@ObiWanKenoBit @zanepocock @mrcoolbp @thibm_ @Tom_Harned @alphaazeta @MartyBent @matt_odell @BlockFiZac 1/ Yep—agree, @zanepocock, great job with the thread. A couple things: #rehypothecation **is** fractional-reserve banking by another name. FRB is typically associated with money (+ a central bank), but the exact same thing can happen w/ any asset (eg, a claim to #bitcoin, a loan
@ObiWanKenoBit @zanepocock @mrcoolbp @thibm_ @Tom_Harned @alphaazeta @MartyBent @matt_odell @BlockFiZac 2/ ...collateralized by #bitcoin, US Treasury bonds, Apple shares etc). Rothbard wrote that the only legit form of govt action was to ban FRB—were he alive today, we would have been screaming about #rehypothecation too bc it has the same effect—it distorts the price of money...
@ObiWanKenoBit @zanepocock @mrcoolbp @thibm_ @Tom_Harned @alphaazeta @MartyBent @matt_odell @BlockFiZac 3/ ...(ie, it distorts the interest rate). One beauty of #bitcoin is that it’s a pure experiment in free banking. No govt controls the base money, so all excess/phantom claims to it are created privately by intermediaries—hence, a pure experiment in free banking. It’s a great...
@ObiWanKenoBit @zanepocock @mrcoolbp @thibm_ @Tom_Harned @alphaazeta @MartyBent @matt_odell @BlockFiZac 4/ ...time to be alive & watch this play out in the coming years! Remember-there’s no fault tolerance in #bitcoin & no lender of last resort. People will get #rekt by not understanding & mispricing default risk to coin lenders. I wish Mises & Rothbard were alive to debate abt it!
@ObiWanKenoBit @zanepocock @mrcoolbp @thibm_ @Tom_Harned @alphaazeta @MartyBent @matt_odell @BlockFiZac 5/ ...& over time we’ll be able to do a lot of research on how efficiently the mkt *actually* priced default risk for #crypto lenders (each of which is different). Data from the MtGox & Quadriga defaults suggest the mkt was not at all efficient at pricing the default risk of...
@ObiWanKenoBit @zanepocock @mrcoolbp @thibm_ @Tom_Harned @alphaazeta @MartyBent @matt_odell @BlockFiZac 6/ ...#crypto custodial exchanges. We’ll see if the mkt does any better with crypto lenders. Also remember— lenders can always prove their solvency via chain audits—they have asymmetric information. Beware of accepting GAAP audits tho—repo acctg requires each party in a...
@ObiWanKenoBit @zanepocock @mrcoolbp @thibm_ @Tom_Harned @alphaazeta @MartyBent @matt_odell @BlockFiZac 7/... #repo collateral chain to report that they own the very same asset (as long as they record a different dollar of debt). This is why accounting audits don’t catch the insolvency problem—each institution looks solvent but the system is not. Many ways to get #rekt—be careful!
