Ftx.com Has Probably Collapsed(forum.effectivealtruism.org) |
Ftx.com Has Probably Collapsed(forum.effectivealtruism.org) |
I've never been an EA person (much less a utilitarian) but I can appreciate the meat and potatoes of applied ethics, especially when those ethics are applied consistently. The infusion of cryptocurrency funny money into that world has completely perverted both aspects: much of EA now seems focused on speculative concerns (AGI) rather than real ones (world hunger or civic integrity), and all sorts of perverse rationales are offered for wealth extraction in service of future utils rather than just doing morally good things.
My impression is the (excessive) AGI focus predated FTX (which was founded in 2019), rather than being caused by cryptocurrency money. For example, OpenAI was founded in 2015.
The example I'm most familiar with is calculating utils in terms of the expected total human population of the galaxy, were we to achieve interstellar travel: it's not inconceivable that orders of magnitude more humans would be alive in the distant future than are alive now, which makes their combined future interest more important than the interests of any (or even all) living human beings. Consequently, we should divert money away from the welfare of people living today and towards efforts that maximize the likelihood of a galaxy filled with colonized planets.
If that sounds ridiculous, it's because it is.
A lot of the initial people in EA came from the world of rationality. Classic LessWrong had 3 main topics that were actively discussed - AI risk, Rationality, and EA. It also happened that cryptocurrency became known and somewhat popular among some LessWrong visitors.
We're probably talking like 1% of LessWrong visitors, mind you - but a few of those became crypto-millionaires.
So that's why a bunch of people, who were interested in both AI risk and EA, and now have millions, are infusing the EA movement with cash. Or at least, that's the story as I understand it.
And it couldn't happen to a nicer cult.
I think you missed the point about consistency: I was trying to say that EA, minus the recent tangent, has my appreciation for its consistency. Consistency on its own isn’t a moral virtue, but it is a sign of earnestness. And I like it when people are earnest.
this has been the case since perhaps the very start of EA. many prominent EA/utilitarian faces and perhaps all "long-termists" have been involved in highly speculative stuff like that. it's a meme at this point, as they say.
1. All the alt-coins in FTX/Alameda Reasearch holding will be liquidated. E.g. Solana has been down >40% already.
2. The value of the FTT tokens issued by FTX valued at billions has evaporated. The value of FTT were used to buy other coins, directly and indirectly inflated all of them, including Bitcoin and Ethereum. When the value of FTT evaporates, it can be thought of as billions have been sucked out of the crypto markets. The prices of all coins will drop, including BTC and ETH.
3. The cascading falling of the alt-coins. Some alt-coins will fail. Just now there's an incoming $1B+ Solana tokens being unlocked and will be released to flood the market. Other alt-coins will be impacted in a similar way. One can argue some of these coins are created out of the thin air just like FTT. Their value can simply vanish just like FTT.
What’s funny, in a tragic kind of way, is that initial market manipulation from Karpeles is what drove the initial wave of VC interest who thought they were seeing an indication of genuine widespread demand. And then they couldn’t be left holding the bag and it just snowballed where we’ve seen this ongoing pattern of ever bigger scams and market rigging.
There’s some key difference between Coinbase and an exchange like FTX. Is it because FTX had a token, and then leveraged themselves using their own token?
Binance has a token too. Are they in similar danger? It would be an interesting contrast to know why one exchange is safe vs another.
Here’s SBF testifying in front of congress in Dec 2021 that FTX is completely transparent and therefore safe: https://www.tiktok.com/t/ZTRxC7XrT/
Consumers need to be able to research claims like these. Is there a way to make a “Warning: this exchange is over leveraged” indicator? Or is it just impossible to know?
By inspecting the growth mechanism of the company. Amount of leverage, yield on investments relative to risks, assumptions about future growth, management commentary etc.
Unfortunately for investors in FTX, they had no visibility or regulations/protections against their deposits being stolen
> By inspecting the growth mechanism of the company. Amount of leverage, yield on investments relative to risks, assumptions about future growth, management commentary etc.
Why waste your time like that? Just buy an index fund.
> Unfortunately for investors in FTX, they had no visibility or regulations/protections against their deposits being stolen
Even more important, short sellers couldn't correct the price, I guess?
NFTs are the ones I'm really LOLing about vs the currency plays, but since the currencies are failing too, it just kind reveals the house of straw the whole thing truly is.
> I think of myself as like a fairly cynical person. And that was so much more cynical than how I would've described farming. You're just like, well, I'm in the Ponzi business and it's pretty good.
If effective altruists with their superior analytical abilities can't figure out that the money they're getting is fraudulent, how do you expect them to make rational decisions on what charities are most effective?
Sounds like my kind of asset
There is utility in a black currency for all sorts of illegal things
I'd go here and in seconds it would be gone:
https://www.pay.gov/public/form/preview/pdf/103
For a moment, inflation would run backwards.
That is effective altruism. It saves all of the overhead in distributing your assets - like an index fund for philanthropy.
I don't think people who made billions by scamming well meaning customers should be held in high regard.
In fact, I wouldn't be surprised if he ends up in prison
I doubt any exchange/bank could save themselves by facing the extremely bulky and fast withdrawals in the span of hours that FTX was facing; the only play there was to save face while avoiding locking withdrawals as much as possible e.g. the binance play (obviously horrid but it did buy some time.)
Besides that, the net worth of SBF and Alameda being denominated in FTT and using customer funds (unproven as of now) to make more gambles is obviously terrible, and here everyone is to free to shit on him all they want, but the point is, the EA community shitting on him? Having Sam donated more than a hundred milli to various orgs? mind you that he still is a good poker player, likely to come back, and cover all users funds.
I was tragically wrong...sorry for the comment.
"Tragically wrong" is an understatement; monstrously wrong may do it justice...
As for Binance, they have the SAFU (https://academy.binance.com/en/glossary/secure-asset-fund-fo...) which they just topped up to $1B at current market prices (today). You can verify the balances on chain, but there aren’t any statements about outstanding obligations, and there are no guarantees that those funds haven’t been earmarked for other things.
FTX.us has been under SEC investigation for security fraud for months, so still too early to make this call
I wouldn't be too sure of that. Sequoia just emailed all their LPs saying that they are marking down their investment in FTX.com and FTX US to $0.
Seriously look at their balance sheet!
They have zero risk of this kind of insolvency, their only risk is people stop using them to trade.
Say what you will about that being a weird/dumb model but here we are.
US regulated companies can, in fact, go bankrupt, and frequently do. They can also misuse funds or make foolish decisions that cause them to to under even if customers keep using them.
There is even have a system for scoring this risk, called the Altman Z score. A good score is above 3. A grey zone score is 1.8-3.0.
Coinbase’s current score is 0.15!
In the distressed zone with serious possibility of bankruptcy within the next two years.
https://www.gurufocus.com/term/zscore/COIN/Altman-Z-Score/CO...
Anyone who disagrees with this solvency risk assessment is free to purchase some of their outstanding bonds. Their bond coming due in 2028 goes for 53 cents on the dollar.
If they don’t go bankrupt, you’ll double your money in five years. A yield of 13.3% per year!
https://markets.businessinsider.com/bonds/coinbase_global_in...
Coinbase may eventually run out of money and go out of business because their operating costs presumably exceed their revenue, but the customer funds won't evaporate if/when they do, unlike the shadier exchanges.
1. https://www.reuters.com/technology/coinbase-reports-third-qu...
I'm curious about why was he buying out all those other failing crypto firms? Did he not understand his own situation? Was it binance's triggering via the sale of ftx that triggered customers pulling their money out? Who knows about binance now. Any external investments they had went down in value, their crypto holdings went down. There's not particular reason to worry about binance. I've never bought into these inexplainable crypto giants anyway. How many more are left to fail?
https://twitter.com/cz_binance/status/1590103159506341888
As far as I can tell, this seems to be the correct analysis. The technical term for why you should avoid this is "wrong way risk".
In the bookmaker analogy, it sounds like FTX took the betted cash and spunked it away to prop up Alameda. Nominally this was a loan backed by the FTT token, but at best this was a risky asset, and FTX could no longer promise they can pay out all the bettors - because FTT could, and did, drop in value.
Note that at no point during the various crises of past 15 years has any fiat exchange been under financial pressure. Banks, funds and insurers, yes, but they take outright financial risks. But not a single exchange.
People who use exchanges should withdraw their crypto asap. Does not matter if it's binance or coinbase or kraken. There is 0 benefit to keeping it on any exchange and unlimited risk for doing so
Conversion to/from fiat
Of course I don't think you find other dubious money making activities to be acceptable. I was pointing out that consistency is not a very useful moral yardstick. But since you don't seem to be claiming it as such with your clarification, my comment was unnecessary.
> FTX assets frozen by Bahamas regulator as crypto exchange fights to survive
https://www.ft.com/content/c6658ce8-26a3-4580-9e64-6083a7d35...
Why buy index funds that hold many overvalued companies, like Chipotle at 50x PE (2% yield), or Costco at 40x (2.5% yield) when 10y at 4%. To name just a few of many
Also certain sectors and companies will do better than others in this macro environment.
Would rather buy things that are fairly valued. But to each their own
Since hedge funds are allowed to short, that includes any estimates I could make about things being overvalued.
All the news are priced in by the time they reach me.
> Also certain sectors and companies will do better than others in this macro environment.
Definitely, but that's already priced in as far as I can tell.
However, you might be more confident in your ability to spot undervalue and overvalued companies than I am.
I do agree with you that less liquid markets, like private companies etc, are less likely to be efficient.
They pretty much all had 5000 price targets on the S&P for 2022
Buy recommendations on stocks with wild overvaluation that later collapsed 90%. Just look what most banks and funds were doing during the dotcom bubble
Like nearly every other asset. 'Bitcoin is dead' has been said for over a decade now. We'll see what happens. I mined one of the first few thousand blocks. I don't think it's going anywhere unless civilization gets destroyed but that's just my opinion.
Prove to me you know nothing about investing in one sentence. Bravo.
Plenty of assets cashflow and provide tangible value. Crypto is not one of them. Unless you consider yields from a lending ponzi to be sustainable
Yeah, Visa is much better.
Like I said, the model is sort of stupid and weird but it’s less stupid than FTX’s at the moment!
More broadly, the existence of the SAFU should raise eyebrows. If they're acting as a depository trust, in other words maintaining a 100% reserve ratio, then why does the SAFU need to exist? Maybe just marketing? Giving cryptobros something to point at to say "Binance is safe"? I guess that's fine. I don't know; just weird.
Its like, imagine if JP Morgan only dabbled in 0% interest checking accounts, literally just took your money and put it in a box, then said "we've got a billion dollars here to pay out in case we go bankrupt. Half of it is in JP Morgan Stock, that should be fine right?". The situation doesn't make much sense to me, but I may be missing something.
I can sympathize with them because losing your arse sucks. Been there, done that.
I can't empathize with them as I've just never been in that situation, nor would I ever put myself in that situation. I've been on my arse before, but because of other things mostly out of my control. Investing in a scam after being advised not to is not the same thing.
So it's not satisfactory to say surely binance wouldn't do that, because it seems many of these companies were doing similar things but always claiming they were safe.
Edit: The original version of the comment implies LessWrong is the single precursor to EA, which is wrong. But it is a relevant and influential one.
I have no doubt whatsoever that EA the organization, LessWrong, and MIRI are all instrumental in EA the movement. But my understanding, including from actually reading just about everything Singer's ever written, is that the applied ethical groundwork for EA was laid at least a decade before LessWrong or MIRI arrived on the scene.
You need to look at what people do, not what they say. And market prices are an aggregate of the former.
Btw, the efficient market hypothesis says that the current market price is basically the best 'price target' / forecast available. (Modulo an accumulation of interest and cost of carry etc.)
> Just look what most banks and funds were doing during the dotcom bubble
That's an interesting example to bring up!
If you had bought the Nasdaq composite index during that time, you would have done pretty already today.
We didn't so much have a dotcom bubble, as an irrational dotcom burst where tech stocks were perhaps irrationally underpriced for a long time.
Do keep in mind that I am not saying that market prices are a perfect predictor. Just that they are the best predictor we have.
In an efficient market, you would expect prices to look like a random walk. So prices going up or down isn't any evidence against EMH. (Someone consistently outpredicting the market would be evidence against EMH.)
It doesn’t matter if the index level reached new highs 15 years after crashing. Valuing 15 years of company growth into today’s price almost always means that it’s a poor buy. You could obviously buy something more fairly valued today and enter later at a more optimal price.
Is cloudflare a good investment now at 12-15x sales? Almost certainly not. It becoming a $1T company 20 years from now doesn’t invalidate that
There are plenty of people who beat the market consistently, including myself. Warren Buffet, Michael Burry, Druckenmiller, Peter Lynch, Renaissance Capital.
Are they statistical outliers, or do they have an edge?
To me, it appears quite easy these days if you have any sense of fundamentals, which 90% of market participants seem to no longer have.
You literally have many companies that are direct peers/competitors trading at far different multiples. That alone is enough to invalidate the EMH.
Look at valuation differences between single tenant net lease retail stocks, for example. The biggest edge will be in smaller cap and less followed names. And there are thousands of them. Pretty easy to find small cap peers in RE that have better growth, same risk profile, and much lower valuation multiples, for example
> Look at valuation differences between single tenant net lease retail stocks, for example. The biggest edge will be in smaller cap and less followed names. And there are thousands of them. Pretty easy to find small cap peers in RE that have better growth, same risk profile, and much lower valuation multiples, for example
Less liquid markets are less efficient. People who go and exploit these mispricings help make the prices better, and the market pays them for it. (But that only works for as long as there are mispricings.)
> Is cloudflare a good investment now at 12-15x sales?
Please short cloudfare and make some easy money.
If you’re even a little bit familiar with bankruptcy law, you know that those depositors are the top of the stack (by a mile) and part of the reason Coinbase scores so low on those tests you cite is because the customer deposits get ignored (since they legally can’t touch them).
This is different from A) FTX which lent out those customer deposits irresponsibly and B) Thinking they are a good business whose corporate debt I want to buy.
Like I said in my original comment, that’s a stupid/weird business model that no one else follows because it’s so stupid and weird!
It’s also based on a Ponzi scheme!
But anyway…
SEC specifically forced Coinbase to disclose the following:
“ "Because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors”
“Deposits” legally are a banking term and coinbase is not a bank.
The money given to Coinbase is more akin to a gift card balance. Starbucks segregates customer gift balances on its balance sheet but if they go bankrupt gift card holders are in line with other unsecured creditors.
Show me the precedent where bankruptcy courts considered depositors as general creditors, since you are so sure that’s what will happen.
2) Will you please please please read the balance sheet.
As a favor to me?
In it you will see that of Coinbase’s $105bn in liabilities, $101bn of it is owed to depositors. That is offset by $101bn of depositor assets.
So even in your worst case scenario, depositors get what, a <4% haircut?
I’d love to see the number of FTX depositors who’d take that deal rn…
EDIT: Maybe this will help. What’s special about Coinbase isn’t the fact that deposits are a line item on their balance sheet (FTX did the same), it’s that Coinbase actually keeps the assets.
So whereas FTX not only lost solvency in its core business, it also lost solvency in deposits, Coinbase can only lose solvency on its core business, which is minuscule relative to the scale of deposits.
Because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors
There’s no precedent. Disclosures are always worst case scenarios
And again, will anyone please read their fucking balance sheet?
Liabilities of $105bn, $101bn which are deposit liabilities vs. $101bn of customer assets.
Even in a worst case scenario depositors get a <4% haircut.
THIS IS VERY DIFFERENT FROM WHAT FTX DID
Edit: not bitcoin, eth actually, but it makes no difference here
In your ransomware example, it means that if you ever used that wallet for anything in the past or future that can be connected to you then they now have a pretty good proof that you committed a serious crime. And everyone who transacts with that wallet now can be questioned if their identity is connected with their wallet
It would be like if you took someone hostage and asked for marked bills with the serial numbers recorded. And also providing the cops with a list of all the other times you might have committed a kidnapping.
Most criminal enterprises deal with cash because because it acts nothing like bitcoin. No transaction history, no nothing
1. The numbers you refer to are from the unaudited quarterly report
2. The last audited numbers are from their annual report, end date Dec 2021, during the tail end of bull market
3. $95 billion of the assets on the balance sheet are crypto assets. This is an unaudited figure, but there is no obligation to hold crypto 1:1 from what was deposited
4. Concentration of credit risk was a significant risk listed. This would apply to non insured funds at banks in excess of $250,000 and they also face risk of Tether or USDC imploding. We do not know the composition of their crypto assets. About 1/3rd of their audited crypto assets are classed as “other”
There’s plenty of room there for saying “I am shocked, shocked that our assets were not redeemable at market value en masse in the flash crash”
We’re talking about a company which has been repeatedly and publicly slapped by the SEC, in an industry full of accounting fraud, in a bear market, and which the markets rate as highly distressed.
Perhaps they risk criminal prosecution for missteps, but there are plenty of examples of that not being sufficient deterrent, of companies trying to dig themselves out of a hole.
You were referring to their unaudited 2022 balance sheet correct? I am not an expert so please tell me if I have missed something
Many of us have seen many "too big to fail" exchanges fall, have seen 2+ other "crypto bubbles" drop the price by 80%+.
When we told everyone "don't keep your money on an exchange" and "we've seen seen these 'too the moon' skyrocketing prices before - be prepared for the eventual crash" - they laughed and confidently said it was different this time, that we were just jealous, didn't understand defi/web3 etc.
I seriously do not enjoy seeing people suffer, I tried to warn people to prevent them from losing huge amounts of money. But when your warnings were laughed off - it's hard and there's some mixed emotions, and many of us are a bit jaded.
I do think crypto has a legitimate use, but this "buy crypto because you'll get rich" mentality just creates these detrimental hype cycles.
The FTT token itself was only used on the exchange to get some benefits like lower fees or free withdrawals and didn’t give any yield at all when staked.
From a risk averse user perspective and someone working in tech, there really wasn’t anything shady going on to suck people in. So them collapsing hurts and is very sad news for the entire ecosystem
Without regulations there's absolutely no incentive for them to be transparent, there are tons of perverse incentives to hide and cook the books though.
Which is something that will be true until it's not. Bitcoin dropped around 25% in the last week (though is rebounding a bit this morning). It only needs to drop around 33% from the current price to break your 2 year thing. Anything is possible here (in any direction), because it's an insane market propped up by all sorts of shady bull****
Just wanted to come back and say - today the price (Currently ~$15950) has dipped below the price two years ago (~$16100)
So that didn't age so well!
I do not think crypto itself is a ponzi - I think long term it has uses, but not this stupid "get rich quick" bs.
But I was laughed at for saying "don't buy crypto to make money". NFTs can genuinely be useful - but if you're using them with the goal of making money then you're using them wrong. This stupid art stuff and other general stupid "get rich schemes" have obfuscated it's actual usefulness, leaving it overvalued as all heck, and everyone scammed.
The very volatile price caused by this stupid "get rich quick" hype makes it even more difficult to actually use it.
The bad outcome I was warning about was the 80%+ drop. Even advising people to keep coins in their own wallet is commonly dismissed with "yeah but [exchange] does x differently and is too big to fail".
This is coming from someone who genuinely hopes there will be real benefits coming from crypto.
The FTX story is interesting though - mostly reads like an execution by CZ: https://twitter.com/jonwu_/status/1590099676744646656?s=46&t...
The main technical innovation of cryptocurrency is the capability to self-custody funds. People ignore this at their own peril. That said, bad UX will lead people to do the wrong thing even when their life depends on it, so it’s not a surprise it continues to be a problem.
My main takeaway from this is that Coinbase continues to be underrated in the crypto community and Brian Armstrong is a good CEO: https://twitter.com/brian_armstrong/status/15900886737267179...
I'm a little surprised SBF was engaged in this kind of scheme, there's a pretty interesting interview with him and Sam Harris here: https://www.samharris.org/podcasts/making-sense-episodes/271...
Though I suppose Jane Street does select for people willing to take massive risk on bets they think they can control. It might have continued to work out too, but CZ saw an opportunity to destroy a competitor and had the capital to carry it out.
And yes, I believe a little schadenfreude is appropriate, given the circumstances and all the "Have fun staying poor" crap.
Maybe someone more familiar with the EA movement can answer this: why has rule utilitarianism disappeared from EA rationales for behavior? That seems to me a very natural check on these otherwise extreme (long and short-term) leaps of reasoning.
I would understand it more if it was purely hedonic: at least I could then argue about whether the ends actually do justify the means! But instead it's this sort of unfalsifiable, "but what if" reasoning that's actively diverting money away from worthwhile causes.
It sounds ridiculous to you because you framed it in an uncharitable way. Another way of saying "maximize the likelihood of a galaxy filled with colonized planets", so far as contemporary people are concerned, is "minimize the likelihood of civilizational collapse". Even a marginal reduction in the risk of nuclear war, for instance, would be a very good thing.
Nobody disagrees with this. But since you brought it up, I think it's worth asking: what precisely has the EA movement done to reduce, even marginally, the risk of a nuclear war?
https://www.givingwhatwecan.org/cause-areas/long-term-future...
https://80000hours.org/problem-profiles/nuclear-security/
https://www.effectivealtruism.org/articles/carl-robichaud-fa...
Nothing that I'm aware of. In general I think that most of the current "longtermist" organizations are useless - but that doesn't mean they're incorrect.
Based on how you described it, I don't see what's ridiculous about it.
It can justify virtually any action. The future is unknowable, so we can spin a new yarn every time we want to justify a new ethical compromise.
The problem is you can't actually be certain those future lives will come to exist. One assuming they will, and being so confident in their assumption that they deprioritize the lives of the currently living based on it, is hubris, but only because it over-estimates one's powers of prognostication.
It's frustrating that centralized opaque companies keep failing and yet people keep trusting them or lumping DeFi into the same bucket when they are night and day different. Decentralized Finance is the point of Crypto.
No, thanks...
Another perspective to consider; the best way to help people in the future is to help people today. Solving the challenges of our time is an investment that will compound into the distant future. Speculating on what life could be like in a hundred or a thousand years, and tailoring your efforts to that imagined future, is much like creating a product without a customer in mind. If you end up with something useful, it's almost certainly on accident and not because your speculation was accurate.
>>That's like saying the principle behind 1 + 1 = 3
That's not sound in principle..
>>Another perspective to consider; the best way to help people in the future is to help people today.
That is an entirely valid, and I would argue probably correct, perspective yet it doesn't invalidate the principle that a greater number of future lives matter more than a fewer number of current lives. It may be that the best course of action for both future lives and current lives is to pursue the best interest of the currently living.
I don’t belong to the EA movement, so maybe it just isn’t my place to say what should or shouldn’t be EA. But this kind of bootstrapping of classroom ethical dilemmas into actually diverting donated money away from human welfare efforts astounds me.
I agree that they're ineffective, but I don't see any evidence that the MIRI types are lying - they're trying to help, they think they're helping ... and they're mostly wrong. It happens.
> But this kind of bootstrapping of classroom ethical dilemmas into actually diverting donated money away from human welfare efforts astounds me.
Are you sure that's what's actually going on? Donations and especially effort are not fungible. The techy libertarian futurist types in the MIRI orbit, for instance, are so far as I can tell simply not as bothered by poverty as Singer et al. A world in which they're not worried about AI risk is not a world in which they give just as much to other causes; it's a world in which they give less.