Comment by gst | Hacker News Reader

Comment by gst | Hacker News Reader

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But it's only an issues for other connected entities when they are using risky business practices themselves.

A stablecoin that backs its assets in the currency that the stablecoin issues (for example a USD-based stablecoin that is backed by US treasuries) won't be affected by any disruption in the market. An exchange that is fully backed and does not allow margin trading won't be affected either. Regular holders who hold their own coins or use responsible exchanges also aren't affected.

Yes - there's quite a bit of propagation. But all entities affected by that propagation didn't seem to have proper risk management and used business practices that work well when the market does well, but that fall apart in case of high volatility. Maybe I'm just biased because I'm not a fan of margin trading (and similar practices), but I don't consider it a disadvantage if an ecosystem is hostile to those types of business practices.

The process by which you create a bubble is when you create mechanisms to ship risk as far away from the people who are knowledgeable about it as possible.

The core might all be completely self-deluded or intentional scammers, but the second-degree people who invested/loaned to them intended to some degree to take a bit less risk than being directly involved in the scam, the third-degree people who rely on the second-degree people thought they were allowing a little innovation instead of missing out by playing it too safe, the fourth-degree people aren't even aware that they're invested in the core scam or delusion at all, and make fun of it online. There's a fifth-degree of people who have no idea that whether they eat depends on the scam (because the fourth-degree was a municipal bond issue, the city is now drowning in liabilities, so they had to cut food banks.)

edit: The most recent crypto peak was largely fueled by a ton of normies who put their retirements into something that has gone down somewhere between 40% and 70% in value since they bought it. Other people depend on those people.

>But it's only an issues for other connected entities when they are using risky business practices themselves.

I think that's the thrust of the argument. We're about to find out how many DeFi companies are utilizing bad business practices.

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