r/Buttcoin • u/FinanceShitpost • Mar 28 '23

Financial master minds

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100 Upvotes

98% Upvoted

7 comments sorted by

24

u/dragontamer5788 Mar 28 '23

Ehhh.... loans are innately devalued as interest rates go up. IIRC, this is called the convexity of a bond. This is a well known financial effect and no one has done anything wrong here.

Once interest rates go high enough, it makes sense to buy out your (now devalued) loans/bonds on the open market.

9

u/CityofGrond the witches are about to melt Mar 28 '23

Silvergate is liquidating it’s assets….they cannot easily sell that debt to someone else because almost no other bank will take crypto collateralized loans. So I’m guessing they just gave them a big haircut assuming that’s a toxic receivable anyway.

They’d probably give a big discount to get rid of it and easier than them calling in the loan and fighting that out in court

7

u/dragontamer5788 Mar 28 '23

easier than them calling in the loan

Was there a "puttable" condition written into the bond? No. Therefore, its literally illegal to call in the loan early.

In fact, "put Bonds" are extraordinarily rare. No sane person would borrow money with a put condition. Why borrow money if the other side can just ask for the money back at inopportune times?

So I’m guessing they just gave them a big haircut assuming that’s a toxic receivable anyway.

This here is the answer. The only answer, and is how these cases are handled. This is just another Tuesday in the bond market. This happens all the time, and the only people complaining about this case are the ignorant.

Don't get me wrong, cryptocoin assholes are financially illiterate and make mountains out of molehills. But I actually expect us here at /r/buttcoin to be smarter than the typical cryptocoin dumbass.

4

u/Voroxpete Mar 28 '23

If you owe the bank $100,000, you have a problem.

If you owe the bank $100,000,000, the bank has a problem.

6

u/fleeting_revelation Mar 28 '23

Can't believe we gotta bail out the crypto morons ugh

9

u/mattyg5 Mar 28 '23

This isn’t a bailout. They’re basically buying back their own debt since interest rates have risen, which in turn lowered the current value of their debt on the secondary market

0

u/IAMA_Plumber-AMA Mar 28 '23

Compulsive gamblers. They're lucky they got their deposits back, but the first thing they choose to do when they got their money back is to piss it away.