From the Desk Of A Trader #11
"The game is to survive, not to shine."
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From The Desk Of A Trader
The prisoner's dilemma of hodlers intensifies.
A Dutch crypto exchange has put a notice on their website that they no longer have access to Euro 280 million, which was used to facilitate a risky lending program called staking.
The problem arose as their borrower was hit by the collapse of FTX.
One of the first things I learned about commodity #trading is that all cash commodity transactions between counterparties are tracked by "forwarding" departments of trade houses.
A list tracking counterparties is called a "string".
It sounds sexier than it is.
The string facilitates financial and physical delivery arrangements, and in case of problems, the forwarding department goes back into the string to where the problem arose.
No blockchain is needed to track contracts. E-mail and Excel are fine.
When you go back into the string you have a problem when you end up in the string where the trader has gone bankrupt, or is "in default". Then the next trader in the string needs to perform, and you hope you are not the last one in the string empty handed.
You may not receive #money for a commodity sold, or may not receive the commodity bought.
When money comes in easy, irresponsible or inexperienced players take more risk.
They underestimate counter party risk and overestimate #technology.
They do fancy long term sponsorship deals and are invited to talk about their brilliance.
Vanity and ego become important and a distraction, risking the drivers of their business model, and customer interest.
The exchange notified users that the missing Euro 280 million is not a problem, as last year they made Euro 175 million, and their counterparty which they have "good conversations" with is doing everything to get their money back. It is just a matter of time. Of course.
Everyone knows that the end of the string is bankrupt, due to unprecedented fraud, with its former CEO in Fox Hill prison, facing the dilemma of eating non vegan food.
Now the other hodlers' prisoner's dilemma.
Hodlers with tokens or fiat deposits at the Dutch exchange (similar to what is happening now at Binance), having seen what happened to FTX, know that taking their money out of the exchange will likely be the end of the exchange.
It runs out of money, or it can't operate as an exchange anymore, the end of its business model.
But that also means the end of the crypto infrastructure.
Without the exchanges crypto loses its sole use case of gambling.
But if you don't pull your money out, and others will, then it is very likely you lose all your money stored at the exchange.
So what to do?
It is such a dilemma for hodlers as contrary to professional traders, their ego has become too attached to their trade.
They have become crypto.
If crypto goes down, their ego goes down with it.
But #markets do not care about your ego, so professional traders are trained to act rationally, get out of a crap trade and move on.
The game is to survive, not to shine.
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