circle trading group. SBF was not popular behind the scenes and there were many eyebrows raised at how he was continually raising so much money (which as we know now was via inflating assets with illiquid shitcoins).
 
ash_1050 said:
And a great summary of the fleecing can be found here on Reddit.

He never made millions unless you count scamming people with shitcoins with 1% free float as "making millions".

SBF/Alameda's initial strategy was arbitraging price differences between US and Korea/Japan. The different crypto exchanges in different countries would have different prices for the same coin. In theory this was possible but in practice it was basically impossible. They lost money in Korea due to capital controls, they made some money in Japan but still lost money overall due to the enormous amounts they had to borrow and the high interest rates they were paying.

The arbitrage strategy wasn't working so they switched to shilling shitcoins. Basically they would create a new token backed by say $5m seed money, put like 1% of the total number of tokens created on the market, then use their own money to pump up the token price by 100x. Since they owned and controlled 99% of the total amount of tokens, this was easy to do. Now their initial $5m is worth $500m, but only on paper because liquidity on these tokens is tiny and if they actually tried to sell it would immediately crash.

Alameda did this in order to get loans using the tokens that they created and pumped as collateral. Then they took the borrowed money to make large directional bets on crypto prices. However it turned out they were bad at trading crypto and took billions in losses and the margin calls started coming in for their loans.

At this point Alameda was stuck, the collateral backing these loans were all shitcoins and if they started selling them the price would crash causing the entire company to go under. Since SBF couldn't meet the margin calls by liquidating the underlying collateral, he and the other founders decided to steal money from customer accounts at FTX to meet the margin calls. Basically they would give Alameda their own FTX token(FTT) and then have FTX loan customer funds to Alameda using the tokens they just gave them as "collateral". It was essentially the same scam as the one they pulled on lenders, only now they're doing it to customers while promising they would never touch customer funds.

Alameda kept losing money and eventually the scheme was discovered and it ended up being they stole something like 2/3 of the customer funds at FTX. Current estimates are at about $10 billion they lost gambling on crypto with customer money. It was a classic case of a gambler kept doubling down and borrowing and stealing until it came crashing down.

This isn't a Ponzi scheme though, they weren't paying old customers with funds from new customers. This is just plain old theft, fraud, gambling, and being really bad at trading crypto.

EDIT: Oh yeah and let's not forget SBF heavily encouraged his own employees to invest their life's savings into the company's shitcoin(FTT) and even paid people in FTT tokens. Those employees also lost everything and one of them probably stole the $600 million in the aftermath.
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Yep, this became very apparent when CoinTelegraph had an article a couple of weeks back with their balance sheet. VC money is not always smart money; anyone completing proper due diligence could have uncovered these holes long before it was made public (which some did, as I've heard stories from people that passed on FTX capital raising rounds due to a few red flags popping up).
 
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Saint said:
The tulip stuff is over-played. It wasn't widespread and didn't send people broke. It was a bunch of rich Dutch people faced with a plague playing drunken games with a specific market item. None of them went broke, they were all filthy rich. The nobility weren't involved and obviously neither were the ordinary people of the time.

The main comparison/similarity was that it was done by people with money they could afford to lose. Now that things are tightening, so is the market.

People still grew and sold tulips after the "crash" in value a few months after the plague and drunken winter had passed.
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Tulip mania is a poor comparison to bitcoin because it was a one time bubble. If bitcoin is worthless, why has it had at least 5 bubbles with subsequent 80-90% crashes?

More importantly, what reason is there to believe crypto won't recover given it has consistently done so over the past 13 years? Why is this time different?
 
Bought more for my long term holds today at $16,500. FOMO kicking in. I don't know about you guys, but I'm more scared of missing out than losing money at these prices.
 
Evolved1 said:
Bought more for my long term holds today at $16,500. FOMO kicking in. I don't know about you guys, but I'm more scared of missing out than losing money at these prices.
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Awesome. Think everyone here would agree that $16.5k will prove to be a great entry price in 2-3 years. Personally I'm waiting a couple more months though.

The next 2-3 months will be a low volume period IMO. Prices will either go lower, or at worse will continue to chop sideways. I don't think there's any risk of the market running away from us at the moment, as sentiment is so low.

Interesting to see that the DXY looks to have topped and has weakened, which is causing stocks to bounce and crypto to bounce less due to the FTX saga. I'll be watching for a bounce in the DXY or a double top. If/when that happens, stocks will fall and crypto will fall lower to the point where we could see new lows for BTC.
 
LongBombFromOutside50 said:
Awesome. Think everyone here would agree that $16.5k will prove to be a great entry price in 2-3 years. Personally I'm waiting a couple more months though.

The next 2-3 months will be a low volume period IMO. Prices will either go lower, or at worse will continue to chop sideways. I don't think there's any risk of the market running away from us at the moment, as sentiment is so low.

Interesting to see that the DXY looks to have topped and has weakened, which is causing stocks to bounce and crypto to bounce less due to the FTX saga. I'll be watching for a bounce in the DXY or a double top. If/when that happens, stocks will fall and crypto will fall lower to the point where we could see new lows for BTC.
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The safer bet is waiting for 11-14k or a weekly close above 20k.

This has the feel to me of the 3-4.5k range of 2018. I'd rather buy early on the way down than buy late on the way up.

If we go lower, I have more USDT to throw in but I don't want to get too greedy this time around.
 
ash_1050 said:
And a great summary of the fleecing can be found here on Reddit.

He never made millions unless you count scamming people with shitcoins with 1% free float as "making millions".

SBF/Alameda's initial strategy was arbitraging price differences between US and Korea/Japan. The different crypto exchanges in different countries would have different prices for the same coin. In theory this was possible but in practice it was basically impossible. They lost money in Korea due to capital controls, they made some money in Japan but still lost money overall due to the enormous amounts they had to borrow and the high interest rates they were paying.

The arbitrage strategy wasn't working so they switched to shilling shitcoins. Basically they would create a new token backed by say $5m seed money, put like 1% of the total number of tokens created on the market, then use their own money to pump up the token price by 100x. Since they owned and controlled 99% of the total amount of tokens, this was easy to do. Now their initial $5m is worth $500m, but only on paper because liquidity on these tokens is tiny and if they actually tried to sell it would immediately crash.

Alameda did this in order to get loans using the tokens that they created and pumped as collateral. Then they took the borrowed money to make large directional bets on crypto prices. However it turned out they were bad at trading crypto and took billions in losses and the margin calls started coming in for their loans.

At this point Alameda was stuck, the collateral backing these loans were all shitcoins and if they started selling them the price would crash causing the entire company to go under. Since SBF couldn't meet the margin calls by liquidating the underlying collateral, he and the other founders decided to steal money from customer accounts at FTX to meet the margin calls. Basically they would give Alameda their own FTX token(FTT) and then have FTX loan customer funds to Alameda using the tokens they just gave them as "collateral". It was essentially the same scam as the one they pulled on lenders, only now they're doing it to customers while promising they would never touch customer funds.

Alameda kept losing money and eventually the scheme was discovered and it ended up being they stole something like 2/3 of the customer funds at FTX. Current estimates are at about $10 billion they lost gambling on crypto with customer money. It was a classic case of a gambler kept doubling down and borrowing and stealing until it came crashing down.

This isn't a Ponzi scheme though, they weren't paying old customers with funds from new customers. This is just plain old theft, fraud, gambling, and being really bad at trading crypto.

EDIT: Oh yeah and let's not forget SBF heavily encouraged his own employees to invest their life's savings into the company's shitcoin(FTT) and even paid people in FTT tokens. Those employees also lost everything and one of them probably stole the $600 million in the aftermath.
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The guy could see everyone's liquidation price, and was able to front-run other people's orders. He was playing with god mode on and STILL managed to lose $10B!!! 🤦‍♂️
 

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Evolved1 said:
Tulip mania is a poor comparison to bitcoin because it was a one time bubble. If bitcoin is worthless, why has it had at least 5 bubbles with subsequent 80-90% crashes?

More importantly, what reason is there to believe crypto won't recover given it has consistently done so over the past 13 years? Why is this time different?
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Tulip mania wasn't even a bubble. It was just some drunk rich kids playing silly buggers with a specific stock for shts and giggles.

I'm not saying it won't recover, I'm saying that despite many of you saying it definitely will, the true answer is that nobody knows for sure. I bet none of you are staking your house right now. The risk profile is very high.
 
ash_1050 said:
Agreed. I’ve said all along I think it’s not backed 1-1 and that it’s printing USDT at will to prop up the BTC (and wider market) price. They’ve never released any actual audit results.
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Pretty sure they have released attestations of their holdings, but you're right no external audits.

IDK man, everyone seems to panic about tether every year, however they have been around for over 7 years and have never had any issues apart from losing the peg (+/- 2%) for very short periods of time during high volume selling.
 
Saint said:
Tulip mania wasn't even a bubble. It was just some drunk rich kids playing silly buggers with a specific stock for shts and giggles.

I'm not saying it won't recover, I'm saying that despite many of you saying it definitely will, the true answer is that nobody knows for sure. I bet none of you are staking your house right now. The risk profile is very high.
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No, I'm not risking my house on crypto right now. I'd consider remortgaging my house to buy more shitcoins if the timing was right, but that time isn't now.

I disagree with your claim that the risk profile is very high. Imo we're close to the "point of maximum potential opportunity". Bitcoin is down 76% from all time high while a typical drawdown is around 85%.

Given crypto hasn't faced environmental pressures from weakening economic conditions before, there's a fair argument this time is different. How low we go is guesswork, but I'm of the view that bitcoin and ethereum are undervalued here. On the balance of probability, 100k Bitcoin and 10k ethereum are quite likely. On that basis, the risk/reward for long term buys right now is a worthwhile proposition.


risk profile.png
 
LongBombFromOutside50 said:
Pretty sure they have released attestations of their holdings, but you're right no external audits.

IDK man, everyone seems to panic about tether every year, however they have been around for over 7 years and have never had any issues apart from losing the peg (+/- 2%) for very short periods of time during high volume selling.
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And FTX has been around three years, was a major sports sponsor, and up until two weeks ago looked totally sure of its position.
 
ash_1050 said:
Agreed. I’ve said all along I think it’s not backed 1-1 and that it’s printing USDT at will to prop up the BTC (and wider market) price. They’ve never released any actual audit results.
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Tether has been dealing with legal action since 2017. Would the SEC allow them to keep printing unbacked USD this long?
 
Evolved1 said:
I disagree with your claim that the risk profile is very high. Imo we're close to the "point of maximum potential opportunity". Bitcoin is down 76% from all time high while a typical drawdown is around 85%.
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I disagree with this, crypto investment is definitely an investment for people with a high risk appetite and a high risk tolerance. You can’t say that a space where two major players just totally imploded and people have lost their life savings as a result isn’t high risk.
 
One conspiracy theory is that tether is owned and managed by the CIA. It makes sense if they're going after money launderers.
 
Evolved1 said:
Tether has been dealing with legal action since 2017. Would the SEC allow them to keep printing unbacked USD this long?
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You’re assuming tether is running out of a US jurisdiction, I suspect it may not be. Plus the SEC is already wary of it:

The SEC is now coming to terms with the Hindenburg-sized problem Tether poses to digital asset markets: VanEck’s proposed Bitcoin ETF was rejected by the securities regulator earlier this month with the regulator listing “manipulative activity involving the purported ‘stablecoin’ Tether (USDT)” as one of the reasons.
 
ash_1050 said:
I disagree with this, crypto investment is definitely an investment for people with a high risk appetite and a high risk tolerance. You can’t say that a space where two major players just totally imploded and people have lost their life savings as a result isn’t high risk.
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I agree, but I wasn't saying crypto is low risk. My claim is we're close to maximum opportunity buying points for this asset class.
 
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