Where finance and media intersect with reality


In the Blind Spot (Prop Crypto Trading, Adam Curtis, Resistors)


Business, Econ, Markets etc…

But This Was a Fantasy…

  • Everyone stop what you’re doing. There’s a new Adam Curtis documentary about Russia out on October 13.

Crypto Matters:

  • CEO of JPMorgan Jamie Dimon says he is sceptical of crypto tokens such as Bitcoin, describing them as “decentralised Ponzi schemes”

    Dimon has said critical things about bitcoin before. He even went so far as to imply he wouldn’t let his own bankers trade or invest in it. But the latest backlash comes during a Congressional testimony. What is more interesting is the fact that Dimon isn’t so critical about stablecoins — no doubt because (as Decrypt rightly points out) its launched its own stablecoin JPMCoin.

    We, however, have it on good authority that the world’s supervising central banking authorities are a little puzzled about stablecoins, which they view as nothing more than the reemergence of currency board systems. If you’re going to go to those efforts to replicate the stability of fiat currencies, why not use the fiat currency in question?

    Well I think we all know the answer to that. Stablecoins allow users to free-ride on the stability of fiat currencies without the headache of having to comply with the majority of their regulations.

    The question you should really be asking as a result is why do JP Morgan clients need a stablecoin that replicates the stability of fiat currency, when JP Morgan is swimming in buckets of fiat already? The answer, dear readers, is probably the most under appreciated financial story of our time — and relates to the mechanics of intraday funding imbalances. But we will have more on that shortly – IK

  • Southern District of New York judge orders Tether Holdings to produce financial records of its stablecoins’ backing. (Could be interesting).
  • Coinbase had an in-house Risk Solutions group that looks awfully like it might have been a prop trading team.

    None of this will be news to Blind Spot readers. As we noted in June, 2022, the group’s accounts pointed to certain risks being creatively “solved” on a proprietary basis somewhat clearly. Of course, one man’s Risk Solutions group is another man’s prop trading group. But the issue at hand is that Coinbase testified to congress last year that they didn’t buy or sell cryptocurrencies for their own account. Coinbase sources, however, told the WSJ the company has always viewed this activity as prop trading. The fact that there is a difference of opinion internally about what has been happening on that front speaks volumes.

    The WSJ highlights that Coinbase did eventually recant its congressional testimony a little bit too:

    “Later, the company clarified its activities to Rep. Maxine Waters (D., Calif.) by saying that “Coinbase does, from time to time, purchase cryptocurrency as principal for specific purposes that we do not view as proprietary trading because its purpose is not for Coinbase to benefit from increases in value of the cryptocurrency being traded.”

    What’s always struck me as odd is that nobody has battered an eyelid about any of this until now. Certainly, nobody cared about it when Coinbase was rolling out its IPO. Of course, it’s important to state that even now it’s unclear if there’s any legal limitation to Coinbase operating a prop-trading arm. The only real downside for the company is reputational. If customers become concerned that their platform of choice is potentially using their customer flow against them, they might scarper. That would explain why the company wouldn’t be too keen to advertise this sort of activity is going on.

    Many years ago, when Coinbase was merely a baby in its field, I sat next to one of its early departmental heads at a dinner. I was struck by this person’s non-awareness of things like the Volcker rule, which banned prop-trading in banks. I mean, it wasn’t entirely unreasonable for them to not know about it. There was zero cryptocurrency regulation at the time.

    But this was a long time ago, and I can’t remember who it was or the specifics of the conversation. What I do remember is that I walked away from that meeting convinced Coinbase employees didn’t have a good understanding of why it might be considered controversial for them to be trading their own capital on the platform.

    A few years later when I learned Coinbase were running a large OTC matching desk, specifically for netting transactions offchain — I realised there was probably a lot more going here than the crypto world appreciated. Add to that that Coinbase doesn’t operate segregated accounts, but instead pools customer deposits in its own wallets… and, well, you see the risks.

    According the WSJ, Coinbase only endeavored to formalise the prop-trading element in July last year:

    “In July of last year, Coinbase established the Risk Solutions unit to trade crypto for clients. The group also made plans to begin making trades with Coinbase’s cash, among other strategies, according to the people close to the matter.

    The team built sophisticated trading systems to enable this trading, according to the people. Coinbase Chief Financial Officer Alesia Haas was involved in creation of the unit, which was led by Brett Tejpaul, Coinbase’s head of institutional sales, trading, custody and prime services, the people said. Employees were discouraged from sharing information about the new trading business or discussing it in internal communications, the people said.”

    It seems to me regulators need to figure out pretty quickly if the Volcker rule applies to cryprocurrency trading platforms — all of which benefit from assymetric knowledge generated from being ahead of the curve on customer flows and large offchain block trades. To my mind, the regulatory ambiguity surrounding this element has likely been a key driver behind Coinbase’ success to date. It’s time for that ambiguity to end. – IK

Buy the Dip-Stopia:

Ye Olde Stoners:

  • Traces of psychoactive drugs uncovered by Israeli archaeologists have been recorded as the earliest use of opium.


  • Anti-Vax Facebook groups are using the carrot emoji to avoid social media bans.

    After authorities banned those resisting communism in Poland during the 1980s from wearing “Solidarnosc” pins or badges, they took to wearing actual electrical resistors on their jackets or lapels instead as a continuing identifier. It worked until the authorities picked up on it.

    The photo below is from this piece.

    Emojis, laser eyes, phrases etc are the new 80s-style badges, pins and secret handshakes of the internet. Some are obvious (Ukrainian flags), others are more subtle (what do full stops around one’s name mean?). But there’s no doubt that as self-identifying groups get chased down and cancelled, they will evolve their symbology. To continue to recognise eachother as members of a secret “resisting” group, they will ensure their recognition symbols will become less overt. Indeed, they might actively aspire to make them entirely common place. Hidden in plain sight — so that only subtle derivatives of a popularly used symbol actually means something specific — but only to those who have been initiated in the symbology of the movement.

    There are many movements online. But banning and cancelling those you don’t like, only encourages them to adapt and become less identifiable  — and their symbols more plausibly deniable. Over time, this risks creating a semantic collapse on the internet, where nobody overtly says what they mean anymore. None of this is new, of course. It has been the same old story throughout all of history. What is new, however, is how the scaling of the internet might impact things. If everything online eventually becomes Aesopian and filled with double meaning, at scale, how will anyone be sure of anything? How will anyone trust anything?

    It’s about time academics turn their attention to the internet symbology field. We need a proper semantic analysis of the various emojis on display across Social Media — not for the purpose of shutting them down, but for a better understanding of what populations are really thinking and feeling. Investors especially need double-meaning pollsters. – IK

  • John Pilger on how modern propaganda works.

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