The news for cryptocurrencies keeps getting worse as Three Arrows Capital (3AC), a major cryptocurrency hedge fund, plunges into bankruptcy and fires 25% of its workforce.
Rumors that the embattled fund was in trouble started gaining steam early last month, and it was hit hard by the collapse of the Terra crypto and other issues. A court order in the British Virgin Islands ordered their liquidation after they defaulted on a loan worth $660 million to crypto brokerage Voyager Digital.
[...] 3AC is one of the most prominent cryptocurrency hedge funds, focusing on investments in digital assets, and it is known for bullish views on bitcoin and highly leveraged bets. It was founded by Kyle Davies and Zhu Su, who is now trying to sell the $35 million mansion he bought in December.
The collapse of Three Arrows Capital has sent shockwaves throughout the crypto lending market, with countless firms now racking up significant losses as a result of their exposure to the fund.
[...] The conditions have led experts to conclude the crypto space is dealing with its first wide-scale credit crisis. IntoTheBlock Head of Research Lucas Outumoro wrote: "Institutions led by their risky practices thrived during the bull market, but were exposed as prices crashed and took down the rest of the crypto space with them. Ultimately, as an industry, crypto ended up learning the same lessons from traditional finance from its first debt crisis." Are you jumping in when it bottoms out?
Having a need for a $660M loan is surprising in itself, but more surprising to me is having another crypto fund step up and loaning them that much and putting their own business at risk. Is this the start of a major collapse, or just a "market correction," as the economists like to say?
See previously: Crypto Hedge Fund Three Arrows Capital Plunges Into Liquidation
Related Stories
Three Arrows Capital, a cryptocurrency-focused hedge fund, has plunged into liquidation, deepening the crisis engulfing the global digital assets sector.
Sky News has learnt that partners from Teneo in the British Virgin Islands has been lined up to handle the insolvency of the Singapore-based firm, which was set up in 2012 by Su Zhu and Kyle Davies.
Cryptocurrency insiders said on Wednesday that the liquidation would be a significant moment in the current unravelling of the cryptocurrency sector, which has grown at breakneck speed in recent years.
The firm's demise is likely to raise further questions, however, about the regulatory oversight to which cryptocurrencies and other digital assets are subject in the world's major financial centres.
[...] The crypto landscape is experiencing tumultuous change amid a collapse in valuations of assets such as stablecoins - digital currencies pegged to the value of assets such as the US dollar or gold.
(Score: 4, Informative) by darkfeline on Thursday July 07 2022, @01:26AM (27 children)
Hedge fund? They were asking for it. You can't manage investment risk if your entire investment is in a single type of commodity.
The tragedy of crypto is that most people don't even know what it's for. Hate the scammer and not the medium.
There are people who use crypto to transact, especially in places where the financial system and government can't be trusted. Even in the glorious US, it's much easier to send someone Bitcoin than cash. At best you have to sign up for a Venmo account or similar, or you have to wait days for an ACH transfer, and good luck with international transfers.
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(Score: 5, Interesting) by stretch611 on Thursday July 07 2022, @03:50AM (26 children)
For the uninformed/misinformed...Crypto is a classic pyramid scheme. This one in slightly different in that it has very high expenses due to wasting a ton of electricity.
Crypto is also known for misleading people.
In spite of your comparison to untrusted governments, at least you have more of a chance of retaining some minor value in the local currencyof a corrupt government than you have with the anarchy of crypto.
Now with 5 covid vaccine shots/boosters altering my DNA :P
(Score: 1, Interesting) by khallow on Thursday July 07 2022, @04:04AM (18 children)
Except that it is not. Words have meaning. I'll note that this is just the first of many straw man arguments. I won't bother noting them except to say that virtually everything you wrote was part of a straw man argument.
Which is incorrect because government doesn't control the trustworthiness of any transactions much less crypto transactions. Regulation != control. And they certainly don't control it with FDIC insurance.
You already acknowledged the "very high expenses due to wasting a ton of electricity" (which is only one of many schemes for preventing the "print money out of thin air" problem) which makes that statement false.
Like say the stock market?
Many countries don't use much electricity.
(Score: 4, Insightful) by FatPhil on Thursday July 07 2022, @07:42AM (14 children)
> Except that it is not.
Your pedantry is unwarranted, in particular as it's more misleading than the technical falsity it tries to counter. What he should have said is:
Crypto is a field containing almost entirely classic pyramid schemes. The few examples which have not been, by deliberate design and marketting, set up to be classic pyramid schemes are so few in number they're a rounding error. And almost all of /those/ have in turn subsequently been used as a classic pyramid scheme. This is hardly surpising, as there's no intrinsic yield. Some of the scams promise yield, but they can only get that yield by handwaving with "and the magic happens elsewhere", that elsewhere being somewhere with no intrinsic yield, or by yielding something of no value that magically gains value for no other reason that they need you to believe that so that you fall for the scam. None of them, ever, definitionally, can be used for investment, *unless* they are classic pyramid schemes - ones where you need to find a bigger sucker.
I can genuinely only think of one thing in the entire crypto space which, as yet, isn't being used as an enabler for pyramid schemes. Almost the entire field is utterly toxic. Any practical utility any of it may have promised to have has been dwarfed to irrelevance by all the get-rich-quick scams.
But to lighten the tone, here's an anagram I found a week or so back:
Bullish in the crypto space? = Crap! The shitcoin's belly up!
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 2, Interesting) by shrewdsheep on Thursday July 07 2022, @12:04PM (1 child)
I agree that the pre-mined crypto currencies have to be judged to be pyramid schemes. The few established ones (bitcoin, ether) I do not see as such though. By volume, they are not a rounding error. They are subject to egregious speculation and pump-and-dump schemes (Musk) but they are established currencies otherwise, i.e. used to exchange (real) goods and capable of retaining value (subject to large fluctuations, I give you that).
(Score: 2) by FatPhil on Thursday July 07 2022, @10:54PM
On this we agree.
> The few established ones (bitcoin, ether) I do not see as such though.
Sorry, but Bitcoin was definitely pre-mined. Get some business studies 101 down you - look at "adoption curves". It may not have been *solo-mined*, but that's a different claim. The essential thing in ponzi schemes is the getting there early, and bitcoin has as much of that as any of the shitcoins.
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 1) by khallow on Thursday July 07 2022, @01:02PM (5 children)
Like Bitcoin? The one that the AC was complaining about as consuming more electricity than most countries?
To give an idea of how flawed this argument is, you can say the exact same thing of almost all currencies and a variety of other investments. Pyramid schemes don't depend on some underlying aspect of the alleged investment, particularly safety or reliability. The safest investments can be used as the basis for a pyramid scheme just like the shiftiest crypto. What's going on is that the scammer uses later funding from the marks to fake investment return from earlier funding. No serious investment (beyond whatever is needed for the role) need happen.
It's even easier to run a pyramid scheme for an investment that no one expects a lot of return for. You might have to kick back 10% a year rather than 10% a month.
As darkfeline noted, the tragedy of this whole thing is that so many people just don't get what crypto was for in the first place. As a glaring example, I don't have to invest in cryptocurrencies even a little to use it!
(Score: 2) by FatPhil on Thursday July 07 2022, @10:56PM
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 5, Interesting) by FatPhil on Friday July 08 2022, @07:20AM (3 children)
> you can say the exact same thing of almost all currencies and a variety of other investments.
Nope, because fiat currencies have fiat. They are guaranteed to be usable to pay your taxes, or other debts. Cryptos have no fiat, except in I think 2 dumbass shithole countries.
Maybe those other investments aren't actually investments, perhaps they're almost entirely speculation, i.e. gambling. I'd say my ownership of a small portion of a brewpub was an investment, that may go down in value as well as up, is an investment, as there's material stuff like equipment and virtual stuff like recipes/brands that have real market value were it necessary to liquidate it. I'd say my silver holdings are an investment too (and now's a great time to btfd), because there will always be an industrial demand for the metal, and that demand will only increase as more of the world becomes electronic. Ditto, my U3O8 investment - that uranium ore has material value, as we'll always need energy, more in the future than ever before. I don't own any Tesla shares, I don't consider that an investment, that's pure speculation, as it's clearly so dramatically overvalued (more than Ford/GM, for example) that it's a joke. And its value can drop 10% when some idiot makes a joke.
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 1) by khallow on Saturday July 09 2022, @03:44AM (2 children)
The "exact same thing" is:
There are plenty of pyramids and other varieties of scams in the USD world. Its "fiat" aspect turns out to completely irrelevant. But as you acknowledged, there are fiat cryptocurrencies out there if we really feel the need to check that box.
And sorry, I don't buy that your three investments are investments merely because there's some sort of minor identifiable value in them, should things head south. That's merely a part of the decision and it shows in your treatment of Tesla. After all, even if Tesla heads south, there will be some gear to sell off. But it's nothing compared to the high price of Tesla stock.
I too don't own Tesla or any cryptocurrency, and price is exactly why. I don't consider either to have a positive return on investment - once you account for the uncertainties and such. But being way overpriced, which I think is the real sin of crypto, doesn't make something a pyramid scheme.
(Score: 2) by FatPhil on Saturday July 09 2022, @09:15AM (1 child)
Yes, but only 1/50th of the value of your shares. And shareholders are always reimbursed last. So you'll get 0% of that 1/50th.
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 1) by khallow on Monday July 11 2022, @01:39PM
(Score: 2) by NotSanguine on Thursday July 07 2022, @06:49PM (1 child)
There is a useful (for some people and some values of the word "useful") side to cryptocurrencies. Buying drugs, guns, child porn and other commodities that are illegal in many jurisdictions.
But you're correct, the vast majority of "crypto businesses" are quite scammy. And don't even get me started on the cesspool that is "Web3" [wikipedia.org].
I actually came to post about Voyager filing for bankruptcy [soylentnews.org], but you beat me to it. Thanks!
No, no, you're not thinking; you're just being logical. --Niels Bohr
(Score: 3, Interesting) by FatPhil on Thursday July 07 2022, @10:59PM
See elsethread for my favourite web3 resource... (because it's going *just great*!)
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 2) by darkfeline on Friday July 08 2022, @08:21PM (3 children)
> Crypto is a field containing almost entirely classic pyramid schemes.
What a disingenuous statement. By the same logic telephone and email technology are fraud, as the total proportion of non-fraud volume of their usage is a rounding error. Your first error is conflating the tech with its usage at a specific point in time, and your second error is conflating volume with legitimacy or value.
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(Score: 2) by FatPhil on Saturday July 09 2022, @09:12AM (2 children)
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 2) by darkfeline on Saturday July 09 2022, @09:19AM (1 child)
Because the vast majority of phone calls are for fraud? Specifically robocall/call center scams, although it's also used for more mundane fraud like giving insider trading info or negotiating political corruption.
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(Score: 2) by FatPhil on Saturday July 09 2022, @09:25AM
[citation needed]
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 2) by DeathMonkey on Thursday July 07 2022, @04:47PM
People conflate things like the Tulip Bulb Bubble [investopedia.com] with Pyramid Schemes although you are correct that they are technically not the same thing.
The Bitcoin bubble shares much more in common with tulip bulb speculation and subsequent crash than paying out investment income from new member subscriptions like a pyramid scheme would.
(Score: 0) by Anonymous Coward on Saturday July 09 2022, @05:16PM (1 child)
Or had set the original minting limit much lower, so testing of 'end game economics' of getting paid for processing transactions rather than minting new coins was done, I might agree with you. But all indications from how it was released and how it has been marketed since release very strongly imply it is a Ponzi scheme. The only difference is it doesn't rely on all the 'ranking of investors' that normal ponzi schemes relied on, but rather on when one chose to 'buy in' to it.
Basically a greed game. (Plenty of manga/anime going into this part in-depth.)
(Score: 1) by khallow on Sunday July 10 2022, @04:04AM
Except, of course, how it was released strongly imply it wasn't. That's always the problem with these sort of narratives - not paying attention to the facts. Here's some facts. The original BitCoin was just released as a white paper with an open source implementation that could and was readily replicated by design - scams don't let everyone join the scammers in profiting off the scam. A large block of bitcoins is thought to have been mined by the creator. It has been untouched for more than a decade - a scammer would have found the exit long ago. And the founder handed everything off to other people. A scammer would have kept control until they sold out.
In other words, just a typical asset bubble.
(Score: 2) by FatPhil on Thursday July 07 2022, @08:08AM
Nah, there have been loads. Heck, the split of Etherium off its classic incarnation was such an operation. The most recent one seems less than a couple of months ago:
"""
Crypto.com reverses some Luna trades, offers $10 consolation prize
One of the features of crypto that its proponents sometimes highlight is that transactions can't be reversed. This, of course, is not true when making trades on exchanges like Crypto.com, who can largely do whatever they want with the wallets they maintain and the coins they keep track of on users' behalf.
On May 13, the company announced it would be reversing transactions made during an hour-long period on May 12 when "users who traded LUNA were quoted an incorrect price". Some users were able to profit off the discrepancy, but later were told that their transactions were being reversed. Crypto.com offered $10 in CRO, their cryptocurrency token, "for the inconvenience caused". Crypto.com halted Luna trading after discovering the issue, and it remains halted as of May 13.
The issue sounds quite similar to issues that affected various defi projects around the same time. Several projects who failed to account for unexpected Luna price data coming from blockchain oracles including Chainlink suffered major attacks.
"LUNA Trading Incident on Crypto.com App", Crypto.com
""" -- https://web3isgoinggreat.com/web1?cursor=2022-05-25-0&direction=next#cryptocom-reverses-some-luna-trades-offers-10-consolation-prize
Where the crypto.com link is to:
"""
On 12 May 2022 between 12:40 – 13:39 (UTC) users who traded LUNA were quoted an incorrect price. Our systems quickly detected the error and trading was halted. Trading remains halted until further notice.
All impacted trades (buy and sell) will be reversed, and affected users will be credited USD $10 in CRO for the inconvenience caused. Affected users are being informed via email.
""" -- https://crypto.com/product-news/luna-trading-incident/
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 5, Interesting) by Thexalon on Thursday July 07 2022, @11:12AM (5 children)
It's not just that.
Currency is supposed to be 3 things: A measure of economic value, a store of economic value, and a medium of exchange.
Crypto sucks at all 3. Its value fluctuates so much that it can't be a useful measure of economic value, it can't be a safe store of economic value (as those who heavily invested into it 6 months ago can definitely tell you), and as a medium of exchange it's so slow that its value can change while the transaction is being processed.
The pro-crypto people know all this, but try to sell you on the idea that it might be someday in the future all of those things. But it never has been, and it's been trying to be those things for years, and the systems that have been set up to work with it are getting worse the more activity it tries to handle. Which means that unless the tech changes dramatically, it's never going to be what it claims to be.
And once you understand that, what's the sales pitch? That you can sell it to somebody else for more real currency than you bought it for before the game is up. Which makes it nothing more than a fraud.
As far as avoiding government control goes, I'll just point out that the libertarian position on how much control government should have over our lives is always identical to the position of organized crime. I don't think most libertarians think of themselves as pawns for the mob or drug cartels, but that's exactly who they are really helping however unwittingly.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 1) by khallow on Thursday July 07 2022, @01:07PM (4 children)
Actually, it just needs to be a medium of exchange - that's the massive economic value of currency. And a measure of economic value comes for free once you have a medium of exchange.
It doesn't have to be good - that merely means that there's huge opportunity for something better - it just needs to be better than the alternatives.
(Score: 2) by Thexalon on Thursday July 07 2022, @04:45PM (3 children)
It doesn't function as a medium of exchange when it's so unstable that it's impossible to agree on a price. For example, let's say you accepted an offer on a house for 10 Btc, around $300K, 30 days ago, which seemed quite reasonable, around its expected market value. However, by the time you get to closing today, that same house should be worth 15 Btc, which means you're going to be scrambling to either modify the agreement or get out of it.
This happens on an even smaller time scale: For instance, the (alleged) value of BtC increased by 2% since this morning, most of which was between 3 and 2 hours before me writing this comment. If you were selling a small-margin product like a lot of generic consumer goods, that would force you to change prices approximately every 10 minutes, which means that between the time of you picking an item up from the shelf and getting to the register the price might be different than what was shown on the shelf. And since that BtC transaction can take an hour or more to complete, a good deal when you chose "buy" might have just become a bad deal, or vice versa.
And right now, the major fiat currencies with conventional banking and payment card processors are vastly better than crypto for all common applications of the concept of money. They're faster, they're more predictable, they have had decades or even centuries of what could reasonably be termed "debugging", there is a lot of infrastructure for preventing fraud, and an army of people whose job it is to ensure that everything runs smoothly. It's even better for foreign exchange in a lot of ways, mostly because of that whole lag-time issue I described above: If you bought Btc in one fiat currency intending to immediately sell it for another fiat currency, you actually have no idea how much of the other fiat currency you're going to get in a couple of hours, whereas if you tell your bank you would like to withdraw $X in Euro there will be a fee but they'll be able to tell you how much you're getting if you go through with it and you'll get the money immediately.
Are fiat currencies perfect? Nope. But they're a heck of a lot better than the price of everything fluctuating based on Elon Musk's mood or how much people like to pretend they own pictures.
But I get it: If you bought into some crypto, you have to talk like it's the best thing in the world in the hopes you can convince somebody else to buy yours so that they're left as the sucker instead of you.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by helel on Thursday July 07 2022, @07:52PM
To be fair, if any crypto-curacy ever were ubiquitous enough to purchase consumer goods at the store the large transaction volume and real-world exchange would do a great deal to stabilize the price.
Republican Patriotism [youtube.com]
(Score: 1) by khallow on Saturday July 09 2022, @03:51AM
Which isn't a problem with cryptocurrencies, let us note.
So don't hold BtC for 2-3 hours. You don't need to in order to trade. Sure, someone does, but it doesn't need to be either party in a bitcoin transaction. They can purchase, trade, and sell the currency in minutes - even in seconds should someone automate the process.
Not for the people trading in cryptocurrencies. Conventional banking and payment cards have a wide area of use, but once you stray outside those bounds it's here-be-dragons.
(Score: 1) by khallow on Monday July 11 2022, @01:44PM
I never have invested in cryptocurrencies. Certainly not now at its present high price and instability.
(Score: 3, Interesting) by Anonymous Coward on Thursday July 07 2022, @02:09AM
It was supposed to be an alternate currency. A hedge against inflation too.
But all the speculating inflated the price and the copycats dilluted the market. So now it's going to fall. A bitcoin was never "worth" tens of thousands of dollars.
As an early adopter that's nuts to me. Maybe it can finally be used as currency again.
(Score: 5, Informative) by FatPhil on Thursday July 07 2022, @07:06AM (3 children)
Voyager Digital files for bankruptcy
Voyager Digital, a crypto broker that suspended withdrawals a week prior, announced that it had filed for bankruptcy. They attributed their decision to "prolonged volatility and contagion in the crypto markets", as well as their exposure to Three Arrows Capital, an also-bankrupt crypto fund that defaulted on a loan from Voyager worth around $660 million.
Voyager CEO Stephen Ehrlich wrote on Twitter that he expected that Voyager would "emerge as a stronger company", certainly an optimistic prediction for a crypto broker that froze customer funds with no promise they will ever be able to access them, then filed for bankruptcy.
"Voyager Digital Commences Financial Restructuring Process to Maximize Value for All Stakeholders", press release
[https://www.prnewswire.com/news-releases/voyager-digital-commences-financial-restructuring-process-to-maximize-value-for-all-stakeholders-301581177.html]
Tweet by Stephen Ehrlich
[https://nitter.net/Ehrls15/status/1544550249519357952]
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 4, Informative) by FatPhil on Thursday July 07 2022, @08:11AM (2 children)
That blog's great - the crypto world's a complete dumpster fire. Some shit hits some fan every single day.
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 2) by PiMuNu on Thursday July 07 2022, @10:36AM (1 child)
I love this one:
> the Korean cryptocurrency investment fund Uprise lost 99% of its customer funds ... The firm advertised its AI-enabled automatic trading strategies
Maybe they should just stick to driving cars
(Score: 3, Funny) by FatPhil on Thursday July 07 2022, @10:58AM
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 0) by Anonymous Coward on Thursday July 07 2022, @01:07PM (2 children)
A good old fashioned Run on the Bank!
There's not enough cash to cover.
The late to withdraw folks are losers.
And I have no dog in this one.
No FDIC or federal backup, just the hot air of sales people.
This may be very entertaining to watch greedy rich people eat some dirt.
(Score: 4, Touché) by DeathMonkey on Thursday July 07 2022, @04:50PM (1 child)
Everybody hates all those pesky bank regulations and FDIC bullshit right up until someone empties their bank account!
(Score: 2) by darkfeline on Friday July 08 2022, @08:27PM
Depends on who empties their account. When it's the government, the FDIC (or similar) doesn't help. What also doesn't help is the trend in countries like the US toward those other countries where these sorts of things happen regularly, like the government asserting falsehoods that can be disproven with stark video evidence. Two plus two is five, comrade.
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