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</o:shapelayout></xml><![endif]--></head><body lang=EN-US link=blue vlink=purple style='word-wrap:break-word'><div class=WordSection1><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal><o:p> </o:p></p><div style='border:none;border-top:solid #E1E1E1 1.0pt;padding:3.0pt 0in 0in 0in'><p class=MsoNormal><b>‘’’</b>> <b>On Behalf Of </b>Adrian Tymes via extropy-chat<br><b>Subject:</b> Re: [ExI] lotta splainin to do<o:p></o:p></p></div><p class=MsoNormal><o:p> </o:p></p><div><p class=MsoNormal>A lot of FTX's assets and value were in its own token, FTT, much like normal banks back their assets with cash, gold, or the like. So, when the value of FTT suddenly plunged (because someone who had a lot of FTT suddenly no longer trusted FTX, and sold their FTT to wash their hands of their investment in FTX), FTX suddenly didn't have the assets to conduct its normal business with, much like a bank run. The inability of a major currency exchange to convert cryptocoins to USD meant those cryptocoins were significantly less able to be converted to USD - which caused their value in USD to drop substantially.<o:p></o:p></p><div><p class=MsoNormal><o:p> </o:p></p></div><div><p class=MsoNormal>Much like any bank run, a massive hit to public confidence in a major financial institution caused impacts to the value of the main currencies that institution dealt in.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>OK cool thx, so the service FTX was providing is converting digital currency into fiat currency and back? Well that makes sense, for I often wondered about that step: that conversion looks like the most dangerous one. Adrian your comment confirms it and makes perfect sense: something vaguely analogous to a bank would do business the way a bank does: keeps a small amount of cash to pay out withdrawals but not enough for all the depositors to withdraw at once, betting they won’t do that.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>So… a major competitor could buy up a bunch of FTX, then dump it, causing the modern equivalent of a bank run, analogous to what the evil Simon Bar Sinister (disguised as the evil Mr. Potter) did to George Bailey in Wonderful Life. Then Potter can buy his broken competitor for pennies on the dollar, as he tried to do, but Bedford Falls rejected the bad guy.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>OK then, that all makes sense. So now I am back to where I was 20 years ago: recognizing that digital currency is cool, but it is still vaguely unclear (and possibly risky) to convert it back and forth into universally-recognized currency. <o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>This part rings true: governments which print fiat money (which is all of them) will fight back somehow against upstarts challenging and competing with their money factory.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>spike<o:p></o:p></p></div></div></div></body></html>