What are you comparing to though? Are you comparing bitcoin to an equity investment in a single regional bank? Because if so, yeah if you just so happened to pick First Republic Bank and compared it to Bitcoin, Bitcoin has been more stable in the last 6 months. But that's only because you've looked at what happened now, then gone back in time 6 months to select the worst outcome and compared that to bitcoin. If you picked a random regional bank or took an average of banks, they've been more stable than bitcoin - and even then you're talking about an equity investment that is known to have real risk.

If you're comparing to the depositors in FRB or CS or whichever bank, their money has been absolutely safe, way more stable than bitcoin - and government guaranteed.

>What are the signs of regulatory success that we're supposed to be looking at?

That in capitalism, individual companies are going to succeed or fail, and those that invest in them will take the gains or losses, but that the broader system still works. And that's basically what is happening so far.

To take your bitcoin example, whenever a crypto company fails, the question is always "Will retail customers get their deposits back" and the answer is... basically always no. That's not how we expect companies to work - the customer deposits are meant to be protected.

But over any time frame that includes the present and FRB, anyone who tried to store value in FRB has underperformed the people storing value in Bitcoin. Many quite badly. It isn't really cherry picking to note that one of the systems has imploded rather more significantly - the one that was regulated and had bad incentives.

What is the value add of all these regulations? We could arguably replicate the system, more stably, if everyone just owned bitcoin and the government bailed out anyone who lost their keys. The regulations aren't doing anything useful.

The role of the regulators here is destabilising the system. We're running a live experiment between lightly and heavily regulated systems here; turns out that less regulation is more stable even with the waste of Bitcoin mining. That says a lot about what the market thinks of the regulators and their regulations - substantial value destruction, and a significant cause of instability. They caused this crisis by loading up the system with debt and risk through 0 interest rate policies.

The regulators are overseeing a system that is underperforming your definition of regulatory success. The unregulated system sees individual companies succeeding and failing but the broader system carrying on. Where the regulators are involved it seems quite likely that the government is going to have to step in and prop up the regulated system again because it isn't sound. Odds are good the bank failures won't end here if it is anything like '08.

> whenever a crypto company fails, the question is always "Will retail customers get their deposits back" and the answer is... basically always no.

That is certainly true, but that is why the crypto ecosystem is outperforming the US dollar system here in terms of stability. People actually have to pay attention to what they do with their crypto.

A 6% raise in rates hasn't been accompanied by mass failures in crypto. Mainly because they deal with the problems by a string of small failures that wipe out an inconsequential number of people and keep the incentives correctly in place. The US regulators disrupted that natural market cleansing and look what it gets them - massive value destruction. And we aren't quite sure yet where the blow is going to hit.

Ok again, I want to draw a distinction, are we talking about equity investments in banks? In which case, yes, by definition any asset has outperformed FRB which went to 0, but no, that's not a reasonable way to value forward looking investments. Or are we talking about depositors.

Because we need to be clear. For depositors the value of the regulation is very clear - when crypto exchanges are unregulated when they blow up their depositors money isn't safe. When regulated banks blow up, the customer deposits stay safe thanks to regulations. The thing that caused instability isn't the regulations, it's rate changes.

The problem you have with crypto is very simple - you can't point at the value of bitcoin or FTT or ETH or Terra or Solana and say that it's safe, because alot of the time the people who were invested in it no longer have the asset! It's all well and good to say that BTC isn't down 100% but the people who had BTC on FTX don't have the bitcoin anymore so the nominal value of BTC is academic.

I'm talking about depositors - the regulations obviously didn't help because the regulators had to bail depositors out. If the regulators bailed out bitcoin institutions the people with crypto in those institutions would not lose any money either. Neither would be a planned action.

The regulations are so useless that the regulators have to roll in and start handing out money to fix their own mess. The system under low regulation is more stable - it works without intervention and rules changes. The regulated system the regulators keep having to make up new rules on the fly to cope with the fact that they are fundamentally destabilising the system and causing enormous losses of value to happen along the way by removing the feedback loops and protecting people from their actions at cost to the bystanders.

The regulations are net-negative value add and destabilising. The regulators are papering over that by unplanned cash infusions. Everyone in the regulated economy is assuming that the regulators fold and change the rules but they're all gambling on how the system will be broken. Nobody is behaving as though the regulations themselves are helping.

The point I'm making is if the rules are going to dissolve anyway, Bitcoin is a better system to go around bailing people out, because at least it is low-friction. It isn't exactly true, but superficially since Bitcoin can reliably preserve value in a way that the banks can't, we should bail out the bitcoin firms in preference to the banks. It is a more fundamentally sound system. We aren't see the sort of cascading failures that happen under the regulators. FTX goes bust and that is kinda it, whereas we've just had 3 huge banks go bust in a more regulated system - likely with more to come and high risk of a cascade of failures through the whole banking industry if the regulators follow the official playbook. Everyone agrees that following the regulations would result in systemic collapse in the event of a crisis. Compare and contrast to the Bitcoin ecosystem where something like Tether has survived at least 2 depegs and carries on like it is nothing. If the banks had that sort of resiliency against a run, this current crisis would not require a response. The reason they don't is because everyone is playing the regulators.

But regulators haven't really bailed out depositors. Firstly, the vast majority of the assets have just gone with the sale of FRB, along with that there is some cost, but the costs associated with this sale are estimated to only be around $13Bn and that's going to come out of FDIC - so it's funded by the banks anyway. The reason this is possible is because FRB only holds a very tightly regulated set of securities, so at worst there would only be a small shortfall and that's what the FDIC is there for anyway.

You say that the regulations are harming the system, but crypto gives us a perfect illustration of what happens without these regulations. You don't end up with companies that function better, you don't avoid duration mismatch, your exchanges go tits up and it turns out that the CEO was spending all the cash on his bahamian polycule. And you say FTX goes bust and that's it but that really only works because bitcoin is so tiny that when FTX goes bust it isn't all of our pensions and life savings on the line. And it wasn't just FTX, FTX was the last domino in a whole slew of failures over last summer - half of which it turns out were self-dealing and committing fraud.

The whole point is that the government can step in and backstop a system where it's tightly regulated what these banks are doing, they can't step in and backstop a system where your bank may literally just be taking your deposits and spending it all on bahamian parties.

There's just this massive disconnect between the unregulated world where a bank can be bust and pay back 99 cents on the dollar, and the deregulated world where a crypto exchange can be bust and it turns out it's only going to pay 10cents on the dollar, and it won't even do that because the CEO started siphoning off the remaining funds.