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Comment by skybrian | Hacker News Reader

Who takes the other side of the trade? If someone is using a lot of USDT to buy Bitcoin, don't there have to be a lot of people who trade Bitcoin for USDT and then hold on to it?

On the other hand, seems like the Bitcoin price would rise due to people being skeptical about this newfangled Tether thing.

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Well there's a notional $2.2bn worth of Tether that someone's holding on to, which is certainly enough to have got the price of a perceived buy-and-hold asset like BTC moving a lot.

If you can issue yourself newly minted Tether notionally worth a dollar and exchange your own BTC for it on your own exchange it's also dead easy to start pumping the price with wash trades (in theory you could do this by faking USD transactions on your exchange too, and some exchanges probably have done at various periods in the past, but printing USDT would allow you to actually increase your BTC holdings by buying from real traders at the same time, without having to worry about honouring the dollar payments)

How does a wash trade pump the price any differently than just using a large buy order?

Much easier to generate a pattern or even a sustained history of price rises and trading volume increases via fake trades than try to nudge the price up by spoofing buy orders. Of course, if you're printing your own dollars you can actually execute large buy orders as well, but if you can pump the price some more afterwards, then why not?

Large buy orders are normal and may execute leading to you buying stuff. Wash trades are fakery to make it look like money's being invested when it isn't.

Hmm. I get that except the part about "without having to worry about honouring the dollar payments." Wash trades aside, as soon as they buy Bitcoin from someone else, they have to give them something.

Or really, since it's all accounting entries in the exchange's database, what it means is a number in that trader's account needs to go up. If the Bitcoin price is high, this number has to go up a lot. And they'll expect to cash that out someday.

I don't see why Tether makes this any easier or harder? The basic security flaw is using an untrustworthy exchange.

> Well there's a notional $2.2bn worth of Tether that someone's holding on to, which is certainly enough to have got the price of a perceived buy-and-hold asset like BTC moving a lot.

This is what I don't get - who on Earth thinks that being long USDT is a good idea. Are they expecting the USD to dissapear? USDT to go to the moon?

I understand having to own USDT to get your money out of exchanges that don't deal with fiat... But you need a counterparty on the other side of the trade - someone who will give you perfectly good USD for USDT. How has that ecosystem managed to absorb $2.2bn?

Is anyone on Hacker News long USDT? If so, why?

Every time Bitcoin/Eth/etc is discussed, there's always people admitting to holding on to it because they expect it to increase in price. I don't agree with them, but that's speculation - you can still make money, even if you disagree with the fundamentals.

Why Tether? There's no speculative gains, and there's no fundamentals.

People are holding Tether and don't realize it. Most BTC/USD exchanges aren't BTC/USD exchanges, they're BTC/USDT exchanges, but that "T" is stuffed behind an asterisk. People that want to make profits don't realize they're not actually cashing out for $10k, they're cashing out for 10k USDT.

As soon as they wired USD to one of these exchanges, they were stuck holding USDT. They could take the BTC and run to another exchange like Kraken, but that has transaction fees associated with it and they don't want to lose ~10% of their investment.

That is amazing. So, the exchanges turn USD into USDT, and the reason they sucker people into that trade is because you can buy more BTC on them... Because BTC is the only way that you can get wealth out of the exchange.

So, USDT is not actually useful to anyone, except people trying to fleece crypto-traders. I love we are re-inventing all the best parasitic parts of the fiat financial ecosystem.

Well not really - the main reason exchanges use USDT rather than USD is so as to not to have to deal with KYC like regulations associated with holding USD.

The fees for cashing out via Kraken are way less than 10%.

Also checking just now bitcoin is trading for about usd 8100 on Kraken and usdt 8060 on Kucoin so there doesn't seem much problem at the moment there.

That is the key question, I think - especially since the people trading Bitcoin for USDT would've been doing so at prices which value USDT for slightly above face value. (That is, on all but a handful of occasions they could've got more by selling their Bitcoin for actual USD on Coinbase. The main exceptions were after the Tether hack and during this recent bout of negative news coverage, if I remember correctly.)

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