I'd be interested in researching this a bit more as we all know how the FTX situation ended for the market. If we're starting to see obvious cases of entities using paper Bitcoin and not being able to cover client holdings, it is time to say goodbye to the market for a couple years.
Would a repeat of the FTX scenario necessarily play out to the downside?
I would think so. If a company holding a lot of coins on behalf of users turned out not to have them, it would set off an investigation as well as bankruptcy. Assets that were being held by the company would be frozen and users would have themselves trapped in a long legal battle in hopes to recover anything. The market would see this as a breakdown and a lot of people speculating on the price of Bitcoin would view this as a sign to exit the market. It's best if everything is functioning as advertised.
Just sayin': the 2013 version of trying to fill a gaping exchange coin hole meant pamping eet almost 100x in a year
Interesting thoughts, but sometimes your terse and barely hinting style is a bit hard to follow.
Maybe something big is brewing when one of the main casino's spot arb starts to get seriously outta wack like way back?
ELI5: How is the spot arb getting out of whack? Is someone doing something? What are they doing?
Paperization runs the risk of price discovering there are no bailouts: a covering willybot with current market dimensions could produce spectactular results
Could you elaborate on that?
No spreads are outta wack and this is merely a hypothetical scenario regarding paper games. If Mikey, "treasuries", etc exercise claims bigly (and if someone turns out to be playing), the price will go up where pockets of paper live unless they double down to compensate.
You mean "corrective" shorting or similar foul play?
Yes
Also consider that if the gubmint/sec/cftc begin gynecologizing US-based exchanges, casino games they've been greenlit to run since and before "regulation through enforcement" would be in jeopardy, which would also have the effect of tamping down any back room naughtiness.
You mean regulation through enforcement could tamp down some of the trickery?
Before "T2: Firing Day", exchanges were free to unload questionably legal scam tokens, counter trade users to take all their leveraged moniez, freeze accounts arbitrarily, overcollect sensitive information for later loss or sale, etc- all for the periodic wells notice shakedown and an office visit with Gary. Since January, established players have been free to do all of the above without fear of persecutionary prosecution and without a vig. One might imagine fewer scams with a microscope focused on Armstrong's few remaining follicles?
My favorite theory re:21 - SBF was a patsy weapon sent to kneecap native players to move in and take over at a discount. The turd pedigree of that org is asstounding and tells you all you need to know