On Wednesday, November 30, 2022 at 10:20:07 PM UTC-5, RichA wrote:
> Here is what I don't get; crypto is just a storage mechanism. You put in $10 worth of crypto coins, you can then take them out at some point. In this case, Crypto values dropped. People panicked and wanted to withdraw their crypto (and likely liquidate it for cash) from this guy's exchange before the bottom dropped out. But he didn't have the resources to cover the withdrawls.
> These assets are not like stocks where they'll stop trading if they head south too fast, or like money in a bank which is protected (up to a point) from complete elimination. These were volatile financial instruments whose values declined precipitously. If the value on day one of deposit was $100, and it declined to $50 on day 10, then the people could only get back the crypto that was now worth only $50.00 but the number of coins has not changed. However, if the exchange didn't even have that, then the crypto was obviously committed somewhere else, reducing the exchange's liquidity. So where did it go? Did he liquidate coins and spend the proceeds on maintaining the exchange?
>
> According to a court filing earlier this month, FTX currently owes its 50 largest creditors almost $3.1bn.
>
> https://www.bbc.com/news/technology-63817522

Imagine McDonald's makes its own money, let's call them clown-bucks, keeps most of it, and sells some to the market.

McDonald's then uses their remaining clown-bucks as collateral for actual loans.

And then people remember clown-bucks aren't real.

And then Starbucks comes and market sells the clown-bucks they were holding, while reminding the market that clown-bucks aren't really a thing.

McDonald's balance sheet is trashed, with their clown-bucks wiped out.

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Send in the clowns

https://twitter.com/BTCGandalf/status/1590433069441650688