Tether Mints Record 2B USDT in One Week
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Keep in mind that Bitfinex profits from trading activity. They benefit substantially from both increased prices and increased volume, both of which occur after each Tether-driven surge in Bitcoin. The concern is that the Bitfinex operators are using Tether as a convenient pump to drive the market into a frenzy, from which they profit greatly by skimming trading fees off of the top. If only a fraction of people ever try to withdraw Tether, it's entirely possible that they could cash out those few requests from trading profits, indirectly. If they can continue to pump the value of Bitcoin higher and higher, any potential fraud may never be exposed.
1. Tether, even if fraudulent, has very little impact on bitcoin. How do I know this? There are currently 24 Billion dollars worth of tether in existence. The daily volume of bitcoin in dollars is almost three times that much. Even if tether wasn’t backed by dollars on a 1:1 basis, it would have a small impact on the current market cap of bitcoin. This is important because many people say tether is proof that bitcoin price is heavily manipulated and inflated. The reality is that selling $24 billion dollars worth of bitcoin won’t move that needle that much.
2. I have no reason to not trust tether. If it is one day revealed that there are no dollars backing the minting of tether, then so what? See point #1. People have been curious about Tether for years, and for good reason: it’s the first successful stablecoin (success in the sense that it actually gets used).
Edit: I have no exposure with Tether and honestly don’t care what happens with it. But it is not artificially propping up the value of bitcoin or other currencies.
Also let me remind you that market cap is really just a made up number. If only 1% of your company is floated and I buy all of it for a million dollars your market cap is 100 mil even though only 1 mil has moved.
Are you joking? You seem to think the world works only by mathematical formulas but in fact if the crypto market is run by a shady stable coin, I'm sure there will be a huge panic sell with hundreds of news sites stating crypto market was run by fraud and bunch of blogs mentioning "told you so" further upsetting all investors.
I wish other legitimate stable coins gain more market cap to replace tether before it explodes in the face of traders.
The problem would come if the number stops going up and there isn't enough money to cover all the people dumping the Tether IOUs simultaneously. I assume they cannot cover $25 billion dollars of worthless IOUs. Even more if their assets are also simply bitcoin, which in such a scenario would also be collapsing in price.
https://marketinsider.net/why-tether-might-tank-the-crypto-m...
> Bitfinex and Tether have till the 15th of January to submit documents to the New York state attorney general about their financial relationship.
Will there ever be a consequence or endgame, or do we all just like watching things get pumped forever?
This is just how ponzi scheme works. I've seen people who I respected become Gordon Gekko pushing shitcoins and trying to get co-workers to buy their crypto
The real problem is that so many people are invested in Bitcoin that they're not just watching, they're benefiting. At least on paper. People are too excited about the prospect of doubling or quadrupling or 10x-ing their money that they don't want to believe anything could be wrong with the system.
Even if we assume that Tether is 100% fraudulent and has zero reserves, that still only represents 24 billion of bitcoin's 600 billion market cap. Nothing compared to the USD that was 'minted' recently.
If the BTC market was really $600bn you wouldn't see the price regularly rising or falling 10% or more in a single day based around small numbers of trades.
Even if the float (shares available) are only 10% of total shares outstanding, if those shares now trade at $20 the market cap becomes $20 mil.
I went to Bitcoin and gold, but later got rid of my gold reserve, as it is manipulated even more heavily than Bitcoin price.
Anyway, this and other comments here all point to how much the Hacker News community grossly misunderstands markets and economics.
This is an opinion, not a fact.
> The only concern is that maybe they don’t have enough reserves to cover all the tether they created.
So, it sounds like selling 1 USDT for $1 the Tether people put, lets be optimists here, $0.1 into the bank as reserve and pocket $0.9. Or do i miss something here?
The trick is that lots of exchanges don't have any way to convert from crypto to real currency at all so use USDT as a stand-in, USDT's supposed backing 1:1 with $ means it's a stable place during crypto volatility, and it's next to impossible to actually get $ from directly exchanging USDT.
> Each tether is created when someone gives up a dollar.
With this:
> The only concern is that maybe they don’t have enough reserves to cover all the tether they created
If they're accepting dollars and creating Tethers in exchange, then they should have 1:1 reserves as they claim, right?
The concern is that they're creating Tethers without having the cash to back it up, indirectly using those Tethers to prop up the price of BTC, and hoping that no one tries to withdraw Tethers beyond their ability to pay out.
For comparison, consider that Bernie Madoff ran his ponzi scheme out of his bank account for almost two decades. He created imaginary "profits" on paper and paid out "returns" to investors who wanted to cash out. The scheme worked as long as no one tried to withdraw enough returns to take his bank account balance below $0. The fear is that Tether is a similar scheme to inject fake money into the Bitcoin ecosystem, which can't realistically be proved unless people try to withdraw more USDT than Tether has in their bank account, at which point the system implodes.
1. Only create tether when someone gives up a dollar
2. Treat the "reserve" as your wallet, and use it to cover operational expenses or yachts or escorts or whatever
And you think you're right that running a fractional reserve would not create any consequences if spotted?
Ultimately if people cooperatively agree to trade USDT at around USD1 it is working as intended and that's really all that matters, considering USDT isn't something you'd hold for an extended period of time.
I wonder if it would be possible to design a token such that if any trader caused its value to crash from the prescribed function (where in this case it is a flat USD1), that trader's wallet is banned from trading, as a digital punishment, leaving only the players who respect the rules of the game and maintain its prescribed trading value. Is that possible to encode such logic in a token? (I haven't coded for crypto before, so honest question)
These documents are due no later than tomorrow, January 15.
This is an immense amount of cash to manage, and management is not as trivial as it might seem, especially since it has to be kept liquid.
And accepting $2bn of new inflow in just one week, given how frequently and strongly crypto has been connected to illegitimate business (Silk Road, etc.) is borderline unbelievable.
> Bitfinex and Tether have till the 15th of January to submit documents to the New York state attorney general about their financial relationship.
Right now staking dollar stablecoins looks like a pretty risk free way to make 5-10% per annum on your USD positions. The way you do that is by providing liquidity for trading back and forth between USDT/USDC/DAI and other stablecoins. If USDT ever breaks a buck, then there will be a run on the pools and all your USDC/DAI will suddenly convert to now worthless USDT.
Can someone please explain how this either right or wrong?
The "fraction" is unknown though, with unwillingness to provide details and a vague assertions from someone that it's "fully backed". But, you know, you have to take his word for it.
You can't do this with Tether. A country's own economic reports and extensive external analysis by others can validate the financial state of a country & its fiat currency. With Tether, you have to take their word for it.
And loans? Doesn't that contradict their entire premise-- Mint 1 Tether and sell it for $1 so it's always fully backed. Loans shouldn't be necessary. Loans could be called in the second Tether shows weakness, which would further destabilize it.
And lets face it: If it's not actually fully backed $1 for $USDT then there's zero guarantee that it can't start floating against other coins or currencies. It's only worth $1 if you can find someone willing to give you $1 for $1 USDT. People claim if it loses value then Tether will simply buy up enough to drive the price back to the $1 peg. Buy it with what though? Their assets, the money backing it! which means it's then backed by even less! The only way a strategy of Tether buying the price back up to the $ peg can work at all is if Tether has more assets backing it that strictly necessary.
As for other assets backing it, they'll go up & down in value too. Even if it's currently fully backed, without transparency those other assets backing it can go down in value and then all of a sudden it's not fully backed.
All of these concerns might be moot. Tether might be completely sound, rock solid & stable. But anyone who believes that is taking it on faith based on the word of people who are highly biased & highly interested in having $USDT owners believe it, true or not, and it is unfathomable to me at this point in crypto, where shitcoins & pump & dumps and ponzi schemes and all kinds of scams persist, that anyone would take something like this on faith.
That makes tether something very different than the federal reserve which can just conjure money and give it to the banks.
But now the US dollar isn’t redeemable for anything, so they can’t go bankrupt.
Should Tether be revealed as a fraud and the price collapse below that level again as a result, I'm not sure if there'd still be enough miners to keep the show going.
Nodes that add new blocks earn both new Bitcoin rewards (until ~21 million bitcoins are created) and transaction fees. If hash power drops from miners going out of business, then difficulty adjusts and competition for fees is reduced, reducing the cost of mining until there are miners again. When all Bitcoins are mined, nodes that add blocks are still compensated from transaction fees. They compete for transactions by offering lower fees, and in this way the transaction fee is determined by the market for Bitcoin transactions.
That might still create a period of instability where the network lacks hashing power, but it's not nearly as bad as I thought. And since the same number of transactions would be achieved with less hashing power, I guess the environment would gladly see Tether collapse :P
Coincidence that there is a huge bitcoin ralley, and massive Tehter 'printing' going on right now? We shall see :) Get your popcorn ready!
However the moment they create a catalytic event, the entire house of cards falls down. The equivalent of a bank run.
How much does your bank have again? Last I looked in most places on Earth it's a few percent although the US removed any cash requirement so no one even has to report it anymore. I guess you folks will argue "well we have guns" but step and think about how that looks. Sounds like the mob to me.
Hating crypto is fun and cool yeah, but being wrong over and over again for so many years must really hurt. Please put your money where your mouth is, no one seems willing to do so these days and I truly wonder why. Playing that "market can remain solvent longer than you" nonsense is ridiculous, the overhead on buying bitcoin futures going short is a fraction of a percent, supposedly "low-cost" ETF's charge nearly a magnitude more.
Shorting bitcoin tether is literally a few clicks away for everyone on the planet, why not go bet everything you have on it. Watching all these people so proudly sure of themselves yet somehow you aren't all the richest people in the room? Please consider the very real possibility you are completely wrong and have been for years while mindless repeating this crap.
Tether itself is a short on bitcoin, billions are stashed away in it, if it collapses all the coins will rise as people race for the exits.
You could rolling in it right now or you could just be another one in this list:
https://hn.algolia.com/?q=tether
Choose your own adventure friend.
Can you provide a source for this claim?
I think that's a deceptive mischaracterisation of what the NYAG has done, unless you have more information than what I found.
The NYAG has accused [0] Bitfinex/Tether of misappropriating up to $900M (which I'm guessing where your missing 5% comes from) of Tether's reserves to cover up some other dodgy stuff they were doing.
But absence of lawsuits covering the other 95% doesn't mean that the NYAG has "proven" that the rest of the money is there.
> Please put your money where your mouth is, no one seems willing to do so these days and I truly wonder why.
> Shorting bitcoin tether is literally a few clicks away for everyone on the planet, why not go bet everything you have on it.
Speech isn't pay-to-win. Nobody has to bet their life savings shorting Bitcoin futures in order to participate in a discussion.
[0]: https://www.bloomberg.com/news/articles/2019-07-29/crypto-ex...
There is a lot of value being created in the BTC ecosystem. Very little of the price changes reflect this. Probably the best course of action is to sell 30 to 50% and then buy the dip in 9 to 12 months. That's my personal plan.
Gotta have the engines of the market ecosystem churning somehow. Also like you I plan on adding more when it dips low so I can cash out later this year when it historically moons again.
It's 2021. It's not hard to buy BTC at the institutional scale any more. Why arbitrarily go through a middleman to buy USDT, then use that same middleman to sell your USDT for BTC?
In 2021, Bitcoin is relatively liquid. They can quietly exit their positions at some point when they suspect a collapse is around the corner. Of course, you won't see announcements that these investors have sold their BTC until they're bragging about it after the next crash. They only announce BTC purchases because it drives follow-on investments, which drives the price up for them.
If Tether is not fully backed, it's a problem for those who own Tether. Tether is not a problem to Bitcoin.
That said, I've never owned a single USDT, but rest assured that if I did own one, I'd not hold it when I went to bed.
Tether is being printed because btc is pumping. They have to print tether to maintain the peg at 1$. If the price keeps rising due to demand for tether they need to print and sell tether.
It does not matter if you can redeem your tethers for dollars because they buy tether when the price goes below 1$ to maintain the peg.
Tether doesn't claim to "print" anything. Supposedly, Tether is 1:1 backed by actual dollars being paid in to the Tether corporation.
If Tether corporation is "printing" Tethers without having received corresponding deposits, that's the fraud.
Also, please don't post supercilious dismissals of the community. It's tedious and dyspeptic. If you're commenting here, you're as much "HN" as anyone else is. If you know more than other users, that's wonderful—please share some of what you know, so the rest of us can learn.
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...
Tether is backed. It isn’t a fraud. I worked at a company that minted and burned billions of Tethers. Keep praying for it to die - it won’t.
Is it backed by dollars?
Both of these can be true. But it is also true that Tether cannot be redeemed for USD (owning USDT does not entitle you to exchange for USD) and it has never undergone a hard audit. So while the entire project can be a good faith effort its also entirely possible its worth a lot less than $1USD for 1 USDT
I guess we'll find out on Friday if that's true or not.
If you have a proof to back your claim, feel free to share to get the upvote you're looking for.
Maybe they’re right this time? Who knows, but it seems like a lot of work has been done to fine the smoking gun of the big tether fraud, and so far nothing.
The questions seem valid, but so far it doesn’t seem like anything has panned out.
They had the investigation on hold for a few years.