The Volker Rule legally limits them to holding zero dollars on their own books beyond what they can reasonably expect (RENTD) to quickly turn around and sell to potential clients.
The good name of Goldman Sachs, lol. The only people who don't find the vampire squid's name toxic, are those who only care about money to the point that these sorts of things never would have bothered them.
So, no, there is no "only care about money" exception for distrusting them.
Interestingly, in 2008 there was somebody recommending their clients buy shares that they were selling themselves. I misremembered and looks like it wasn't them. Now I'm curious what investment bank was it.
From the opinion:
This was accomplished by Citigroup's misrepresenting that the Fund's assets were attractive investments rigorously selected by an independent investment adviser, whereas in fact Citigroup had arranged to include in the portfolio a substantial percentage of negative projected assets and had then taken a short
position in those very assets it had helped select.
It's taken me a while to understand this but a very common cycle for tech is:
1)Startup founder gets and idea and develops it.
2)The startup develops the tech and finds a market for it
3)The Startup becomes successful
4)The market falls apart and the founder can't guide the
startup thru the difficulties
5)Start up is in distress or fails
6)An MBA type comes along buys everything at a deep discount
7)The new manager restarts the company. This time with much more discipline and a plan on how to sell the product.
8)Company becomes successful enough to be sold or go public.
9)MBA guy multiplies his investment. Startup guy gets the shaft.
We are going to see this cycle in crypto. Right now, MBA types are looking for any companies that are falling apart but have a future. Looks like Celsius is one of them.
I’ve seen a couple examples of a somewhat opposite scenario where founder does well, sells to MBA for a lot, business struggles, founder repurchases for much less, then brings business back to profitability
I remember some of the founders of the first startup I worked for commenting after its acquisition that before being acquired they had been terrified that the huge acquirer would just go "Oh, we should do that" and assign a dozen software engineers to design, implement and ship a rival product, but after acquisition from inside the huge corporation they could see they had nothing to worry about, assigning a dozen software engineers to go ship a rival product would have needed board level determination and nobody in the board knows the first thing about the actual product so that's not going to happen.
DELL and Apple are a good example of your scenario. And Microsoft and Google are examples where the founders handed the company to an MBA and the companies profits greatly increased. But I've seen these happen much less.
Interesting, didn’t cross my mind even though I had an Apple Performa from their dark years. I think I was young enough not to realize some of the flaws.
You got Microsoft in the wrong category. Gates gave the reins to Ballmer, an MBA, which tanked the stock. Ballmer was never a founder, he was an employee with early stock. Microsoft flourished when Gates was the CEO.
> Ballmer joined Microsoft on June 11, 1980, and became Microsoft's 30th employee, the first business manager hired by Gates
> [Ballmer] left the MBA program at Stanford University
Ballmer is what Marisa Mayer was (or vice versa). An employee that latched onto a rocket. What made the company successful wasn’t them but the founder. By the time you can hire the 10th employee, risk is already greatly reduced.
The way I remember it is that profit's growth for MS greatly increased under Ballmer but company growth tanked and that's what tanked the stock since MS lost its reputation as a growth stock. But generally speaking Ballmer was not the best choice to take on the company.
Yes, Ballmer spent his decade squeezing oil from rocks while completely shitting the bed on anything forward looking; as a result they lost ground on almost every consumer facing product. On the outside Microsoft was starting look like IBM.
However his focus on enterprise laid the seeds for 365 and Azure and flourished once Satya made it clear that not everything had to revolve around Windows and Office. I think Gates is also a bit to blame here as I think the story goes that almost every decision that came to the board was shot down unless it meant more windows/office sales
"Gets the shaft" implies harsh or unfair treatment. It was startup guy's idea to sell the company, and startup guy's lack of abilities which led them to the mess in the first place. It seems like startup guy is getting exactly what he deserved?
I think from a purely moralistic perspective this is unkind. Perhaps they are getting exactly what they signed up for. But how many naive purely technical people have been short changed by similar antics in the past
The conclusion to be drawn here is that naive pure-tech people are not well rounded enough to extract the maximum value from their creations for themselves.
In other words sole-founders have missing skills which are likely to be exploited by those who have those skills.
Perhaps this implies that a founding team with a mixed skill set (creation, sales, business) will likely have long-term better outcomes. Perhaps it implies that sole-founders would be well advised to pay for competent advisors in the areas they are weak.
Facebook's Zuckerberg had the right idea. He sucked in some of his ego and hired Sandberg to help him run the company. I'm sure Facebook has done so much better thanks to the two running the company. She brought in the business discipline and know-how to be able to maximize profits.
Whatever people might think of Zuckerberg, one thing for sure, he's smart enough to know that he doesn't know everything and should ask for help. Many founder's ego just won't let them do that.
I can think of a small number of cases where this has occurred. For the most part, it's been the other way around...it's been founders and VCs dumping on MBAs and retail for the past 15 years.
1) Startup founder gets an idea and develops a legitimate product.
2) The company gains some customers, but the growth is tough, since competing products often sell below cost.
3) The founder gives up and goes to VCs.
4) VCs take away the controlling stake in exchange for an endless stream of cheap money, so the company can start selling dollars for 90 cents just like the competition.
5) The founder's vision is no longer a critical asset, the cheap VC capital is. The founder gets pushed out and replaced by the VCs' protégé.
6) If the stars align, the (still unprofitable) company exits. Numerous retail investors buy shares in something they've heard about but don't fully understand. VCs get 100x returns. The founder gets a letter of appreciation.
The whole cycle is all about getting a bigger share of the endless stream of cheap money from the fed. VCs throw in a lump sum to buy visibility. Enough visibility guarantees that more people with extra freshly minted cash on hand will choose your shares over other speculative investment.
Except all that recently printed cash is now competing for wheat and baby formula (hence inflation), so the fed has no choice but to backtrack and raise interest rates. And if this holds for sufficient time, the whole VC game may suddenly stop paying off.
I agree with the (cynical) view of founders, VCs, and equity. Founders who sell their business to VCs get what they deserve (an education.)
Your digression into the link between stimulus cash, baby formula, and inflation seems somewhat less accurate.
Firstly, baby formula (and wheat) are not luxuries. The amount of formula you need is 100% based on your baby, which neither knows no cares how much cash you have. My guess is its the first thing a mother buys, not the last. So excess cash, or lack thereof, has no impact on demand.
If demand is stable, that means inflation is caused by constrained supply. Which is exactly what has happened year - close a factory producing significant % of supply, and supply drops.
The same with wheat. No one is buying extra bread with their extra bread. But global wheat supply has been affected by the Russian invasion of Ukraine.
Yes, extra cash can contribute to inflation, and no doubt that has had some effect, but between the war, and the pandemic the primary inflation seems to be caused by supply issues. And oil. The war drives up the oil price, and that knocks on to everything.
"The whole cycle is all about getting a bigger share of the endless stream of cheap money from the fed. VCs throw in a lump sum to buy visibility. Enough visibility guarantees that more people with extra freshly minted cash on hand will choose your shares over other speculative investment."
I would mostly say yes but keep in mind that money does make the world go around. Meaning that greed sparks ideas, products and services that keeps us from going back to a society that survives having or providing nothing to spare beyond the basic necessities.
It's not pretty but it's what's kind off working now.
I've been in tech startups for 20 years and have never seen this pattern or heard of it. What is even one example?
MBAs notoriously do not fix things. They usually run them into the ground.
Sometimes VCs will replace founders with experienced execs to try to control costs before a sale, but I haven't seen examples of this where they fix the product or find the market fit. They usually just fire people and try to get the financials to look better.
Because people trying to commit violent acts will go to prison etc. and, assuming they're at least vaguely rational, will realize that (and that it won't actually return their money).
Rational expectations/efficient market hypothesis is the explanation for why we can't predict the future. Predicting it would mean something isn't "priced in".
This is one of the premises behind the United State’s uniquely effective approach to prevent gun violence. Everyone understands the penalty for murder, so no one ever uses a gun for unlawful acts against other humans.
I know you're jesting, but in case someone else misunderstands, even if every person is 100% efficient and rational for real, the market is still chaotic and unpredictable.
Like the weather system, every molecule of air and water behaves "deterministically". And yet, we can predict no more than a few days, may be a few weeks at most, with any real accuracy. This is the hallmark of a chaotic system (aka the error in prediction grows exponentially).
Apparently things are pretty tense in South Korea where Terra originated. An increase in suicide-related searches was recorded in Seoul. Authorities have put dozens of Terraform Labs employees on a no-fly list to prevent them from leaving the country.
Sounds like there could be ramifications beyond the usual crypto "aww shucks, the money's gone, what can you do lol".
A lot of people in crypto are mature adults, they understand the risks, and only put in money that they will be OK with losing. That should always be the motto, especially for F grade semi-decentralized retarded projects like Celsius, terra, etc
People who invest in cryptocurrency are doing just fine. They may have lost a large portion this money, but the fact they even have money to put into crypto means they are able to afford food, rent, etc.
Losing money in cryptocurrency is a first-world problem, no one is going to commit violent acts over losing their side/play money.
a lot of people were fooled into putting money into "stable coins." Then they thought getting returns on it from celsius was risk free. Then they put a majority of their net worth into celsius accounts. they are "fine" by your definition but they may have lost 90-95% of their net worth.
Funny I remember warning people on various reddits many months ago that there is no risk free 10-20% investment and asking where is this yield originating from. Let’s just say people weren’t very receptive. Greed is a hell of a drug
I personally know someone who lost everything to a risky investment / investment scam. Not crypto, the traditional kind. They borrowed money from friends and family, their primary residence is mortgaged, and their net worth is deep into the negative.
That you somehow believe everyone losing money to investment scams is responsibly investing only an appropriate portion of their side/play money tells me you know very little about this space.
>Honestly I am surprised we are not seeing violent acts against people running these companies (Celsius, terra, etc).
Let's flip the question: what reasons do you have to expect "violent acts against people running these companies"? Sure, you have a bunch of people that are angry, but makes you think they're angry enough to follow through with the plan? Was there a spree of violence against bankers in 2007/2008?
Wall street is in on the crypto idea. They see a future. Soon (a few years?) we will see the crypto craze back on. Maybe not as crazy and better regulated but it will be there. The "Turn a $1000 into a $million craze" is probably no more. But crypto is here to stay.
A few wall street firms have started to recommend Crypto as an investment. Goldman probably sees a future where their clients will have crypto assets so they see a future in controlling some of the infrastructure. We'll see more of these types of deals.
I'm sure they would love to control Coinbase but it's too expensive to own, now.
The one thing of value that crypto actually delivers (and which will never be replicated in tradfi because of incentives of existing players) is atomic multi-party transactions across unrelated parties. Something like a flash loan would never exist in tradfi. Being able to borrow billions with _no_ risk of loss due to execution delays between borrowing money and executing a trade means more liquidity and lower risk for market makers which translates to a better experience for everyone else.
It's so rare that I see people who actually understand the problem crypto solves; essentially everyone is either balls deep on the clueless hype train, or full of vitriol that there's a real thing happening they don't like or really understand.
IMO you said it perfectly and it's worth emphasizing for programmer types:
> The one thing of value that crypto actually delivers [...] is atomic multi-party transactions across unrelated parties.
I wouldn't say it's the one/only thing though: Ethereum builds a trustless computation platform on top this core primitive, which I think is pretty fundamental and impressive (especially when you consider Vitalik Buterin was 21 when he created it, and already had a long career of writing for Bitcoin Magazine; in particular this article from 2014 criticising Bitcoin's centralisation: https://bitcoinmagazine.com/business/opinion-on-mining-14032...).
Here's an advantage that no one seems to point out. "Longevity," crypto, like bitcoin, does not need a nation state to survive. True, it's value will fluctuate, there is nothing stopping it from going to zero, but as long as there's group of people that want to mine it and use it, it will be here.
Bitcoin is quite susceptible to its own form of death spiral: the point at which attacking it becomes more profitable or simply more amusing than to mine it honestly. There is a large amount of mining hardware out there, and the lower the price goes, the less profitable it is to mine with that hardware. But idle hardware still exists.
Imagine if you could rent mining hardware, IaaS-style, and there was enough available to control a majority of the active hash rate. An attack that lasted a few hours would not be particularly expensive.
It’s easy to assume that Bitcoin, Ethereum, etc are technologies that work as advertised and that the only interesting questions are weather the tokens on the respective blockchains are useful and/or valuable. But the blockchains themselves have critical requirements for proper functioning, and they can easily fail.
(For Ethereum in particular, you can rent GPUs on fairly large numbers. A change in the economics could easily make it possible to rent a majority of mining power on AWS or similar platforms. At least Bitcoin hardware is mostly useless for anything other than Bitcoin mining.)
You need gigantic investment to accomplish it now and it's not even a sure return and by the time you're constantly successful with your attack, the market has figured the network is taken over for the price to go zero to move over to another coin.
Then you're left with crazily invested factories, mining a worthless coin.
Your assumptions are missing the simple idea that if there's a room to be profitable, they'll mine that themselves than somehow let them stay idle for someone else to rent and start a massive attack.
If the price of Bitcoin always goes up and the efficiency of mining hardware always goes down, then I probably agree with you. But this is not the case! There is plenty of mining hardware, right now, that cannot be used to profitably mine Bitcoin. The lower the price goes, the higher the fraction of hardware for with this becomes true. To me, mining hardware that can’t honestly mine for a profit is just asking to be used to dishonestly mine.
You cannot possibly own half of that hash rate to yourself unless you're some state level actor wasting tax on it thinking wasting billions (even then, you can't just order million ASIC units overnight) today to kill Bitcoin is better than some future they see with Bitcoin but then again, people can fork Bitcoin to form another base cryptocurrency, and their effort could become a complete waste.
The only few ways Bitcoin can kill itself is that either people fail to see its usefulness or that some severe unfixable security flaw is found.
There are no technical barriers preventing atomic swaps from happening in a centralized system. Transactional databases have existed since the 70s. There are no technical barriers preventing bank transfers from clearing in seconds either, but as I said, there are incentive problems that prevent existing actors from making it happen. Cryptocurrency is merely a technical solution to a political problem. How do you bypass the existing entrenched players in finance so you can implement real changes? You make your own money. How do you get people to trust bullshit money? Crypto.
There are a huge number of stock exchanges today that all trade the same products with slightly different exchange features. Do you think they're going to be inclined to cooperate with each other to make atomic swaps work across exchanges?
They don't seem to be buying anything. They are raising other peoples money to buy it. They then charge those people. So unless they retain some portion of it, they will make money regardless of whether the investment makes money.
>They are raising other peoples money to buy it. They then charge those people. So unless they retain some portion of it, they will make money regardless of whether the investment makes money.
With FTX and now Goldman buying up assets from dying crypto companies, it looks like a bigger crypto crash will now start to hit the rest of the financial markets.
Interesting times coming if there are more issues with USDD and/or tether.
> With FTX and now Goldman buying up assets from dying crypto companies, it looks like a bigger crypto crash will now start to hit the rest of the financial markets.
Those companies have connections to the broader financial markets. The traditional thought was that crypto could do what it wants because it's a fairly insulated silo. If it fails, nothing of value fails with it. If it is going to contaminate the rest of the financial system, we are going to need to shut down the shenanigans very fast.
That has never been the modus operandi for Centralised Exchanges for Crypto. This is like saying the Internet could do what it wants because it's insulated from the real world.
FYI most funds have always been holding crypto, bitcoin in particular gives a better yield over any traditional asset in the world over a 10 year period, consistently over 30 years.
Stocks have wiped out 7 trillion in value this year. At its peak the entire crypto market was 2.5 trillion and is now 1 trillion. So stocks lost 3 entire crypto markets worth of value this year, seems hard to say that it has the power to contaminate the system just yet.
$2B is chump change lol, Bill Hwang/Archegos blowing up in 2021 cost banks $10B in losses.
Crypto is hilariously tiny compared to the actual world of finance. SPY (a single ETF) does as much dollar volume in a single 7.5 hr trading day as the entire crypto market does in 24h, and the entire crypto ‘market cap’ is worth less than half of Apple, one company.
Question: Who owns the deposited assets? Don't the original owners have dibs? Or can Goldman just pull the rug and say "ours now". That would seem crazy.
> Question: Who owns the deposited assets? Don't the original owners have dibs? Or can Goldman just pull the rug and say "ours now". That would seem crazy.
Their terms have this language:
> Eligible Digital Assets held in a Custody Wallet are subject to the other provisions of these Terms, unless where expressly stated otherwise. Celsius retains the right to set-off any Eligible Digital Assets in a Custody Wallet against any obligations you may have to us.
> You understand and acknowledge that the legal treatment of Digital Assets remains unsettled and may vary depending on the jurisdiction in which you reside. In the event that you, Celsius or any Third Party Custodian becomes subject to an insolvency proceeding, it is unclear how your Digital Assets would be treated and what rights you would have to such Digital Assets.
> Celsius does not make any representation as to the likely treatment of Digital Assets in your Celsius Account, including those in a Custody Wallet, in the event that you, Celsius or any Third Party Custodian becomes subject to an insolvency proceeding whether in the U.S. or in any other jurisdiction. You explicitly understand and acknowledge that the treatment of Digital Assets in the event of such an insolvency proceeding is unsettled, not guaranteed, and may result in a number of outcomes that are impossible to predict reliably, including but not limited to you being treated as an unsecured creditor and/or the total loss of any and all Digital Assets reflected in your Celsius Account, including those in a Custody Wallet.
I’d think they’re more interested in buying some loans from Celsius (at a discount), not their deposits. Celsius would obviously lose money on those but gain some much-needed liquidity
> Question: Who owns the deposited assets? Don't the original owners have dibs?
If you give your money to something that looks like a bank, walks like a bank, but is not actually a bank, don't expect them to be held to the same legal standards as a bank.
Difference is the banks are insured. Banks can make bad investments with deposits and do go bankrupt. 2012 had lots of banks going bust when they invested in mortgage backed securities which is ironic because they were the ones originating these bad loans and they had to know they were garbage.
If Goldman are raising money from investors it's probably because they think they can charge those investors for advising on and structuring a deal. It doesn't mean Goldman are buying Celsius. It's only a vote of confidence in Celsius to the extent that it means Goldman think they can find people who want to buy it and who will pay an investment bank to do so.
They are raising money for liquidation, they will pay back users a fraction of what they originally deposited, and then play with some rows on an excel spreadsheet and walk with millions. Celsius can't go back live because the bank run would destroy the entire thing just like with Terra.
Note that Terra/Luna was an algorithmic stablecoins, while the Celsius situation is kinda-sorta more like a proper bank run. Rumors of losses from exposure to 3 arrow capital causing a stampede of users forcing Celsius to shut down. There is a Celsius coin that kinda is like terra but really is quite different.
They seem to have completely different mechanics, aside from failing within a month of each other there is almost no other mechanical similarity between these situations.
$2B for what was suppose to be $12B of AUM. Doesn’t sound like a vote of confidence. Question is what priority are funds distributed. Depositors are unsecured creditors. Are there secured creditors that would be before them?
If it's like any bailout of the past, it probably zeroes a lot of people.
A troubled company's balance sheet usually looks like:
Assets: A Mess
Liabilities: A Mess
None of the claimholders (liabilities) know what they can withdraw, when, etc. A "buying asset" bailout often happens when someone (like Goldman here) comes in to buy only the gross assets. They will pay $2 bln in cash for the assets, and divorce the two messes. The two companies afterwards are now:
NewCo:
Asset: A Mess
Liabilities: None, other than their new single equityholder, Goldman.
OldCo:
Asset: $2bln
Liabilies: A Mess.
NewCo is controlled by one person (or a tight group) and can unwind its positions slowly at leisure, waiting for prices to go up, with no more (financial) liquidations.
OldCo has a much easier time. All creditors are called to line up in order. A judge decides who is most senior. The senior most people go collect their money (chunk of $2bln first). People queue up until the money is gone. In the highly unlikely case there is any money left after all claims are paid, the money goes to the old Celcius equityholders.
I had been expecting steeper dips so I missed that 600% flip.
Not exactly my perfect storm for buying a dip, I usually wait for an information asymmetry in my favor, but shoulda just taken a slightly smaller position.
I don't have formal education in economics/finance; it took me a while to understand their language. Here's an attempt to explain it.
Assets in this context means loan contracts between Celsius and its borrowers.
When a finance company GLC (Great Lending Company) makes a loan of $100K to a borrower Joe it deposits $100K in Joe's account in exchange for Joe signing a contract (lets call it LC) that stipulates interest rate, repayment terms etc., On GLC's book the deposit of $100K becomes its liability and LC becomes asset.
Now, GLC could also offer deposit services with attractive interest rates. The deposits needn't (and often do not) equal loans made. If inflows into GLC's reserves match outflows it typically works OK. In an economic up-cycle (low interest rate, positive consumer sentiment etc.,) everyone is happy. But when those assumptions change (usually high interest rate) some of GLC's borrower's begin to default. And it take just a fraction of borrowers to default for GLC to become insolvent. At the first sign of trouble GLC's depositors take their money out, popularly called a bank run. It thus depletes GLC's reserves making them take measures such as pausing withdrawals.
At this point GLC has 3 options.
1. Borrow; they could use their assets (i.e., LCs) as collateral.
2. Sell their assets at a discount.
3. Go bust.
As you can guess #1 and #2 are short term measures to tide over short-term down-cycle. But the current macro situation is in no way short-term. High interest rates are going to be here for a long time. If anything fed is pondering to raise interest rates as high and 5%. So for GLC #3 is the only option.
This is where companies like Goldman come in. In a bankruptcy firesale they scoop up GLC's assets at steep discount. GLC could have assets worth $10B (i.e., it has made loan contracts worth $10B). A big chunk of those loans could be bad. But even if say 70% of them are bad Goldman could make a hefty profit of $1B by buying $3B of assets by paying $2B. The risk is at this point no one knows what those loan contracts are really worth. It takes quite a bit of time and effort to untangle these loan contracts that were made during boom time. GLC won't have neither of those resources in times of distress. So GLC and Goldman make rough calculations and agree on $2B price. It may turn out to be worth 0 (highly unlikely) or $5B or somewhere between. But either way it's highly likely that Goldman stands to make good profit out of this firesale. Because they have a robust balance sheet and resources they could wait out for years to recover from borrowers.
The loans that Celsius gave out to random people were over-collateralized with cryptocurrencies. I don't understand how they could have become insolvent from that. I guess they made bad investments with customer deposits or made uncollateralized loans to other parties.
If I was a Goldman shareholder I'd be quite alarmed by this. What productive assets will they be getting for this money? Hard assets or just more coins?
That's not how it works. Goldman is soliciting money from private clients to buy the distressed assets. They will receive a fee for this. Goldman is not putting their own capital at risk.
The assets are likely coins or stablecoins at a deep discount to market (80%+).
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[ 3.0 ms ] story [ 195 ms ] threadhttps://en.wikipedia.org/wiki/Goldman_Sachs_controversies
So, no, there is no "only care about money" exception for distrusting them.
Interestingly, in 2008 there was somebody recommending their clients buy shares that they were selling themselves. I misremembered and looks like it wasn't them. Now I'm curious what investment bank was it.
From the opinion: This was accomplished by Citigroup's misrepresenting that the Fund's assets were attractive investments rigorously selected by an independent investment adviser, whereas in fact Citigroup had arranged to include in the portfolio a substantial percentage of negative projected assets and had then taken a short position in those very assets it had helped select.
Opinion: https://casetext.com/case/us-securities-exchange-commission-...
1)Startup founder gets and idea and develops it.
2)The startup develops the tech and finds a market for it
3)The Startup becomes successful
4)The market falls apart and the founder can't guide the startup thru the difficulties
5)Start up is in distress or fails
6)An MBA type comes along buys everything at a deep discount
7)The new manager restarts the company. This time with much more discipline and a plan on how to sell the product.
8)Company becomes successful enough to be sold or go public.
9)MBA guy multiplies his investment. Startup guy gets the shaft.
We are going to see this cycle in crypto. Right now, MBA types are looking for any companies that are falling apart but have a future. Looks like Celsius is one of them.
> Ballmer joined Microsoft on June 11, 1980, and became Microsoft's 30th employee, the first business manager hired by Gates
> [Ballmer] left the MBA program at Stanford University
Ballmer is what Marisa Mayer was (or vice versa). An employee that latched onto a rocket. What made the company successful wasn’t them but the founder. By the time you can hire the 10th employee, risk is already greatly reduced.
However his focus on enterprise laid the seeds for 365 and Azure and flourished once Satya made it clear that not everything had to revolve around Windows and Office. I think Gates is also a bit to blame here as I think the story goes that almost every decision that came to the board was shot down unless it meant more windows/office sales
In other words sole-founders have missing skills which are likely to be exploited by those who have those skills.
Perhaps this implies that a founding team with a mixed skill set (creation, sales, business) will likely have long-term better outcomes. Perhaps it implies that sole-founders would be well advised to pay for competent advisors in the areas they are weak.
Whatever people might think of Zuckerberg, one thing for sure, he's smart enough to know that he doesn't know everything and should ask for help. Many founder's ego just won't let them do that.
1) Startup founder gets an idea and develops a legitimate product.
2) The company gains some customers, but the growth is tough, since competing products often sell below cost.
3) The founder gives up and goes to VCs.
4) VCs take away the controlling stake in exchange for an endless stream of cheap money, so the company can start selling dollars for 90 cents just like the competition.
5) The founder's vision is no longer a critical asset, the cheap VC capital is. The founder gets pushed out and replaced by the VCs' protégé.
6) If the stars align, the (still unprofitable) company exits. Numerous retail investors buy shares in something they've heard about but don't fully understand. VCs get 100x returns. The founder gets a letter of appreciation.
The whole cycle is all about getting a bigger share of the endless stream of cheap money from the fed. VCs throw in a lump sum to buy visibility. Enough visibility guarantees that more people with extra freshly minted cash on hand will choose your shares over other speculative investment.
Except all that recently printed cash is now competing for wheat and baby formula (hence inflation), so the fed has no choice but to backtrack and raise interest rates. And if this holds for sufficient time, the whole VC game may suddenly stop paying off.
Your digression into the link between stimulus cash, baby formula, and inflation seems somewhat less accurate.
Firstly, baby formula (and wheat) are not luxuries. The amount of formula you need is 100% based on your baby, which neither knows no cares how much cash you have. My guess is its the first thing a mother buys, not the last. So excess cash, or lack thereof, has no impact on demand.
If demand is stable, that means inflation is caused by constrained supply. Which is exactly what has happened year - close a factory producing significant % of supply, and supply drops.
The same with wheat. No one is buying extra bread with their extra bread. But global wheat supply has been affected by the Russian invasion of Ukraine.
Yes, extra cash can contribute to inflation, and no doubt that has had some effect, but between the war, and the pandemic the primary inflation seems to be caused by supply issues. And oil. The war drives up the oil price, and that knocks on to everything.
I would mostly say yes but keep in mind that money does make the world go around. Meaning that greed sparks ideas, products and services that keeps us from going back to a society that survives having or providing nothing to spare beyond the basic necessities.
It's not pretty but it's what's kind off working now.
Their required collateral when making a loan is 4x in cryptoassets. This means the collateral is not enough after a 75% drop.
Yet Bitcoin dropped 80% every 3-4 years or so.
https://studio.glassnode.com/metrics?a=BTC&m=market.PriceDra...
MBAs notoriously do not fix things. They usually run them into the ground.
Sometimes VCs will replace founders with experienced execs to try to control costs before a sale, but I haven't seen examples of this where they fix the product or find the market fit. They usually just fire people and try to get the financials to look better.
I would be beyond furious if I couldn't withdraw my assets from this scam.
https://someunpleasant.substack.com/p/economists-do-they-kno...
https://i.redd.it/pd0s2ysxnm791.jpg
Like the weather system, every molecule of air and water behaves "deterministically". And yet, we can predict no more than a few days, may be a few weeks at most, with any real accuracy. This is the hallmark of a chaotic system (aka the error in prediction grows exponentially).
Laws need to be bad enough violence may feel better.
Sounds like there could be ramifications beyond the usual crypto "aww shucks, the money's gone, what can you do lol".
Losing money in cryptocurrency is a first-world problem, no one is going to commit violent acts over losing their side/play money.
A lot of people are not fine, they just didn't feel the full ramifications for their actions, yet.
That you somehow believe everyone losing money to investment scams is responsibly investing only an appropriate portion of their side/play money tells me you know very little about this space.
Let's flip the question: what reasons do you have to expect "violent acts against people running these companies"? Sure, you have a bunch of people that are angry, but makes you think they're angry enough to follow through with the plan? Was there a spree of violence against bankers in 2007/2008?
My working assumption is that there will be some breaking point or a triggering event where people just had enough.
There's plenty of violent acts driven by various reasons, I guess I am surprised we have yet to see "vigilante" type act against people of power.
https://news.ycombinator.com/item?id=31869856
But what's Goldman's play here? To pump crypto after buying?
A few wall street firms have started to recommend Crypto as an investment. Goldman probably sees a future where their clients will have crypto assets so they see a future in controlling some of the infrastructure. We'll see more of these types of deals.
I'm sure they would love to control Coinbase but it's too expensive to own, now.
It's too bad it's attached to scams and grifters.
IMO you said it perfectly and it's worth emphasizing for programmer types:
> The one thing of value that crypto actually delivers [...] is atomic multi-party transactions across unrelated parties.
I wouldn't say it's the one/only thing though: Ethereum builds a trustless computation platform on top this core primitive, which I think is pretty fundamental and impressive (especially when you consider Vitalik Buterin was 21 when he created it, and already had a long career of writing for Bitcoin Magazine; in particular this article from 2014 criticising Bitcoin's centralisation: https://bitcoinmagazine.com/business/opinion-on-mining-14032...).
Imagine if you could rent mining hardware, IaaS-style, and there was enough available to control a majority of the active hash rate. An attack that lasted a few hours would not be particularly expensive.
It’s easy to assume that Bitcoin, Ethereum, etc are technologies that work as advertised and that the only interesting questions are weather the tokens on the respective blockchains are useful and/or valuable. But the blockchains themselves have critical requirements for proper functioning, and they can easily fail.
(For Ethereum in particular, you can rent GPUs on fairly large numbers. A change in the economics could easily make it possible to rent a majority of mining power on AWS or similar platforms. At least Bitcoin hardware is mostly useless for anything other than Bitcoin mining.)
You need gigantic investment to accomplish it now and it's not even a sure return and by the time you're constantly successful with your attack, the market has figured the network is taken over for the price to go zero to move over to another coin.
Then you're left with crazily invested factories, mining a worthless coin.
Your assumptions are missing the simple idea that if there's a room to be profitable, they'll mine that themselves than somehow let them stay idle for someone else to rent and start a massive attack.
The hash rate is actually going up during this bear market.
They should drop once they can't mine profitably for a while but so far not the case.
https://www.blockchain.com/charts/hash-rate
You cannot possibly own half of that hash rate to yourself unless you're some state level actor wasting tax on it thinking wasting billions (even then, you can't just order million ASIC units overnight) today to kill Bitcoin is better than some future they see with Bitcoin but then again, people can fork Bitcoin to form another base cryptocurrency, and their effort could become a complete waste.
The only few ways Bitcoin can kill itself is that either people fail to see its usefulness or that some severe unfixable security flaw is found.
People say crypto has no intrinsic value but its uncontrollable existence is the value itself.
But it's ok for those people to keep missing the boat to see bright friends make killings.
When will they try to answer the simple question that how crypto is still around after 13 years with constant price increase?
Can atomic swaps happen in a centralized system? If so, does that still count as cryptocurrency?
There are a huge number of stock exchanges today that all trade the same products with slightly different exchange features. Do you think they're going to be inclined to cooperate with each other to make atomic swaps work across exchanges?
https://www.forbes.com/sites/korihale/2022/01/11/goldman-sac...
https://newsroom.bankofamerica.com/content/newsroom/press-re...
and on and on...
To take a cut on their investors buying some assets from a drowning company at a steep discount.
Yes, that is indeed how Goldman makes money.
Interesting times coming if there are more issues with USDD and/or tether.
Why?
FYI most funds have always been holding crypto, bitcoin in particular gives a better yield over any traditional asset in the world over a 10 year period, consistently over 30 years.
Crypto is hilariously tiny compared to the actual world of finance. SPY (a single ETF) does as much dollar volume in a single 7.5 hr trading day as the entire crypto market does in 24h, and the entire crypto ‘market cap’ is worth less than half of Apple, one company.
Their terms have this language:
> Eligible Digital Assets held in a Custody Wallet are subject to the other provisions of these Terms, unless where expressly stated otherwise. Celsius retains the right to set-off any Eligible Digital Assets in a Custody Wallet against any obligations you may have to us.
> You understand and acknowledge that the legal treatment of Digital Assets remains unsettled and may vary depending on the jurisdiction in which you reside. In the event that you, Celsius or any Third Party Custodian becomes subject to an insolvency proceeding, it is unclear how your Digital Assets would be treated and what rights you would have to such Digital Assets.
> Celsius does not make any representation as to the likely treatment of Digital Assets in your Celsius Account, including those in a Custody Wallet, in the event that you, Celsius or any Third Party Custodian becomes subject to an insolvency proceeding whether in the U.S. or in any other jurisdiction. You explicitly understand and acknowledge that the treatment of Digital Assets in the event of such an insolvency proceeding is unsettled, not guaranteed, and may result in a number of outcomes that are impossible to predict reliably, including but not limited to you being treated as an unsecured creditor and/or the total loss of any and all Digital Assets reflected in your Celsius Account, including those in a Custody Wallet.
https://celsius.network/terms-of-use
If you give your money to something that looks like a bank, walks like a bank, but is not actually a bank, don't expect them to be held to the same legal standards as a bank.
They seem to have completely different mechanics, aside from failing within a month of each other there is almost no other mechanical similarity between these situations.
A troubled company's balance sheet usually looks like:
Assets: A Mess
Liabilities: A Mess
None of the claimholders (liabilities) know what they can withdraw, when, etc. A "buying asset" bailout often happens when someone (like Goldman here) comes in to buy only the gross assets. They will pay $2 bln in cash for the assets, and divorce the two messes. The two companies afterwards are now:
NewCo:
Asset: A Mess
Liabilities: None, other than their new single equityholder, Goldman.
OldCo:
Asset: $2bln
Liabilies: A Mess.
NewCo is controlled by one person (or a tight group) and can unwind its positions slowly at leisure, waiting for prices to go up, with no more (financial) liquidations.
OldCo has a much easier time. All creditors are called to line up in order. A judge decides who is most senior. The senior most people go collect their money (chunk of $2bln first). People queue up until the money is gone. In the highly unlikely case there is any money left after all claims are paid, the money goes to the old Celcius equityholders.
I had been expecting steeper dips so I missed that 600% flip.
Not exactly my perfect storm for buying a dip, I usually wait for an information asymmetry in my favor, but shoulda just taken a slightly smaller position.
I was just watching this one so closely to begin with
Just be sure to check liquidity depth and current network transaction fees beforehand
Assets in this context means loan contracts between Celsius and its borrowers.
When a finance company GLC (Great Lending Company) makes a loan of $100K to a borrower Joe it deposits $100K in Joe's account in exchange for Joe signing a contract (lets call it LC) that stipulates interest rate, repayment terms etc., On GLC's book the deposit of $100K becomes its liability and LC becomes asset.
Now, GLC could also offer deposit services with attractive interest rates. The deposits needn't (and often do not) equal loans made. If inflows into GLC's reserves match outflows it typically works OK. In an economic up-cycle (low interest rate, positive consumer sentiment etc.,) everyone is happy. But when those assumptions change (usually high interest rate) some of GLC's borrower's begin to default. And it take just a fraction of borrowers to default for GLC to become insolvent. At the first sign of trouble GLC's depositors take their money out, popularly called a bank run. It thus depletes GLC's reserves making them take measures such as pausing withdrawals.
At this point GLC has 3 options.
As you can guess #1 and #2 are short term measures to tide over short-term down-cycle. But the current macro situation is in no way short-term. High interest rates are going to be here for a long time. If anything fed is pondering to raise interest rates as high and 5%. So for GLC #3 is the only option.This is where companies like Goldman come in. In a bankruptcy firesale they scoop up GLC's assets at steep discount. GLC could have assets worth $10B (i.e., it has made loan contracts worth $10B). A big chunk of those loans could be bad. But even if say 70% of them are bad Goldman could make a hefty profit of $1B by buying $3B of assets by paying $2B. The risk is at this point no one knows what those loan contracts are really worth. It takes quite a bit of time and effort to untangle these loan contracts that were made during boom time. GLC won't have neither of those resources in times of distress. So GLC and Goldman make rough calculations and agree on $2B price. It may turn out to be worth 0 (highly unlikely) or $5B or somewhere between. But either way it's highly likely that Goldman stands to make good profit out of this firesale. Because they have a robust balance sheet and resources they could wait out for years to recover from borrowers.
The assets are likely coins or stablecoins at a deep discount to market (80%+).