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Comment by SilverBirch | Hacker News Reader

You know what this makes me kind of wonder... back earlier in the year SBF made a big show of coming in and investing in a bunch of the companies that were collapsing due to the LUNA/3AC/Celsius problems. He stepped in and to some extent halted the unwinding of some of these issues. It turns out now that it's likely FTX is underwater, and Binance is basically doing the same thing - coming in, picking them up cheap and preventing them from really having to unwind.

So It's perfectly possible this action does the exact same thing as last time - simply stalls the unwinding of this catastrophe, which in the end could possibly even prove Binance insolvent. At the end of the day we just end up in a situation where Binance itself has pricing power over tonnes of coins, and if the market comes back they'll be fine, but if the market continues to slide at some point they won't be able to support the market any more.

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This is the crypto ponzi falling apart. First the smaller ponzis fall apart so the larger ponzis need to step in so the fact that the entire thing is one big Ponzi doesn’t get fully exposed.

The Ponzi falling and subsequent cover up by the bigger Ponzi keeps going up the chain until those at the top of the Ponzi food chains collapse.

Right now it looks like that might be Binance.

I'm perfectly happy with that outcome as long as the taxpayer isn't left holding the bag at the end.

Pure speculation - but I am going to go ahead and speculate that they lost most of the money when everything collapsed a few months ago in the defi blow up.

They doubled down and bought up distressed assets for cents on the dollar, hoping to make it back. A few months on, these bets are worth $0 and there is a $5bn hold in the balance sheet.

If binance havent been f'ing around on the side gambling on the price, and just collect their brokerage on their exchange they will have plenty of cash to make FTX customers whole, restore some faith in the system and dominate the market place.

Yup, I think this is what happened. And they claimed "it was for the good of the crypto ecosystem", which in part is true. But the reality if SBF aquired because he had to.

Taking that a step further, is Binance doing the same thing?

Without wanting to overdo the "speedrunning 100 years of trad finance" crypto has just replayed 2008.

FTX is playin the role of Bear Sterns and Binance playing JP Morgan. Defi are subbing in for Mortgage bonds, CDOs and synthetic CDOs squared. Margott Robbie can play herself again the the explanation https://www.youtube.com/watch?v=wlHrSZ7BVFI

As with 2008, it is entirely possible that an exchange does what it is meant to do and just happily generates piles of profit for zero risk - taking a percentage of every transaction a bit like ebay. Is that Banance? Or maybe Gemini of Winklevoss fame?

No idea, CZ of binance tweets like he gets this, but who know. SBF tweeted saying they had everyones money but i guess the character limit means he couldnt say the whole statement which really was "we have everyones money ... except for 5-6billion of it"

> No idea, CZ of binance tweets like he gets this, but who know.

Agreed. CZ has also posted that he intends to start publishing merkle-tree proof-of-reserves [0] for Binance. Definitely could be posturing, but if he follows through it would definitely raise the confidence in Binance.

[0] https://twitter.com/cz_binance/status/1590055819416330240

Binance has serious legal issues (governmental investigations) and isn't based out of any jurisdiction. A Binance failure would have consequences that are very hard to predict

I'm not sure that binance has a reason to exist in the current world where defi is a thing.

Things like Coinbase etc are your place to go if you want a fiat to crypto on-ramp or off-ramp or if you want a reasonably safe place to park crypto if you don't want to own it yourself.

There are innumerable decentralized exchanges where a person can be absolutely (for some definition of the word) sure that the exchange won't be shutting down and taking your money before you're done doing your transaction. There are L2 DEX even that are approximately the same cost and same level of inconvenience as something like Binance.

Why does it matter if Binance goes away? I'm not sure if it does!

Binance is the biggest exchange by a huge margin. It dwarfs coinbase and FTX.

They are also huge investors in crypto and any winding up will have an impact on a significant number of companies.

They control a significant portion of stablecoin, defi, and chain market too.

Their impact would be felt outside the crypto space if they ever go down.

All the more reason for them to go down sooner rather than later because they’re eventually gonna go down, so better now where they will have less impact outside the crypto world than they would a few months or years later.

And yet, here they are, processing a huge amount of volume. Their customers obviously do think they have a reason for existing.

Binance reminds me of https://en.wikipedia.org/wiki/Bank_of_Credit_and_Commerce_In... but I don't think they're stealing customer money. It is amazing that they have evaded American regulators so long. I think one day they are going to disable trading in dollars.

Honestly, I think FTX is biting off way more than they can chew. They’re really well-connected for the crypto industry, knifing them will definitely get the attention of regulators and that could blow up the entire thing. Their only real asset is being perceived as too big to fail but they’re not exactly acting in ways that endears them to the federal government

Unless Mr CZ is on the moon, he very much is based out of some jurisdiction. It just might not be extraditable to the US.

He keeps moving around. I think he’s based out of Dubai now, but there’s been seven countries or so over the past 5 years

Maybe that's why he's been so supportive of musk in his Twitter buyout

If it's going to happen, better sooner than later.

I mean we are wishing here for an economic catastrophe. What am I missing?

It's not an economic catastrophe: currently the real economy is not strongly affected by what happens in the crypto-economy--and we need to keep it that way!

To protect people from getting scam and to put money in more efficient and productive industries.

In retrospect, something very shady about those deals they made. There may have been more contagion than let on. Or FTX themselves was financially tied to those assets, and was the true actor swindling people through ponzi yield farming schemes.

Yes, because the entire space is predicated on some magic beans having intrinsic value, which they don't. And then people realize that magic bean number N is also worthless, everyone exposed to magic bean number N goes bankrupt.

So, report back here for the same thread in a few months? Who'll it be next?

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