Bitcoin is still early

[Turf Doc]

The collapse of leveraged firms will drive down the price of bitcoin due to liquidation, but also loss of confidence/belief and outright fear. That would create an investment opportunity for an asset with intrinsic value. However, I don't see any in bitcoin.

I wonder though, if there is an investment opportunity somewhere in the rubble of the crypto universe.

I recognized the housing bubble from 2003-2007, but didn't know how to profit from that idea. Later, I learned that it was possible to create derivative contracts on mortgage securities through investment banks, as several hedge fund managers did (though that option was probably not available to individual investors). There is probably an opportunity here (in crypto) somewhere.

Did you predict the bubble would have lasted as long as it did? market irrationality and solvency and all that

[xraygoggles]

are you going on record that you think customers of blockfi are going to lose coins / funds? It will sure be interesting to see if that comes to fruition. Much depends on btc price. Pumps cure many ailments. For sure I would not hold assets on any of these platforms now. But I still had USDC on blockfi up until a few weeks ago

celsius always seemed more sketch but ************************ if they weren’t just doing straight up degen stuff lol. Don’t know anything about the rest.

Looks like alpha chad SBF of FTX is buying up all these worthless CeFi exchanges/lenders, including BlockFi, for pennies on the dollar.

I wonder if any of the myriad grifter bitcoin podcasters and Twitterati who were endorsing and advertising BlockFi on their platforms have even a modicum of remorse or self-reflection rn? My guess would be no. Also noticed a lot less laser eyes on Twitter....

[xraygoggles]

The collapse of leveraged firms will drive down the price of bitcoin due to liquidation, but also loss of confidence/belief and outright fear. That would create an investment opportunity for an asset with intrinsic value. However, I don't see any in bitcoin.

I wonder though, if there is an investment opportunity somewhere in the rubble of the crypto universe.

I recognized the housing bubble from 2003-2007, but didn't know how to profit from that idea. Later, I learned that it was possible to create derivative contracts on mortgage securities through investment banks, as several hedge fund managers did (though that option was probably not available to individual investors). There is probably an opportunity here (in crypto) somewhere.

You can short crypto via futures, options, perps, or leveraged 2x and 3x tokens. The r/r is not as good as it was a few weeks or months ago.

[Zaphod]

CordMcNally and I have a bet re tether so it will be fun to watch

during the terra/luna implosion tether redeemed billions in coins for actual dollars without issue.

Starts to become a problem when the asset value drops enough and continual redemptions. There is a threshold somewhere when its impossible for it to not break. Getting closer every day. Nearly a certainty to eventually occur.

[CM]

Did you predict the bubble would have lasted as long as it did? market irrationality and solvency and all that

I didn't know how long it would last, but neither did Michael Burry or John Paulson. They made out alright.

In fact, I thought things would begin to unravel by mid-2006 when all of the homebuilders had reported drastic slowdowns in orders during the first half and suffered large share price declines as a result, but nope.

Then a large hedge fund focused on the housing mkt collapsed in April 2007 and another followed in July, and I was astonished that equities remained afloat. I was largely out of equities by summer's end, and in September I called Fidelity inquiring about protections beyond SIPC. I was sure that a huge collapse was coming and was worried about the security of my funds.

Still the market went up until October 2007. Like Wiley Coyote running in the air over an abyss, financial institutions continued to function until Bear Stearns went under in the spring of 2008. And I didn't foresee the manner of the collapse either, i.e., investment banks tipping over like dominoes. My worry about brokerages was unfounded.

[CM]

You can short crypto via futures, options, perps, or leveraged 2x and 3x tokens. The r/r is not as good as it was a few weeks or months ago.

I'm not interested in a pure short, only in long investments, or in the case of crypto assets, perhaps an arbitrage opportunity; something like this (below), but without extra leverage:

"Crypto firms began taking on more leverage after the approval of Grayscale Bitcoin Trust in 2013. The trust for years was one of the few bitcoin investments that average investors could access in brokerage or retirement accounts. Because of that, its value often traded many times higher than that of spot bitcoin, letting investors profit from the difference."

[jacoavlu]

Looks like alpha chad SBF of FTX is buying up all these worthless CeFi exchanges/lenders, including BlockFi, for pennies on the dollar.

I wonder if any of the myriad grifter bitcoin podcasters and Twitterati who were endorsing and advertising BlockFi on their platforms have even a modicum of remorse or self-reflection rn? My guess would be no. Also noticed a lot less laser eyes on Twitter....

Maybe overlooked, but you didn’t answer the question

[jacoavlu]

Starts to become a problem when the asset value drops enough and continual redemptions. There is a threshold somewhere when its impossible for it to not break. Getting closer every day. Nearly a certainty to eventually occur.

Sure, which goes back to the underlying assets. Tether has reduced the percentage of underlying commercial paper that they hold, Which is already pretty small I believe less than 10%, and are continuing to do so. I think they have a small percentage of bitcoin as reserve, but the majority of the underlying would be short term US treasuries. Time will tell of course. I’m still comfortable with the bet

[jacoavlu]

I'm not interested in a pure short, only in long investments, or in the case of crypto assets, perhaps an arbitrage opportunity; something like this (below), but without extra leverage:

"Crypto firms began taking on more leverage after the approval of Grayscale Bitcoin Trust in 2013. The trust for years was one of the few bitcoin investments that average investors could access in brokerage or retirement accounts. Because of that, its value often traded many times higher than that of spot bitcoin, letting investors profit from the difference."

The problem is, where there is easy arbitrage opportunity, it goes away quickly. Grayscale bitcoin trust is a perfect example of that. It now trades at net asset value of something like 30% less than spot bitcoin. There are some people that believe the trust may eventually be converted to an ETF, which would then benefit holders as the net asset value should return to par with the spot price. But that has not come to fruition. As a matter of fact the SEC just again denied their application for conversion to an ETF. And the managers of the trust don’t have a lot of incentive to do anything because they make a hefty 2% management fee based upon the net asset value despite the fact that the fun trades at the significant discount

[CM]

From what I can learn online, Tether has never submitted to a full and proper audit. If correct, then it is highly unlikely that Tether actually holds the assets it claims.

[CordMcNally]

Like Wiley Coyote running in the air over an abyss, financial institutions continued to function until Bear Stearns went under in the spring of 2008. .

"Hey Wile E. Coyote, well I'm on your side.
Won't you hang in there brother, you're bound to survive.
I hate that roadrunner as much as you do.
He's a [email protected]$$, he's a showoff, he's a communist, too."

- The Great Divide

[CordMcNally]

From what I can learn online, Tether has never submitted to a full and proper audit. If correct, then it is highly unlikely that Tether actually holds the assets it claims.

Their 'audits' are just that. They're basically attestations done by other fraudsters.

[Brains428]

https://tether.to/en/transparency/#reports

Here is their attestation about holdings. But they never allow a formal audit, which is odd. At least they claim to not be in bed with other crypto lenders (Voyager had 15k of 21k BTC and 350MM of 400MM of USDC let to 3AC),

Really odd that at this time of uncertainty and loss of faith in crypto, that this large firm wouldn't be transparent to shareholders... or whatever you want to call people who use Tether to navigate the cryptoverse. Imagine the bump in the price of BTC if they allowed an audit and everything that was supposed to be there was there?

[jacoavlu]

From what I can learn online, Tether has never submitted to a full and proper audit. If correct, then it is highly unlikely that Tether actually holds the assets it claims.

None of the big four accounting firms will touch tether for an audit. Nor will they touch other stable coins, presumably secondary to reputational risk. There’s just nothing in it for them.
Their CEO has recently said that they have found a top 12 firm willing to do an audit. For what it’s worth.

The state of New York also took action against them, so you can go read the results of that legal case if you would like. The state of New York certainly looked at their underlying assets.

As in aside I saw a headline recently where one of the big four, I think it was E Y, was just issued large fines secondary to apparently a bunch of their employees cheating on the ethics examination

[CM]

None of the big four accounting firms will touch tether for an audit. Nor will they touch other stable coins, presumably secondary to reputational risk. There’s just nothing in it for them.
Their CEO has recently said that they have found a top 12 firm willing to do an audit. For what it’s worth.

The state of New York also took action against them, so you can go read the results of that legal case if you would like. The state of New York certainly looked at their underlying assets.

As in aside I saw a headline recently where one of the big four, I think it was E Y, was just issued large fines secondary to apparently a bunch of their employees cheating on the ethics examination

A Big Four audit would be nice, but Tether hasn't allowed any full audit (based on what I can find online):

"Need for audit
Such an auditor needs to do two things. First, they need to ensure that every Tether in circulation is backed by at least as many dollars. At present, there are just more than 2.2 bln Tether tokens in existence, meaning that the auditor must find at least $2.2 bln in the company’s bank accounts. Second, the auditor must confirm that the funds in those bank accounts aren’t actually designated for another purpose. It’s possible, for instance, for the company to have $2.2 bln in the bank, but have pledged some of those funds to secure a debt.

In order to assuage investors, Tether hired an external auditor, Friedman LLC. The auditor verified the first condition that there is, in fact, enough money in the company’s bank accounts to back all the tokens in circulation (as of September 2017). However, a complete audit is necessary to ensure condition number two, that other liabilities do not actually impair the funds in Tether's bank accounts.
Auditor fired
However, according to reports, Tether has terminated its relationship with Friedman LLC, claiming that the audit was going into too much detail and thus taking too long. Tether issued the following statement:

“Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable time frame.”"

Auditors are beset by conflicts of interest and the blessing of an auditor doesn't guarantee that assets are as stated. However, when companies don't allow audits, it is because they are fraudulent.