I’m leaning toward this explanation too. But these SBF tweets are probably meant to suggest something like the following:
Alameda used the standard spot margin lending that anyone can use to borrow the $10b from users who explicitly opted into this feature.
Alameda’s collateral dropped in value and people withdrew from FTX.
The liquidation engine couldn’t close the enormous position in time, and the backstop liquidity providers couldn’t handle it either.
FTX, for the first time, had to do a clawback – something that they try hard to avoid but reserve the right to do.
All in all that seems unlikely to me. There’s this talk of a backdoor to hide transactions from accounting and auditors, and the spot margin approach would’ve generated interest payments to countless users, which would’ve been hard to hide. (But maybe that’s telephone game, and the backdoor is simply the invite-only backstop liquidity provider program or whatever. Seems unlikely though.)
But, at least without some complex backdoor, such an enormous increase in demand for lending would’ve increased the interest rates, and the total size that is lent out is also public.
Here’s an aggregation of the total size in USD and the size-weighed average of the interest rates across some 16 major coins over time. (Pulled from my private copy of the data.)
The interst rate is a bit spikey, but nothing major, and the total size hovers around $4–5 billion. And additional $10 billion would be obvious as an enormous step up by ~ 3x. Plus, when I lent out USD, I was typically immediately matched with borrowers, indicating that the lending is the bottleneck for USD stablecoins. So it might not even have been possible to borrow $10 billion. That doesn’t hold for BTC and ETH though, where there were (I think) more lenders than borrowers.
I’ve cut off the last few days when people started withdrawing because the interst went up a lot. (I would’ve had to use log scale to keep the usual fluctuations in the interest rates visible.)
I’m leaning toward this explanation too. But these SBF tweets are probably meant to suggest something like the following:
Alameda used the standard spot margin lending that anyone can use to borrow the $10b from users who explicitly opted into this feature.
Alameda’s collateral dropped in value and people withdrew from FTX.
The liquidation engine couldn’t close the enormous position in time, and the backstop liquidity providers couldn’t handle it either.
FTX, for the first time, had to do a clawback – something that they try hard to avoid but reserve the right to do.
All in all that seems unlikely to me. There’s this talk of a backdoor to hide transactions from accounting and auditors, and the spot margin approach would’ve generated interest payments to countless users, which would’ve been hard to hide. (But maybe that’s telephone game, and the backdoor is simply the invite-only backstop liquidity provider program or whatever. Seems unlikely though.)
But, at least without some complex backdoor, such an enormous increase in demand for lending would’ve increased the interest rates, and the total size that is lent out is also public.
Here’s an aggregation of the total size in USD and the size-weighed average of the interest rates across some 16 major coins over time. (Pulled from my private copy of the data.)
The interst rate is a bit spikey, but nothing major, and the total size hovers around $4–5 billion. And additional $10 billion would be obvious as an enormous step up by ~ 3x. Plus, when I lent out USD, I was typically immediately matched with borrowers, indicating that the lending is the bottleneck for USD stablecoins. So it might not even have been possible to borrow $10 billion. That doesn’t hold for BTC and ETH though, where there were (I think) more lenders than borrowers.
I’ve cut off the last few days when people started withdrawing because the interst went up a lot. (I would’ve had to use log scale to keep the usual fluctuations in the interest rates visible.)