Ok, got through the video. Great to kind of have people on both sides of the debate, even if they are all pro bitcoin. What I found interesting was that Scott and Simon both have millions of dollars now in limbo. So here you have 2 supposed experts in this space who got screwed. I even watched a video from Scott just three weeks about where he interviewed the CEO of Ledger, and right in the middle of the video was a promo for Vauld.
Now in all fairness, I don't think anyone truly knew where the money was. I honestly assumed that much of the crypto an exchange has from customer deposits is kept in their storage. But now I see a crypto exchange is no different than a bank. They probably have less than 10% of deposits in a liquid form, and hope the rest of it that is lent out comes back to them. A bank at least has the full backing of the FED, and they can just print up any shortfall, but in the crypto world, well we know there is no backing. Caitlin addresses this very well when she discusses lending out to the max ratio of 1:1, but above this, you are not solvent.
As the guests discuss, full disclosure would have been very helpful in this scenario. I spent so many hours watching the videos from Invest_Answers on YouTube. I think the guy comes from the corporate world, has decades of trading experience, and always had nothing but praise for Mashinsky from Celsius. Now it sounds like it was nothing more than a ponzi scheme, and if this professional can be fooled as well, what chance was there for most other people? I haven't watched his videos for months now so I'm not sure what his personal exposure was, but I at least hope he is being transparent.
I'm also really excited to read about what news things are coming this year according to Jeff who said they made big investments into upcoming projects. Also, in the interview with the Ledger CEO, he said a new product is coming out that gives you the ability to own your own crypto without being worried about the 24 word seed phrase. Sounds like they are really trying to make this all more user friendly.
I don't think there's concrete evidence that pure exchanges like Coinbase, Kraken, Binance lend out most of the user coin deposits
But for the longest time, Bitcoiners have suspected that major exchanges are selling more bitcoins than they actually hold, like fractional banking
The purpose was to naked short Bitcoin like what happened with GME and AMC where over 100% of the float are shorted
To try to make these exchanges honest, there's a yearly Bitcoin ritual called proof-of-keys on January 3 where every Bitcoiner is encouraged to withdraw their bitcoins from exchanges
Back to Celsius, Voyager, BlockFi and others, they are crypto banks and that's how they earn their yields by lending out the cryptos to traders (rehypothetication)
To focus on Celsius with the recent law suit and from statements from insiders and long term investors Plan C and Simon Dixon, it seems at some point they lost on some trades or investments and in trying to make the losses back, Celsius became a Ponzi, taking in deposits to pay off user withdrawals, with case in point on Eth
I really like BlockFi and really like the ability to use Bitcoin and crypto assets as collateral for $ loans but the whole crypto assets borrow/lend industry is very scary right now. Most if not all are insolvent. Nexo for some reason is doing well, but there are suspicions going around
Anyway, I think the crypto assets banks like Celsius, BlockFi, Voyager are not pure exchanges, but they do offer buying and selling of cryptos but it's not their main business and more on the borrowing and lending of crypto assets
One final note is how the pure DeFi borrowing/lending platforms did not have any problems during the crypto crash periods. AAVE and Maker did not have insolvency issues as the smart contract were not affected by human emotions and lent to 3AC under collateralized or even un-collateralized
AAVE and Maker liquidated in accordance to the smart contracts and worked as designed
