Is there something preventing IRAs from holding any of the 3x leverage S&P 500 ETFs with less than 1% in fees? Or am I missing something? My guess is:
4x is greater than 3x! (ignore the extra weird fees behind the curtain)
We know leveraged ETFs typically do worse, but we don't with this (because it's crazy weirdness most people would realize is unnecessarily and possibly fraudulently complex)
Speaking of weird, what's the “one weird trick” that the wealthy have access to? Whatever it is, my guess is that it is not this. But would be nice if the trick was spelled out and how it is of course different.
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Levine also raises questions about who exactly is going to provide the funding for the loans to Basic’s customers, but I’m not sure I see this as a key issue.
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Sometimes I think DeFi is a great way to see what happens in TradFi but is often obscured by bailouts and money in politics. And in DeFi who provides funding for loans is extremely important. For example, let's say they have a mixed collateral scenario. You can deposit BTC, ETH, derivatives of it, mostly legit stablecoins, oh, and /our governance token/. I'd run. That's prime Mango Markets exploit territory. Actually it's subsubsubprime territory.
You have an exotic asset to provide as a deposit. You will need to go somewhere that accepts exotic assets. You want a decent rate, you'll probably need to mix in with some others. Those others are now your risk that the entire platform defaults.
Also speaking of complexity hiding flaws in bad investments, this isn't even close to probably the biggest one in crypto/DeFi. Governance tokens. At the end of the day, you're watching a supposed automaton play chess, but inside the pedestal below the chessboard is a person who ultimately moves the magnetic pieces. Neat looking mechanical puppet, but ultimately a human puppetmaster will do whatever they please with pieces. And they do it all the time!
I'm going to reach out to DefiLlama and see if they can't start recording cases where the developers just said screw the governance vote “because this is an emergency” or maybe didn't give a reason at all. It might shock a lot of people. Honestly the smart money is probably aware of this and that's what is really keeping the number of governance “attacks” down–and the trajectory of their prices.
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But what if almost nobody can really understand the fees relative to what you get for them? The mix of flat fee, APR, and performance rake on Basic is already totally mind-numbing
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That's what makes DeFi a useful lesson. It can be expensive though. APRs are bull**** (because the higher APRs are almost always based on tokens that plummet in value well before “annual” time passes). APYs equally because of it. Simpler almost always works better. Boring a** lending. If you want a bit of risk/leverage, borrow a different asset, sell it, buy more of your primary asset, deposit it. That's it. Works better than pretty much everything else. But, if you don't try it, it's hard to believe it.
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I’m willing to grant that the motives behind Basic really were innovation, and maybe even democratization.
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Ain't no one with enough startup capital and a desire to build a TradFi product like Basic got it based on ideals of democratization. I'd love to be proved wrong.
Excuse typos, didn't edit:
Is there something preventing IRAs from holding any of the 3x leverage S&P 500 ETFs with less than 1% in fees? Or am I missing something? My guess is:
4x is greater than 3x! (ignore the extra weird fees behind the curtain)
We know leveraged ETFs typically do worse, but we don't with this (because it's crazy weirdness most people would realize is unnecessarily and possibly fraudulently complex)
Speaking of weird, what's the “one weird trick” that the wealthy have access to? Whatever it is, my guess is that it is not this. But would be nice if the trick was spelled out and how it is of course different.
–
“
Levine also raises questions about who exactly is going to provide the funding for the loans to Basic’s customers, but I’m not sure I see this as a key issue.
“
Sometimes I think DeFi is a great way to see what happens in TradFi but is often obscured by bailouts and money in politics. And in DeFi who provides funding for loans is extremely important. For example, let's say they have a mixed collateral scenario. You can deposit BTC, ETH, derivatives of it, mostly legit stablecoins, oh, and /our governance token/. I'd run. That's prime Mango Markets exploit territory. Actually it's subsubsubprime territory.
You have an exotic asset to provide as a deposit. You will need to go somewhere that accepts exotic assets. You want a decent rate, you'll probably need to mix in with some others. Those others are now your risk that the entire platform defaults.
Also speaking of complexity hiding flaws in bad investments, this isn't even close to probably the biggest one in crypto/DeFi. Governance tokens. At the end of the day, you're watching a supposed automaton play chess, but inside the pedestal below the chessboard is a person who ultimately moves the magnetic pieces. Neat looking mechanical puppet, but ultimately a human puppetmaster will do whatever they please with pieces. And they do it all the time!
I'm going to reach out to DefiLlama and see if they can't start recording cases where the developers just said screw the governance vote “because this is an emergency” or maybe didn't give a reason at all. It might shock a lot of people. Honestly the smart money is probably aware of this and that's what is really keeping the number of governance “attacks” down–and the trajectory of their prices.
–
“
But what if almost nobody can really understand the fees relative to what you get for them? The mix of flat fee, APR, and performance rake on Basic is already totally mind-numbing
“
That's what makes DeFi a useful lesson. It can be expensive though. APRs are bull**** (because the higher APRs are almost always based on tokens that plummet in value well before “annual” time passes). APYs equally because of it. Simpler almost always works better. Boring a** lending. If you want a bit of risk/leverage, borrow a different asset, sell it, buy more of your primary asset, deposit it. That's it. Works better than pretty much everything else. But, if you don't try it, it's hard to believe it.
–
“
I’m willing to grant that the motives behind Basic really were innovation, and maybe even democratization.
“
Ain't no one with enough startup capital and a desire to build a TradFi product like Basic got it based on ideals of democratization. I'd love to be proved wrong.