You can rehypothecate a synthetic?
Let’s break it down and explain why you might want to care.
A synthetic asset, also known as a "synth", is a financial instrument that mimics the characteristics of another asset or asset class without requiring the owner to own the original asset.
Rehypothecation is a financial practice where a broker or financial institution uses a client's collateral for their own purposes.
Rehypothecation can be risky, as over-leveraging assets can lead to complex chains of obligations. This can increase systemic risk if the market declines.
My understanding of the 2007/8 financial crises is these are the methods used. With the property market as asset base and with the banks playing the role of bad actors.
This is now what Saylor is doing with $MSTR he is buying Bitcoin, packaging that Bitcoin up as $MSTR shares, these shares have no direct relationship to the underlying asset.
Then investment firms are creating funds tracking the performance of $MSTR shares either betting for or against them and selling synthetics at multiple times the underlying asset of $MSTR shares, which has multiple times the underlying asset of $BTC.
This model is actively being replicated by many other firms copying this model, believing it to be sound.
Why should you care about this?
We know that the 2007/8 crises was a tremor and we are yet to experience the actual earthquake.
Bitcoin was created by Satoshi to counteract what happened in 2007/8 by creating hard money.
Saylor through $MSTR and others through ETFs, which while currently backed by real Bitcoin (as far as we can tell), are creating synthetics and being rehypothecated.
Meaning that Bitcoin is becoming part of the problem rather than the solution. Not only that, it is dramatically increasing the size of the problem.
It has never been more important for us to self custody Bitcoin and not allow its use as a Synthetic or to allow it to be rehypothecated.
Saylor discusses this here, it sounds clever, and to be frank I don’t understand most of it, but it is actually using Bitcoin as a leverage device:
https://v.nostr.build/C0z85M8H3Gbyc6Y2.mp4
nostr:note19stecwggn4c5u6qntdc42vxnv09q9dy6vvh3sfyzwx9296xtgess8cwmdp
I keep telling people on her but nobody seems to want to listen, if you think you own ANYTHING apart from bitcoin, you don't. Stocks, shares, pension funds, you don't. They are all rehypothecated and when the next BIG ONE happens, and it will be big. EVERYTHING will be owned by the BIS.
Read the book "The Great Taking".
You could continue to be frustrated by others lack of interest.
Or, perhaps, you could try to understand how to leverage the leverage that is being used against you for your advantage.
This is what martial arts teach us.
The most important thing you can learn in investing is called the "margin of safety". When you invest in something, sometimes you will have an edge. But there is always risk. The margin of safety is when your edge is greater than your risk. This is the simple technique that made Warren Buffett the richest man in the world. When your edge is smaller than your margin of safety you are gambling, and will eventually fail. When your investment beats the margin of safety you are on to a winner. That is exactly what Saylor is doing. It's pure genius. What's more he stated this strategy from the start and it has played out exactly as he said. So, if he took on TOO MUCH leverage there would be a problem because he's outside his margin of safety. That's the tight rope you have to walk if you are MSTR CEO and also if you invest in them. There's a little bit more around bit sizing, but that essentially is the name of the game in investing.
IMHO
The BIS is a western construct and will likely be hamstrung if not completely supplanted by the BRICS+
Nations with the “New Development Bank” which will likely end up just as corrupt… it would be a severe financial blow to the economies of the developed western nations and their large trade deficits and massive debts
Historically changes in economic dominance/world reserve currencies have ended in kinetic wars… as the dominant world power(s) is/are weakened from within by corruption and domestic polarization which reduces cohesion and national productivity as well as economic strength, the door is opened for rising powers to assume dominance.
Time will tell…but in the mean time ima short fiat currencies and paper assets (IOU’s) with hard self custodied assets🤔🤷🏽♂️
Full disclosure: I’m an idgit and wrong almost all the time🤷🏽♂️🫡
The BIS is largely a clearing bank for assets as opposed to a fractionally reserved one. They legally "Own" the assets till they are sold or contracts settled, that includes ALL derivatives contracts.
👆💯
I agree paper assets (3rd party risk/iou’s) can and at some point prolly will be utterly rekt…and the lil guy will be the one left standing when the music stops💥
