Comment by FabHK
4 months ago
> Crypto hosts the most profitable businesses in the world.
Well, because the retail clients expect to get rich and don't mind paying 1% or so fees per exchange.
Similarly, the BTC future basis (the difference between the spot price and future price) on many exchanges around 10 to 5 years ago was easily 80% p.a. which you could realize by buying Bitcoin and selling the future. What happened there is that people going long Bitcoin with leverage essentially borrowed the money giving them that leverage at usurious rates (this implied rate is not usually displayed and thus invisible to your average retail client, but definitely very visible to the finance professionals moonlighting in crypto (such as Jane Street, Jump trading, and many others)).
Crypto use case: ripping off retail.
You pay 1% on Coinbase because they are a quasi monopoly due to regulation. Offshore exchanges take less than 0.1% usually.
The neutral rate for perps is 10%, which is lower than the credit card borrowing rate in the USA. And nothing prevents retail investors to earn it by shorting while holding spot.
Last, Tether is crypto's most profitable business, and likely the world's most profitable if you account on $ of profit per employee, and is not an exchange.
Tether is an absolutely remarkable business, indeed. Basically an unregulated bank that pays no interest and follows no KYC/AML/ABC/CTF rules (because they just deal with wholesale, and then the Tethers are transacted on some permissionless "who, me?" blockchain).
Remarkable dereliction of responsibility. I don't understand why we let them get away with it.
Yes, that's the concept of crypto. Uncensorable transactions. USDT is used in many countries that have capital controls, shoddy banks, or simply no proper payment infrastructure. Stablecoins work on week ends and are settled instantly. It's a superior form of money compared to what your average bank proposes.
And of course that stablecoin providers conduct AML and KYC when you redeem/mint them. It's like complaining that the gold foundries don't control the secondary market for ingots and gold coins.
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Presumably for the same reason the US let offshore banks get away with creating Eurodollars in the past: It's useful to maintain the status of the US dollar as the currency of global trade.
This utility has always been at odds with the (relatively recent in comparison to Eurodollars, as far as I understand) desire to and ability of the US government to use USD financial rails as a political tool via sanctions.