| I'm assuming you are implying that alameda is taking loans to cover insolvency? There are plenty of reasons why a trading firm takes loans (it's also possible the FTT is structured as a long, inflating said number) 1. I want to short X, but don't actually have X. I borrow X and sell it. 2. I want to sell X and buy a derivative paying people who are long the derivative. Goto step 2. 3. I want to trade X but don't know how ahead of time, so i need inventory of X in case I want to sell RIGHT NOW. I don't want to actually have exposure to a ton of X, so I borrow it instead. Very common for a market maker like alameda, although there's no way they actually need billions of collateral for market making purposes. 4. I can borrow X, and put it in a defi yield farm for a better rate than what I borrowed it for. 5. I have a ton of Y, and I don't have any plans to use it soon. I put Y up as collateral to borrow X which I can meaningfully trade. This gets you in a lot of trouble when Y values goes down and X doesn't. Say "Four Bullets Investments" has some BTC, they post BTC as collateral to borrow dollars, and use that to buy more BTC. Then BTC goes down a lot - oops! Not making value judgements on what risks are and aren't entailed here, just pointing out that there are reasons aside from covering losses. 1-3+5 equally apply in tradfi as well. The really interesting thing, which you touched upon, is to what extent are they collateralising loans with FTT. COllateralising loans with a coin you hold isn't unusual at all, but what's unusual is that the potential FTT collateral size is monstrous compared to realistic available liquidity minus alameda. Posting BTC is one thing since there are liquid spot markets trading billions a day, not to mention derivatives. But FTT? Good luck liquidation even 10-20MM without moving markets a lot. |