Posted on 11/18/2022 8:46:48 AM PST by EBH
From the story it sounds like this bank didn’t “invest” in crypto so much as loan money to crypto miners using the crypto mining rigs (high end specialized hardware) as the collateral. Some of the loans were foreclosed/forgiven with the collateral (the mining rig hardware) taken in possession by the bank. Now that many/most of the crypto currencies have collapsed 50-80% from their highs that collateral that was taken back is not worth quite as much as it once was.
Kind of like a bank loaning money to wildcat oil drillers and then seizing the oil drilling rigs when the drillers were unable to pay back their loans. When the price of oil collapses the value of a rig drops as many unused rigs flood the market (supply goes up) and the value of how much a rig can earn goes down with the price of what they produce.
The question for this bank at this point is will these crypto currencies ever recover in price to where the drilling rigs go back up in value? And unlike an oil drilling rig the value of the crypto rigs tend to depreciate over time because newer, better hardware is always getting cheaper.
More like a drop of bitcoin from 65k to 16k. And crypto mining is energy intensive.
Oh good grief. That isn't a sound asset to safeguard your depositor's funds entrusted to you.
That’s what you get when you mindlessly chase the yield curve!
They bet not on crypto, but on a crypto miner. There is no asset except his receipts for booze and whores.
I’ve done business in the past with Provident...
They earned this loss.. not a bit of sympathy from me.
Well, that isn’t going to be covered by the FDIC.
If you are mining Bitcoin, and it’s not coming from hydro….you are going to lose big time.
Most Bitcoin is mined by hydro surplus energy. You shouldn’t be running a rig in New England. Some loan officer is going to lose his bonus.
It’s not. At least not criminal. It’s just stupid.
” safeguard your depositor’s funds entrusted to you.”
What do they care?
The FDIC is on the hook if they go belly up....
Heads they win.
Tails we lose.
Welcome to crony capitalism.
This wasn’t about buying and holding crypto. It was about lending money to Bitcoin miners.
Bitcoin mining is very electricity intensive. If you don’t have cheap energy, it quickly becomes a losing proposition. Most major miners are in places where they can tap either a lot of solar power or hydroelectric. To be profitable, you would be somewhere next to a hydro facility and run off hours to consume the cheapest power.
There aren’t a lot of those places in New England.
Agreed. Reminds me of George Floyd/BLM. create chaos to create public anger, to focus public attention - then attack the scapegoats, and present your political "solution" that has been ready to go all along.
IF I was an investor in this bank I would demand the Loan and bank manager be fired.
They probably already have been.
It must have been one hell of a presentation the the “loan committee.” I worked with several small New England banks, mostly community banks. This type of loan would have had a hard time getting through our committees.
But that was 22 years ago. We had a lot of crap real estate stuff. Every generation has their dogs I guess.
If you know those scammers, turn them in to law enforcement. Otherwise you are wasting bandwidth here.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.