Tether (USDT) price falling to $0.95
coinmarketcap.com
coinmarketcap.com
The spread between Bitcoin priced in Tether and Bitcoin priced in USD has been holding steady at <1% until now, but as I type this, the risk premium is at 8.4% and climbing. Looks like the Untethering has begun.
For the curious, source at https://github.com/jpatokal/untether and also submitted as a Show HN at https://news.ycombinator.com/item?id=18219034.
Side note: The graph could use some TLC. The colors are indistinguishable and there are no static historical charts on the page, just the graph since my visit.
It's possible that $2M were issued, and the rest don't even exist (or rather they are still controlled by the tether organisation).
@patio11 19h19 hours ago Eventually, a bank or, more likely, a regulator is going to say “Actually this doesn’t look like a legit deposit that we’re uncomfortable with supporting due to AML/regulatory reasons. It looks an awful lot like proceeds of crime intermingled with grey money.”
@patio11 19h19 hours ago More And the terrifying outcome, from the cryptocurrency economy perspective, is the regulator doing what the USFH did with respect to Mutum Sigillum (Mt Gox’s US front): “OK, we’re going to give you two choices.”
@patio11 19h19 hours ago More Door #1: Prove that it’s legal money. This should be trivial for you because KYC is the law and your compliance should be automatic. So have your lawyer suit up. BTW we expect this to take 3+ years.
Door #2: We propose a 50% haircut.
A clear abuse, it's the government's job to prove illegal deeds. Holding customers funds hostage under the threat of bankruptcy, while the company navigates the complex legal minefield the government itself created is just about the most corrupt system and farther from the rule of law you can get, short of direct confiscation.
They even went as far as claiming MtGox was a money transmitting business because it was a customer of Dwolla, and so customers of Dwolla could send money to themselves by withdrawing and depositing dwolla to MtGox: http://k.lenz.name/LB/2013/05/16/seizure-warrant-against-mut...
Tether and Bitfinex are the same thing, though both will vigorously deny that, but it's patently clear that they're intimately related. Tether has variously been able to get banking services, and thus act as a USD deposit to enter crypto exchanges like Bitfinex (USD -> USDT tether -> trade for Bitcoin, etc.). Because it's so clear that Tether is simply used as a way to circumvent AML/KYC, Tether continues to have difficulty securing banking services.
This current uncoupling of USD:USDT(tether) is due to such a banking issue. There are two major risks with Tether:
* Liquidity: without access to banking services, Tether uncouples and there can be a 'bank run' as the majority of funds are unavailable to maintain the stable price.
* Reserves: right now there are no guarantees that each Tether is backed by actual USD. You simply have to trust Tether on this. Ultimately Tether may be a sort of fractional reserve, and thus enough selling pressure will make Tether worthless.
At it's core, it's just a clumsy obfuscation.
Would you mind briefly expanding on "Because it's so clear that Tether is simply used as a way to circumvent AML/KYC"? Not being contrarian, I just don't understand how this part works.
This is blatant, willful and permanently-documented tax evasion, an amusing combination of illegality and stupidity.
This is really no different than selling and buying stocks in an IRA account.
You transacted into (what you believed was) a proxy for cash. That's obviously selling.
Every tax jurisdiction has rules about this because every tax jurisdiction has idiots who thought they'd found a clever workaround. (I think the first American one involved a guy in the 19th century selling property for the key to a lockbox full of cash.)
In reality if they want to punish you for this they'll see right through it. Loopholes are only loopholes because there's an established history of authorities not willing to enforce it (brown paper bags around liquor bottles, "Suggested Donations").
This is an insane assertion. One of the main points of an IRA is that the trades within it aren't taxable events. Trades made outside an IRA are taxable events.
But I see the point here regarding a cash proxy.
Full disclosure: I have zero exposure to crypto. Not my cup of tea.
On 31 December 2017, the IRS clarified that § 1031 does not apply to crypt-crypto trades. It did not say § 1031 applied to crypto-crypto trades before then.
The article you reference says "traders still may be able to argue that their transactions undertaken in 2017 and prior years were not taxable under the Section 1031 like-kind exchange rules," but that "the application of the like-kind exchange rules to crypto transactions is far from certain" [1, emphasis mine].
Essentially, you're being taxed on the income you got from holding that security, not for trading, it's just assessed when you trade.
* If I mouse-over the x ticks, I can see that the graph spans ~10 minutes, but most people probably wouldn't have the patience. Now that I know it's been stable for ten minutes (is it usually unstable across ten minutes‽), my next question is 'how did it look over the last 30 days? 12 months? *
All in all, a cool site! Just a tip from the graph-nitpickers out here.
EDIT: I see now, this graph shows only current activity since page load. This was likely a tradeoff to simplify the design of the page such that the data didn't have to be stored on the server. Maybe the page is such that the data is requested directly from the exchanges themselves?
https://web.archive.org/web/*/http://www.untether.space
EDIT: seems like Feb will always display 0.41% and the rest is 27.02%
What this means is that this dramatically overstates the price of tether. If you navigate to "market" [1] and change the "Pair" dropdown to "USD" you'll see the three exchanges that actually offer the pair. Bitfinex is the sponsor of Tether, so will always say $1; but currently they are apparently having banking problems.
Kraken and Bittrex offer independent markets so are a better fair reflection of the price, in the sense of "if you have tether, and want foldin' money right now, this is the current discount". Kraken has somewhat limited withdrawal capabilities at the moment as well, so their price also reflects a premium for the latency.
To date, there has been no trusted and regulated digital representation of the U.S. dollar that moves in an open, decentralized manner like cryptocurrencies. Enter the Gemini dollar — a stable value coin (often called a “stablecoin”) that is (i) issued by Gemini, a New York trust company, (ii) strictly pegged 1:1 to the U.S. dollar, and (iii) built on the Ethereum network according to the ERC20 standard for tokens. ...
https://medium.com/gemini/gemini-launches-the-gemini-dollar-...
I still don't see how they satisfy their anti-money laundering requirements.
You can't have a token which is (a) anonymously traded, (b) freely redeemable for hard currency, and (c) compliant. Even if you modify (b) to "redeemable with approved KYC paperwork for hard currency," you still have the problem that you sold a token for cash to one person, redeemed it for cash to another person, and have no clue what happened in the middle.
One could completely remove (b), i.e. have a non-redeemable currency. But now you're closer to the precedent set by Liberty Reserve [1], in that the people who most want anonymous electronic dollars over real electronic dollars are people laundering money.
[1] https://www.nytimes.com/2013/05/29/nyregion/liberty-reserve-...
Where exactly does anyone claim that?
They have a team of lawyers and access to all the regulators by virtue of being such a huge exchange. Do you honestly believe they haven't consulted widely on this?
I'll get back to you in a few days when I finish laughing... MtGox was also a huge exchange, I think the only sane thing to do at this point with Cryptos are to assume all exchanges are stupid, aren't solvent, haven't consulted lawyers, and/or don't know the law until it is proven otherwise. Exchanges that don't fit the criteria are the exception not the rule.
Gemini is owned by the billionaire Winklevoss twins, its based in and regulated by NY, the most notoriously heavy handed cryptocurrency jurisdiction on Earth. Many exchanges won't even do business with customers from NY.
Think it's fair to say that they're not "stupid"
* https://medium.com/@blog_53353/announcing-sila-building-the-...
If it’s true that tether is fraudulently printing tethers, then Bitfinex has already pulled one of the largest heists in history.
An important case law regarding these types of digital cash operators would be liberty reserve.
https://www.nytimes.com/2013/05/29/nyregion/liberty-reserve-...
[0] https://www.investopedia.com/terms/b/breaking-the-buck.asp
I deem it worth $1.00! why? because I said so.
I will sell it to you for just 95c
Easiest arbitrage opportunity.
Second point, 1 dollar is not a stable unit of value as viewed by other currencies. This is fine, you're valuing the fed vs currency x's backing resource.
That is a massive assumption, that very few people seem to currently hold.
I thought that was the whole point of fiat-backed crypto?
More and more people are starting to doubt that it actually is backed by anything.
That is a key point of fiat-backed crypto. Whether Tether is an example of fiat-backed crypto is another question entirely. :)
This is actually why it's so hard to tell from this whether or not this is something bad or just "normal" because tether price always reaches lower levels like this when people get out of it to buy cryptocurrencies, too.
Maybe they think the bitcoin price is going to shoot up
3xin the coming months so using their money to buy tether
would be pretty stupid in that case no?
If they have invested the fiat in bitcoins, they aren't backed by US$ any more.
* The tether organisation doesn't have an effective way to buy back tethers. They might not have the processes/infrastructure in place.
* The tether organisation doesn't have the USD in liquid enough form to do said purchasing. For example, it might be in frozen bank accounts or offshore and take many days to transfer.
* The backing USD doesn't exist entirely.
It’s been a long standing allegation that tether is a fraud, counterfeited by Bitfinex to manipulate the spot price in a scheme to steal bitcoins (buying BTC with free tether printing).. [1][2]
The telltale sign of a bankrun at Bitfinex seems to be playing out, as you can see the spot price rises on Bitfinex meanwhile on other exchanges BTC spot price drops. Coinciding with the drop in USD:USDT pair losing its peg is a huge red flag.
Bitfinex might attempt a last ditch effort to avoid a MTGOX like collapse, it could be though a large enough drop of the spot price on other exchanges along with Bitfinex purchasing back their customer deposits in a fraudulent version of short selling.
Yet that assumes Bitfinex/Tether has liquid cash reserves to leverage such a trade.
https://i.imgur.com/pBO0nfY.png
https://i.imgur.com/2DkzWWm.png
[1] https://www.nytimes.com/2018/06/13/technology/bitcoin-price-...
As also evidenced by the fact that the price of all other crypto assets is going up, meaning that people are dumping Tether at a loss to buy other stuff at inflated prices.
Pretty much the only major exchange that does USD/USDT trades is Kraken, and the rate is looking distinctly wobbly today: https://www.coingecko.com/en/price_charts/tether/usd
One is that there's an ~8% chance of tether being long-term without value. That seems to be the dominant interpretation among critics of Bitfinex and Tether.
The other is that a short-term liquidity crunch is causing investors to take a haircut in order to obtain liquidity in their desired currency.
Rumors abound, but except for one tangential announcement from Bitfinex [1], I haven't heard much that is definitive about the current state of fiat deposits/withdrawals on Bitfinex. Currently the price differentials themselves are the strongest signal.
[1] https://medium.com/bitfinex/fiat-deposit-update-october-15th...
So I'm accumulating position in MKR.
Here is YC interview with backer of MakerDAO:
https://blog.ycombinator.com/blockchain-investing-with-olaf-...
Andressen Horrowitz also increasing their position in MKR:
https://medium.com/makerdao/a16z-crypto-purchases-6-of-mkr-b...
https://medium.com/makerdao/maker-sells-12m-of-mkr-to-partne...
Although there are some concerns that it's economically impossible to create fully decentralized stablecoin. Historical example:
https://en.wikipedia.org/wiki/Black_Wednesday
Failed stablecoin example:
https://coinmarketcap.com/currencies/nubits/
We will see as time goes on. Anyway, it's very interesting economic experiment.
P.S. So YC HN readers keep downvoting me even if I give links to interview on YC. Okay...
Don't get me wrong, I think Tether is up to something fishy but I don't think that they have billions of dollars less in assets than the number of Tether issued.
Also note, the article you linked to is not Forbes but just a random blogger using the public Forbes blogging api.
That's not to say that Tether does not have major credibility issues and dubious liquidity, just that no new publicly available information would justify the movement. On the other hand, when a bank run is in progress, it's irrelevant if it was started by a rumor because the rumor becomes a self fulfilling truth, especially in the face of shaky financials.
When a jenga tower topples over, it's not usually because someone played especially badly, but because almost any touch at all would make it fall.
I keep hearing this, yet can instantly and for no charge electronically transfer under $10,000 between various accounts, and with minimal (often waived) wire charges, much larger quantities more reliably (and with less risk) than using a "stable coin".
Ofcourse it BECAME just another financial wizardry tool, that's honestly all the tech sector really does. The smartest people on the planet are thinking about how to make more money.