Something Went Very Wrong
May 13, 2022 11:23 AM   Subscribe

 
Isn't this one specific "stablecoin" the keystone in the entire cryptocoin edifice?

I thought it was basically too important to fail.
posted by wenestvedt at 11:27 AM on May 13 [4 favorites]


You're probably thinking of Tether, $USDT. It's price also cratered while Terra/Luna was failing, dipping as low as $0.95. But it's recovered. Well mostly; it's still only at $0.9986 which doesn't seem like a big deal but is significantly further from $1.00 than it has been historically.
posted by Nelson at 11:28 AM on May 13 [14 favorites]


I have been watching this all with a kind of a fascinated, schadenfreudian horror, and am glad someone else made the effort to make a post because I couldn't really bring myself to.

Isn't this one specific "stablecoin" the keystone in the entire cryptocoin edifice?

No, Terra/Luna isn't quite that big, though it is quite big. Tether is the real big stablecoin, and it is not exactly Having A Normal One right now either though it's hovering more around $0.95 (vs. its notional dollar peg) rather than plummeting into outright oblivion so far.
posted by cortex at 11:29 AM on May 13 [17 favorites]


There is a post on reddit with someone that went from $74 million in LUNA to nada.

I wonder if taxing unrealized gains would have somehow helped that person.
posted by NoThisIsPatrick at 11:31 AM on May 13 [8 favorites]


It’s also notable that about 2.2% of Tether tokens got unstaked yesterday, and another 2.8% today. That’s about 5% of the total tokens in circulation. If, as is commonly believed, Tether is vastly undercapitalized relative to its supposed promise of 1:1 capitalization, every at-par payout brings the currency closer to insolvency.

And it has to be “believed”, rather than “known”, because they have refused all requests (or even demands) to audit. If this was a responsibly run operation, that was legitimately running itself strictly on the float from top-rated bonds (which would at this point be a tidy $800 million a year!), they would be tripping over themselves to get audited to publicly prove their reliability.

But no, these greedy fuckers probably stole a bunch of it, and are running it as a Ponzi scheme. SMDH.
posted by notoriety public at 11:31 AM on May 13 [44 favorites]


Thank you for this chavenet. Like Cortex, I wanted this post to exist, but so much blew up all at once (and I'm not the most knowledgeable about cryptocurrency), I didn't even know where to begin to start.

I'm really interested in hearing what the pro-crypto people on here think. And, I mean, the really hardcore ones.
posted by a non mouse, a cow herd at 11:34 AM on May 13 [2 favorites]


Tether is definitely the big stablecoin; when it collapses I think it will wreck 80%+ of all cryptocurrency activity. (Plain Bitcoin may survive, but Ethereum and its derived currencies probably won't.) There's a lot written about Tether's complete shadiness, here's something from six months ago. Recently Tether announced it was holding more US Treasuries but hilariously they won't tell anyone a verifiable amount of what they own or explain where they are being held. Given all the lies about their reserves in the past, there is no reason to believe them now. Last August the Economist guessed Tether was leveraged 383-to-1.

Terra/Luna was a so-called "algorithmic stablecoin"; $UST's peg was held to $1 by using $LUNA to buy $UST when $UST was down. In turn they'd use the $UST to buy $LUNA when $LUNA was down. No, this does not make sense, and we just saw its catastrophic collapse. Ironically the smart contract thing is still working; the synthetic currency $UST is still nominally worth $0.20 or so. But the slightly more real backing currency $LUNA is essentially worthless, in large part because 6.5 trillion coins were issued in the last 24 hour (a 3000x dilution or so). A week ago this ecosystem was nominally worth $30B.
posted by Nelson at 11:41 AM on May 13 [38 favorites]


NoThisIsPatrick, the issue with unrealized gains is that the regulatory meaning of realizing gains is a few generations out of step.

By borrowing against those unrealized gains, you can generate tons of liquidity without paying any taxes. At the same time, a real-time tax on paper gains would be absolute madness. I dunno what the real solution is, but I don't have any sympathy for libertarian crypto ppl learning that they're as independent as a housecat and that paying taxes is part of living in a functioning society.
posted by MengerSponge at 11:50 AM on May 13 [35 favorites]


[CW]: Be aware before looking at the terraluna subreddit; their pinned post is a list of international suicide hotline numbers & there's a lot of suicide talk there too.
posted by chavenet at 11:51 AM on May 13 [16 favorites]


Yeah, notoriety public, I started in on the top (cnet) link and stopped at
The Terra UST coin is different to Tether and USDC in a key way. Tether and USDC are backed by actual US dollars
As far as Tether goes, that's just not an assertion that can be proven based on public evidence (and indeed seems to be blatantly false)

I can't speak as a "hardcore pro-crypto" person, but .. just like FTL space ships and immortality vaccines, I admit there's something super cool about the IDEA of DeFi. I want the version created by "actually good people" working for the ultimate good of society. A system where Visa & PayPal & a few others don't get a percentage of all transactions, and where they don't get to declare by fiat that sex workers can't participate in the monetary system in an above-ground fashion.

I could also say, how orderly or predictable were the first 2 decades of fiat currency? (It's so long ago that it's hard to know, but let's assume it was actually kinda crummy) It's hypocritical to demand that DeFi sprung perfect from the mind of Satoshi or other blockchain creator. Just wait, it'll perfect and improve itself like Skynet or The Borg. (*Note: may be cold comfort if your coins changed from a nominal value of $xxx million to $0.xx in 12 hours)

But I'm not a hardcore pro-crypto person, because crypto comes with a political agenda that is abhorrent and the actual implementation is also a horror.
posted by the antecedent of that pronoun at 11:51 AM on May 13 [14 favorites]


The biggest problem was that LFG was keeping Luna's value mostly through Bitcoin. When they had to defend the UST peg they basically sold a shitton of Bitcoin, further lowering the fiat value of their reserves.

BTC has a nominal market cap on paper the size of the Australian dollar but zero liquidity and market depth. If you have $5-10 million in BTC handy you can drop the price of it by 2%. If you dropped 10 million into the USDAUD trading pair you wouldn't even move the needle. Why? Because people want to buy things that Australia produces. Iron ore, coal, gas, wheat, beef, the list goes on. Plus any exporters that are earning other currency need to change to AUD to pay their taxes. What does a theoretical country of Bitcoinalia sell for their currency to be demanded? Speculation and illegal drugs. There's no real exports or taxation to setup a baseline level of demand. When you hear a stuffed shirt finance guy talk about "fundamentals", this is the kind of shit they're usually talking about.

On top of this, there's plenty of idiot forex investors speculators who are leveraged 100:1 on BTCUSD. Every move down with BTC means more of them get margin called and have to liquidate their positions. In a market that has no liquidity. The LFG BTC selloff basically kicked it all off and why the slide continues downwards.
posted by Your Childhood Pet Rock at 11:52 AM on May 13 [26 favorites]


I'm advising a couple of senior theses about Robinhood and meme stocks and crypto and all of them mention these anecdotes of people having stupidly large (paper) gains. And this week a lot of those gains were wiped out, because the high reward was associated with high risk as it turns out.

and every time I'm like 'man, i would've just cashed out once i had a couple million'

probably everybody thinks that huh.
posted by dismas at 11:54 AM on May 13 [46 favorites]


More evidence to support my (not-very-well-thought-out) pet theory that the original white paper by "Satoshi" was an elaborate plank to unmask the fetishism (in a Marxist sense) of money.
posted by Saxon Kane at 11:56 AM on May 13 [16 favorites]


and every time I'm like 'man, i would've just cashed out once i had a couple million'

Paper hands. Don't you know you're supposed to HODL?
posted by Your Childhood Pet Rock at 11:57 AM on May 13 [14 favorites]


When they had to defend the UST peg they basically sold a shitton of Bitcoin

I don’t know how you’d go about proving or disproving what they actually did with the money, but given the writing on the wall, I could see them just ghosting with the withdrawn Bitcoin and not doing any defense at all. Why throw the money away? The jig is up, take the money and run.
posted by notoriety public at 12:03 PM on May 13 [1 favorite]


I’m really interested in hearing what the pro-crypto people on here think. And, I mean, the really hardcore ones.

So, “the really hardcore ones” is rather subjective, but I have taken to looking at 0xquit’s twitter for fun. This is a dude who trades various crypto actively and works on fighting scams in the community but seems very bullish on the space as a whole and is unlikely to have any sort of dramatic reversal and decided that crypto is bad. He was never heavily into Terra or Luna, so has mostly taken a “that was extremely bad for everyone, but also stop pretending it’s going to come back” stance, along with a smidge of “don’t invest in something you don’t understand” and “don’t put your entire fortune into this!” He seems to think that this week -which has also included a founder of Azuki revealing that they had been involved in multiple rug pulls and an ugly BAYC Otherside launch. What I would say is most interesting about him to me is that he is in 100% agreement with anyone who claims that crypto is full of grifts and cons. He just also thinks that it’s a place where you can make money if you’re smart and it’s a future he wants to help build.

@0xquit on May 11 at 10:43 AM: Ok UST was all fun and games but if USDT doesn’t repeg soon I’m legitimately fearful for the future (It mostly has.)
posted by Going To Maine at 12:03 PM on May 13 [5 favorites]


my (not-very-well-thought-out) pet theory that the original white paper by "Satoshi" was an elaborate plank to unmask the fetishism (in a Marxist sense) of money.

What better way to illustrate that capitalism is in its final stages than by someone needing to invent artificial scarcity?
posted by 1970s Antihero at 12:08 PM on May 13 [10 favorites]


I mean that if they had to sell some of that to pay taxes on it maybe they would have been able to get more value out of the asset before it fell apart.

I'm not trying to be smudge or arrogant.
posted by NoThisIsPatrick at 12:09 PM on May 13 [3 favorites]


I could also say, how orderly or predictable were the first 2 decades of fiat currency?

Literally the entire reason we switched from commodity-backed currency based on gold and silver to fiat currency is that having a money supply that can be adjusted by a governing body (the Fed, specifically) makes for a much more stable and growth-enabling economy than one where everything goes sideways the moment the economic value in the system exceeds the value of the amount of gold and silver the currency issuer holds.
posted by Pope Guilty at 12:14 PM on May 13 [59 favorites]


my (not-very-well-thought-out) pet theory that the original white paper by "Satoshi" was an elaborate plank to unmask the fetishism (in a Marxist sense) of money.

I maintain that cryptocurrency is the ultimate dream of the bourgeoisie; you take capital (a computer with mining software) and combine it with capital (electricity and an internet connection) and you get wealth without needing to buy any labor at all! Abolish the proletariat!

From a Marxist perspective, or even a pre-marginalist perspective, of course the thing doesn't work.
posted by Pope Guilty at 12:18 PM on May 13 [21 favorites]




Matt Levine in today's column had a really smart observation
Other people, though, bought UST, not because they were betting on Terra but because they wanted a safe place in the crypto world to put their dollars. ...

Safe assets are much riskier than risky ones. This is I think the deep lesson of the 2008 financial crisis, and crypto loves re-learning the lessons of traditional finance. Systemic risks live in safe assets. Equity-like assets — tech stocks, Luna, Bitcoin — are risky, and everyone knows they’re risky, and everyone accepts the risk. If your stocks or Bitcoin go down by 20% you are sad, but you are not that surprised. And so most people arrange their lives in such a way that, if their stocks or Bitcoin go down by 20%, they are not ruined.

On the other hand safe assets — AAA mortgage securities, bank deposits, stablecoins — are not supposed to be risky, and people rely on them being worth what they say they’re worth, and when people lose even a little bit of confidence in them they crack completely
posted by Nelson at 12:18 PM on May 13 [47 favorites]


For someone who took graduate level cryptosystems seminar classes as soon as they'd let me and grew up reading Cryptonomicon, all this stuff is absolutely fascinating.

I have to admit, a bit of it is schadenfreude because given my background, in a just barely adjacent universe I mined bitcoin for the hell of it in 2011 and then sold it all for millions last year. I guess it's easy to make a fortune speculating if you do it in retrospect though!

Ultimately, the culture around these things is in some ways the weirdest aspect of it. I do due diligence for a living and the whole culture around cryptocurrency is simultaneously that you have to "do your DD" (by which they often seem to mean credulously reading a whitepaper once and just believing everything it says) *and* a strange camaraderie between people who think they're part of something greater than themselves and just have to believe in the magic. This is clear if you venture into the Luna / Terra reddit. So many people over recent days just begging each other to believe in the magic and talking about how they "believe" in the "community".

For someone who vets investments for a living, it is like a parallel universe because they switch back and forth between using language that looks familiar to me and mystical stuff couched in the language of faith.

and every time I'm like 'man, i would've just cashed out once i had a couple million'

It's weird. Silicon Valley VCs actually encourage founders to take some money out during funding rounds because they want them to stay focused on going for mad growth rather than get conservative. If you've cashed out $2m from your company, you at least know that your downside is covered at "never work again if I move somewhere low cost of living" whereas if you haven't you get nervous that it might all crater and you'd be back at zero. Logically if you want to motivate yourself to HODL, you should sell some on the way up to steel your nerve.
posted by atrazine at 12:22 PM on May 13 [52 favorites]


I could also say, how orderly or predictable were the first 2 decades of fiat currency?

not very? But, crucially, those decades have already happened

Apart from the decentralized aspect, which is barely even that important functionally, the whole DeFi space seems to be asking the question “what if there were no financial regulations of any kind?”, and getting a very predictable answer.

In kind of a similar way that a motorbike can go at ludicrous speeds with an engine that would have a family sedan puttering along hilariously, finance can produce incredible returns for some once you’ve stripped out every last painstakingly acquired safety feature, except in this analogy we’re also letting the bike riders ride helmetless on roads with no speed limits or traffic rules.
posted by Jon Mitchell at 12:23 PM on May 13 [21 favorites]


The question is: can I add slurp juice to my remaining coins in order to get more coins out of them? A lotta y'all still don't get it.
posted by fifteen schnitzengruben is my limit at 12:23 PM on May 13 [25 favorites]


From General Malaise's link about stablecoin:
Except, here we are, with crypto traders desperately lending out Bitcoins to bail out their sketchy algorithmic bank which they can’t turn off or pause because it’s completely automated.
Basically, what if the grey goo hypothesis, but with money?
posted by gauche at 12:29 PM on May 13 [11 favorites]


I could also say, how orderly or predictable were the first 2 decades of fiat currency? (It's so long ago that it's hard to know, but let's assume it was actually kinda crummy)

It is not in fact that long ago; Nixon withdrew from Bretton Woods in 1974, ending the US dollar's gold peg (at USD$35/ounce). If you mean "the end of the gold standard in the USA in 1933", then that is ALSO not hard to know, since we have data for price inflation. This is CPI inflation under the gold standard from the resumption at the end of WWI through 1933 (maximum rate, +25%); this is CPI inflation over the last 20 years (maximum rate, 8.5%). "Fiat currency" is more stable over the long term than a gold standard, with fewer inflationary and deflationary spikes related to gold supply.
posted by Pseudonymous Cognomen at 12:30 PM on May 13 [44 favorites]


I mean that if they had to sell some of that to pay taxes on it maybe they would have been able to get more value out of the asset before it fell apart.

This was an experiment done with stock options before the dot com crash. You do pay AMT on unsold options as they vest.

Some people absolutely paid these taxes with loans and it did not end well. And the sorts of people who took this approach are, I guarantee you, exactly the sort of person who'd have $74 million in cryptocurrency.

At the same time, a real-time tax on paper gains would be absolute madness

It would be a big change and require more regulation and major coordination across the financial infrastructure, but it would be workable. Say: Anyone with more than $5 million in assets does a market estimate January 1st of all holdings and you compare to purchase or last Jan 1 price and pay taxes accordingly.

In practice the complexity would be about the same as that of implementing a wealth tax, a la PIketty (or Warren). The change would of course upset people just because change always does, but more importantly because a lot of tax dodges would get harder.
posted by mark k at 12:31 PM on May 13 [14 favorites]


I have come here to Chew Bubblegum and go LONG on Schadenfreude
.....and I'm all out of bubblegum.
.....but not out of Bubbles!

New BubbleCoin(TM) StableCoin! backed by the integrated human misery index
posted by lalochezia at 12:32 PM on May 13 [16 favorites]


"Fiat currency" is more stable over the long term than a gold standard, with fewer inflationary and deflationary spikes related to gold supply.

For example, put "panic of" into the google search bar and watch it autcomplete and list every four years of the pre-fiat era.
posted by Your Childhood Pet Rock at 12:34 PM on May 13 [25 favorites]


New BubbleCoin(TM) StableCoin! backed by the integrated human misery index

In other news, Ethereum has skipped proof of stake and shifted directly from proof of work to proof of pain.
posted by GCU Sweet and Full of Grace at 12:38 PM on May 13 [4 favorites]


_____XXXXXX____
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__XXXXXXXXXXXX__
_XXXXXXXXXXXXXX_
XXXXXXXXXXXXXXXX
posted by DirtyOldTown at 12:54 PM on May 13 [2 favorites]


I was about to come here and feel bad for Molly White, because it looks like running web3isgoinggreat.com was on the verge of turning into a full-time job this month.

2 hours ago she announced she's leaving her job, so maybe she shorted Luna and is set for life.
posted by JoeZydeco at 12:54 PM on May 13 [19 favorites]


This is just a repeat of what happened in England and the United States when banks could issue their own banknotes. It is long past time that we allowed crypto to bypass the centuries of hard fought currency and securities regulations and laws just because they are doing it on a computer.
posted by interogative mood at 12:55 PM on May 13 [15 favorites]


Bitcoin's value is so relatively high because a million news articles and blogs spoke about it by name as an outlaw attraction, the other reason being a threat to the world's currencies by not being a fiat currency. Yellow journalism, copying each other. Bitcoin goes beyond fiat currency in flimsiness because anyone can start a new blockchain, but that can't happen with a hard currency or a company stock that reports product sales to attract investors. And this digital "gold" requires the internet and power infrastructure, while real gold value exists as a hedge against dark ages. Now that the word "crypto" is mostly replacing the word "bitcoin" in shallow articles, it might be predictable to see them begin to even out because there is not much separating them besides name recognition. Some have already predicted the enlistment of celebrities to sell coins, perhaps foreseeing the confusion among new investors who may see celebrity as solid backing.
posted by Brian B. at 12:58 PM on May 13 [1 favorite]


HAA AHHAAAA AHAA AHAAAAAAAAAaaaaa*arrggh* *COUGH*. Sorry, choking on all the schadenfreude... HAAAA HAHAHAHHAHHAAaAaaaa
posted by lawrencium at 1:01 PM on May 13 [10 favorites]


Paper hands. Don't you know you're supposed to HODL?

There's a (n extremely modest) house a few blocks from me with a "HODL HOUSE" sign above the front door. I'm 98% sure that's not their last name. I wonder how they're doing today.
posted by uncleozzy at 1:03 PM on May 13 [4 favorites]


Be aware before looking at the terraluna subreddit; their pinned post is a list of international suicide hotline numbers & there's a lot of suicide talk there too.

I fully admit I was unjustifiably salty in the meme stock post the other day, but this, and the things just short of this, are what I want to keep people from. My "axe to grind" comes from seeing various iterations of this in my professional circles.
posted by praemunire at 1:04 PM on May 13 [10 favorites]


in a just barely adjacent universe I mined bitcoin for the hell of it in 2011 and then sold it all for millions last year

I'm comforted by the certain knowledge that in that parallel universe, I lost the password for my wallet before I could cash out.
posted by Gerald Bostock at 1:08 PM on May 13 [41 favorites]


lol

posted by sammyo at 1:15 PM on May 13 [2 favorites]


JimCoin is the only stable blockchain cryptocurrency because it's the only one backed by physical assets: blocks and chains.
posted by Harvey Kilobit at 1:16 PM on May 13 [19 favorites]


There is a post on reddit with someone that went from $74 million in LUNA to nada.

Be careful, there are a lot of, ah, creative writing exercises on Twitter and Reddit right now. Someone holding 800,000 Luna today could have paid maybe $20 for it yesterday (by buying depegged UDT and burning it to create Luna out of thin air).
posted by muddgirl at 1:21 PM on May 13 [4 favorites]


Cryptocurrency isn't a currency. You can't pay taxes with it. You can't buy food or pay for utilities with it. But even playing devil's advocate as far as calling it an "investment" goes, I do hope that the people buying and selling these "investments" do not get to claim capital losses against tax obligations.

It would be terrible if these Ponzi schemes were allowed to continue dipping into everyone's pockets twice: Once to sucker new "investment" to prop up prices, and a second time when the pyramid collapses and regular taxpayers who didn't even buy into the scam — have to subsidize losses by "investors" in the form of the US having to borrow more money (on the taxpayer's behalf) to cover lost revenue and debt increases (however meagre).
posted by They sucked his brains out! at 1:22 PM on May 13 [16 favorites]


I feel like the internet is ready for a post-apocalyptic blog called "web4isdoinggreat", which is all just about people trying to grift after society collapses.

• Stringr, the startup rebuilding the internet with empty tin cans and string, was discovered to have dumped several hundred pounds of edible beans to obtain more cans. The company was liquidated and subsequently consumed by an outraged mob.

• the Cannibal Rabbit Club has lost its entire store of WheatCoin, which it claimed was being securely stored in Satoshi's skull. "It turns out skulls have more holes than just the one," says founder Matt Chadder

• and of course endless deerhide-pulls
posted by phooky at 1:24 PM on May 13 [25 favorites]


Time to refurbish an old favorite: this is great news for Bitcoin crypto NFTs schadenfreude pie. (h/t jscalzi)
posted by Halloween Jack at 1:30 PM on May 13 [4 favorites]


and every time I'm like 'man, i would've just cashed out once i had a couple million'

I finally know the answer to this question about myself. When Dogecoin first launched, I was feeling a little sad at the time for missing out on Bitcoin. So, in a rush of irrational enthusiasm, I bought $300 of DOGE. Then nothing happened. And I almost forgot about it.

Then Elon decided to hype DOGE for some nefarious purpose. Price skyrocketed. I thought for a minute about holding and waiting, but I suspected this wasn't going to last. I sold everything at $0.48. Fuck HODL! A week later it would hit a peak of around $0.60 before crashing again.

Felt a little sad I didn't hit the peak, but overall pretty happy about getting out on the good side of the curve. I don't think I would have felt that bad even if it had reached $1 or more. It really emphasizes to me how evil the whole "HODL" rhetoric is. If you're going to get 100% gains, or 10,000%+ as I did, then sell out. It's a shame so many impressionable people were convinced to ride & die by the false bravado in "HODL".
posted by Teegeeack AV Club Secretary at 1:32 PM on May 13 [19 favorites]


Between this and tech stocks (suffering from bad news in the form of EU regs and worse politics from the Texas/Florida law attempts to make it some kind of indentured business??), I'd say we've left the Move Fast phase for the Break Things phase.
posted by Slackermagee at 1:33 PM on May 13 [4 favorites]


In this universe, I made enough Australian dollars in the 2020-2021 financial year trading on Stellar Lumen volatility to require paying more income tax in a single year than I've needed to at any time in the last twenty. Nowhere near millions, but enough to fund the next few years of my retirement without help from any of my actual investments.

The fun wore off so I stopped playing. I still have a substantial (to me) parcel that I'm happy to keep hodling, even as the cryptocurrency markets continue to eat themselves, because they owe me absolutely nothing at this point. Even if Lumens now fall all the way to zero, which I don't think they will because I think the design of Stellar is good enough to give it some chance of a future as an international payment system, I'm still well ahead. In the extremely unlikely event that my parcel appreciates to the extent required to fund the building of a new passive solar house, I'll sell them out and do that with the proceeds.

I would not even consider gambling with proof-of-work or proof-of-stake cryptocurrencies. Being greedy when the herd is fearful and fearful when the herd is greedy, for both my own benefit and that of the Australian public, is profitable and entertaining but not if doing so involves externalities as toxic as those inherent in any of those protocols.
posted by flabdablet at 1:34 PM on May 13 [9 favorites]


Teegeeack AV Club Secretary, I did almost the same. I had a Robin Hood account and I wasn't making any money and I was irked that I always ended up owning 0.0018276 of something. I could afford many Dogecoin, so I bought them as a lark. Not long after, Musk started hyping it and it went through the roof. I thought to myself, "This is foolishness. Let's see where it goes."

I added some more on the next dip. In the end, what started out as $600 turned into $3800 when I sold just before his SNL appearance. We went to Croatia with the money.

Family members would ask me, "So how do you know so much about cryptocurrency? Can you teach me?" I would tell them "All I did was spot a very goofy train as it pulled into the station, rode it for a while and got off in time. It was all pure luck." It could just as easily gone the other way. It's gambling. That's all it is. I don't care how smart you think you are, you should never out a dollar into it you can't afford to lose.

I have nothing in crypto anymore.
posted by DirtyOldTown at 1:50 PM on May 13 [26 favorites]


It's great that a couple of y'all got lucky with some gambling. I've yet to visit Croatia, would love to go!

Just want to refocus on the subject of the post here, of the collapse of $30B worth of a supposedly stable cryptocurrency asset. A lot of ordinary folks out a lot of money they couldn't afford to lose. Particularly galling is a key reason people were buying $UST was because the scam attached to it run by Terra was promising 20% return on loans of real money, held in $UST in a thing called Anchor. Fleeced a lot of victims that way.

My hope when the dust settles is someone writes a clear article about exactly where all the real money went. The Bitcoin part of it should be traceable, not sure once it entered the Terra ecosystem.
posted by Nelson at 1:58 PM on May 13 [9 favorites]


a key reason people were buying $UST was because the scam attached to it run by Terra was promising 20% return on loans of real money

Anything promising 20% returns is such an obvious Ponzi scheme it's hard to feel any sympathy.
posted by Pseudonymous Cognomen at 2:05 PM on May 13 [23 favorites]


There is a post on reddit with someone that went from $74 million in LUNA to nada.

Pro Tip: The phrase "$74 million in LUNA" does not actually mean anything. See (MeFi's own/Kuro5hin's) Rusty Foster, who is so, so good on this.
posted by The Bellman at 2:05 PM on May 13 [19 favorites]


I found this post recapping the structure of stablecoins and this recent meltdown to be illuminating (and a fun schadenfreude read).
posted by msbutah at 2:06 PM on May 13 [5 favorites]


Jinx.
posted by The Bellman at 2:07 PM on May 13 [2 favorites]


Say: Anyone with more than $5 million in assets does a market estimate January 1st of all holdings and you compare to purchase or last Jan 1 price and pay taxes accordingly.

And you pay taxpayer back if the assets decline in value, right?
posted by chrchr at 2:07 PM on May 13 [3 favorites]


Anything promising 20% returns is such an obvious Ponzi scheme it's hard to feel any sympathy.

This is where I'm at. The reek of scheme coming off of every corner of everything blockchain is bad, like house made of red flags flying a red flag on it kinda bad.
posted by DirtyOldTown at 2:10 PM on May 13 [16 favorites]


The only money I have in crypto is the $30 worth of various crypto I was given for watching videos on the coinbase app and answering quizzes while drinking pints and waiting for my wife. I just checked and my "free" crypto holdings are now only about $15. Meh, I'll probably just forget about them until one of them skyrockets and hits the news and then I'll sell them. I feel sorry for the true believers and suckers.
posted by schyler523 at 2:13 PM on May 13 [1 favorite]


Just want to refocus on the subject of the post here, of the collapse of $30B worth of a supposedly stable cryptocurrency asset.

I cannot be the only person who saw a plan that amounted to:
  • "we're going to legitimize cryptocurrency by backing it with a fiat currency"
  • "... but it isn't really backed by that currency, it will actually be just declared to be of that value
  • "... but it is backed, for real!
  • "... by a different cryptocurrency."
... and was absolutely convinced I was watching some sort of satirical performance art.
posted by mhoye at 2:14 PM on May 13 [27 favorites]


"They promised me this crypto was stable!" is pretty comparable to "The guy who sold me this out of his trunk showed me a certificate of authenticity!"

I mean, you're a grown-ass adult. Make an effort not to be a total mark.
posted by DirtyOldTown at 2:19 PM on May 13 [22 favorites]


I thought about throwing a few bucks at Dogecoin at one point, just for laughs, but I could never get the wallet software to fully sync on my old laptop. Once Musk started dicking around with it around the time of his SNL appearance, I lost interest fast, as that screamed out "shell-game" in fifty-foot letters of fire.

Investors in so-called "serious" cryptos just... befuddle me.
posted by delfin at 2:20 PM on May 13 [3 favorites]


A podcast I recently learned of: Crypto Critics Corner has a pretty good explainer on the Terra and Luna crash.
And three much more in depth videos about Tether and the very twisted web connecting Tether and Bitfinex:
Part 1
Part 2
Part 3 (Q&A)
It drifts around the topics a little, and it helps to have some experience of some of the terms from the get-go.
My TL;DR on it is that massive quantities of money were getting shuffled back and forth between the stablecoin and the crypto-exchange so that both/either could prove they had the backing that they claimed they had. Naturally, that does not end well.
posted by shenkerism at 2:23 PM on May 13 [7 favorites]


It really emphasizes to me how evil the whole "HODL" rhetoric is. If you're going to get 100% gains, or 10,000%+ as I did, then sell out.

Actual successful high-frequency traders are in equities for milliseconds. It's not that that's the only way people make their money, but it just illustrates the uselessness of bringing a lay mindset to the market.

Just want to refocus on the subject of the post here, of the collapse of $30B worth of a supposedly stable cryptocurrency asset. A lot of ordinary folks out a lot of money they couldn't afford to lose.

"Ordinary folks" investing money they couldn't afford to lose were being criminally irresponsible, and, unlike other ways you can fritter or mindlessly risk your money, they had to make a real effort to do it, too. (Again, not to get uber-salty, but...) However, the idea of these particular speculators as largely just good ordinary salt-of-the-earth folk caught up in the run on Bailey's bank will not, I think, withstand inspection.
posted by praemunire at 2:25 PM on May 13 [18 favorites]


As someone looking forward to the day when they can buy a GPU at normal f***ing prices again, this is great news, but it's still possible to feel bad for the victims caught up in the grift.
posted by The Lurkers Support Me in Email at 2:28 PM on May 13 [26 favorites]


This is the most hilarious real-time satire of late stage capitalism imaginable. Cypto and billionaires in sub-orbit for shits and giggles. This isn't necessarily the worst timeline, just the most absurd that my feeble brain can comprehend.
posted by Token Meme at 2:34 PM on May 13 [5 favorites]


I don't follow the crytocurrency world closely. What does HODL mean?
posted by biogeo at 2:41 PM on May 13 [1 favorite]


HODL refers to hold typed in all caps and spelled wrong, now it's used intentionally.
posted by schyler523 at 2:44 PM on May 13 [6 favorites]


Of course the whole point of currency is that it isn’t an investment it is just a temporary store of value for buying and selling. The entire system is setup to make sure you don’t hold your cash — you either spend it, save it (and the bank loans it out), or invest it.
posted by interogative mood at 2:45 PM on May 13 [5 favorites]


Last september, I bought some ethx.b (an etf pegged to ethereum) based on the idea that all of my other investments are boring and/or "safe".
I did it that way because I tried to set up a coin wallet and found it to be a giant hassle in Canada.
I told myself I wouldn't check the value for at least a year.
After reading this thread, I'm sure that this has all ended just where I expected. I'll continue to ignore it and instead just focus on worrying about my "safe" index funds etc.
posted by Acari at 2:45 PM on May 13 [1 favorite]


Also for "Hold on for dear life" apparently?
posted by Windopaene at 2:45 PM on May 13 [12 favorites]


When I see HODL, the image in my head is of Jim Cramer telling people to buy Bear Stearns.
posted by Pseudonymous Cognomen at 3:01 PM on May 13 [26 favorites]


On a metalevel, HODL (misspelling of hold as pointed out above) refers to a mindset where if you really "believe" in the promise of crypto you should not sell when the value appears to be tanking, instead you should "buy the dip" and HODL until the value recovers. This is obviously a ploy to persuade people not to cash out, because it turns out that one thing the organizers of a Ponzi scheme have a lot of problems dealing with is many investors attempting to cash out at once.
posted by axiom at 3:03 PM on May 13 [29 favorites]


I'm sickos
posted by ominous_paws at 3:12 PM on May 13 [7 favorites]


What does HODL mean?

I AM HODLING
posted by signal at 3:20 PM on May 13 [9 favorites]


"Ordinary folks" investing money they couldn't afford to lose were being criminally irresponsible, and, unlike other ways you can fritter or mindlessly risk your money, they had to make a real effort to do it, too.

I watch a lot of basketball, and because I watch random streams I often end up watching a lot of commercials. I think it's very easy to blame people for being "criminally irresponsible" but the crypto "industry" is obviously counting on people's lack of financial savvy. When you have the Lakers playing in Crypto.com Arena and Steph Curry touting easy investment with the FTX app it's easy to think this is something legit. Of course people who were mostly fine before their "investment" tanked are going to continue to be mostly fine and those that could ill afford to lose a bunch of cash are going to be fucked. Blaming them (criminally? Do they deserve to go to prison?) for being swayed by a veneer of legitimacy doesn't do a whole lot to change the fact that grift seems to be a much larger facet of society these days, and much easier to become a victim of by just downloading an app.

Sports betting is also exploding, buy-now-pay-later apps are being used by people to pay for food - it just seems like stripping people of money in order to make money is becoming easier and more prevalent than it's been in a while. People are being victimized and if they aren't aware of that how is it their fault? Not everyone has someone in their life to tell them "don't invest money you can't afford to lose".
posted by oneirodynia at 3:22 PM on May 13 [45 favorites]


HODL refers to hold typed in all caps and spelled wrong, now it's used intentionally.

this is somehow the funniest thing I've read all day, thank you!
posted by elkevelvet at 3:30 PM on May 13 [1 favorite]


What does HODL mean?

Imagine "YOLO" but it's your finances about to try a skateboard trick off the roof.
posted by Navelgazer at 3:31 PM on May 13 [52 favorites]


and every time I'm like 'man, i would've just cashed out once i had a couple million'

probably everybody thinks that huh.


I would absolutely unequivocally have gotten out at a couple million (probably a couple hundred thousand, honestly, clearing my mortgage principle would have been more than enough), but then I also wouldn't/didn't get in in the first place because I'm deeply ethically opposed to the whole fucking concept not least because I know that even if I got lucky most people would get fucked and that's not a system I want to support. Hi, it's me, person who is smugly not rich, I know that's worth about a cup of coffee and a sad sack lunch to the folks who are in it to win it.

"Ordinary folks" investing money they couldn't afford to lose were being criminally irresponsible

Generally in response to overt marketing pressure to do so, is the shitty thing. When you go to the carnival and buy what the barker is yelling about a can't-lose dart game, okay, you signed up for it. When Matt Damon goes on TV during the biggest event of the year and tells you to buy crypto, that's a little different as far as decision matrices go. Let's not pretend that the only reason people get sucked into grifts is pure unadulterated effortful avarice. Con artistry is an art, after all, and at scale it is especially fucked up and exploitative.
posted by cortex at 3:32 PM on May 13 [32 favorites]


Whenever someone says they got rich from crypto, you now have to wonder: did they get lucky, or are they the scammers?
posted by meowzilla at 3:36 PM on May 13 [7 favorites]


it's not "how do you get a gambling addiction" it's who is not addicted? I'm planning a trip to a casino, in my parts casino volunteering is how most not-for-profits finance their projects and the whole landscape has changed so much in 30 years it's hard to remember we did 50/50 raffles, bake sales, and the like. That all seems quaint now.

all these shitty crypto ads and online gambling ads, it's just a symptom of a disease and call it End of Times or Late Stage Capitalism but I'll say this: at least all the crypto activity kept a lot of young men occupied. That's how bad it is.
posted by elkevelvet at 3:39 PM on May 13 [5 favorites]


People keep saying end times capitalism like it will end soon.
posted by Going To Maine at 3:41 PM on May 13 [24 favorites]


"Ordinary folks" investing money they couldn't afford to lose were being criminally irresponsible

In fact, rare double-comment clarification: they were not being criminally irresponsible, period. I know you were probably using that phrase figuratively, but it matters: they were being irresponsible and stupid, but it's not a crime to lose your own money on a foolish venture. This matters in context: much of what makes up the systems that lost them their money in this case was criminal, but not on their part, and that's a big part of why it's such a fucked up exploitative system. The average joe caught up in a speculative grift is no more a criminal than someone caught up in an MLM or a retail investment scam: the criminals are the ones knowingly perpetuating those schemes with the intent to ride high and cash out on the credulous folks providing cash in exchange for hope.

Playing the lottery likewise isn't a criminal enterprise. It may be foolish, but hope and poverty and a desire to escape the rigid confines of a capitalist system aren't crimes, as much as the system itself may be to a lesser or greater extent fundamentally ethically awful or even criminal.
posted by cortex at 3:41 PM on May 13 [25 favorites]


I cheer for the collapse of a Ponzi scheme despite the very real harm it inflicts on the victims, because collapse is the only way to stop it from claiming even more victims.
posted by allegedly at 3:45 PM on May 13 [32 favorites]


I could also say, how orderly or predictable were the first 2 decades of fiat currency?

Literally the entire reason we switched from commodity-backed currency based on gold and silver to fiat currency is that having a money supply that can be adjusted by a governing body (the Fed, specifically) makes for a much more stable and growth-enabling economy than one where everything goes sideways the moment the economic value in the system exceeds the value of the amount of gold and silver the currency issuer holds.

Fiat currency works well because of all the rules and mechanisms and institutions constructed around it, to keep it stable and useful, tamp down wild market gyrations, curtail scammery, protect ordinary people's money, etc.

Of course, all those safeties are the things that the libertarian crypto enthusiasts consider to be stupid bureaucratic big government BS. They built a new system with none of that stuff. Of course it crashed and burned. Turns out all those safeties were implemented for good reasons, based on hard experience.
posted by Artifice_Eternity at 3:46 PM on May 13 [14 favorites]


People keep saying end times capitalism like it will end soon.

Yeah, I feel like "late capitalism" is an unduly optimistic term.
posted by Artifice_Eternity at 3:47 PM on May 13 [6 favorites]


After a little reading (because I have huge holes in my cryptocurrency knowledge due to wanting them all to die in a fire), it turns out that the USDC stablecoin (the #2 one) is basically “what if Tether, but not a scam?” Like, with auditors and reasonable transparency on where the money is being kept and as what assets. Auditors, even!

I’d ask “why have I never heard about USDC?” But the answer is “doing the sane and legal thing is booooring”, with a side of “I never heard of UST either until it imploded”.

I mean, I still think it needs to die in a fire along with all the rest of the cryptocurrency ecosystem, but they’re at least TRYING to follow the rules.
posted by notoriety public at 3:51 PM on May 13 [4 favorites]



I cheer for the collapse of a Ponzi scheme [and the prosecution, bankrupting and jailing of the perpetrators] despite the very real harm it inflicts on the victims, because collapse is the only way to stop it from claiming even more victims


FTFY.

Remember if a ponzi scheme goes bust, it's the bottom that loses. We want heads, spikes and walls for the....heads.
posted by lalochezia at 4:21 PM on May 13 [8 favorites]


HODL explained
posted by straight at 4:22 PM on May 13 [3 favorites]


Is this where I can brag that back in the day I bought bitcoin, dogecoin, and ethereum and sold them all at a profit?

Not much of a profit (because I didn't buy a lot), but some.

I sort of wish I'd held my bitcoin until it was worth $50,000, but I also know damn well that if I were the sort of person who wouldn't sell at $120 (which is what I did), then I'd be the sort of person who wouldn't sell at $50,000, either.
posted by It's Never Lurgi at 4:24 PM on May 13 [3 favorites]


Fresh tweets about the situation from @StableKwon / Do Kwon, the founder of Terra.
I’ve spent the last few days on the phone calling Terra community members – builders, community members, employees, friends and family, that have been devastated by UST depegging.
I am heartbroken about the pain my invention has brought on all of you.
I still believe that decentralized economies deserve decentralized money – but it is clear that $UST in its current form will not be that money.
Neither I nor any institutions that I am affiliated with profited in any way from this incident. I sold no luna nor ust during the crisis.
We are currently working on documenting the use of the LFG BTC reserves during the depegging event. Please be patient with us as our teams are juggling multiple tasks at the same time.
There are multiple proposals on Agora on the best steps to move forward for the community – after having read many of them, I’ve put down my thoughts of what I think the best steps are:
What we should look to preserve now is the community and developers that make Terra’s blockspace valuable – I’m sure our community will form consensus around the best path forward for itself, and find a way to rise again.
This sounds humble, but my impression is that he was quite cocky before crashing the third (fourth?) largest stablecoin.
posted by Going To Maine at 4:31 PM on May 13 [3 favorites]


phooky: "I feel like the internet is ready for a post-apocalyptic blog called "web4isdoinggreat", which is all just about people trying to grift after society collapses."

I will be your first subscriber.
posted by adamrice at 4:34 PM on May 13 [3 favorites]


"I didn't get rich while destroying you all financially" is a distinction, certainly, if not particularly a difference for those affected
posted by cortex at 4:49 PM on May 13 [6 favorites]


People keep saying end times capitalism like it will end soon

I think of "end-stage capitalism" like "end-stage renal disease" -- just because your kidneys are completely broken doesn't mean your transplant is coming anytime soon.
posted by saturday_morning at 4:56 PM on May 13 [26 favorites]


hope and poverty

Come on. Poor people aren't staking their little all on the performance of an algorithmic stablecoin. No, that demo gets fleeced via lottery scratch-offs and sports betting, and it's hard to blame people in their position for it. But these were (mostly) men with some money trying to get over, who got got instead. There is always at least one compelling reason to be opposed to any given grift, which is that grifters don't tend to be the sort of people who use their ill-gotten gains for the benefit of society, and then the second generation is Betsy DeVos. But every victim isn't equally sympathetic, and people seek to evade regulation so they can exploit other people are somewhat far down the list. Even if they remind some Mefites of their younger selves.

(I was appalled by the crypto ads during the Super Bowl. But a week ago, today's victims would've been the first to say that regulation of such advertising was the abuse of power of a parasitic government, etc.)
posted by praemunire at 5:11 PM on May 13 [8 favorites]


praemunire, without getting into it in in any detail I'd like to suggest you remember the you of a few hours ago acknowledging you got "unjustifiably salty" in a recent previous thread when you start to get into "no actually we should definitely hold everyone here in contempt" mode in this thread in turn. People who are not 100% acceptable target for outright hostility can make stupid financial decisions under the current system. Worth keeping in mind and keeping, if not humble, at least empathetic about.
posted by cortex at 5:19 PM on May 13 [7 favorites]


Come on. Poor people aren't staking their little all on the performance of an algorithmic stablecoin. No, that demo gets fleeced via lottery scratch-offs and sports betting, and it's hard to blame people in their position for it.

Do we actually know the demographics of who's getting screwed by crypto? I get a good number of ads in podcasts for both crypto and sports betting, and, frankly the ads are pretty similar, so there's clearly some belief out there that there's a demographic both things can prey on.
posted by hoyland at 5:20 PM on May 13 [7 favorites]


Thanks to folks who've called out the victim blaming comments here. To a first approximation, people who lost money in $UST (particularly Anchor deposits) are not criminally anything, they are the victims of criminals. Some were no doubt stupidly greedy, others negligent. But I think many were probably just naïve.

Or desperate. One particularly unpleasant thing I see in the crypto discussions online are folks who seem to genuinely believe Getting Rich Quick is their only hope to pay off student loans, or afford a house, or take a trip to Croatia, or just generally not feel broke all the time. And now there's a whole industry represented by folks like Matt Damon preying on them. See also: prosperity gospel.

Those Do Kwon tweets are something else! He uses the word "community" 5 times in 6 tweets. I appreciate atrazine's comment about just how weird this rhetoric is. Again, see also prosperity gospel.

it turns out that the USDC stablecoin (the #2 one) is basically “what if Tether, but not a scam?”

Well, sorta. USDC is Coinbase's stablecoin and, like Coinbase, they're walking the edge between being legal in US securities law while also trying to create a business which is fundamentally rooted in black market currencies rife with fraud. I think USDC's capitalization is probably mostly on the up-and-up, at least now. But then Coinbase also misrepresented the safety of USDC. Also last year Coinbase had to cancel a loan program they were running while claiming the loans weren't actually regulated securities. They were only promising 4%, not 20%, but also were misrepresenting the product they were offering. The SEC threatened to sue and Coinbase backed down.
posted by Nelson at 5:22 PM on May 13 [16 favorites]


the collapse of $30B worth of a supposedly stable cryptocurrency asset

This supposed stability is never, never, never going to eventuate unless and until the supply of the cryptocurrency tokens involved is managed by institutions at least as trusted and trustworthy as the central banks that manage national fiat currencies, using the same processes and considerations as those institutions use. As Yanis Varoufakis has repeatedly pointed out, the money supply is first and foremost a matter of politics. Crypto bugs who see that as a problem rather than an essential, and honestly believe that some putatively impartial algorithm could possibly be a workable substitute, have got rocks in their heads.

I can easily imagine a future where at least one national central bank implements part of its country's fiat currency supply in the form of its own tokens issued on e.g. the Stellar blockchain, if the national government saw doing so as advantageous. The fact that neither you nor I can perceive any such advantage might not be an impediment: the example of El Salvador and Bitcoin clearly shows that national governments are not immune to playing bizarre financial games when it suits them.

A national cryptocurrency could also be implemented as ERC20 tokens on Ethereum, but although the Ethereum blockchain has the necessary support for multiple independently issued tokens that Bitcoin's lacks, Ethereum's system design is at least as awful as Bitcoin's. Its consensus protocol relies on a very similar proof-of-work scheme that's now wasting energy on a comparable scale. If it ever manages to cut over to proof-of-stake instead, a move that's been about to happen Real Soon Now for years at this point, it will rapidly become an oligarch's plaything to an even greater extent than it already is. Plus, transactions on it are already so expensive as to make PayPal look good by comparison. All it's really got over Stellar is better name recognition.

But any token supply scheme that isn't tightly coupled to a national politics is only ever going to create tokens whose value is set only by speculation and is therefore permanently volatile and/or subject to sudden and total collapse. Speculation in any decentralized blockchain's native tokens is therefore purely and exactly gambling, morally equivalent to playing poker, and anybody who promotes cryptocurrency as some kind of respectable "investment" is a liar.
posted by flabdablet at 5:24 PM on May 13 [11 favorites]


Nelson: "Those Do Kwon tweets are something else! He uses the word "community" 5 times in 6 tweets."

The last one says:

"6/ What we should look to preserve now is the community and developers that make Terra’s blockspace valuable – I’m sure our community will form consensus around the best path forward for itself, and find a way to rise again."

The fiction that the "community" has any value in itself apart from a way of grouping a vast amount of marks in one easy-to-access space, is mind-boggling.
posted by signal at 5:28 PM on May 13 [7 favorites]


HODL:Hang On for Dear Life::Hodor:Hold the Door
posted by shoesfullofdust at 5:29 PM on May 13 [6 favorites]


What we should look to preserve now is the community and developers that make Terra’s blockspace valuable

Wow, he really went with "and isn't the true value of crypto the friends we made along the way?"
posted by gwint at 5:36 PM on May 13 [46 favorites]


And you pay taxpayer back if the assets decline in value, right?

Is this supposed to be a gotcha question? Because you can, in fact, deduct losses from future years profits, yes.

But honestly: So what? Stock markets are risky, and you may lose money some years. Doesn't change the fact you made money earlier years, and there's not a constitutional right to get rich on unrealized gains that would be infringed by paying taxes on them.
posted by mark k at 5:36 PM on May 13 [9 favorites]


Late in the game for this but this tweet thread is a reasonable summary of the mechanics of how the UST/LUNA pair worked and its relationship to Bitcoin. I can't vouch for its accuracy but it matches the other explanations I've read, particularly Levine's.
posted by Nelson at 5:38 PM on May 13 [2 favorites]


"no actually we should definitely hold everyone here in contempt" mode in this thread in turn.

My original comment was in response to the idea that crypto speculators were just "ordinary folks" losing money they couldn't afford to lose. I don't believe that to be generally true, and I find it distasteful to frame the group in that light. Unlike some here, I don't celebrate their losses, except to the extent that they help bring the quicker end of the broader scheme, which in this case they probably won't. But they're not Ma and Pa Kettle whose bank sold them worthless bonds, either. I'll leave it at that.
posted by praemunire at 5:39 PM on May 13 [9 favorites]


Do we actually know the demographics of who's getting screwed by crypto? I get a good number of ads in podcasts for both crypto and sports betting, and, frankly the ads are pretty similar, so there's clearly some belief out there that there's a demographic both things can prey on.

You're right, but from what I've seen, which admittedly isn't definitive, it's the middle class that can go for both. For those for whom it's simply gambling, gambling's appeal is universal through the class system, but some people go to private card parties at Gstaad and some people buy scratchoffs from the local bodega.
posted by praemunire at 5:41 PM on May 13 [1 favorite]


I cheer for the collapse of a Ponzi scheme despite the very real harm it inflicts on the victims, because collapse is the only way to stop it from claiming even more victims.

I don't think this is the first time this has happened though - it's likely not the last until the gov steps in to regulate it
posted by Selena777 at 5:45 PM on May 13 [2 favorites]


The SEC threatened to sue and Coinbase backed down.


Thank you, Nelson, for your nuanced reply. I definitely agree that Coinbase and Circle are no angels, but backing down when the regulators show up with a beef is pretty much how "playing by the rules" works. Any business participating in the crypto space is automatically suspect in my books, after all. But I give these guys a modest amount of credit for playing a relatively clean game.

I expect Tether to implode soonish, and if that doesn't bring the whole crypto edifice down, I think USDC will survive to dominate the niche. I mean, I still think it's an enabler of shady shit at best, but when I look at it with my Capitalist Eyes, I see a stodgy but successful business.
posted by notoriety public at 5:46 PM on May 13 [2 favorites]


mark k, not a gotcha question. Just something I don’t see discussed when people propose taxing unrealized gains.

For me, the scandal here is that under current federal law, the billionaire oligarchs can pass their fortunes to their heirs without ever having a “taxable event”. When Zuck bites it, his Meta shares go to his heirs. There’s no taxation event, no estate tax, no nothing, and the cost basis on the assets now held by the heirs is at the valuation when the heirs acquired them, not when Zuck acquired them. The gains made between original acquisition and passing them to the estate are never taxed. I’m not opposed to a wealth tax, but mostly I just want the gains to be taxed sometime and not never. But it ain’t up to me.
posted by chrchr at 5:55 PM on May 13 [12 favorites]


when I look at it with my Capitalist Eyes, I see a stodgy but successful business.

Yeah, that's definitely Coinbase's shtick, they're the polite US company. The fact they tried to break the rules and then complained loudly when caught at it makes me more skeptical. They backed down (they have no choice, they're a publicly traded US company) but weren't exactly nice about it.

What remains to be seen is how much legitimate financial activity there is in cryptocurrency; so much of it is driven by money laundering and scams. I have more faith that some as-yet-unknown federally backed digital money will work better. There's many in the works, even the US Federal Reserve is working on it. When those happen I think the current unregulated cryptocurrencies will go the way of e-gold and Liberty Dollars.
posted by Nelson at 6:04 PM on May 13 [3 favorites]


JimCoin is the only stable blockchain cryptocurrency because it's the only one backed by physical assets: blocks and chains.
posted by Harvey Kilobit at 4:16 PM on May 13 [14 favorites +] [!]


I'm glad at least one comment in this thread makes some sort of sense to me.
posted by bondcliff at 6:05 PM on May 13 [16 favorites]


My original comment was in response to the idea that crypto speculators were just "ordinary folks"

The distinction between what your comment was in response to and how your comment actually reads is important and worth paying attention to, basically. I think crypto is a giant horseshit scam-plex too but one of they key aspects of how it has juiced more money out of the last year or so is its aggressive targeting of retail rando marks who aren't the insufferable all-in crypto diehards it's easy (for me and others) to shit on. Again, Superbowl celebrity endorsements aren't about playing to the in-the-weeds diehards. The bottom level of the ponzi are the people least implicit in the shitty motives of the top-tier instigators.
posted by cortex at 6:14 PM on May 13 [14 favorites]


some people go to private card parties at Gstaad and some people buy scratchoffs from the local bodega.

And some people are getting targeted hard by ads for newly legal sports betting in NY and it is absolutely not rich people. And they are also getting crypto ads. And it's not the "private card parties in Gstaad" crowd.
posted by hoyland at 6:23 PM on May 13 [3 favorites]


praemunire : My original comment was in response to the idea that crypto speculators were just "ordinary folks" losing money they couldn't afford to lose. I don't believe that to be generally true, and I find it distasteful to frame the group in that light. [...] But they're not Ma and Pa Kettle whose bank sold them worthless bonds, either. I'll leave it at that.

Here's the thing: this view was almost certainly correct, at least up to 2015 if not later. However, I would suggest that things have changed recently (say, maybe since 2020?). Like any pyramid scheme, there's always a need for new marks and their money to keep the grift going. And, while the earlier phases of crypto were generally concentrated among the Reddit/HackerNews/LessWrong/etc... crowd, it's pretty apparent that the current phase is setting its sights on the so-called "ordinary folks". Specifically, people don't buy advertising time during the Super Bowl for commercials featuring Matt Damon or Larry David if they're trying to target some niche audience; you do this when your target is pretty much everybody in the US. On a smaller scale, I've been hearing occasional crypto ads on ordinary FM radio, top-40 pop stations, another sign of broad targeting. Now, while I don't have any stats regarding what the composition of the current batch of cryptocurrency holders are -- and there's certainly an abundance of the aforementioned Reddit-ish crowd given their visibility on Twitter and elsewhere -- I think I can safely propose that the people pushing crypto are definitely making a concerted effort to lure in the Ma and Pa Kettle.
posted by mhum at 6:40 PM on May 13 [14 favorites]


This push to get the masses involved is strong but it seems recent. For a long while it seemed like they didn’t even care if women used their money/investment vehicle/lottery.
posted by Selena777 at 6:46 PM on May 13 [1 favorite]


Recent meaning in the last year or so. People heard about all the huge gainz and hopped aboard. My wife made … a lot. She sold it and feels very distasteful with herself for how much she bought into a zero sum game where she probably sold that ethereum (at the actual peak, she’s both smart and lucky) to another random person.

Happy news though? She worked at a non-profit that helped at-risk or dropout people get their GED. I met a lot of them at the funeral in… september? Around then. for a very old carpentry teacher they had. A lot of them had kickstarted their lives from extreme poverty/jail to doing well based on crypto. A guy paid all his jail fees I learned from just buying the dip and selling at the rebound. I hope they’re all doing well, they had actual jobs now doing all sorts of things they seemed into.
posted by OnTheLastCastle at 7:03 PM on May 13 [6 favorites]


These kids were sharks. They had no fear. I wish I could recreate meeting the three of them for you all. They knew exactly what they were doing it seemed like which was working a scam system perfectly legally and easily. And I never got the feeling they planned to stay in it, hence their doing other stuff.
posted by OnTheLastCastle at 7:05 PM on May 13 [2 favorites]


USDD: Because 40% APY is totes sustainable……and clearly not a big old ponzi.
posted by inflatablekiwi at 7:29 PM on May 13 [2 favorites]


1. there's no such thing as an honest mark

2. legend has it that one person got out of the stock market in 1929 when he was getting his shoes shined and the guy gave him a hot stock tip - he realized then it was time to get out

3. the electricity goes off, so does the money - it's only virtual money, it's not real, there's nothing backing it up and and you may as well fill your hand with wishes as with bitcoins

4. at least tulips were pretty
posted by pyramid termite at 7:40 PM on May 13 [11 favorites]


I shared praemunire's suspicion that cryptocurrency is overwhelmingly a middle class or above thing. I also thought it was overwhelmingly white males. Turns out that demographic profile does not appear to be true these days.

Here are some interesting stats, self-report of course. While there is no direct info about salaries or net worth, based on other habits (such as use of payday loans), it sure seems like there is a large contingent of crypto users who are poor. Hispanics are also overrepresented.
posted by Flock of Cynthiabirds at 8:07 PM on May 13 [13 favorites]


HODL/Hodor ..... you're the guy holding the door so that the crooks can make it off safely with your money
posted by mbo at 8:33 PM on May 13 [1 favorite]


Yeah, there's been a rash of recent articles about poorer folks latching onto crypto; here's one in WaPo from December, quoting a different study than the one Flock of Cynthiabirds linked above:

Locked out of traditional financial industry, more people of color are turning to cryptocurrency:

A survey last summer by NORC at the University of Chicago found 13 percent of Americans reported having purchased or traded cryptocurrencies in the past 12 months. Of those, 44 percent were non-White, 41 percent were women and 35 percent had annual household incomes of less than $60,000. The average trader was under age 40 and did not have a college degree, according to the survey.
posted by mediareport at 8:37 PM on May 13 [7 favorites]


Yeah, Matt Damon in particular has been getting dragged all over social media for his crypto ads; having multiple crypto ads during the SuperBowl with major mainstream celebrities really feels like a crossing-the-Rubicon moment when a lot of people who were only vaguely aware crypto existed started getting interested.

The best celebrity follow on crypto, btw, is Ben McKenzie (yes, the guy who played Ryan on The OC), who is an articulate and funny anti-crypto activist and who's been very loud in calling out celebrities who shilled for crypto.
posted by Eyebrows McGee at 8:43 PM on May 13 [11 favorites]


I have to admit, a bit of it is schadenfreude because given my background, in a just barely adjacent universe I mined bitcoin for the hell of it in 2011 and then sold it all for millions last year.

I downloaded a miner back in 2009 when they were still using CPUs. And then turned it off later in the day because it slowed down my Photoshop. And then never opened it again.

Sometimes I get upset about it because, you know. I could be a literal billionaire. But then I think, probably I would have traded them all for a delivery pizza a year later, because, you know. Free pizza.
posted by Jairus at 9:04 PM on May 13 [10 favorites]


When I see HODL, the image in my head is of Jim Cramer telling people to buy Bear Stearns.

Or Jim Cramer proclaiming that Lenny Are You Fucking Kidding Me Dykstra was some sort of financial genius. Or, Jim Cramer.

Sports betting is also exploding, buy-now-pay-later apps are being used by people to pay for food - it just seems like stripping people of money in order to make money is becoming easier and more prevalent than it's been in a while.

There's another current thread on the blue about people just kinda saying fuck it and buying whatever. Seems related, maybe.

And WRT celebrities hawking this shit, I unfollowed Brie Larson on Twitter when she very publicly endorsed a particular brand of NFT, making it her avatar, and saw the split between people very earnestly begging her to reconsider, and other people who had "invested" in the same NFT dittoheading like crazy.
posted by Halloween Jack at 9:19 PM on May 13 [1 favorite]


> US Federal Reserve is working on it

It's a bit daft that they need to "work on" cryptocurrency, given that they have a perfectly obvious solution right in front of them: they're a bank. They could just... give everyone a bank account.

None of this faffing about with blockchains.

Managing 300M accounts probably doesn't even get you fancy hardware. You could do it with a couple of racks of stuff (one in every major Federal Reserve office building, for redundancy and DR).

I can think of a bunch of reasons why we don't have this today, but none of them are really technical reasons. And all of the nontechnical reasons, plus some technical ones, apply to a blockchain/crypto-based solution.
posted by Kadin2048 at 11:15 PM on May 13 [9 favorites]


You know who the first thinker was who advocated for WAGMI? A little man named Karl Marx.
posted by Going To Maine at 12:25 AM on May 14 [1 favorite]


If anyone figures out how to short Tether let me know.
posted by NMcCoy at 12:51 AM on May 14 [6 favorites]


Re demographics, I've said this before but recently there are these Bitcoin "ATMs" popping up in gas stations around here ("ATM" in quotes because you can only use them to buy cryptocurrency with dollars, they don't offer any way to convert your cryptocurrency back into dollars and cash out).

Are they in the wealthy neighborhoods, or are they in the gas stations across the street from the public housing developments? Take a wild guess.
posted by subdee at 5:48 AM on May 14 [11 favorites]


And I know this, BTW, because my husband bought $300 Ethereum on the advice from a friend at one of those "ATMs" and then tried to use the same ATM to cash out when the market was at 4x. He couldn't figure out how to do it and then the market crashed. This is the level of tech-savvy of many recent investors.
posted by subdee at 5:52 AM on May 14 [11 favorites]


HODL explained

Indeed
posted by CynicalKnight at 5:57 AM on May 14 [1 favorite]


When a theoretical blockchain theoretically crashes in cyberspace, does it make a theoretical sound? -- causing theoretical marketeers to theoretically jump out of theoretical windows?
posted by mule98J at 6:14 AM on May 14 [1 favorite]


Also on the demographics front, I was connecting to the MTA wifi this morning and one of the ads was for some sort of cryptocurrency. I don't think of the MTA wifi ads as particularly targeted (vs say the ads I get on some podcasts, which definitely are)--they're likely bottom of the barrel RTB stuff, but I do think it's an indication that there is clear desire to have "normal" people and not just tech bros losing money in cryptocurrency.
posted by hoyland at 6:24 AM on May 14 [1 favorite]


flabdablet: "I can easily imagine a future where at least one national central bank implements part of its country's fiat currency supply in the form of its own tokens issued on e.g. the Stellar blockchain, if the national government saw doing so as advantageous."

Could but probably won't. Central bankers are not unaware of cryptocurrency, obviously, and there is a working group of central banks, coordinating through the Bank for International Settlements, to work out the kinks of "central bank digital currency." In the model that I am aware of, a central bank issues CBDC to intermediary banks and simultaneously creates a liability (essentially, a national bond) to back it, and when the CBDC is redeemed, the liability is erased.
posted by adamrice at 6:40 AM on May 14 [1 favorite]


I did a few interviews with a cryptocurrency company that supplies miners with... things. A marketplace to buy/sell? Financing? Mining Pools? Staking? I'm still not really clear about what they were into.

Well, we talked about my software testing background, which they really liked (I got the sense that there were a lot of junior programmers with 3 years or so of experience in over their heads) but ultimately they were turned off by my "lack of enthusiasm" about cryptocurrencies. I feel that making good software is the process I care about. Not what the software does. That's the user's thing.

I considered it a feature, not a bug, since when I told my wife about it I qualified the gig as, "It's one of those jobs where you get paid well until -- one day -- nothing gets deposited into our checking account..."
posted by mikelieman at 6:47 AM on May 14 [8 favorites]




I like the cut of that fellow’s jib.
posted by notoriety public at 7:46 AM on May 14 [1 favorite]


I am at maybe a "Crypto 102" level, and am wondering if someone would venture an answer to the following question. A "stablecoin" is supposed to be stable. That's the ... best-case scenario? Why would I place money in a mutual fund, by analogy, that would at best stay worth $1 per unit, but if things went bad somehow, the downside is unlimited? i.e., Why would I place money in a money-market fund that paid 0.00%? (For the purposes of this question, pretend money-market funds actually pay something notably better than that....)

So I read CNET's "What's a stablecoin?" section in the first link above. What I'm getting is that stablecoins are a way to switch in and out of volatile cryptocurrencies while staying in the crypto universe? Their example is selling Ether to get a stablecoin because you believe Ether will drop, then buying Ether back. Here, stablecoin would just be "US dollars" (etc) otherwise. Are these switches done entirely without recourse to a traditional currency though? If I use some platform like Coinbase (know nothing here either), does it internally go from Ether->USD->stablecoin in this example? If so, why not stick with USD? Are blockchains somehow linked in a way that USD never needs to be in the middle of the switch? That is hard to imagine.

Thanks for any insights.
posted by sylvanshine at 7:46 AM on May 14 [1 favorite]


"I can easily imagine a future where at least one national central bank implements part of its country's fiat currency supply in the form of its own tokens issued on e.g. the Stellar blockchain, if the national government saw doing so as advantageous."

The thing is, once you agree that trust matters, and that there should be such a thing as accountability or that fraudulent transactions should be reversed - that is, once you concede, even a hair, that trustworthiness should matter, then the entire blockchain exercise just evaporates. The only reason you need this massive, slow, stupid zero-trust consensus engine is specifically so you can solve the double-spend problem in a zero-trust context, which is in turn only a problem that exists because those transactions are immutable.

The very instant that's not the case, the entire reason you need a blockchain just ends. Once you admit that trust matters or that the double-spend problem isn't really that big a deal and can be fixed any other way, the entire cryptocurrency exercise - the whole thing - can be run on a Raspberry Pi.

That is not an exaggeration, that is how efficient this exercise actually is. Bitcoin, etherium, Solana, whatever - their entire transactional throughput could not saturate a Gig-E connection or make SQLite bat an eye. That's what zero-trust actually means. Massive amounts of wasted effort.

The chief use case of zero-trust systems are to give people who absolutely should not be trusted a thing they can point to and claim that the trust doesn't matter.
posted by mhoye at 7:49 AM on May 14 [40 favorites]


A stablecoin is not so much an investment but really just something crypto speculators park money in to move in and out of tokens. They use stablecoins for that instead of actual cash because the exchanges that speculators use are not banks and don’t have access to real capital making it onerous to use actual money and easy to use fake crypto stablecoins.

In your example, Coinbase is a real U.S. corporation that tries to sort of comply with regulations. They might actually let you hold USD. Most exchanges are unregulated and USDs are difficult for them to handle so they use stablecoins exclusively.
posted by chrchr at 7:53 AM on May 14 [3 favorites]


Thanks chrchr... a simple follow-up: isn't the goal most of the time to make money in a real currency? If you can't actually hold/handle (withdraw?) USD, what is all of this?
posted by sylvanshine at 7:56 AM on May 14 [2 favorites]


Thanks chrchr... a simple follow-up: isn't the goal most of the time to make money in a real currency? If you can't actually hold/handle (withdraw?) USD, what is all of this?

I've been trying to better understand this as well over the last few days and I think one thing it comes down to is that USD<=>crypto is hard, and crypto<=>crypto is easy (or a lot easier at least). So if someone is gambling in random crypto stuff, and wants to cash out of a risky token without a specific immediate next plan, it is by far easier to move it into a stablecoin until they decide what to do next than to move it into USD.

Also, this particular stablecoin was tied to a ponzi scheme that was supposed to guarantee 20% return. So it was simultaneously marketed as safe/non-risky, while promising rather implausible profits. The Current Affairs interview with Nicholas Weaver linked above has some helpful insight on this as well. Two key passages:
Effectively, then, the economic analogies are gambling and a Ponzi scheme. Because the profits that are given to the early investors are literally taken from the later investors. This is why I call the space overall, a “self-assembled” Ponzi scheme. There’s been no intent to make a Ponzi scheme. But due to its nature, that is the only thing it can be.

[...]

Now, why would you use Terra at all? Well, one, this is a stablecoin and these are necessary for the gambling aspects of cryptocurrency. They act basically as casino chips, because almost all of the cryptocurrency exchanges are really cut off from the banking system. But the other reason is, because you could take your Terra stablecoin, put it in a lending protocol that was created by the creators of Luna and Terra and get a 20% rate of return paid for by Luna and Terra, a.k.a. a Ponzi scheme.
posted by advil at 8:04 AM on May 14 [3 favorites]


As discussed above, one big reason people were buying the stablecoin $UST (via Anchor) was because they were being promised 20% interest payments. It was marketed as a savings account with very high interest rate. (Yes, this is basically fraud.)

The stablecoin Tether ($USDT) serves a slightly different role. It's used as a proxy for actual dollars in Ethereum contracts. I want to say "I'm selling 420 Florpcoins for $69". But there's no way to transact actual US dollars via a blockchain. So instead you write the contract as 420 Florpcoins for 69 USDT. The main purpose of USDT is to always, always be worth exactly one dollar but be a cryptocurrency. That's what makes it so incredibly dangerous. Tether is a fraud and when it finally collapses it's going to blow up a lot of Ethereum business with it.

(I'll note the cryptocurrency markets have sort of calmed down in the last 24 hours. But $USDT is still having trouble maintaining its $1.0000 peg. It's at $0.9982 right now. Before this recent turmoil it was always within $0.9998 to $1.0002.)
posted by Nelson at 8:06 AM on May 14 [5 favorites]


isn't the goal most of the time to make money in a real currency?

See that's one of the many blindingly obvious ways the whole thing is a scam.

Supposedly, the entire point of cryptocurrency is to replace "fiat money." Bitcoin is the future. It's foolproof. It's more reliable than US dollars because it doesn't need a government. All it needs is math. Why would you ever want to convert from crypto back to fiat?

But the whole time they are spouting that nonsense, the cryptobros are also bragging about crypto like it's an investment with particularly great returns. For the past few years, the story of Bitcoin hasn't been "look how much better this works as a currency" (it doesn't), but look how many more US dollars it's worth than last year.
posted by straight at 8:31 AM on May 14 [18 favorites]


If you intend to do a bit of recreational gambling with cryptocurrencies and you don't begin by opening an account with an exchange that's (a) based inside your own country (b) lets you hold a balance denominated in your own country's national currency and (c) complies with all of your own country's legal requirements for organizations that offer (b), then you're at severe risk of having lost before you've begun.

The process of setting up an account with such an exchange typically involves providing similar amounts of personally identifying information to that required to set up a bank account. If you're setting up an exchange account that purports to let you hold fiat currency balances separate from your crypto coin balances, and you're not being asked for that much ID, then you're almost certainly in the process of being scammed.

On the other hand, simply being asked to fork over enough PII to enable complete identity theft cannot possibly, in and of itself, guarantee that you're not. The idea that real-world cryptocurrency trading requires trusting only an algorithm is therefore frankly ludicrous. Know who you're dealing with before you pay them any money, and if they're dodgy, don't.
posted by flabdablet at 9:09 AM on May 14 [4 favorites]


Yeah, a big part of the whole thing is the same story that pops up in failed tech stories repeatedly: A bunch of tech bros wanting to make a lot of money enter a market to disrupt it, and do so by ignoring all the laws and regulations that have developed over 100 years (or hundreds of years!) to guard against catastrophic mistakes. (Like, why are Chicago suburban taxis so wildly overregulated? Because of the mafia using taxis for crime. I would prefer not to ride in an unregulated ride-share, thank you, because I am aware of the history of Chicago-area taxis.)

Crypto is easiest to understand if you start from the base of, "What if we completely didn't understand how currency works, let alone how fiat currency works, and we decided to totally reinvent money from first principles?"

And then add, "And what if we decided to do so from a position of zero historical knowledge about how markets work, how bubbles work, or even wtf went on with Dutch tulips 400 years ago? And what if, from a position of complete ignorance of history or theory, we tried to invent a 'currency' that basically replicates all the worst parts of the stock market, where bubbles with no underlying fundamentals can pump up and crash stocks, and where rentiers can make a lot of money on millisecond trades?"

People trying to understand crypto and failing are usually making the error of assuming that there must be some underlying value proposition, because that's how currency works. But there's not. Currency starts as a mechanism for storing value, literally by giving people receipts for grain they put into granaries in the bronze age, defended by the local military. You could give your receipt to someone else to let them have your grain. Over time, it gets more fungible (often as metal coins), largely to make barter easier, by allowing you to store value for non-immediate bartering or for times when you have a lot of stuff to barter and the other guy has not much. As money gets more abstracted from underlying goods, those goods are still there. Someone is still actually growing grain and selling it for actual money. (I mean, the Chicago Board of Trade is functionally still bronze-age dudes trading grain receipts, and offering to buy soon-to-exist grain receipts in advance of the harvest.)

As this all gets more and more abstracted, and people and corporations produce more goods and services more efficiently, it gets harder to convert value into metal and back. Fiat currency basically says, "There's a ton of underlying value in our nation's economic activity producing goods and services, but storing gold bars is inefficient. It's much more efficient if we just say, 'You know, we're the government, we can tax people. Money is worth this much, and if we need some, we'll tax people for it.'"

Crypto has no underlying goods or services (except arguably crime and money-laundering -- those are both activities that can produce a lot of value! -- but criminals and money-launderers want to be in dollars or another highly-stable currency. $1 trillion of money is laundered every year; bitcoin's market cap is only $500 billion. It's just not useful for large-scale laundering.) ExxonMobile, Citigroup, Pfizer, GE -- they all produce goods and services that people want. (And it's notable that publicly-traded financial companies that want people to invest in them are hugely regulated because it wasn't even 100 years ago that less-regulated banks all collapsed, wiping out all their value.)

But there are no goods or services underlying crypto except crypto itself. If we try to think of it as a stock, it's like an unregulated bank of the 1920s with no fractional reserves or government regulation, just a ledger. If we try to think of it as a fiat currency, it's a government with no ability to tax anything. If we think of it as an alternative currency, it's company scrip with no company store. (Honestly it's Kohl's Cash -- there's a dollar value on it but only very limited opportunities to redeem it for goods or services, with no way to convert it back into dollars. If you try to think of running an entire economy by convincing other people to buy your Kohl's Cash, it becomes very clear why crypto is worthless.)

Crypto runs on optimism about crypto, because the only underlying good or service it offers is crypto. And we know exactly what that is -- that's a market bubble. It's the Dutch tulip mania, except that after the tulip market collapses and makes everybody broke, at least you still have some pretty flowers. Optimism about future value of an item that drives market speculation that vastly outruns the intrinsic value of the item is a bubble, and bubbles pop. But at least if there's a frantic run-up of the value of GameStop stock, far outstripping GameStop's value, there's an actual company selling video games that's worth something. There were actual tulip bulbs worth something. Russia's ability to tax its people is worth something, despite the collapse of its currency. Crypto has nothing underlying it, and nothing backing it.

So you're either betting that everyone just believing really hard in crypto can drive its value up forever (I don't know if this is selling indulgences in medieval Europe, or Theranos); or you're betting that you can run an economy on convincing people to buy Kohl's Cash from you; or you're betting that crime and money-laundering is a valuable enough industry to prop up an entire currency despite governments have a lot of incentive to arrest people for felonies.

---

The other super-fundamental underlying problem for crypto is that you have to put the servers somewhere. You can put them in a relatively stable country with the rule of law -- let's say Canada -- where government authorities will respect your ownership claims to your servers and your data, but those governments are going to insist you obey their other laws about money-laundering, about committing crimes, about obeying financial regulations. Or you can put them in country where the rule of law is weak, and you can avoid financial regulations and dodge criminal charges ... but the government isn't going to protect you from other criminals who want to steal your stuff, and the government itself may steal it. Or you may end up on a blacklist that prevents you from exchanging anything out of your crypto or your local currency into stable-value currencies.

You can't both have the ability to exchange crypto into dollars and euros AND dodge financial regulation. If you want to play in the stable-currency playgrounds of the world and be protected from criminals, you have to play by the rules. If you want to exist in the wild west of the financial world, you're going to lose access to stable currencies and recourse to the rule of law. Crypto claims it can do both, but that's obviously not true. The wheels of justice turn slowly, but they grind exceedingly fine -- anyone saying crypto will be exchangeable for dollars AND unregulated is either delusional or is pumping the currency up to cash out before the regulators eventually arrive.
posted by Eyebrows McGee at 9:52 AM on May 14 [54 favorites]


For those who are keeping track (like me, I got my popcorn right here), another $2B unstaked from Tether last night. That’s $6.6B pulled out since before this little unpleasantness, about 7.9% of the total token count at that time.
posted by notoriety public at 10:03 AM on May 14 [2 favorites]


Interesting, notoriety public. Is there any more I can read about what destaking Tether means? Is it a natural consequence of people converting $USDT to real dollars? Or is it something Bitfinex (the company administering Tether) is doing to keep the price up? I've been following this story by using the market cap chart on CoinMarketCap, is that a good source?

My memory is that the usual story with Tether is the price starts getting weaker and then magically Bitfinex increases the stake to keep the price at $1.0000. There's a lot of questions about whether the US dollars Bitfinex claims to be adding really exists.
posted by Nelson at 10:35 AM on May 14 [1 favorite]


Destaking is the same as taking your money out of the bank. If the bank runs out of cash to cash you out, and can’t liquidate other holdings fast enough, that’s a bank run. With Tether, we don’t have any idea how much cash they have, or how many liquid assets that they could conceivably liquidate fast enough, or even if they have enough assets to cover at all.

If they invested badly, or (rather more likely) they stole the money or lied about ever having it (which you touch on with your correct observation that they’ve magically whomped up more stake every time this has happened before), that means there’s a certain level of withdrawal that they will be unable to cover, and they will suddenly stop allowing redemptions because they don’t have the money.

On that day, Tether goes straight to zero. I don’t know exactly what that means for crypto as a whole, and I don’t think anybody else does either. I’m sorry I don’t have particular links to read up on- I’ve been doing my own research (in the genuine sense of looking around at public information and drawing conclusions based on 20+ years experience as a programmer in finance), and this is my read so far.

I hadn’t read about the magic stake conjuration, but I observed (literally yesterday because I am fairly new to the details here) that the token count for Tether had NEVER gone down by more than a trivial amount before this week. At least not at the resolution of the data I had on hand. And that makes absolutely no sense.

In the world of ETFs, one can create or redeem shares of the ETF, exchanging baskets of stocks for ETF shares, or vice versa. This is a mechanism by which the ETF price stays in line. If it’s too rich, sell it for more money than it takes you to create ETF baskets to deliver. If it’s too cheap, buy it, crack it into stocks and sell those for a profit.

Seeing that process not happen in both directions for Tether (until this week) set off every Spidey Sense my work experience has given me. That absolutely screams at some kind of market manipulation.
posted by notoriety public at 11:14 AM on May 14 [11 favorites]


"ATM" in quotes because you can only use them to buy cryptocurrency with dollars, they don't offer any way to convert your cryptocurrency back into dollars and cash out

There do exist some that will give you cash for crypto, but they are often out of cash and the spread is even worse than it is on the buy side. Last one I saw was buying crypto for around 12% below market. Plus you have to wait around a good long while for the transaction to be included in a block and then for two or three more blocks to generate so they can be sure the transaction is really final. Convenient it is not.
posted by wierdo at 12:00 PM on May 14 [4 favorites]


Yep, schadenfreude is a funny concept.
posted by firstdaffodils at 12:23 PM on May 14 [1 favorite]


"and if you need to drop into the argumentative rathole, the hackernews discussion is likely a good read"

That Hacker News thread is amazing. Just the total naivete about history and anonymity and the inviolability of the blockchain. My favorite is the comment from the guy in Canada who decided to get into crypto after the trucker protests in Ottawa because he wasn't allowed to donate to the protests through GiveSendGo after a judge ordered it stopped, and he wants to be able to donate to anti-government activists anonymously, for his own protection from the state.

In no particular order:
--Then why are you announcing your intention to donate to violent right-wing terrorists with a persistent pseudonym on Hacker News, while also announcing in what jurisdiction you live?
--Why do you think ycombinator isn't immediately complying with a government subpoena for all your data they possess?
--What makes you think that if the government shut down GiveSendGo, they couldn't also come after whatever blockchain you decide to live on?
--What makes you think that if hackers broke into GiveSendGo to get a list of donors, hackers couldn't also break into your crypto or your computer and either steal your crypto or out you?
--What makes you think that once someone's been declared a terrorist, as long as their funding sources are hard to track, the government's going to just shrug and give up rather than imprison or kill the terrorists? Like, congrats on successfully obscuring yourself as a funding source, but your money is just going to keep disappearing and being of no use as you give it to terrorists who immediately get arrested.

Like how can you be so distrustful of government power, but think the government has no power to come after the blockchain?

And again, the servers have to be physically located somewhere. That means they're either subject to regulation by the host country, or lacking all protection from the host country. Despite repeated attempts throughout history, you can't really escape from government without recreating it, because it's the most efficient and convenient solution for super-common problems that will immediately arise again as soon as you get rid of government.

"Oh, we'll buy an oil platform in international waters and all agree to a contract to live on the oil platform" -- CONGRATULATIONS ON REINVENTING THE IDEA OF A CONSTITUTION, JACKASS.
posted by Eyebrows McGee at 12:29 PM on May 14 [22 favorites]




"Excuse me that is total garbage you are trying to hide the truth.. You are hiding the truth anyone who can read financial statements knows that you're *** lying"

George Noble Questions Tether's CTO Paolo Ardoino On Why They Won't Complete an Audit.

Jeezus, Ardoino's dancing around the question more or less seals it. Tether is going to blow up big time.
posted by storybored at 12:49 PM on May 14 [4 favorites]


[in the likely case that Tether is lying about the assets underpinning their coin] that means there’s a certain level of withdrawal that they will be unable to cover, and they will suddenly stop allowing redemptions because they don’t have the money

It's worth pointing out that both in absolute and I think percentage terms, more Tether has been taken out of supply (converted to cash presumably) in the last 2-3 days than in any comparable period of time in its entire history. On May 11 the market cap was at a high of about $84B, it is right now at about $77B -- literally more than 8% has been liquidated.

I don't think anyone has ever persuasively argued that there was literally nothing backing Tether; clearly, some redemptions do occur. But, if it turns out that as many have argued that they don't have nearly enough real assets to cover all the coins out there, as you say, there's a threshold where things will totally fall apart. The people getting paid out right now at $1:1 or $0.99:1 will get out relatively clean, but once you pass the point of no return everyone else gets $0.

Given how fast people are taking money out, it seems like there's a real chance of it happening (thank god!).
posted by a faithful sock at 12:54 PM on May 14 [5 favorites]


Oh, and you know, just in case you're thinking, "nah, things are fine, they're still redeeming, right?".

Bitfinex is offering interest rates > 30% if people please, please, just keep their Tether as Tether and don't try to redeem it.
posted by a faithful sock at 12:59 PM on May 14 [8 favorites]


I don't understand the 30% interest rate. If I were foolish enough to try to loan money at that rate, how would I do that? Is there some market where I give them US Dollars, they convert it to $USDT for me and pay me a 30% interest rate?

The evidence in the link is a tweet from Bitfinex/Tether's CTO, so I'll take the number at face value. Is this rate published on the Bitfinex' funding dashboard as FRR APR? What does it mean exactly? It's about 31.5% right now, on May 3 it was 9.3%.

Some interesting reading from Matt Levine's retweets: What’s Driving Tether’s De-Pegging?. An analysis yesterday from the order books at various USDT markets.
posted by Nelson at 1:44 PM on May 14 [3 favorites]


It makes sense when you realize that Bitfinex runs the Tether printing press. And is desperate to keep people from cashing their Tethers into dollars. But they can pay any rate of “interest” in USDT because they can print as much as they like. Won’t be backed by anything of course. Sadly, I bet plenty of people will be fooled.
posted by notoriety public at 2:01 PM on May 14 [2 favorites]


I don't understand the 30% interest rate. If I were foolish enough to try to loan money at that rate, how would I do that? Is there some market where I give them US Dollars, they convert it to $USDT for me and pay me a 30% interest rate?

It's not just USDT, the USD rate they're paying over 30% as well. Once a week Bitfenix goes over all their accounts and gives out interest just for keeping tokens and money in the account, just like a regular bank. The bank gets liquidity, pays the customer for it.

But if a bank started saying they'll pay you 30% on USD in a market where the prime rate is 4% you know they're fucking desperate for liquid cash. Especially when they're supposed to have giant piles of money in commercial paper they can easily liquidate.
posted by Your Childhood Pet Rock at 2:02 PM on May 14 [6 favorites]


I hadn't heard about crypto ATMs... they seem to be functionally equivalent to slot machines.
posted by i_am_joe's_spleen at 2:14 PM on May 14 [2 favorites]


Well slot machines are actually regulated
posted by Carillon at 2:17 PM on May 14 [21 favorites]


"I don't understand the 30% interest rate."

It's 1861. You're the Confederacy. You issue about $20 million confederate dollars, pegged to the US dollar, in the first half of the year. Your currency is technically a bill of credit, because it is not backed by anything -- neither a country's power to tax, nor actual reserves of gold or goods. Bills of credit are how the not-yet-US financed the Revolution (via "continentals," which also collapsed in value, but ended up functioning as a tax, partly because other currencies continued to circulate and partly because the US won the war); this is totally gonna work. You offer to pay 3.65%, one year after issuance.

It's 1862. Things are going pretty well, but you've had to issue more bills of credit. You're up to close to $300 million bills of credit, and must offer 8% interest, and promises for shorter redemption terms.

It's 1863. You lost at Gettysburg. Your currency deflated 20% overnight. You promise the people of the Confederacy that if they just hold on to their Confederate dollars, they will again appreciate in value when the Confederacy wins the war. You start intervening in markets to induce merchants to lower prices, so Confederate dollars are worth more. You start printing banknotes that specify the money can't be converted into gold until two years after a peace treaty. You leave the interest rate off the notes, but promise it will be a lot.

It's 1864. A Confederate dollar is now worth 3 US cents. A ham costs $300. Everyone has converted everything they can into precious metals, which cannot be acquired for love or money (or ham). You have issued $700 million now. President Lincoln just won re-election, Sherman is marching to the sea, and you are fucked.

For Tether, it's 1863, they've handed out $400 million in promises and are now offering frantic interest rates to keep people from cashing out and to try to remain viable long enough for General Lee to figure something out.

Intriguingly, Mississippi and Florida actually issued their notes with backing (Mississippi's by cotton stores in the state; Florida's by state-owned land), and their notes tended to hold value a little longer than other states' notes. But when belief in the Confederacy's ability to win the war -- the only way the vast bulk of notes could be redeemed -- collapsed, it took Mississippi and Florida's notes with it. Which is the question for all of crypto right now -- are the semi-responsible stablecoins going to be pulled into collapse along with the irresponsible ones, as people lose faith in the entire endeavor? Or can the collapse of Terra be isolated?
posted by Eyebrows McGee at 2:55 PM on May 14 [37 favorites]


I didn't ask for a basic explanation of how currencies devalue. I'm asking about the technical specifics of how Bitfinex loans money and sets spot interest rates. There is no cutesy 150 year old metaphor for those mechanics. Also there's no military backing Tether.

Once a week Bitfenix goes over all their accounts and gives out interest just for keeping tokens and money in the account

That's closer to what I was looking for. Apparently this is called Bitfinex Margin Funding. It's sort of the opposite of borrowing money on margin from a traditional brokerage; instead you're lending money on margin to other Bitfinex customers with the brokerage facilitating the trading (for a 15% cut!) That page says the interest payments are made daily, not weekly. You issue a loan at a term of 2-120 days and you have a variety of ways to set the rate.

The Flash Return Rate at the moment is 31.53% on an APR basis. This is significantly higher than the 9% rate it was 10 days ago and a sign that people really want to borrow money on the Bitfinex exchange right now. Having read all this I'm not sure this is a clear indication that Bitfinex itself is about to run out of hard assets. It indicates there aren't many people willing to loan money to Bitfinex / its customers right now, including Bitfinex itself.
posted by Nelson at 3:15 PM on May 14 [4 favorites]


Bitfinex is also, crucially, unregulated, so there is not much to stop them from suddenly telling the people with USD invested that the rule has been changed and their interest is going to be paid in USDT. Oh, and by the way, so will the principal!

What is Bitfinex going to lose from trying that, if they fundamentally don’t have the real assets to cover? Their reputation? The reputation is GONE if they can’t cash people out. Nobody can stop them from changing the rules. I mean, a regulator could. LOL.
posted by notoriety public at 3:43 PM on May 14 [3 favorites]


The explanation for Bitfinex’s high interest rates is that it’s a simple ponzi and they desperately need their customers to stop withdrawing money, so they offer more money to in the hope of slowing withdrawals. They can offer any interest rate at all because they have no intention — or ability — to honor withdrawals. The interest rate needs to be high enough to be attractive but not so high that credulous crypto speculators start asking questions. That’s all there is to it.

But I guess if you do want a geopolitical analogy, Russia hiked their interest rates this year as sanctions began to take hold.
posted by chrchr at 4:07 PM on May 14 [4 favorites]




Yeah, the crypto / anti-government / white supremacy connection is pretty strong. Not surprising that they’re losing their brown shirts in this crash.
posted by uncleozzy at 7:09 PM on May 14 [3 favorites]




Here's how you know that cryptocurrency is in its end game: at my local supermarket, there's one of those CoinStar kiosks. You know the thing: you feed it your random collection of loose change and it gives you a coupon or a gift card or some such. Recently, I noticed it now offers remuneration in Bitcoin. Bitcoin is literally scraping for sofa change to keep afloat. The number new greater fools to grift is running low.
posted by SPrintF at 8:37 AM on May 15 [1 favorite]


Coinstar has been offering Bitcoin for two and a half years now. They also offer Amazon eGift cards, perhaps Amazon too is at its end game.

"Bitcoin" is not "literally scraping for sofa change". Bitcoin is a protocol and a distributed database. Coinstar is scraping for sofa change; that is literally their business model. The Bitcoin integration is via a partnership with Coinme. Their business is making it easier to convert small amounts of cash into cryptocurrencies. If anything they are a vehicle for increased cryptocurrency uptake, not a sign of an end game.
posted by Nelson at 8:57 AM on May 15 [1 favorite]


No, you know the grift is in it's endgame because it's being heavily marketed to historically powerless communities: the people who won't have the leverage to get bailed out or ask for their money back.
posted by phooky at 9:16 AM on May 15 [15 favorites]


The sooner this Monopoly money nonsense and associate bro assholes dies the better.
posted by GallonOfAlan at 10:21 AM on May 15 [3 favorites]


Disadvantaged communities and people's retirement accounts .... See the recent news about Fidelity offering Bitcoin (and ONLY Bitcoin, not any other cryptocurrencies) as a 401(k) option. Needless to say, the dept of labor is not amused:

https://www.vice.com/en/article/xgdb3a/fidelity-bets-the-american-retirement-system-on-the-crypto-casino

Like a friend on discord said, u know Bitcoin is screwed when they are baiting in the retirement accounts (and ultimately, the federal government) to hold the final bag.
posted by subdee at 10:58 AM on May 15 [4 favorites]


OTOH, prices for high-end NVIDIA graphics cards are finally sub-$400 again or like another friend said, "nature is healing."
posted by subdee at 10:59 AM on May 15 [8 favorites]


I'm exposed to a lot of grandma-TV and there were a LOT of "put your 401(k) in crypto!" commercials a few months back, though they've abated. It was sickening and really hardened my stance against the entire idea of crypto in general.
posted by rhizome at 12:23 PM on May 15 [7 favorites]


Now they're advertising crypto retirement schemes on podcasts!
posted by Selena777 at 12:45 PM on May 15 [2 favorites]




There are zero victims here, only a shrinking pool of suckers looking to grift money off of other suckers, while there are crumbs left.

Or, as has been mentioned elsewhere, there are no honest marks.
posted by They sucked his brains out! at 8:08 PM on May 15 [1 favorite]


Bitcoin and others are terrible for the environment, they have set back any carbon goals by years.
I don't see why we have to have sympathy for people who lose everything on it, they were happy to screw over the world.

Its like if there was a Gorilla Brain Fund, they promise to use your money to hire poachers to kill gorillas and then sell the brains on the black market for great returns. But it turns out it was just a ponzi scheme, they only killed a few gorillas and the rest was just a scam.
Why would you feel bad for people investing in the GBF losing all their money?
posted by Iax at 10:36 PM on May 15 [12 favorites]


So, I do have a question here: LUNA is, as far as I can tell, still being actively traded on several exchanges, with prices fluctuating between a tenth and a hundredth of a penny. Are these just bots, people having a laugh, sub-penny stock HFT, what? There doesn't seem to be a concept of "delisting" in the crypto market space. I guess if they make money per transaction, why would they? Since there's no regulatory oversight, I guess it barely costs anything to process trades, so there's no incentive to ever take a coin down. (I suppose by the same token, ha ha, there's no incentive to ever say no to trading a coin, which is why every time someone farts it pops up on bitfinex or whatever.)
posted by phooky at 6:04 AM on May 16 [1 favorite]


I know someone (an actual person whose hand I have shaken) who posted on facebook yesterday "I just bought 250,000 luna for $60, am I insane?" I know this same guy also bought an NFT a few weeks ago. He's not an idiot and he's not a bro, but he might be a techno-optimist.
posted by adamrice at 6:18 AM on May 16 [2 favorites]


"Why would you feel bad for people investing in the GBF losing all their money?"

Because people who really care about the environment can only exercise political power - to the extent that they can - as part of a coalition that includes people who don't have much money and reconciling the - often disparate in the short term - interests of these two groups (when they don't overlap) probably involves some sympathy towards victims of get rich quick schemes if poor people are targeted. That being said, there appears to be some dispute regarding who the average crypto person is right now.
posted by Selena777 at 6:38 AM on May 16 [2 favorites]


"I just bought 250,000 luna for $60, am I insane?"

I mean, I guess if he's only in $60, and that's disposable income to him, that's not insane. At least it's not really any crazier than going to Pimlico and putting a couple of 20s down on a long-shot horse because you like the name.

Though, at least the ponies' horseshit can be used as fertilizer.
posted by Kadin2048 at 6:54 AM on May 16 [5 favorites]


I know someone (an actual person whose hand I have shaken) who posted on facebook yesterday "I just bought 250,000 luna for $60, am I insane?" I know this same guy also bought an NFT a few weeks ago. He's not an idiot and he's not a bro, but he might be a techno-optimist.

I mean... they've already lost around $26.
posted by DirtyOldTown at 8:17 AM on May 16 [3 favorites]


You mean they have an additional $26 of opportunity!
posted by Etrigan at 8:24 AM on May 16 [1 favorite]


The Luna Foundation Group says they transferred out $3B worth of Bitcoin while trying to prop up Terra/Luna. Note that $42B of nominal value evaporated, so that suggests a 1/14th capitalization. More than I would have guessed! Also clearly not enough.

Note everything LFG and similar cryptocurrency groups say could be a lie. A third party did verify that two major Bitcoin transfers happened consistent with what LFG says they did but was unable to establish what happened with the resulting funds. For all we know right now, they could have been transferred anywhere.
posted by Nelson at 8:38 AM on May 16 [2 favorites]


phooky: "LUNA is, as far as I can tell, still being actively traded on several exchanges"

There are still people advising their downstream that now is the best time to buy. Get in while its low, before it takes off again. There's nothing underlying this "investment", so there's no "going out of business". It's just buyers and sellers trying to pick each other's pockets.
posted by team lowkey at 9:02 AM on May 16 [4 favorites]


I just read an "I lost everything" Reddit post that turned out to be actually an ad for a Luna Survivor t-shirt grift.
posted by Nelson at 9:55 AM on May 16 [6 favorites]




LOL

"However, the company has refused to share any further details of the investments, with its chief technology officer, Paolo Ardoino, telling the Financial Times: “We don’t want to give our secret sauce.”"

Stir a few billion cups of bullshit into twice that amount of water until dissolved. Simmer over low heat until reduced to a nice thick consistency. Once the sauce can coat the back of a spoon it is ready. Season to taste with salt from crypto investors' tears and sprinkle with fresh coarsely chopped dollar bills. Serve steaming hot with your choice of picked over carcasses.
posted by Hairy Lobster at 12:01 PM on May 16 [3 favorites]


Fucking Elon and a little klatch of Bitcoin shills are pumping the fucking thing live right now with chat and comments turned off.

Elon Musk: Bitcoin PUMP - BTC will reach $80 000! Cryptocurrency NEWS about ETH & BITCOIN (YouTube live stream, channel name is Tesla Official)

They're just sitting there spouting a huge pack of lies while offering no opportunity for dissent. Free speech absolutist my shiny metal ass.
posted by flabdablet at 12:11 PM on May 16 [2 favorites]


Big banner on that stream for jointesla.net. Here's its whois:

Domain name: JOINTESLA.NET
Registry Domain ID: 2696523926_DOMAIN_NET-VRSN
Registrar WHOIS Server: whois.reg.com
Registrar URL: https://www.reg.com
Registrar URL: https://www.reg.ru
Updated Date: 2022-05-16T13:59:54Z
Creation Date: 2022-05-16T13:59:49Z
Registrar Registration Expiration Date: 2023-05-16T13:59:49Z
Registrar: Registrar of domain names REG.RU LLC
Registrar IANA ID: 1606
Registrar Abuse Contact Email: abuse@reg.ru
Registrar Abuse Contact Phone: +7.4955801111
Status: clientTransferProhibited http://www.icann.org/epp#clientTransferProhibited
Registry Registrant ID:
Registrant Name: Sergei IUdakov
Registrant Organization: SergeiIUdakov
Registrant Street: Pos TSentralnoi Usadby skh Ozery, d. 46 kv. 15
Registrant City: Ozery
Registrant State/Province: Moskovskaia obl
Registrant Postal Code: 140560
Registrant Country: RU
Registrant Phone: +7.9919540197
Registrant Phone Ext:
Registrant Fax:
Registrant Fax Ext:
Registrant Email: dawd2cecawdc@mail.ru
Registry Admin ID:
Admin Name: Sergei IUdakov
Admin Organization: SergeiIUdakov
Admin Street: Pos TSentralnoi Usadby skh Ozery, d. 46 kv. 15
Admin City: Ozery
Admin State/Province: Moskovskaia obl
Admin Postal Code: 140560
Admin Country: RU
Admin Phone: +7.9919540197
Admin Phone Ext:
Admin Fax:
Admin Fax Ext:
Admin Email: dawd2cecawdc@mail.ru
Registry Tech ID:
Tech Name: Sergei IUdakov
Tech Organization: SergeiIUdakov
Tech Street: Pos TSentralnoi Usadby skh Ozery, d. 46 kv. 15
Tech City: Ozery
Tech State/Province: Moskovskaia obl
Tech Postal Code: 140560
Tech Country: RU
Tech Phone: +7.9919540197
Tech Phone Ext:
Tech Fax:
Tech Fax Ext:
Tech Email: dawd2cecawdc@mail.ru
Name Server: kara.ns.cloudflare.com
Name Server: stanley.ns.cloudflare.com
DNSSEC: Unsigned

Whoda thunkit.
posted by flabdablet at 12:15 PM on May 16 [3 favorites]


My bad; not a live stream at all. Just one of a collection of about six complete horseshit videos that YouTube has seen fit to push to the top of the list of suggestions it's showing me this morning, all of which embed the same recorded stream of Elon and the Shills.

Didn't twig to exactly what was going on until I upped the resolution from the default 360p and could actually read the text next to the video; they're all "send us 1BTC and we'll send you two straight back" kindergarten-level advance-fee frauds.

WTF, Google? Get your fucking disinformation filters sorted.
posted by flabdablet at 12:25 PM on May 16 [3 favorites]


What is the point of crypto? Who is all this for? Crypto proponents are hoping it’s for someone, though it’s often not clear who or why or what.
posted by 1970s Antihero at 1:29 PM on May 16 [3 favorites]


They're just sitting there spouting a huge pack of lies while offering no opportunity for dissent. Free speech absolutist my shiny metal ass.

Looks like you're able to dissent just fine.
posted by atrazine at 1:34 PM on May 16 [2 favorites]


So was Trump without Twitter but to hear Elon drone on about it Trump has been silenced all his life without his twitter account
posted by Mitheral at 5:47 PM on May 16 [4 favorites]


Looks like you're able to dissent just fine.

No thanks to Musk.
posted by flabdablet at 8:51 PM on May 16 [1 favorite]


I was hoping for more of a bloodbath from Tether, but I think that ultimately it's going to be a slow bleeding-out sort of death. The price is hovering around 0.9990, which is right around the arb bound for small fry. There's a $150 "know your customer" fee for them verifying your bank account. Oh, and you can't be a US citizen except under certain circumstances that only Big Players can do, but since the minimum cash-out size is $100k, you need to be pretty big just to play that game. The cash-out fee is 0.1%, up to $1 million, and then the fee caps out. So that's why getting Tether at 0.9990 or less is borderline profitable, because that's when the cost lines up with the cashout fee. Bigger trades can amortize the cashout better, like if you did $5 million at once, you'd still only be paying $1000, so that'd effectively put your arb bound at 0.9998, so you'd have more edge compared to those only trading in smaller batches.

All these are discounting the cost of carry and other transaction costs, so in practice it's a little more work than this. And also it's discounting the risk of redemptions suddenly stopping (counterparty risk), and the Tether you're saving up to cash in becoming basically worthless. However, there are ways to counter the risk of default, or to bet ON the default. Those also come with carry costs, which factor into this whole game.

But the bottom line is: as long as the redemptions continue, this is a one-way trip of dollars leaving Tether and not coming back. And it's basically certain that they don't actually have the assets to take it down all the way to zero outstanding Tether before defaulting. So there's going to be some point at which they balk at redemptions, and then the knives come out.

And again, let's point out that if they actually played by the rules, and kept their cash reserves, they could LET everyone redeem down to zero and just walk away, no harm, no foul. But what madman would ever do that, when they could just wheelbarrow the money out and leave the husk behind?
posted by notoriety public at 9:06 PM on May 16 [3 favorites]


What is the point of crypto? Who is all this for? Crypto proponents are hoping it’s for someone, though it’s often not clear who or why or what.

That article says "Crypto is a solution in search of a problem", but sure seems like it's got plenty of problems.
posted by aubilenon at 1:00 AM on May 17 [5 favorites]


A solution that creates that many problems surely has to count as some kind of success.
posted by flabdablet at 3:58 AM on May 17 [2 favorites]


"DEI (a stable coin) has just lost its its 1-to-1 peg to the dollar. DEI is currently trading at $0.574049"

"Deus Finance has now tried to stabilize the coin by suspending all redemptions."

Yeah, that's how to stop a run on the bank. Tell people they can't get their money out.
posted by dances_with_sneetches at 2:05 PM on May 17 [4 favorites]


dances_with_sneetches,

God will sort them out.
posted by Nancy Lebovitz at 2:38 PM on May 17 [1 favorite]


Central bankers are not unaware of cryptocurrency, obviously, and there is a working group of central banks, coordinating through the Bank for International Settlements, to work out the kinks of "central bank digital currency."

Of course, there's a difference between digital currencies and cryptocurrencies. Major central banks see the issues with cryptocurrencies very clearly and although there is sometime political pressure for them to have a toe in crypto, they are not interested.
posted by Busy Old Fool at 4:08 PM on May 17 [2 favorites]


notoriety public: I was hoping for more of a bloodbath from Tether, but I think that ultimately it's going to be a slow bleeding-out sort of death.

Possibly, though I wouldn't yet rule out a "slowly at first, then all at once" sort of thing. I think the key feature here is that Tether and Bitfinex are pretty clearly joined at the hip and the two entities take turns covering for and bailing each other out as needed. So, for a bank run on Tether to be truly successful, I think you need to somehow simultaneously tap out and/or throttle Bitfinex's liquidity as well.... although offering 30% interest seems like a sign that they may be worried about getting close to some kind of tipping point.
posted by mhum at 5:11 PM on May 17 [6 favorites]


The NYTimes has a summary article of what happened: How a Trash-Talking Crypto Bro Caused a $40 Billion Crash. No new info if you've been following the story other than some details of how some other VCs and investors did in the mess. It's a good bit of instant history writing though.

Meanwhile on Twitter Do Kwon is back to peddling his grift. There's some plan to remake the contract and he's actively campaigning for some particular plan other people seem to not like. I can't be bothered to figure out the details.
posted by Nelson at 9:44 AM on May 18 [3 favorites]


I think it's only a matter of time before Tether implodes. The backdrop, the feeling in the markets in general right now is a slow pressure towards safe/safer assets. Classic assets (stocks and bonds) are feeling it, and real estate too. That (for now) gentle pressure can be easiliy handled by those markets. It can not be handled by rickety, overleveraged, unregulated, scam-infested cryptomarkets.

I'm thinking back to 2007/08 where a number of small mortgage lenders blew up, and then Bear Stearns collapsed, finally followed by the Lehman Brothers singularity that triggered massive collapse. Today, Terra/Luna is the harbinger, and Tether is going to play the part of Lehman Bros in the crypto-world.

There will be no bailouts.
posted by storybored at 11:35 AM on May 18 [2 favorites]


Crypto is a problem in search of your money
posted by Going To Maine at 1:37 PM on May 18 [7 favorites]


The more I read about Tether, the more it looks like a really big Ponzi scheme. Like, maybe the biggest Ponzi scheme ever? And the CEO of Tether is apparently the CEO of Bitfinex, one of the largest crypto exchanges. And that CEO also, apparently, runs a Hong Kong based venture capital firm. But "even some of the group’s biggest customers say they have had few dealings with its chief executive." And no one's even quite sure if his name is "Jean-Louis Van Der Velde" or if it's "Jan Ludovicus van der Velde," and the only evidence of him online is a blurry outdated photo? This is another one of those cases that's going to end up with multiple documentary series on the streaming services, right?
posted by Emera Gratia at 3:18 PM on May 18 [6 favorites]


Yes, Tether is a very long running scam. A scam that was largely responsible for Bitcoin breaking $10,000 in the first place (By minting Tether that was supposedly but not actually backed by USD and using that to buy BTC from credulous people)

At many points in its history it has been effectively impossible to redeem Tether, but they have thus far been able to blame such problems on the evil banks and other outside forces. Funny how they always could seem to take people's money and give them Tether, but often found it impossible to do the reverse.

You'll note that at one point the claim was that Tether was backed by actual cash, but a couple of years ago they modified the statement to say it was backed by cash and other assets, assets that include debt borrowed by "affiliated entities". (read: Bitfinex) Since then, the scam has been that whenever they feel the need to prop up crypto prices, Bitfinex "borrows" from Tether so they can mint more Tether to buy other crypto. Of course the debt in question is 100% illusory, so Tether is backed by hopes and dreams and maybe if you try to redeem at a time when Bitfinex has enough cash on hand from their exchange operations you might get lucky and get at least some of your money back.
posted by wierdo at 12:13 AM on May 19 [3 favorites]


Y Combinator backed company StableGains apparently lost its customers money gambling on Terra/Luna. Not a lot of details yet but they were promising customers 15% and that they'd invest the money in safe, secure stablecoins like $UST. Which as we know, were a fraud.

Mostly unremarkable except this is a Y Combinator investment, a big name in the Silicon Valley tech world. Apparently the geniuses there looked at this company and say "yes, incubating a feeder for shady financial products is a great idea!".
posted by Nelson at 6:07 AM on May 19 [4 favorites]


Late, but:

Anything promising 20% returns is such an obvious Ponzi scheme it's hard to feel any sympathy.

The S&P 500 had returns of 27%, 16%, and 29% in 2021, 2020, and 2019, respectively.
posted by Rock 'em Sock 'em at 10:10 AM on May 19 [2 favorites]


The S&P 500 had returns of 27%, 16%, and 29% in 2021, 2020, and 2019, respectively.

It's not a problem for a stock/security/index to show good returns after the fact. Otherwise nobody would invest.

But stock investments aren't a promise, there was always a possibility the return would be low or negative (see 2022 so far), and that's the big difference.

Anybody who says, you give me X dollars and I promise 20% back, is either a scam/ponzi or not correctly reporting the risk level and your exposure is now much greater than expected. 20% isn't a magic number, its just higher enough than most low risk securities at the current interest rates to be super suspicious.
posted by WaterAndPixels at 11:01 AM on May 19 [2 favorites]


The S&P 500 had returns of 27%, 16%, and 29% in 2021, 2020, and 2019, respectively.

I believe the key difference is that the S&P 500 promises nothing. It's one thing to say "put your money here because you might make 20% on it or you might lose everything who knows" and a whole other thing to say "put your money here because we're going to pay you 20% on it" (the other thing is probably some kind of fraud).
posted by mhum at 11:01 AM on May 19 [1 favorite]


Yeah, investment fund prospectuses tend to include warnings that nothing is guaranteed and losses are possible, not out of a lack of confidence or the goodness of their hearts, but as a CYA exercise (or outright legal requirement). If someone's saying otherwise, it's either because they haven't thought about it, or because they're pretty sure their asses are covered regardless of what happens to yours.
posted by quizzical at 11:24 AM on May 19 [1 favorite]


The S&P 500 had returns of 27%, 16%, and 29% in 2021, 2020, and 2019, respectively.

I know people have hammered this a bit already, but in 2018 it was -6%, 2017 19%, 2016 9.54%, 2015 -0.73%, (...) and it's currently down -18%. Lots of variation and since ~2012 it is of course more up than down, but a notable low point is 2008, -38.5%. Anyone promising you a 20% annual return on the basis of S&P's 2019-2021 would be scamming you.
posted by advil at 11:35 AM on May 19 [3 favorites]


The point is that ~20% returns were happening fairly consistently over a fairly long period of time in a commonly-held investment vehicle. That means that someone promising 20% returns in a similarly "well you put money in and it goes up" investment (not a real tire-kicker) was not as obviously a scammer as people's just-world biases would like to think.

Yes, you can lose money, but the common cultural narrative is to just put your money in the 401K and it'll keep going up and you'll get a fairly consistent rate of return. People wanting to retcon that and pretend like culturally we have always treated investing in an index fund as a genuinely risky thing to do are giving real "we've always been at war with Eastasia" vibes.

Our country's whole retirement scheme (and "scheme" is a good word for it) is to push people into private investing. Yes, it's heavily regulated (I read SEC filings all day long some days), but that's not because it's sooooo easy to spot scams and everyone who doesn't is just soooooo dumb and/or greedy. It's actually pretty hard to spot scams, and a high rate of return is not a reliable indicator of a scam.
posted by Rock 'em Sock 'em at 12:24 PM on May 19 [3 favorites]


Yes, you can lose money, but the common cultural narrative is to just put your money in the 401K and it'll keep going up and you'll get a fairly consistent rate of return. People wanting to retcon that and pretend like culturally we have always treated investing in an index fund as a genuinely risky thing to do are giving real "we've always been at war with Eastasia" vibes.

Absolutely not.

The whole point of an IRA or 401k is that you're doing it over the long term and it will average out, not that it will be "fairly consistent." This is really basic investing 101, the sort you get if you sit in on one seminar given by your employer and then don't pay any attention. I can't argue with the observation that some people hear "average 7%" and convert that "will be around 7% every single year" but claiming that this is the cultural narrative is off.

But that's point two: You can't get 20% consistently and a number that high has never been claimed as an average. That's why the people who think they can get 20% think also think it will show that they are smart or have a special opportunity or lucked into an insider-only opportunity. The very fact that it's abnormally high is part of the grift!

It's actually pretty hard to spot scams, and a high rate of return is not a reliable indicator of a scam.

A guarantee of a high rate--real or implied--is an incredibly good indicator of a scam!

I have a lot of problems with the way stock returns are sold (including that "average" number, honestly) but 20%rates are appealing to self-styled "players", not middle class clerks who want to save 5% of their paycheck and retire at 62 instead of 67.
posted by mark k at 1:08 PM on May 19 [5 favorites]




I have a lot of problems with the way stock returns are sold (including that "average" number, honestly) but 20%rates are appealing to self-styled "players", not middle class clerks who want to save 5% of their paycheck and retire at 62 instead of 67.

This kind of class snobbery is a big part of why people are so quick to tar people who make basic mistakes -- mistakes that have driven massive complex regulation -- as basically scum who had it coming.

The people who annoy you on twitter aren't necessarily the people who are losing out on this.
posted by Rock 'em Sock 'em at 2:02 PM on May 19 [3 favorites]


This is really basic investing 101, the sort you get if you sit in on one seminar given by your employer and then don't pay any attention.

Like, lol, come on man, you really have blinders on if you think "available in a seminar on investing given by your employer" means information is commonly out there for the huge swath of people who aren't part of the middle class banking/401k/"retirement" ecosystem. But who still hope to maybe one day, I don't know, pay down their credit card or put a deposit on a nicer apartment. Like scum do, I guess.
posted by Rock 'em Sock 'em at 2:04 PM on May 19 [2 favorites]


It's weird to bring up that the "cultural narrative is to just put money in your 401k" and then complain that I respond with an example available to literally everyone who has access to a 401k.

But your basic problem is trying assert "Guaranteed 20% returns!" is indistinguishable from a 401k and pretending it is absolutely plays into the hands of the grifters. These are completely different worlds. Someone who earns enough to put a good solid chunk of their paycheck will in fact do OK and see long term growth. Claiming that those people are being screwed the same way as those people who simply can't get their head above water is not doing anyone any favors.

Someone who's trying short term investments to save up for a deposit on an apartment is in a totally different ecosystem when they try that. They are definitely not listening to mainstream retirement planning advice or even "tackle your debt advice." They are in this alternate space, the FOMO and breathless "get in on the ground floor!" hype.

The problem with boring, contribute every week, individual retirement planning isn't that it's doomed to fail; it's that too many people can't possibly afford to buy in. People are suffering, quite simply, because their current paychecks are too low.

I'm not blaming the victim, BTW. I blame the con men. It's just: be realistic about how they are running the con. Also, this mistake is not class dependent. There's a temperament that wants to run away from things that whiff of "free money" and one that wants to run towards it. It cuts across classes; in this sense Theranos was the crypto play for the elite.
posted by mark k at 3:18 PM on May 19 [7 favorites]


Rock 'em Sock 'em : a high rate of return is not a reliable indicator of a scam

I agree that a high rate of return in the past is not a reliable indicator of a scam. On the other hand, I'd say that a guarantee of high rates of return in the future does seem to be a pretty reliable indicator of a scam.

However, I do also agree with the larger point that there has been a ton of pro-market/pro-investing kind of messaging out there that definitely highlights the upsides of things like investing in the stock market and downplays the risks. This was especially apparent during the GWB administration's brief attempt to replace Social Security with private investment accounts.

As well, while a guarantee of 20% return would set off warning sirens for anyone with halfway decent information and/or intuition about investing in general, these crypto scams appear to be targeting the people who lack this information and/or intuition. After all, if you don't have the necessary background information, how would you be able to evaluate whether that a guaranteed 20% return is a totally normal thing to see or absurdly high? By setting the rate so high, I imagine it's virtually guaranteed to scare off anyone with decent investment experience/knowledge.
posted by mhum at 3:24 PM on May 19 [5 favorites]


As my mother used to say "a Fonzi scheme."
posted by dances_with_sneetches at 8:27 PM on May 19 [4 favorites]


Get out before jumping the shark
posted by Going To Maine at 11:38 PM on May 19 [4 favorites]


My online share broker has recently started giving me repeated notifications about the availability of crypto-based exchange traded funds in Australia. They clearly don't believe that the greater fool pool is anywhere close to drained.

Capitalism's response to shark-jumping is to start selling tickets to the annual shark jump. When a Ponzi scheme expands to the extent that the future marks required for its ongoing operation haven't even been born yet, we don't call it a Ponzi scheme, we call it "the economy" and non-participation stops being an option.
posted by flabdablet at 11:56 PM on May 19 [1 favorite]


Madoff didn't promise an especially high rate of return, he promised an especially secure rate of return.
posted by Nancy Lebovitz at 4:57 AM on May 20 [2 favorites]


My online share broker has recently started giving me repeated notifications about the availability of crypto-based exchange traded funds in Australia. They clearly don't believe that the greater fool pool is anywhere close to drained.

MLMs continue to exist and be created as well. There are going to be new coins on offer for a very long time.
posted by Going To Maine at 9:00 AM on May 20


An unexpected delight of having had a Robin Hood account and forgetting to delete the app when I emptied it out has been the brief hits of schadenfreude I've enjoyed when I get push notifications about the price of Bitcoin having dropped another 5%... 3-5x per day.
posted by DirtyOldTown at 9:29 AM on May 20


https://web3isgoinggreat.com/?id=terraform-labs-legal-team-resigns

That should take care of that.
posted by abulafa at 10:50 AM on May 20


I wonder where the nexus is between cryptocoins and unlicensed raffles.
posted by rhizome at 11:48 AM on May 20


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