🇺🇸 Doomscroll News

Tag: Risk

  • Honey, JPM Shrunk the Collateral: Betting on Crypto ETFs Like It’s Not 2008 Anew

    Honey, JPM Shrunk the Collateral: Betting on Crypto ETFs Like It’s Not 2008 Anew

    JPMorgan Chase’s recent decision to allow trading and wealth management clients to use crypto Exchange Traded Funds (ETFs) as collateral for loans is a concerning development that introduces multiple layers of risk. This move, starting with BlackRock’s iShares Bitcoin Trust, integrates a volatile and complex asset class into traditional lending practices, which will have significant negative consequences.

    Custody and Ownership Concerns: “Not Your Keys, Not Your Crypto”

    A primary concern with crypto ETFs is the nature of ownership and custody.

    Lack of Direct Ownership: When investing in a crypto ETF, individuals do not own the underlying cryptocurrency directly (Investopedia). Instead, they own shares of a fund that holds the crypto. This means investors cannot take custody of their share of the crypto assets; they can only trade the ETF shares.

    Reliance on Custodians: Crypto ETFs depend on custodians to safeguard the underlying digital assets. This reliance introduces significant risks:

    Single Point of Failure: Crypto ETFs rely on custodians, such as Coinbase, which holds a significant percentage of Bitcoin for these ETFs. This concentration is concerning, as any major operational issue, security breach, or insolvency at the custodians will have disastrous consequences for the ETFs and their investors.

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  • Ethereum Classic on Coinbase: Seriously? Let’s Talk About That Hash Rate and the 2020 Ownage.

    Forget the deep history lesson. Let’s talk about the here and now, and the flashing red warning light whenever Ethereum Classic (ETC) pops up on major exchanges like Coinbase: its security is fundamentally shaky.

    Why? It boils down to one critical factor in Proof-of-Work cryptocurrencies: Hash Rate.

    Hash Rate = Security (or Lack Thereof)

    Think of hash rate as the total computing power protecting the network. Miners use this power to validate transactions and add blocks to the chain.

    • High Hash Rate (like Bitcoin): Makes it incredibly expensive and difficult for anyone to gain 51% control and attack the network (e.g., reverse transactions, double-spend coins).
    • Low Hash Rate (like ETC): Makes it comparatively cheap and easy for attackers to rent enough computing power to overwhelm the network and launch a 51% attack.

    And with ETC, this isn’t just some abstract threat. It’s a documented reality. Remember August 2020? Ethereum Classic didn’t just get 51% attacked once – it happened three times within that single month. Yes, you read that right. Attackers repeatedly gained majority control, reorganized thousands of blocks, and successfully double-spent millions of dollars worth of ETC. The very ledger that’s supposed to be immutable got forcibly rewritten, not just once, but again and again in rapid succession. It got owned. Publicly and embarrassingly.

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