Hacker News Reader

Comment by paulpauper | Hacker News Reader

the second choice would be true if tether were fake. the evidence suggests it's backed by real money

maybe there is a third option:

3. it was just a bubble pumped by people looking to get rich quick and who are now holding the bag.

What evidence have you seen that tether is backed by real money? I haven't seen "definitive" proof/evidence either way, but it would seem there are certainly strong suspicions that tether is not backed by real money (e.g., never having completed an audit and being fired by their auditing firm).

Research rather than speculation: https://blog.bitmex.com/tether/

That was a decent report considering the source has the incentive to be pro Bitcoin.

And the best that positive report could come up with was:

* serious lack of Tether transparency is not necessarily fraud.

* some correlation with deposit balance in Puerto Rico

I will eat my hat if a respectable audit firm releases a Tether audit showing that Tether has been 1:1 backed by real USD reserves in all of 2017.

Which evidence? Because around December when they were printing about a billion dollars worth of tether there was zero evidence it was backed by anything other than wishful thinking. Maybe that’s changed?

My theory is that it was initially not backed fully but after the fact it became backed. A billion or two dollars is not that much money to eventually get, especially if you also hold a lot of valuable BTC as a result of this manipulation.

Basically the unbacked tether allowed them to purchase BTC and with the great price increases that become worth way more than the unbacked tether allowing them to leverage that to actually get backing for the tether, either via selling BTC or merely promising it.

Thus I believe that tether is likely backed now.

I think it was an impressive scam, very ballsy.

This scheme would likely have fallen apart when they were printing and BTC continued to go down...they were no longer able to keep the price rising, so they likely weren't able to buy more USD than the USDT they printed.

To me, it really looks like Tether was propping up a significant portion of the valuation of BTC for a few months; they were printing enough to buy roughly half of all miner output (and in a market where most coins are in a state of HODL, the miner output and demand for it determines the market price). Probably much of the climb up to 10k was market manipulation by Tether. Yes, lots of dumb money went into the market in response to the climb, but when the printing slowed, the market fell pretty fast.

So, I agree it was ballsy, but I strongly doubt it's fully backed even now. I think when they started printing a hundred million Tethers every few days is when the market began to tip against them, and they were desperately trying to keep the BTC price climbing. They're gonna walk away from this scam multimillionaires, unless they go to jail, but they've never been sitting on 2+ billion USD in cash reserves (I just checked, there are currently 2.5 billion Tethers in circulation). I find that idea literally unbelievable.

Frankly, I'm out of crypto until Tether is, or until there's an audit by a reputable firm which I'd wager will never happen. Somebody's gonna get hosed on the deal, and it's gonna be pretty much everyone involved in crypto who isn't running a massive ponzi scheme, I'd guess. If there's anyone left that meets that description.

How can it "become backed"? Anyone who buys Tether expects to get Tether tokens. If the issuers created Tether tokens from nothing, there's no way they can become backed. Where would the money come from?

Tether isn't redeemable, anyway. You can't go to the Tether issuers and demand a dollar for your Tether token.

Financial Times: Meanwhile, the supply of Tethers rapidly ballooned, from $50 million to $2.2 billion. That led to an increasing number of questions over whether the dollars that were meant to back the cryptocurrency really existed. It was reported in January that both companies had been subpoenaed in December last year by US regulators, who wanted to look into this.[1]

[1] https://ftalphaville.ft.com/2018/06/13/1528904202000/Has-bit...

> How can it "become backed"?

1. Create 1m Tether out of thin air (unbacked).

2. Use them to buy 1000 BTC (when the price was 1000$).

3. BTC Price goes up to 10,000$.

4. Sell 1000 BTC for $10m. Keep $9m, and put $1m into a bank account to "back the tether".

The big generation of Tether occurred around the top, as Bitcoin neared US$20,000. Now it's around $6,000. If that was their strategy, they lost big.

No no, if you can acquire a $6,000 bitcoin for $0 and sell it, your scam has a 100% margin. It is still profitable whenever you can run the scam, at whatever price above $0.

Right, but if they acquire $6000 for 20000 tether (that they paid $0 for), and promise that tether is full redeemable for $20000, they are $14000 short when the tether holder comes knocking.

What if tether is the tether holder and they simply decide to never call in that debt against themselves? That would mean they lost their own money, but they still may have made enough money over the course of the entire scheme to pay off their "legitimate" customers and thus avoid getting publicly called out.

> What if tether is the tether holder

Why should they print more tether if they are already holding them?

So long as the printing press keeps running, the solution is to print yourself another 14000 in tether, convert to BTC and sell the BTC for 14000 in real USD.

What you're describing is fraud which could still be uncovered by, say, an accounting firm hired to audit. Interesting how none has been allowed to complete an audit.

1. What proof do you have?

2. Even if this was their play from the beginning and they've actually pulled it off (I'm doubtful) why should we trust that they won't hit us with some other scam some point in the future?

Answers:

1. I have no proof, it is "my theory." 2. I wouldn't trust them in any way.

https://tether.to/wp-content/uploads/2017/09/Final-Tether-Co...

This report:

1. Is not an audit to be used for assurance purposes. The disclaimer at the top states that it "should not be used or relied on by any other party."

2. Is rather old now.

3. Was conducted by a firm that no longer conducts business with Tether, probably because Tether would not comply with information requests needed to conduct an actual audit, which is not as difficult as Tether makes it sound here: https://www.coindesk.com/tether-confirms-relationship-audito...

Or in other words, it isn't proof of anything, and the fact that Tether has not been able to produce an actual audit for assurance purposes in all this time, speaks volumes.

why is it super hard to believe they may have actually the holdings since their intetest is aligned with bitcoin?

Yes, third point is the most likely, a lot of that money was coming from ordinary people. I know people that are not tech savy at all and they invested in bitcoin when it was worth 15k and holding because they don't want to sell now for 2x times less.

One of my mining rigs was bought by farmer, second was bought by guy selling audio hardware etc. The bubble was so strong, everyone wanted to get in either by buying mining rigs (not understanding how minining/difficulty works) or buying crypto.

Reply on news.ycombinator.com