The IRONy of Mark Cuban
I know I said I wasn’t gonna have time to write a Cryptoday post this morning, but this one was too juicy to not publish immediately.
Billionaire Mark Cuban was one of the liquidity providers for IRON Finance’s $TITAN token recently hit by what the team is NOT calling a rug pull. Their exact words were “bank run,” which is only marginally different in meaning and altogether the same in terms of outcome. Their $TITAN token price fell to zero from a high of $65 less than 48 hours before, and withdrawing liquidity from their pool is currently not possible. The total value locked in IRON Finance used to be over $2B and now appears to be under $50M. Three days prior, Cuban had tweeted “valuing tokens is easier and makes more sense than you think.” Oh, the iron(y)!Dear community, please withdraw liquidity from all pools. We will share a post-mortem as soon as we have a better understanding of this bank run. USDC collateral is available for redemption as normal: polygon.iron.finance/bank?action=re… Iron Finance Team
Indulge your sense of schadenfreude with Coindesk’s breakdown of exactly how the project collapsed here: https://www.coindesk.com/iron-finance-defi-titan-iron-price-drop
Cuban promptly wrote in to Bloomberg, suggesting that regulations were necessary to prevent these young stablecoins from uh, bank-running their investors. It revealed to me how little Cuban actually understood what he was getting into. The annoying part was that unlike a lot of people, he can probably shrug off his $TITAN losses without breaking a sweat. Calling for regulations is antithetical to the DeFi movement. It’s precisely the absence of regulation that makes these DeFi businesses possible, and once you start bringing in the gatekeepers, you’ll end up right back where you started: with more banks.
[BEGIN RANT] There’s a saying that people like to throw around when talking broadly about cryptocurrency investment: “Only invest what you can afford to lose.” I find that to be an oversimplification, because it implies that ALL cryptocurrencies have the potential to go to zero. I believe that that is a highly improbable statement when pertaining to Bitcoin.
As an exaggerated thought experiment: let’s say the price of Bitcoin were to approach zero. Let’s say it dropped to $0.01. I would wager that there would be many individuals who could afford to simply buy up all the supply at that point even though it’s effectively worthless. They could do it for posterity, or just because it’d be fun to say you now own All The Bitcoin In The World. Hell, at a total price tag of $180,000 for All The Bitcoin In The World, even BloomX could probably afford that. And because there are multiple parties willing to pay that much, it would increase the market price, maybe to $0.02. So now the original buyer of All The Bitcoin In The World has seen their dollar position increase by 100% overnight, triggering a new wave of interested investors who want to bid on the uptrend, which increases the price further. And so on and so forth.
Where am I going with this? I find that quote — only invest what you can afford to lose — to be inappropriate when applied to Bitcoin, because the odds that you would lose all your money when you buy Bitcoin is effectively zero. You could lose *some* of your money, you could lose the *majority* of your money, but it’s highly improbable that you would lose *all* of your money. To some people, that distinction may not matter, but it’s literally the difference between ending up with zero versus any-number-greater-than-zero.
HOWEVER, that quote definitely applies to DeFi. Given the frequency of rug-pulls, bank-runs, code exploits, and outright hacks, I’d say the average person probably has a 10% chance of losing their ENTIRE investment in DeFi right now. You absolutely MUST only invest what you can afford to lose, because part of the reason why the APRs on DeFi tokens are so high is because they’re pricing in the riskiness of the venture. Sometimes, you get lucky and 10x your money. Other times, you’re Mark Cuban. [END RANT]
Surprising absolutely no one, the World Bank says it can not assist El Salvador in its adoption of Bitcoin as legal tender. They cite environmental and transparency concerns as their primary reasons, but I’d wager that they’re just not interested in supporting a currency that can’t be controlled by their little cabal.
I stumbled on to this fascinating timeline of the Bitcoin mining industry in Iran from @miningmemo. It’s a nice insight into how these insular governments have flipflopped on crypto regulations over the years. For better or for worse, there’s no similar legislation here in the Philippines for crypto mining, as electricity is far too expensive to do it profitably. By my estimates, your kWH cost needs to be less than 3 pesos for it to make any economic sense. Our 9-peso kWH average is just not gonna cut it.
If you’re looking for something to do tonight, I’m joining a TwitterSpace with some other pinoy NFT artists to talk about our experiences at 9pm! So there you go, an actual reason to follow me at twitter.com/helloluis.