Bitfinex, the Italian network behind the boss that makes Bitcoin tremble | Hacker News Reader

Bitfinex, the Italian network behind the boss that makes Bitcoin tremble

nicolaborzi.medium.com

208 pointsgraeme366 comments

Over the last year Tether has looked more and more like fraud. I was reading this article covering some of the recent developments since Tether's failed attempt to suppress discovery by New York's Attorney General

https://crypto-anonymous-2021.medium.com/the-bit-short-insid...

For years I've told loved ones, friends, and anyone with a passing interest in the nascent space to avoid Tether like the plague. In my opinion, it's only a matter of time until it blows up.

How do you invest in Tether? I thought it was just like a dollar peg for btc for inter-exchange operations.

I am guessing people park their money in tether during periods of instability without needing to pay a broker to transfer into fiat. It looks like a place for temporarily hedging against crypto generally.

They don't invest in tether, it's just a means of moving money between exchanges like you say or temporary hold between trades.

In theory, if you give Tether some dollars, they will store those dollars in reserve and issue you new Tethers. In practice, there is no evidence that any part of that happens aside from the minting new tethers part. Most likely there is some amount of money and/or crypto held in reserve, but despite allegedly having several tens of billions of dollars in reserve, they refuse to do an audit.

I think the currently most plausible answer for how Tether works is: 1 )Tether issues tokens to OTC exchanges in exchange for an IOU 2) The exchange buys BTC with it 3) The exchange sells that bitcoin for dollars, and pays off that IOU. This almost certainly wont fly with regulators, and has many ways it could explode, hence the investigations.

What's the best guess on where the actual cash sits in the meantime, or long term?

Impossible to know. 30 billion Tethers ago, it was at 74% according to a filing from Tether with the New York Attorney General.

In my opinion, best case scenario: Tether is buying Bitcoin and other assets with Tether, and has been able to sell them at a profit as prices rise, leaving their reserves at or above 100%. This sort of initially unbacked issuance may be a crime in and of itself, but its possible Tether holders would have a legitimate claim on any assets if Tether fails or is shutdown and wouldnt take a loss (though it could take years to get back their money).

Worst case scenario: its entirely, or almost entirely fraudulent, and Tether insiders have embezzled and spent as much of Tethers available hard currency as they can.

Your best case scenario is worse than what most people in the industry consider the truth..

Or rather, what most people in the industry pretend doesn't exist, because they know it's a systemic risk and everyone's in way too deep at this point.

Look, it's easy, just phone up Paolo and get us an audit, you seem to imply you're connected.

Then we'll move on! I'll eat my hat and apologize to everyone I've ever told Tether is anything other than the most legitimate entity in the entire world. I'll borrow from the r/wsb folks and tattoo a Tether logo on my backside, even.

Not sure this aged like you think it would:

> Or rather, what most people in the industry pretend doesn't exist, because they know it's a systemic risk and everyone's in way too deep at this point.

Are you referring to the NYAG here?

Consider their T&Cs are very clear - owning USDT gives you no rights or claims on their reserves. They can also arbitrarily, and indefinitely, delay/postpone your withdrawal request. They can also substitute whatever they want from their assets to satisfy your claim. They can also just tell you to go pound sand.

Owning a USDT gives you as much right to cash from the Tether treasury as owning a Chuck-E-Cheese token gives you right to the coins in the cash drawer at your local fun-a-torium.

Why would they sell their bitcoin? I think that the most plausible explanation is that they're almost completely backed with bitcoin. In a bull trend, they're able to keep issuing more Tether because their collateral value increases. They can buy unlimited amount of bitcoin as long as the bull trend continues. In a down trend, they'll liquidate/sell the bitcoin.

> most plausible explanation is that they're almost completely backed with bitcoin.

Even if that's true it would be a direct contradiction to what they promise to their customers, that Tether is fully backed by USD. Any angry customer can then sue them for fraud.

They don't promise that. From their website: "Every Tether token is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, “reserves”)."

That's a recent change, and come about since they've been taken to court.

They originally claimed that every USDT issued was backed by cold hard USD cash. No 'cash equivalents', no 'other assets', no 'loans'. The wayback machine can give you a historical view on their pages and their claims.

Bank accounts in Shell companies around the world. They are pretty good at this game, but it's pretty risky one.

That's how CryptoCapital operated after all. It's a pretty standard approach to money laundering.

> but despite allegedly having several tens of billions of dollars in reserve, they refuse to do an audit.

They don't refuse this, instead they fail to find an auditor that people actually trust that wants to work on a big crypto project. They are very open about this.

The big problem about Tether is the amount of FUD and misinformation going around as common knowledge.

> I think the currently most plausible answer for how Tether works is

As someone who deals with Tether as well as all the big exchanges that run Tether markets, this is about as real as Alice in wonderland.

> They don't refuse this, instead they fail to find an auditor that people actually trust that wants to work on a big crypto project. They are very open about this.

Claiming you don’t trust any auditors so you can’t do an audit is certainly one way of refusing an audit.

> They don't refuse this, instead they fail to find an auditor that people actually trust that wants to work on a big crypto project. They are very open about this.

No no, let's not rewrite history.

Tether hired Friedman LLP to audit them in ~2017/2018. Friedman literally walked out of the audit [1] because, and I assume this is true, it was just too squeaky clean to bother finishing.

Friedman claims to be a specialist in this area [2], and I believe they're actually involved with GBTC [3].

In retrospect it makes sense Friedman ran about as fast as they could. The New York AG lawsuit indicates at the time, Tether knew they were only 74% backed by assets. Boy, that'll make it tough to pass an audit when your website says you're actually backed 1:1 with actual humanly usable physical dollars.

Remember, Bitfinex banked with a money launderer, CryptoCapital, and had $850 million dollars seized by authorities, so they just reached into the Tether kitty to plug the hole. [4] At the time Bitfinex and Tether were of course denying they even had any relationship at all - let alone a "friends with mutually accessible bank accounts" relationship - but we found out thanks to the Paradise papers. [5]

Tether is "very open" about absolutely nothing. Claiming otherwise is the biggest misleading statement in this entire thread, intentional or not.

Let's stick to the facts, Mike.

[1] https://www.coindesk.com/tether-confirms-relationship-audito...

[2] https://www.friedmanllp.com/industries/digital-currency

[3] https://www.friedmanllp.com/insights/congratulations-to-gray...

[4] https://www.bloomberg.com/news/articles/2019-04-30/tether-sa...

[5] https://www.icij.org/investigations/paradise-papers/paradise...

> Tether hired Friedman LLP to audit them in ~2017/2018. Friedman literally walked out of the audit [1] because, and I assume this is true, it was just too squeaky clean to bother finishing.

Reading the source you linked it looks like tether's main criticism of Friedman is that they were 'too detailed'.

God forbid that an auditor actually wants to get into the detail rather than just taking Tether's word for everything.

Circle/USDC has ~$7B of coins issued and makes available monthly attestations of assets (an attestation isn't an audit, but its better than nothing). Tether claiming that they cant get an audit because of the haters on twitter is laughable.

The claims I have seen from you and from e.g. Sam Trabucco amount to basically "Tether is legit because we create and redeem tethers regularly." This is not real evidence, in the same way that "Bernard L. Madoff Investment Securities LLC is legit because I deposit and withdraw funds regularly" is not real evidence.

Kraken will sell you some if you like.

1. Why would any of them care about Tether to begin with? It's not a speculative instrument, like Bitcoin. It's not useful for money transmission, unless they have some incredibly interesting requirements. It's an in some ways better, in some ways worse version of stuffing a pile of money into a mattress.

2. The problem is that even if you stay away from it, because you can't speculate with it, and you aren't moving money around, it is entirely unclear whether or not tether blowing up will take bitcoin down with it. If you want to be prudent about Tether blowing up, you should be advising them to stay away from bitcoin, until it does.

The argument some people have is that tether is printing fake money to prop up crypto market. I think it might have some effects like that if it was truly all fake money. I hope that NY investigation will shed more light on it.

>The argument some people have is that tether is printing fake money to prop up crypto market.

I don't think that's actually supported by evidence. AFAIK there are concerns about tether's solvency (because one of their bank accounts got frozen), but evidence of money printing is lacking.

They never provided the audit they promised. They lied many times about their banking partners. Its on them to prove that they are not printing money.

USA prints money. How is the actual dollar any better supported?

The chance of a bank run on tether is much higher than that of a bank run on US banks.

You will always be able to pay taxes in the US with US dollars, that is the promise of the US government, and there is no reason to believe this will change.

The promise of USD tether is that you will be able to get back 1 USD for 1 token, and there are reasons to believe this may not happen.

As mentioned otherwise in this thread (but it warrants repeating) their T&C say that they have absolutely no obligation to give you USD for your tether, so it's even worse.

  Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens,... 

  ... and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. 

  Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all.

[1] tether.to/legal

The US Gross Domestic Product.

The dollar doesn't claim to be convertible, whereas Tether does claim to be convertible and therefore needs backing.

Aircraft carriers?

Ultimately, the dollar is backed by US military force.

Historically, atremps to debase markets from US dollars have been met with military intervention (khadafi et al). This enforces a relationship between dollar value and global resource value.

The US military is so vast that it has no legitimate challenger on any strategic scale, and nuclear deterrent is traditionally irrelevant to this type of threat model.

Vietnam and Iraq?

US military power still has it's limits. Imagine for example that China refuses to trade in USD, demanding payment in physical gold for all the goods manufactured there. Or Russia refuses USD payments for oil and gas. No way the US Navy would be able pull of an invasion.

> Imagine for example that China refuses to trade in USD, demanding payment in physical gold for all the goods manufactured there

Lets imagine. All of a sudden, China has decided that USD SWIFT payments are no longer acceptable, and requires all exports to be settled in physical gold.

Suddenly, the vast majority of consumers are no longer able to buy goods from China, as the vast majority of consumers do not posses physical gold. Those that do, do not have gold in small denominations, and now costs have to round up to whatever denominations of gold that one has. How do you buy things with $400 sovereigns and $1800 kugerands and still make change?

So instead, we now rely on the banking industry to magically transport this problem away. We still pay USD, and it's transparently converted to AU for you in the background. The banks pool enough transactions together, and do T+2 settlement. Except due to the trade deficit, outflows are going to be significantly higher than inflows, and the vendors would rather have the physical gold delivered before issueing the products, given that massive trade deficit.

So now the banks need to arrange for regular, and large transports of physical gold. They also need to do this securely, since gold is a tempting target for theives. Shipping by air is too expensive, and few people will be willing to face transaction fees that high, so then it returns to sea freight, which is slow. Suddenly T+2 settlement becomes T+50.

So now you're waiting 50 days for your $5 payment to clear, before goods ship, which take another 2-5 weeks depending on shipping method.

Or you'd just buy from someone else, who's willing to settle in cash.

Or you use bitcoin instead of gold and your $5 payment gets cleared almost instantly

$5 plus a $20 transaction fee (or, really, something higher, if you're competing with everyone else who wants to send $5 to China)

The GP's suggestion was physical gold, not another electronic payment form.

To get a transaction cleared inside the next block today costs 185 satoshis per byte, and a minimum transaction size of 192 bytes. So "almost instant" clearing (~10 mins if you're happy to accept one block, ~30 mins if you're waiting 3 blocks, etc) costs a minimum of $18 today.

So that $5 tee that takes 30-60 mins for payment to clear just cost you $23.

As the rate of transactions wants to go up, the cost to get into the next block will go up too. We're already at maximum transaction rate, so the only mechanism left is increasing the price.

Or you could buy local.

(Inb4lightningnetwork)

Well, the obvious answer is that the supply of dollars is only half the equation. Velocity of money is the other. Inflation is a function of velocity and supply. This is well managed by the Fed.

Inflation literally only matters from the moment you obtain fiat to the time you spend it on necessities or invest it in productive assets - or bitcoin.

It's amazing how crypto folks hate on inflation, but the 2% well-controlled rate is specifically designed to incentivize people to allocate that capital in the way they think is best. In some cases, that's Bitcoin. So inflation causing people to invest in Bitcoin (or anything else) is literally inflation doing what it's designed to do.

Of course bank runs are different, but in the US, bank runs are backstopped by the FDIC which has, since the Great Depression seen exactly $0 lost by depositors. Tether is backstopped by literally nothing.

Further, their auditor, Friedman LLP, ran away in 2018. According to the evidence in the NYAG lawsuit, this was when Bitfinex had reached into the Tether kitty to borrow 26% of their assets, $850M. That'd make it hard to pass an audit when your website says 1:1 backed with real physical dollars.

Few fun facts, ready?

- At that point Bitfinex and Tether were pretending not to know eachother.

- The Paradise Papers revealed they had the same owners.

- Bitfinex lost the $850M because they were banking with a money launderer, CryptoCapital, after getting shut out of literally every bank in the entire world.

> It's not useful for money transmission,

It's extremely useful for money transmission, and a way to bypass KYC/AML entirely. For example, Iran can export heroin to Europe and get paid in Tether. It can then use that Tether to buy weapons from North Korea. North Korea can then spend that Tether to import luxury goods from the West. At which point, it then gets sent to Binance and converted back to clean fiat.

None of that's possible with SWIFT. Yes Tether's risky. But in many parts of the world, holding dollars in a bank account is riskier.

Okay, sure, but those are some pretty odd requirements, that are only relevant to a tiny fraction of people. I doubt the friends and loved ones of the grandparent poster are buying surplus Soviet weapons from North Korea, hence why I don't understand why they need to be warned away from it.

I understand why a normie gets into bitcoin or GME or dogecoin speculation. I don't understand why they would get into Tether - hence I don't understand why warning them away from Tether is a priority!

In many exchanges you exchange your crypto against tether (usdt) instead of real dollars. There are other alternatives such as USDC as well.

> At which point, it then gets sent to Binance and converted back to clean fiat.

Not sure this is going to work for $100m+ amounts.

Why not?

You are going to be hit by KYC from Binance and the bank you are withdrawing the money to.

The companies withdrawing the money in that scenario would be a number of legitimate luxury goods sellers. KYC would need to uncover that their customers, possibly through several layers of further indirection, have channeled illegitimate funds from North Korea.

There isn't a big market where people pay for luxury goods with Crypto. This is going to raise eyebrows. As much as the crypto landscape is the wild west, banking on/off crypto is incredibly hard.

I'm not suggesting it wouldn't be hard. But the point is that if you've found somewhere to buy valuable goods for with Tether from a suspect source, then the KYC isn't your problem any more, it's theirs. And it's theirs only if your purchases make up a conspicuous enough portion of their order flow to cause their bank to take a closer look, and assuming that the way you did those purchases causes looking at the source of those order to raise further red flags. People will look just as hard as they have to in order to shift the risk to someone else.

https://www.coindesk.com/tether-usdt-russia-china-importers

Yes. If you own Tether, get out. There is zero upside and a significant downside.

The question is what happens when 50% of volume disappears. Tether currently has about as much volume as the other 9 of the top 10 cryptocurrencies have combined, and is the top trading pair for BTC, ETH and many others. You dont have to hold any to be exposed to a huge downside risk.

>The question is what happens when 50% of volume disappears.

Surely this isn't an issue because the volume will just move the other exchanges? The bigger threat is investors getting cold feet and not wanting to buy at all.

Tether is not an exchange. It is a centralized cryptocurrency where the centralized authority has the ability to freeze assets (they did this recently after a DeFi hack). While I dont necessarily think it will happen, theres no reason the US government or some other authority cant seize and suspend operation of Tether's blockchain. At that point zero Tether transactions can occur, on any exchange, any DeFi contract, or any number of other associated activities.

What happens is at un-banked exchanges, people try and run for the hills, buying as much BTC or ETH as they can get their hands on with their vanishingly worthless USDT. The price of crypto on these exchanges goes up parabolically into the millions.

These folks then transfer their crypto to banked exchanges to try and salvage what little they can - to try and pay back some of the stupid loans they've been taking on the run-up, and they flood these banked exchanges with sell orders, and the price there crashes to pennies.

Some exchanges may go insolvent, and those could be on the CME BRR calculation list, causing the price there to spike, leading to cascading liquidations in the futures market.

The worst case scenario where the wheels come off is that the wheels come all the way off, like a MtGOX on steroids.

Yes, so much this. Everyone keeps simply saying that the BTC price will blow up because everyone sells Tether. Yes and no! What will really happen is that the BTC spot price will diverge between those exchanges that denominate in USDT and those that do in USD. Therefore, the best indicator to see if Teether is failing is to track the difference in the rate between exchanges.

Yup, last time Tether traded as a significant discount(Oct 15 2018) BTC price on bitfinex went up $1500 and on coinbase it went up $700. This was in the depths of the bear market with price around $6200 too.

The volume is fake, which is the point. They want you to believe they are equivalent to dollars, and this fake money comprises the majority of purchase orders for all coins. If the spot price of the fake money falls to an accurate price (nothing), then it will tank everything it has touched.

If you're up on any kind of crypto, get out as well; when Tether goes, it will take down the rest of the market. Again.

Me too. I'm looking into shorting it on Kraken but I am not quite sure how it would work because it would be delisted before it went to 0 possibly and I am not quite sure how that would work.

Don't short it. The market can stay irrational much much longer than you can stay solvent.

For stocks I agree, but here tether isn't ever going to go much above $1, right? So the downside of shorting is just that it ties up a lot of capital, right?

Wouldn’t you be paying for time decay on any short positions?

Time decay happens on options. You pay interest on the tether you borrow.

Don't short the spot.

Thanks, this clarified what’s going on for me.

That means you’ll still be paying interest for whatever period you’re holding the position, which really isn’t that bad depending on the rates. However, not to detract from the thread I would think other concerns like market irrationality and delisting still applies.

If you short the futures I don't think you'd be as affected by delisting of the spot, but the price calculation at settlement time could be dicey

Not just at settlement, if one of the index exchanges goes insolvent and the price of BTC goes parabolic, it may push your short position past your brokers assigned personal risk tolerance for your account and they'll liquidate you. You'll be right, but broke.

I don't think FTX has any policy on this matter other than that they will liquidate you if you are sufficiently under-collateralized. A move in the price of an unrelated asset would not cause you to be under-collateralized.

I'm referring to a real SEC regulated broker like InteractiveBrokers which allows you to buy and sell /BTCG1 futures. The price of the /BTCG1 future is calculated based on a blended average of the spot price at a bunch of other exchanges (the "Bitcoin Reference Rate" or, humorously, BRR).

The current maintenance margin for a /BTCG1 contract is 40%. You're required to have enough margin to cover 40% of the notional value of the contract which is 5 BTC, roughly $100,000.

Let's say you only have $200,000 of margin. A parabolic move towards infinity in the BRR due to insolvency in some of the exchanges involved in the calculation may double or triple the price of BTC. Further, the high volatility may increase the margin requirements beyond 40% and up towards 100%. This means you're going to get a margin call, and you either post collateral or get rekked.

Not sure how FTX works.

Sure, that's shorting BTC in an attempt to short Tether. I agree this is a terrible idea.

Counter-party risk is the issue. The only places you might be able to short for real dollars will require you post up collateral for your short. Then once the wheels fall off they'll declare bankruptcy and keep your collateral.

'declare bankruptcy' is optimistic. More likely is that they disappear completely/fake their own death in a weird jurisdiction/get killed by gangsters/go to prison for child porn, etc.

Exchanges don’t just say it; they declare it ;)

It costs like a penny per year to short Tether quarterly futures at one venue.

If you think tether will crash don't you think the whole crypto space will crash too? Or can you short it with fiat money on kraken?

I highly recommend not doing this - I was shocked to see this article because I'm surprised its _still_ rolling - 2 or 3 years ago I was in your spot, and I would have wasted a ton of money and acquired a much darker view of the world.

Much like TSLA, it'll be 10% of its size eventually, but who knows when or why, its teflon until it isn't.

You wouldn't have wasted much money. At one crypto venue, this trade costs you less than 1% per year to keep on and ties up only 5% of your collateral (assuming you are 1x short and don't push the "pay higher fees for more leverage" button)

Why will TSLA be 10% of its size? Why can't it 2x and be worth an Amazon?

Because Amazon has 1.2 million employees, $386.1 billion yearly revenue, and $20 billion yearly net income. Tesla has yearly revenue of $31.5 billion and net income of $721 million. Presumably people think that Tesla is priced for explosive growth, but Amazon has also been on a growth tear that shows no sign of stopping, so the basic premise that Tesla at less than 1/10th the revenue and 1/20th the net income is worth half as much as Amazon seems fishy.

The bull case is Tesla goes 0.8% of global car sales to 20% or some such. Which is not impossible.

People just throwing numbers. In the very long term, everything will go back to 0. Thus, not putting a timeline for your predictions is useless.

> I'm looking into shorting it on Kraken

Why do you think Kraken would be in a position to pay you out if Tether goes under? Even the CME contract becomes sketchy when you’re talking about a meltdown at this scale—it’s priced off these exchanges. If they start experiencing edge case behaviour, prices could crash or multiply erratically.

If you want to play this, it would likely involve a more sophisticated bet on exposed public companies and/or credits, or a simple bet with a trusted counterparty.

Hence the 2% per month contango on a cash-settled futures contract which is practically unheard of.

In theory you should be able to arbitrage by purchasing a bitcoin and shorting the futures contract to collect that sweet 2% per month. However in a wheels-fall-off situation, the price at USDT-only and insolvent USD exchanges could approach infinity, and since your real-world broker won't take your BTC as collateral, they'll simply liquidate you.

Appears arbitrageurs are willing to leave 2% per month on the table to avoid being strung up in the event the wheels fall off.

> In theory you should be able to arbitrage by purchasing a bitcoin and shorting the futures contract to collect that sweet 2% per month

Variation margin. Shorting the future requires you put up cash. If the price goes up, you have to put up more cash. One could hedge away part of this by holding Bitcoin and borrowing against it. But those lending channels are costly and not presently reliable.

TL; DR That 27% spread [1] includes more than just systemic risk.

[1] (1 + 2%) ^ 12 - 1

Not entirely, right, shorting the future requires you put up margin. Current maintenance margin requirement is about $100,000 per contract, which covers 5 BTC, notionally $258,000.

Margin interest at the institutional level is 0.75% per year, so you're free to collateralize your position with something other than cash or bitcoin. You could have 1 short /BTCG1, collateralized by a portfolio of other investments, and buy BTC to cover at an exchange somewhere.

Yeah it's not risk free, but it's certainly not 27% per annum.

I do agree it's a simplification, however.

> Current maintenance margin requirement is about $100,000 per contract, which covers 5 BTC, notionally $258,000.

If the price changes this goes up. With something as volatile as Bitcoin, that’s a material risk.

Tether USD is a token. If you short Tether, you already got paid. If Kraken is legit, then Tether should not affect its operations.

This. If you short Tether, you already got paid.

> Even the CME contract becomes sketchy when you’re talking about a meltdown at this scale

CME has Tether?

Never short anything cryptocurrency related.

There is simply too much counter-party risk. If the wheels fall off the Tether bus, they're going to take Kraken down with it, and you just won't get paid. Plus you're going to have to post collateral for your short position, which simply opens you up to even more loss potential.

tr0lly seems to think the market is pricing in a 50% chance of a total systemic collapse on a 1 year time horizon by working backwards from the 2% per month contango on CME futures [1].

[1] http://www.tr0lly.com/bitcoin/bitcoins-overnight-collapse-pr...

The argument there starts from bitcoin futures being worth more than bitcoin today. What's wrong with the simple explanation that people expect the price of bitcoin to rise?

This is actually covered in the write-up but the answer is arbitrage.

In a perfect world, I'd simply short-sell the future at a 2% premium over the spot price, then I'd buy a bitcoin on the open market. This pushes the price of Bitcoin up and the price of the future down. The gap closes to roughly zero, an I get 2% for my service.

Hello,

The reason that people don't take the 20%/year arb is that they are taking arbs that pay more than 20%/year.

An additional reason, at some venues, is that the venue does not allow you to use 1 BTC to fully collateralize 1 short BTC future. At those venues, if you do this trade and the price of BTC goes up, you begin to pay interest to borrow dollars for your paper loss on the futures half of the trade.

Edit: for CME in particular, I don't know, but I sort of expect that you cannot post collateral in crypto.

Instead of shorting it, you can do this:

1. Lock up your USD to USDC (get some ETH for gas)

2. Go to https://app.compound.finance/

3. Deposit the USDC as collateral

4. Borrow USDT (Tether)

5. Sell the borrowed USDT to USDC

6. Wait until USDT implodes to $0

If USDT implodes to $0 then you'll have nothing to pay back.

You can even deposit the USDC to, say, Yearn and cancel out your interest expense.

Of course, I do not expect USDT imploding anytime soon, so don't do this. Although it's often the preferred stablecoin to borrow because when it does implode, you will be lucky (assuming it goes under the peg).

You're assuming if the wheels fall off Circle will be around to pay you back.

Which part of "don't do this" you didn't understand?

"Of course, I do not expect USDT imploding anytime soon, so don't do this" doesn't suggest anything about counterparty risk with USDC.

USDC is an example, it's not necessary that you use USDC, there are a few other currencies that can be used for collateral and swapped in to while you wait. Let's be clear: "Do not do this" means do not do this in whatever variation.

Why wouldn't they be?

USDC is audited monthly to verify that it's backed by real dollars. The reports are public:

https://www.centre.io/usdc-transparency

Totally, just a minor quibble, they don't have audits, they have attestations. That's not the same thing, it's much less detailed. I'm not particularly worried about the existence of their backing assets, however, it's just worth noting.

I was referring to the Circle entity in the event of a wheels-come-off situation.

> 4. Borrow USDT (Tether)

> 5. Sell the borrowed USDT to USDC

How is this not shorting? Except DIY instead of a broker hiding the borrowing for you.

Yeah they literally described the process of shorting a stock. Which, to me, is the best alternative to shorting a stock that one could ask for.

Yes, good point.

USDC is now natively on Stellar, so no need to pay Ethereum's transaction fees:

https://stellar.org/usdc

But there is no lending/borrowing market or a decentralized exchange on Stellar. Besides, when you deposit USDC to Compound Finance you will earn interest plus COMP tokens that can cover your gas fees.

Anyways, there may be several competing options coming in the future, but Stellar is just not it.

> But there is no lending/borrowing market or a decentralized exchange on Stellar.

I can't imagine where you got that idea.

https://developers.stellar.org/docs/glossary/decentralized-e...

https://www.lumenauts.com/explainers/stellar-decentralized-e...

Here are a few clients:

https://www.stellarx.com/

https://stellarterm.com/

https://stellarport.io/exchange

https://interstellar.exchange

https://lumenswap.io/

You can lend and borrow just fine on the Stellar network. Here for instance is Celsius' current rate on Stellar Lumens:

https://celsius.network/earn-rewards-on-your-crypto/

> Anyways, there may be several competing options coming in the future, but Stellar is just not it.

Passing judgment is best done after informing oneself.

It looks like the game is rigged on Stellar.

All of the above exchange links that I've visited required account registration and login, which means that they are not decentralized. For the celsius, you have to download an app on your phone. Ewwww. Whatever. Claiming to be decentralized and then requiring signup is dishonest.

It looks like there is not not much liquidity. Also, the only type of exchange supported is "Limit Order", which is also cumbersome to use on a blockchain, and you would probably prefer Automated Market Maker (AMM) type exchanges once you experience them. (You can perform all the steps I've outlined in a single transaction for example)

Also, it looks like that all the assets on stellar are custodial. There are no non-custodial stablecoins for example.

> All of the above exchange links that I've visited required account registration and login, which means that they are not decentralized

Next you'll tell me that Ethereum is centralized because Coinbase requires registration and login.

You've been looking at clients, i.e. independently developed user interfaces to the Stellar DEX. You can interact directly with the DEX here:

https://laboratory.stellar.org/

Or you can roll your own clent. Stellarterm is open source, could be a good starting point:

https://github.com/stellarterm/stellarterm

If you prefer algorithmic trading, there is Kelp:

https://github.com/stellar/kelp

> Claiming to be decentralized and then requiring signup is dishonest.

I find it hard to believe that you honestly don't understand the difference between an independently developed client and the decentralized exchange which it connects to.

> you would probably prefer Automated Market Maker (AMM)

See Kelp above.

> There are no non-custodial stablecoins

This subthread started with your recommendation of USDC, a custodial stablecoin...

…which, lest we forget, went live on Stellaräs decentralized exchange this month:

https://www.stellar.org/press-releases/usdc-is-live-on-the-s...

USDC was just an example, you can use non-custodial coins too. Looks like stellar only offers custodial.

Look, I get you. There is some degree of decentralization, although not fully decentralized. There's definitely a lot more smoke and mirrors there, especially when I need to register to these websites.

The other problem is that Stellars consensus protocol is not sufficiently decentralized.

Regular users may not care about that, which is fine. However, that's a crucial point for me.

> There is some degree of decentralization, although not fully decentralized.

Please stop spreading disinformation.

> There's definitely a lot more smoke and mirrors there, especially when I need to register to these websites.

Again: those are independently developed and managed web apps which provide a nice graphical user interface to Stellar's decentralized exchange.

You don't need to use them to access the exchange. If you do, the accounts you create with them are unrelated to the exchange; they are specific to those web apps, and serve obvious purposes like helping you keep track of your trades.

None of this is even remotely hard to understand for anyone who knows anything at all about the subject. That somebody who claims to be more than a regular user would fail to understand it is not credible.

Oh, this is perfect, I'm going to do this with 100k. Also, yeah it is shorting, but it's honestly less convoluted than how I have to do it on Kraken. + I get profits off staking.

Edit, did it with $500 as a test, I am arbitraging 0.5% as I took the tether I borrowed, turned it. into USDC and staked it. I am getting paid 0.5% to short Tether :O

I was briefly short USDT on Kraken but their fees for that were terrible, like 25% per annum. I'm not sure if there is a more reasonable way of doing it.

When it blows up, it will take Bitcoin with it.

What makes you think that?

Alternatively, it could make bitcoin stronger by removing an alternative cryptocurrency

> What makes you think that?

“Through Tether pass more or less 80% of bitcoin trades.”

I'm not an apologist by any means - I absolutely hate Tether, and cryptocurrencies - though for perspective, the most optimistic take is that if you exclude exchanges that are known for reporting fake volume, the breakdown is roughly 59% USD and 41% Tether. [1]

It will likely take the whole space down with it, not just Bitcoin, because what'll happen is on all USDT exchanges and insolvent USD exchanges, the price of crypto will reach millions of Tethers per coin as people try and flee, then on all real-dollar exchanges, the price will collapse to pennies as everyone tries to sell their crypto for actual people money that you can use to buy goods and services in the real world.

Think MtGOX on steroids.

[1] https://www.bitcointradevolume.com/

I think you underestimate demand massively. If bitcoin price ever starts to drop precipitously, it will be scooped up by a mass of buyers who have a ton of money to blow and a lot of interest in maintaining price. The only thing that could cause a real collapse to sub 4 digits is if something went wrong in the actual protocol or some unforeseen exploit occurred that affected the system in a way that was unrecoverable. If the cryptography and incentive systems continue to function, the price will probably never approach 4 digits again even if Tether blows up (which it probably will).

> The only thing that could cause a real collapse to sub 4 digits

Only thing? I agree that Tether’s collapse won’t be the end of Bitcoin. But if Tether collapses amid a real recession, i.e. one where incomes fall, that potential demand may not be able to act on its impulses. And note that Tether’s collapse and such a recession are correlated.

The logic here is that many people will buy a crashing asset because, if they all cooperate, they can keep the price up. That seems highly unlikely. You can't just will away a bad equilibrium or a collective action problem.

I think this gets to the crux of it. Tether/iFinex isn't just a bad player, it's a bad player that has become the plumbing of the crypto space.

There is a very, very strong suspicion that Tether is involved with market manipulation of bitcoin to keep the price high.

If that disappears, the price will be in freefall.

Wouldn't the price go up even more as people try to get rid of their USDT by buying stuff with it?

Temporarily. For all the talk of crypto replacing central banks and the FIAT system, people heavily involved in crypto want to be able to cash out and buy their Lambo and have fun not being poor. So there will be a rush to use fiat gateways such as Coinbase to liquidize their crypto assets. Enormous sell pressure.

I would imagine the USDT to BTC rate would skyrocket while the USDT to USD rate plummeted. The exchange value between BTC & USD would not really be impacted.

Yes it will blow up the Bitcoin price, as everyone wants to exit tether

That requires the Tether to exist or be worth anything. As I understand it it's a protocol on top of Bitcoin that allows the issuer to arbitrarily destroy it. [1] Even if it wasn't destroyed, the value could fall over a million fold if they were discovered to be totally irredeemable and without backing. Unlike the Papiermark, you can't even burn them.

[1] https://medium.com/wolverineblockchain/whats-the-situation-w...

Temporarily blow up the Bitcoin price and then crash down to oblivion.

I believe that's what you meant. If you think Tether implodes and Bitcoin's price goes higher and higher, I have more creepto to sell you.

How do you prepare / avoid / protect from that ? I mean most people don't have USDT it's simply what exchanges us as a pair. Or are you afraid that any exchange using Tether as the main stablecoin will go under with tether and users won't be able to withdraw assets ?

Tether definitely sucks, but it was an absolutely reasonable response to banks randomly freezing out USD bank accounts of various exchanges, for various reasons.

If you're an exchange that's going to be touching actual USD bank accounts, it turns out you need a fleet of lawyers and significant political and business connections to maintain the relationships required to keep the money flowing. USDT allows smaller, more agile exchanges to play with USD, and delegates the icky legacy finance stuff to the larger players who are set up to deal with it.

Of course no one should ever try to store long term value in USDT, but that's not what it's for. It's a tool for shifting the risk of touching USD to people that are actually prepared to handle it, which is fine.

The whole thing feels like scammy / tulip mania, but I think it is worth pointing out that Bitfinex repaid $550 million Feb 5. Though nothing comes up right away, I think the next trial date w/New York is Sept 2021.

Why do you think next trial will be only in Autumn?

Tether isn't a fraud perse... In the worst case it's a severely overleveraged bank that operates outside of traditional regulatory regimes akin to many eurodollar banks. My bet is they hold something around 5% in reserves.

Reserve requirements in the US have dropped from 10% to 0% thanks to the fed, so our fractional reserve system has turned into an inverted ponzi scheme of sorts.

The biggest risk for tether is a liquidity event. If everyone cashes in for dollars at once, tether is probably dead. But honestly, I might consider buying the dip.

The problem is that Teather advertises themselves as 'non-fractional'. They are meant to hold 100% reserves.

As for their actual holdings: "On 30 April 2019 Tether Limited's lawyer claimed that each tether was backed by only $0.74 in cash and cash equivalents"*

That's better than your pessimistic 5% estimate, assuming their statements can be trusted.

That was really, really old data lol.

That was from when they had about $3B in market cap. Today they have $33B in market cap. What a difference a year or two makes! In fact, they printed in the last week the entire market cap they had when that statement was made, in $1B USDT increments.

That figure comes from the time when Bitfinex reached into the Tether kitty and snagged $850M (leaving an IOU) to make up for the money seized by world governments as being the proceeds of money laundering. That happened when their money launderer, CryptoCapital, got shut down.

CryptoCapital was run by former NFL player Reginald Fowler [1] whose lawyers just withdrew from his case because he's broke.

Luckily Tether has since moved on, and they bank with Deltec in the Bahamas, whose chairman is the guy who created inspector fucking gadget. [2]

I'm not sure 5% is all that far off, given the 33 billion USD they're supposed to have is more than the entire Bahamian banking system has on deposit in USD according to regulators. By like, a lot.

[1] https://coingeek.com/crypto-capital-ny-court-grants-reginald...

[2] https://en.wikipedia.org/wiki/Jean_Chalopin

The one fact we can gather from that statement is "Tether is comfortable lying about their reserves".

Here is a good piece explaining why the data backing that articles arguments is BS: https://medium.com/@nic__carter/assessing-bitcoins-liquidity...

On top of the suspect data source, I notice I few more issues with that teather hit piece.

1. They are only looking on the buy sides. They don't even show the sell side with all the people selling their bitcoin back for teather.

On most exchanges, the amount of teather buys is roughly equal to the amount of teather sells. People just sit there all day selling back and forwards between teather and bitcoin, trying to take advantages in short-term fluctuations in the price.

But by only presenting one side of the trades, that hit piece implies (but never actually claims) that teather is being created out of thin air to buy bitcoin.

2. They misrepresent teather's reserve by implying (and once again not claiming) that it is all cash held in a single bank account in a single Bahamian bank account. (and then pointing out that the value of teather massively exceeds all Bahamian bank holding)

In reality, teather claims their reserves are cash and cash equivalents. They only need to hold a small fraction as actual cash for quick withdrawals. And there is a good chance that teather hold cash in multiple bank accounts in multiple countries. It's a huge risk to have it all in a single bank.

--------

Personally, I'm not a fan of teather, or cryptocurrencies in general. Teather even admit they don't hold full cash/cash-equivalent reserves, saying in April 2019 they only had 74% cash+equivalent reserves.

But I hate misleading journalism way more than I dislike teather. That article is hugely misleading and feels like it's designed to drive the price of bitcoin down so the anonymous author can profit from a short position.

> In reality, teather claims their reserves are cash and cash equivalents. They only need to hold a small fraction as actual cash for quick withdrawals. And there is a good chance that teather hold cash in multiple bank accounts in multiple countries. It's a huge risk to have it all in a single bank.

They haven't burned a single token in the last year.

Give or take zero banks in the world want to do business with Tether, they're totally and utterly toxic to USD banking. Tether got shut down by every major bank on the mainland US, one. By. One.

It got so bad they started getting rejected by third and fourth tier banks. They had to purchase Noble bank in Puerto Rico to get them onboard. Once Noble's mainland US correspondent bank found out, they got shut down immediately and pushed into insolvency.

So they found the sketchiest bank in the entire world, Deltec, chaired by the man who created the Inspector Gadget TV series, Jean Chalopin.

Look, I'm not saying they don't have the money, I'm saying I don't believe them, neither should you, and neither should anyone else until they pony up an audit.

> They haven't burned a single token in the last year.

They burned 1 billion tokens 6 months ago, back in August.

Besides, why do people act like not burning tokens is evidence of wrong-doing? That just shows ignorance for how tether have setup their accounts.

They have a "treasury account" where tether tokens go when people redeem them, and where they can quickly issue tokens when people deposit cash. They only need to issue more tokens when the treasury account gets low, and they only need to burn tokens when they have an excess in treasury.

It makes total sense that in the current bull market that they haven't had the need to burn many tokens. The burn in August only happened because they now have multiple tokens on multiple networks and their TRON treasury account had too much.

------------

All your remaining criticism about banking is 100% valid. And other peoples criticism about auditing and legal troubles.

I don't want to write comments on hackernews rebutting claims about Teather. I want the crypto market to go bust again so I can afford a new GPU. But so many people just parrot invalid criticism without understanding it.

True, my implicit issue is that Paolo was justifying the Saturday billion tether prints by saying they were often chain swaps. If you’re doing a chain swap and minting new tokens do you not burn the old ones? Maybe I’m misunderstanding.

Tether implements chain-swaps by depositing into the treasury account on one chain and withdrawing from the treasury account on the second chain. There is no printing/burning required.

But there is a problem when a large wallet does a chain-swap. These are often exchange wallets with all their user' funds, and there simply isn't enough funds in the target chain treasury wallet.

In these cases, new tokens need to be issued on the target chain. As for the tokens on the old chain, the treasury account just gets really large for a while.

Perhaps they should be burning, but in this bull market, it looks like tether has just taken the approach of waiting and skipping issues until the treasury account gets down to a reasonable level.

Tether document their treasury account balances on their transparency page[1] as "Less: Authorized but not issued" for each chain. Sure it's horrible that the transparency page is missing anything about real-currency reserve holdings (other than saying "All Tether tokens are backed 100% by Tether's reserves"), but they are quite transparent about all the on-blockchain stuff.

You can also view the treasury accounts directly and view the inflow/outflow. Omni is here[2] and eth is here[3]. etherscan even has a nice 'value over time' graph [4]

[1] https://wallet.tether.to/transparency

[2] https://www.omniexplorer.info/address/1NTMakcgVwQpMdGxRQnFKy...

[3] https://etherscan.io/token/0xdac17f958d2ee523a2206206994597c...

[4] https://etherscan.io/token/0xdac17f958d2ee523a2206206994597c...

Thanks for the thorough reply!

(Psst, it's tether, not teather. Carry on.)

> In reality, teather claims their reserves are cash and cash equivalents

In reality, Tether claimed that they held full reserves, in cash, audited.

Then they failed to ever produce an audit.

Then they admitted, in court, that they did not actually have full reserves.

Then they admitted that the reserves were not actually in cash, but in "cash and cash equivalents", never specifying what exactly "cash equivalent" meant.

So we KNOW for a fact that they have lied repeatedly about their reserves. Why, exactly, would we trust anything they say about those reserves NOW? Why are you assuming they have stopped lying?

> In reality, teather claims their reserves are cash and cash equivalents.

FWIW, no, they claim their reserves are

> currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities

which is pretty different.

It actually doesn't really matter.

Yes, The Bit Short isn't completely right, but it's right enough that even if you go back and make the corrections to the data, the point remains equally valid.

Here's one follow-up piece worth reading that does some statistical analysis: [1].

Nic goes on for days about fake volume. Let's use Bitcoin Trade Volume, which I'm led to believe is a very generous pro-crypto take on the actual volume in the space. It shows 59% USD and 41% USDT. That's not the 75% USDT The Bit Short suggested, but who cares? It's huge.

If you sub in those numbers when you're reading The Bit Short, it's just as compelling. Something Nic doesn't care to talk about, slamming the WSJ instead of who he should be pointed at, Paolo Arduino.

[1] https://adrianbarwicki.medium.com/impact-of-tether-trading-o...

[2] https://www.bitcointradevolume.com/

Bitcoin still feels like a house of cards. Does anyone remember what happened after everyone said “buy gold”?

The biggest tell IMO is that you still can't buy many things with Bitcoin.

The transactions are extremely slow, and Steam etc. have even stopped accepting Bitcoin payments.

Then where does the value come from? Sure there's a base layer of narcotics trading, etc. but that could switch to other cryptocurrencies too (like Monero). It just feels like a massive pump and dump built over some base layer of illegal transactions (drugs and money laundering).

It’s definitely more like gold now.

Sure just worse in virtually every way.

> The biggest tell IMO is that you still can't buy many things with Bitcoin.

I get that there is a prevailing anti-cryptocurrency sentiment here and that it's natural to read a statement so often and come to internalise it, but it's really quite egregious to keep reading this when it is beyond trivial to find websites that sell literally anything for bitcoin.

No sites actually accept Bitcoin, they partner with companies that convert them to human dollars. The volatility against the currency their suppliers use and the government uses for taxes makes it entirely impractical not to.

There’s substantially one merchant that accepts Bitcoin: bitpay, and all sorts of merchants happy to take bitpays actual money.

Look if the customer wants to pay a $20 transaction fee to buy something, and an hour to confirm, and bitpay is willing to deal with this absolute garbage situation and turn them into dollars for me for 1% what kind of merchant would say no? The fact any are saying no speaks volumes to be honest.

>I am the cofounder of Coin Metrics, a data business that licenses crypto market data to financial institutions, asset managers, and banks

Oh, so his credentials are "my company depends on crypto and if it fails we fail". And he's saying "oh these exchanges arent legit by our metrics we wont count them". That's the exactly the problem and he's saying "put on a blindfold and its gone".

This is a horrible take.

Anyone who knows the crypto industry knows many exchanges fake volume and companies like CoinMetrics reduce the noise to get better figures on the actual nature of transactions and liquidity in the industry.

Nic Carter knows the data is bullshit because he has a company that specializes in proving such things.

The false data from exchanges likely is key to the belief that these coins have value, and thus affects the data even from exchanges that aren't noticeably faking data.

I appreciate skepticism, but attacking someone's credibility isn't as useful as attacking their argument on its merits. Are there points he makes or facts he uses in his article which are themselves invalid or in bad faith?

The basis itself of the article is invalid and it is in "bad faith". I'm not attacking their credibility, I am attacking the thesis in itself. But since the author attacks the author of the original article and the WSJ in their rebuttal, I apply the same here and note that they have a large piece of cake in the play they are talking about and are thus also not objective.

So to go to the arguments:

1. Total crypto market isn't just US, on which this rebuttal seems to focus.

2. Is bitcoin price determined only by fiat inflow via "whitelisted" exchanges? Are they the only part of the whole crypto community that matters? The answer is no, and thus we gotta count the whole market.

3. And again, the article completely avoids the problem by saying "there are problematic exchanges but we will ignore them". The problematic exchanges are exactly the problem. They are creating fiat-tied coins with no backing and putting that money into market - which is valued by the amount of money in it. So the "whitehat" exchanges, even tho not directly involved in dirty money, are involved and profit off of the same ecosystem the dirty money is in. Thus, they are not an isolated system and cannot be observed as such and the market cannot be judged on the behaviour of these isolated systems alone.

Imagine if this was about gambling and illegal casinos (which in a way, it is). So this article would be written by someone working in Vegas saying "Well, yeah if we're looking at all casinos there is illegal stuff going on and people are printing their own chips and trading them for real Vegas chips, but as a company that counts chips, we only count chips sold in Vegas casinos and we haven't found such problems in Vegas casinos". Would you say "hey but there is a bunch of illegal casinos you are not looking at that print chips which are exchanged at your place for money" or "oh okay this makes sense"?

It's kind of mind boggling that anyone who spends any amount of time looking at Tether comes away with the same exact conclusion: this seems like scam...

and yet there's a billions of tethers flowing around.

Luckily for me, I have no money, so I don't need to worry about losing it.

> and yet there's a billions of tethers flowing around.

It may simply be to make hay while the sun shines? As I understand it Tether creates liquidity, facilitates inter-exchange transfers without incurring huge on-chain Tx fees, which greases the day trading gears all while providing a thin psychological security blanket to people who may believe that the downside risk doesn't exceed the opportunity for enormous gains. Everyone thinks they'll be the first into the lifeboats when the ship starts to sink.

The extreme reliance on a centralized token like Tether, like the existence of centralized exchanges in general, is a tacit admission that blockchains are completely unsuited to the pace of financial activity and need these informal crutches to work effectively at all.

Real ideologues who care about decentralization are thin on the ground, and rationalize these shortcomings away as readily as the most degen speculator when 10x profits are on the table.

If everyone trusts it regardless of what's actually backing it, then that makes it a de facto fiat currency.

...with a private unregulated overlord. Small difference to USD.

You probably knew this but the Federal Reserve is mixed public and privately owned. USD monetary policy is for a significant part in private hands.

It's a private organization with a public mandate. Big difference.

That could be changed by the same guys when needed. The difference is in some parliamentary theater.

Which you pay for with your little taxes. You own the parliement whatever they pretend to say, even in communist China. They cannot go further than your taxes allow, so they will have to benefit you eventually.

The consortium of mining farms behind bitcoin however, it s not sure they ll ever feel the leash.

> I have no money, so I don't need to worry about losing it

To date I’ve been relatively confident that when this melts down, the silver lining will be no bailouts for the afflicted. As the phenomenon spreads, however, this becomes less and less likely.

I don't know who would bail them out, considering that bitcoin is an unregulated international currency. It isn't tied to any government or national entity. It doesn't belong to any jurisdiction. I don't think bitcoin "investors" have any lobbying power either.

The people scared of a violent revolts and the populist riding on it?

Why do they bail homeowners who cant pay their loan? (or "banks" like every anarchist yell since 2008... No bailout, no more loans for everyone, no more support for politicians.

> violent revolts and the populist riding on it?

Few of any country’s elite, nowadays, would be better off fighting a revolt than fleeing with their capital. It’s probably the defining characteristic of modern revolutions compared with pre-Industrial ones: the increasing intangibility and thus mobility of skill and capital.

$30bn is a drop in the ocean at the international scale. So is $300bn. None of these guys is getting bailed out.

> As the phenomenon spreads, however, this becomes less and less likely.

To big to fail often is related to who is involved. Are influential big companies, politically connected and banking companies involved? Then it is more likely there is a bailout of some time.

Market cap of Tether is $33B (that much is "flowing around"). At the same time market cap of Dogecoin is $6.5B, only 5 times less. Everybody knows dogecoin worth nothing, and even it's creators are telling everybody that it's a joke. Whatever.

It's worth what the market thinks it's worth, like every crypto out there. And the lack of seriousness is working. There's still a lot of people who bought a ton of doge and are seeing their investment's value increase tenfold, with the potential of a lot more though, which will make them greedy and try and pump the value up via memes.

It stopped being a joke coin when you could start trading it for fiat.

Look at the daily volumes, instead. Doge isn’t used as the primary on/off ramp for the entire crypto market, but Tether is.

Tether has basically become the crypto fed. Without tether, this whole thing falls apart.

How can something like tether be a primary on-ramp? No one has their salary in tethers. It must be bought somewhere.

It s because banks were horribly slow to work with exchanges. In my country, China, many exchanges closed down due to account freezes by their banks (granted they might never have followed proper regulations in the first place).

So, when your bank freezes you out a few times, you build an exchange entirely on Tether and tell people it s like money. And then all exchanges do it and when you look back at it, Tether is the only way to redeem BTC, which you wanted an exposure on because your grandma is a paper millionaire.

So each time there s a bubble you rush to an exchange, give your RMB for BTC, the bubble burst you rush out and what s the only way? Calling Bank of China to beg them to reinstate yout exchange? Or take the USDT and go elsewhere?

It s better these days but a few years ago everyone I knew was locked in BTC or Tether. And the more they re locked in, the more delusional these people are abt their crypto things, pushing the bull up... I tell you in 10 years everyone will see it like the scam it is, but boy is it hard to yell at the wind meanwhile :D DONT BUY VIRTUAL MONEY IT S VIRTUAL BUT NOT MONEY

>And then all exchanges do it and when you look back at it, Tether is the only way to redeem BTC [...] the bubble burst you rush out and what s the only way? Calling Bank of China to beg them to reinstate yout exchange? Or take the USDT and go elsewhere?

Surely a bitcoin millionaire can afford an offshore bank account to withdraw USDT to?

It’s the in-market ramp because exchanges can’t afford to cash you out with the dollars you put in.

And this is where it becomes a scam.

People need/want the ability to cash out to sit on the sidelines during periods of extreme volatility, market declines, etc. Crypto exchanges can’t literally cash you out, because they don’t have the dollars.

So here’s a brilliant idea. I’ll just print a Tether and give it to you. It’s pegged to the dollar, and so you don’t care.

But wait, aren’t there obvious flaws with this plan? Isn’t this just punting the actual problem down the road? Who controls how many tethers are printed? What if everyone wants to convert their tethers to dollars? Are the tethers actually backed by dollars?

And, most importantly, can’t the price of crypto be artificially manipulated upward by the printing of additional tethers?

If you want the answer to these questions, get in line with the rest of us.

>Crypto exchanges can’t literally cash you out, because they don’t have the dollars.

Why not? For every seller there must be a buyer, so the money has to be around somewhere.

Money laundering, scams, insolvency, lack of regulations, lack of clearinghouses, etc. Lots of reasons. Tether wouldn't exist if Bitfinex was able to cash out dollars on demand.

> Tether wouldn't exist if Bitfinex was able to cash out dollars on demand.

Is there evidence of this, ie. mass reports of bitfinex clients not being able to withdraw?

https://www.forbes.com/sites/stevenehrlich/2019/05/02/after-...

Bitfinex, and Tether, are under scrutiny from multiple state attorneys general.

That doesn't answer my question. There's definitely shady stuff happening at bitfinex/tether and they should be investigated, but that's not evidence for your claim that bitfinex issued tethers because they couldn't service withdraws.

If you're a miner, then you've got bitcoin no one's ever bought.

That's true, but how is this relevant to this discussion? We're talking about exchanges, not the bitcoin system as a whole.

Can you give an example where you can put real dollars in and only get tether out? The major American exchanges have ACH withdrawals (obviously). Coinbase + Kraken + Gemini have massive liquidity in real dollars. You could cash out millions per day without moving the needle.

Bitfinex.

You can withdraw USD on Bitfinex if you verify you identity, 10k minimum.

Tether is highly sus and needs to be immediately investigated. Around $30B of Tether exists. Its unknown how much is actually backed by real USD. This could single handedly crash the crypto markets. https://en.wikipedia.org/wiki/Tether_(cryptocurrency)

It may be the case that USDT is a fraud, but that it's not a fraud big enough to crash anything else but USDT itself (heck, the "exit" may see USDT bag holder buy frantically Bitcoin at any price they could, creating a pump on Bitcoin's price).

For comparison there are 7.5 bn USDC circulating and these are emitted by Centre/Coinbase and these are known to be real (Coinbase being an HN unicorn to soon do its IPO).

Tesla also just bought 1.5 bn of Bitcoin.

Then are regular people buying directly with non USD currencies like EUR / JPY etc. (for which I take it there are no USDC emitted).

So it's a known fact that money is flowing, by the billions, into Bitcoin.

The question is: is iFinex/Bitfinex/tether printing USDT out of thin air by so many billions that they are actually manipulating the entire market?

The argument only provides support for the lows.

Tether backing is not just dollar. They recursively use bitcoin as part of their reserve. Bitcoin price rises, and they print more usdt to buy more btc.

It's hard to say how much btc would drop or pump.

Tether bootstrapped crypto demand, even if it was done so fraudulently

For what it's worth makerdao also created DAI backed by crypto collateral (and stablecoins) and right now the outstanding debt from maker alone is like 2B+ and growing pretty rapidly (daistats.com).

I know for a fact that many traders are using makerdao to leverage their crypto holdings to buy even more crypto, so there's definitely a circular money pump that happens (for example: WBTC-A vaults have an outstanding 240M$ debt, presumably significant chunk is used to buy back more BTC).

Given tether makes up more than ~60% of the bitcoin liquidity I would argue otherwise...

https://coinlib.io/coin/BTC/Bitcoin

> For comparison there are 7.5 bn USDC circulating and these are emitted by Centre/Coinbase and these are known to be real (Coinbase being an HN unicorn to soon do its IPO).

Fun fact: USDC is not backed by real USD. Circle is using these dollars for its trading purposes and that's actually in the ToS.

Pretty much no stable coin is: https://omarabid.com/usd-stable-coins

> Fun fact: USDC is not backed by real USD. Circle is using these dollars for its trading purposes and that's actually in the ToS.

That is really weird. From the link you gave: "you agree Circle is free to use the funds provided for its own purposes".

As you wrote: it may be the case that no stable coin actually is stable.

>it may be the case that no stable coin actually is stable.

gemini dollars, maybe?

It's already being investigated by the NY AG.

First sentence: "The lawless rollercoaster of bitcoin enriches few investors, while many often lose everything."

How can they start with this sentence even though it has been only up, up and up. All you had to do was wait and not freak out upon some nosedives. Who lost money? People that bought end 2017 thinking the sky was the limit and sold in February? Sure, but that can happen anywhere.

You know where you loose money? In the normal economy, because the government likes inflation. And we should all like it because money creation is debt based. But imo that is what is causing us normals to loose constantly (enriching the rich, who have dibs on the fresh printed money to make it happen).

I can't think of a single individual who held bitcoin and lost money in the long run

They held it so well they threw their hard drive in the trash.

Not yet, because the cake is still growing. Wait until the cake has reached its peak size and starts shrinking (not for a short intermediate timeframe like 2017-2020, but for a timeframe long enough to consider it "the end game" for humans with finite lifespans) and see whether your assumption is still true then.

The problem will be that realizing that we're finally in the "cake-shrinking" phase will only be possible after watching it shrink for decades.

Even if I don't like Bitcoin as a cryptocurrency (I think it did a great job but now really should be put to rest) I completely agree with that. That paragraph is plain silly, trying to avoid a stronger word.

> Who lost money? People that bought end 2017 thinking the sky was the limit and sold in February? Sure, but that can happen anywhere.

That's like... euh,... everybody.

> You know where you loose money? In the normal economy, because the government likes inflation.

That's like... euh,... everybody.

People who are hating on Tether/Finex/Crypto are just in denial that they are getting screwed by their governments. At least in crypto, you have full claim to your tokens.

Some people are rich enough never to need to consider withdrawing their savings (and cautious/lucky enough to avoid scam exchanges and keep their private keys safe). Others are not.

Oh, and "the rich" don't have "dibs on the freshly printed money" in the normal economy (arguably they do in a crypto economy because mining rigs aren't cheap...). The newly printed money is credit for people and companies not rich [or liquid] enough to have the cash to pay, and specifically it reduces the cost of borrowing because borrowers don't need to rely on rich people agreeing a fee to lend their money until it can be repaid.

Banks are private institutions (even though need tax money to be saved when they screw up, they are socialists when it is in their advantage). The newly printed money is indeed "credit", over which interest is always paid... to the rich private institutions with dibs on printed money.

> The newly printed money is indeed "credit", over which interest is always paid... to the rich private institutions with dibs on printed money.

The newly printed money is credit to the private institutions, who must repay the printed money with interest. You're not getting a system less skewed towards the rich by replacing that liability with one towards high net worth individuals or hedge funds instead...

Why is the money not equally distributed over all people? Or indeed, that would be the same as allowing for deflation (but maybe then we'd keep the money worth the same in terms of big macs which has benefits), as is happening with Bitcoin. Saving makes sense then, as with Bitcoin. Maybe then we don't need crippling mortgages anymore, because then banks are not the only entities that can afford houses by "Whoop" signing a 500k debt into existence, which is subsequently used to enslave us for ~30 years as we pay interest (because the banks don't want to feel the inflation) on an amount that is just, just withing reach of saving for 30+ years on an average salary, 2 if you're just starting and missed on the latest insane price increase driven by the lack of newly build houses and an unsustainably low interest.

If you want to ask why money isn't 'distributed equally across all people', Bitcoin isn't your answer and nor is a currency actually designed with a deflationary or zero inflation mechanics. If you want to distribute money across all people, you design a system which actually gives everybody money, but funnily enough, Bitcoin was designed so Bitcoins were distributed to those rich enough to participate in mining activity instead...

Saving makes sense in a deflationary environment, its just that "saving" involves letting other people do productive things with the money with rather than starving them of funds in the hope they will be sufficiently desperate for cash in future to be willing to exchange more stuff for it. A deflationary environment sets a floor on how much the 1% control, not a ceiling, disincentivises them from creating jobs (lots of risk, no aggregate money returns to be earned) and makes it risk free for them to starve the economy of resources instead.

And in a world with no "crippling mortgages", you still need somewhere to live before you can save 500k. Which means instead of borrowing and repaying and ending up with a house, you spend roughly that portion of your income on rent instead...

I agree that the success of individual investors shouldn't matter in this context. But I also think that nobody should ignore potential fraud or systematic problems just because BTC "makes money". For example, scams like pyramid schemes work very well until they don't.

But you dont care abt losing money when your inflating currency backs a loan for your house. What we are supposed to want is a roof, a value producing asset, not cash.

So if you keep all in cash you re doing something wrong. The goal of fiat currency is to adapt to changing condition naturally.

But BTC isn't possibly going to work: it s cant adapt rationally, it cant pretend to pay you the same when the country goes bad by tweaking your fiat value so you calm down and the country continues.

Whoever said inflation was wrong was like a teenager moaning at his 200$ in a free bank account. The economy has to inflate and deflate transparently for you to some extend or you ll be stuck never lending anything and stashing stashing stashing.

If 1 bitcoin was worth 10000 USD last year and it's worth 52000 this year, where is all the extra USD from?

Do we all buy some bitcoin, wait for it to grow 5x in value, and then we all sell for 5x profit? Where is that profit coming from?

Or do we all buy some bitcoin and never sell it?

How does the gold market work?

You may have heard the fed printed a lot of money this year.

Yeah, that seems a bit unfair. You could start any article on the stock market the same way, but it would sound gratuitous.

I just want to say, thay given how tense this conversation can be, the quality of the conversation in this thread (as of right now) is amongst the highest I've ever seen.

Excellent thread.

It’s worth noting that there exists some confidence in the tremendous operational liquidity that Bitfinex & Tether have from Bitfinex’s repayment of a $550 MM loan to Tether just this month.

https://www.coindesk.com/bitfinex-says-its-repaid-tether-for...

Why is affiliates transferring cash amongst themselves reassuring?

AFAIK the 550M loan was because bitfinex lost that money somehow (not sure whether it was because of a hack or their accounts got frozen). Them repaying it back would mean they were able to cover up that hole with their profits, which means tether is more capitalized than before.

It means absolutely nothing. The "loan" was made many months after the funds were transferred. In reality, Bitfinex does not treat Tether as an segregated account...it's just part of Bitfinex. When they lost money, they just used Tether funds and later on they formalized it as a loan when they started to be investigated.

It's like saying you gave yourself a $1k loan and then repaid it. It's just going from one pocket to the other. It's meaningless.

Bitfinex makes a tremendous profit from being the most liquid spot exchange. It's meaningful in the fact that they have strong cashflow to back a stablecoin.

Just wow. All these times hearing that it's probably the Chinese pumping and manipulating BTC prices and it turns out there are so many italians involved in key positions in Tether. As an Italian I guess I'm feeling pretty proud! :-D

I believe it's an open secret that tether is not backed by $ 1 to 1. If I remember correctly, they admitted that somewhere around 80% was backed by cash and the rest in collateral. Not sure how much you can trust what they say anyways.

In the meantime, avoid tether at all cost, alternatives like USDC and DAI are much better and trustworthy.

Even 80% seems like enough to make a bank run very unlikely, especially if some of the rest is mostly in easy to liquidize crypto.

If there is a "bank run" (price collapse) on BTC, the value of that crypto collateral will collapse and it will be very hard to "liquidize" it (because everybody else is selling too).

Unless it's overcollateralized similar to what maker does with DAI. And if there was a bank run, that would a bank run by people trying to exit tether, so you'd expect to see a temporary increase in BTC price.

I've seen many people say this. But the reality is that the significant part of BTCs trading volume is in tether. When that dries up it's price will nose dive and the only route out will be into fiat. And if BTCs price is declining, no one is buying. So tether collapsing means BTC will collapse.

If Tether untethers there will be a rush to other assets, pushing them higher.

Shorts denominated in USDT will get absolutely decimated, pushing other assets higher.

Exchanges using Tether will enforce a maximum withdrawal, pushing other assets higher.

Smart money will buy USDT at a discount once their reserve details are made publicly available. If it's FUD they'll make an absolute killing.

There's 3 possibilities here: 1. Tether is completely backed 1:$1 (highly unlikely) 2. Tether is partially backed, the reserves are greater than the outstanding 3. Tether is partially backed, the reserves are less than outstanding

Only 3) will have a downward price correction. If they've been buying BTC like everyone here has suggested then 2) is the most probable, since you know BTC is at yet another ATH.

If it becomes public that tether has excess reserves, the FUD will disappear silently. Worst case Tether says they will slowly sell off to reach 1:$1 over the next 12 months.

you own a bunch of tether, you decide to "rush" to other assets.

Except your existing assets are dropping to 0, so you don't actually have that much buying power anymore. So you'll only see a fraction of a rise. Meanwhile whoever sold you the tether probably cashed out a while back.

Someone will front run the news and sell tethers for btc, or things like that.

Not to mention that people don't rush to other assets in general, they rush to safe assets. No one is gonna rush to buy bitcoin in the event of turmoil affecting bitcoin exchanges, this is just nonsense.

> If Tether untethers there will be a rush to other assets, pushing them higher.

On unbanked exchanges this is true. However the next step is that people will transfer those inflated assets to banked exchanges to exchange them for fiat, pushing the price down. See Gox, Mt.

Yeah, or simply buy Bitcoin and wait it over.

This argument is very flawed, I'll pick on just one point. The main users of Tether are generally people who find it difficult to use conventional finance, so in the event confidence in USDT collapses, a lot of holders will be unable to exit.

I don't know why you gave possibility 1, given Tether have admitted it is not completely backed. Since the operation has refused over many years to provide proper accounts, breaking their own promise that they would, you would be foolish to bet on a rosy picture of their finances.

> But the reality is that the significant part of BTCs trading volume is in tether.

I believe that is not even remotely true.

Most Bitcoin users I know have never touched tether in any form.

Rather, what you're seeing is that there are a multitude of casinos operating under the guise of "exchanges" which have absolutely no access to fiat -- usually because they're fly by night shady operations if not outright scams. All these things use tether due to having no fiat access. All of these also pump out enormous amounts of fake "volume" that is ignored by most people with a clue.

Checkout the bitwise presentation to the SEC: https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca2...

And their paper on it: https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca2...

Most I know had no choice because our chinese banks blocked withdrawals.

The threat is that the US government comes in and says, no, you can not pretend 80 cents is a dollar and seizes as much of their reserves as they can.

80% backed by high quality liquid assets is pretty good. But insolvent banks avoid bank runs partly because lots of the money is sticky. Many people and organisations won't participate in a run no matter what, either because they think it's antisocial, or they believe the system will look after them, or they just aren't informed enough. A bank whose depositors are all cynical speculators has a much harder job to stay afloat.

Tether was supposed to show documents to the district attorneys general in January — but I can’t seem to find any details about it anymore. Anyone aware of any upcoming cases trying to uncover their books?

According to this, there was a Jan 15th date for documents that was pushed back 30 days: https://www.ft.com/content/3ac4809e-7c4d-4d9f-83ea-7112bfd34...

Can follow this: https://twitter.com/RealWillyBot

It's been almost a month arguing with my wife not to invest in Bitcoin. I'm just fed up with positive (microstrategy, tesla and other banks) news and negative news (mostly on here).

I believe institutional investors do their research before investing in Bitcoin. Why do they still invest if Tether & Bitfinex are fraud?

They make up an increasingly small % of the crypto exchange volumes. And it's not clear that it's a 100% fraud, they probably have some backing even if it's not at 100%. I'd say research Bitcoin itself instead of looking at news to decide whether you should hold some or not. It may go to 1M$, it may go to 0, but at least you'll understand what you were buying.

Could it be the greater fool theory? If they believe future buyers exist despite bad fundamentals then it could be a gamble. An attempt to ride the wave and get out before it collapses.

Is gold the ultimate greater fool? Sure, it might have "intrinsic value" (eg. industrial use), but the current and historical price far exceeds that of comparable substances. Only about 7.5% of gold mined goes to industrial use, with the rest going to jewelry (48.5%), investment (29.2%), and central banks (14.8%). https://www.statista.com/statistics/299609/gold-demand-by-in...

If your numbers are accurate >=55% of the demand for Gold is completely organic and because of the desire of human beings to wear it. The rest is largely as a hedge against other assets under the belief that the demand for Gold will endure a crisis. This sounds healthy.

Contrast this to Bitcoin where it has already been established in other comment threads that the vast majority of Bitcoin trading volume on dozens of exchanges might be fake ( see Bitwise/SEC presentation) and that a huge amount of volume is via the BTC/USDT pair and USDT may be fraudulent. Sounds pretty unhealthy.

> Contrast this to Bitcoin where it has already been established in other comment threads that the vast majority of Bitcoin trading volume on dozens of exchanges might be fake ( see Bitwise/SEC presentation) and that a huge amount of volume is via the BTC/USDT pair and USDT may be fraudulent. Sounds pretty unhealthy.

You do realize that most gold and silver traded on the COMEX is also "fake" in the sense that they're trading in amounts of underlying gold and silver that could never ever be delivered at the COMEX prices?

JP Morgan even got a tiny "still worth it" fine for blatant metals price manipulation: https://www.nasdaq.com/articles/jpmorgan-to-pay-%24920-mln-f...

Note that the fine for JP Morgan was so tiny compared to profits made that there's 0 incentive for them !and others! to stop this behavior. Sounds pretty unhealthy.

All in all, I don't really see how "fake volume" on some exchanges would make Bitcoin any less valuable as an alternative to holding USD or other fiat?

> You do realize that most gold and silver traded on the COMEX is also "fake" in the sense that they're trading in amounts of underlying gold and silver that could never ever be delivered at the COMEX prices?

Which means that gold is UNDERVALUED - there's a lot more demand for it than can be fulfilled with physical metal, hence the "paper gold" in form of contracts. If the COMEX scam comes to an end we can see gold price skyrocketing to 20-30k USD per ounce.

People often choose gold jewelry because of its value as a metal. Either because they want to be able to cash it in one day (a traditional form of family savings for some communities) or because an expensive gift is preferred to a cheap one, even if the cheap one had all the same physical properties.

>If your numbers are accurate >=55% of the demand for Gold is completely organic and because of the desire of human beings to wear it.

It's not as simple as that. If people wanted gold jewelry for the appearance the pieces would be gold plated.

I am long on Bitcoin and also believe Tether is a fraud. I expect Bitcoin will significantly drop, but I realize I could be wrong. If it does drop, that is nothing but a large buying opportunity to me. If it doesn’t drop, I’ll be happy to just buy smaller amounts on a steady basis.

>>I believe institutional investors do their research before investing in Bitcoin. Why do they still invest if Tether & Bitfinex are fraud?

Because institutional investors are not people borrowing $50K from loan sharks risking their life and limb to invest in one instrument hoping they'll get lucky.

When you have hundreds of billions to manage, your options are to invest everywhere, even in scammy places.

Bay Area billionaires invest money in lots of start ups, every once in a while you get your Google's, Facebook's, Air BnB's and they make up for what they lost else where.

You can use this strategy too. Invest $10 or $50 in lottery'ish places every time you come along one. If you find something pays off, spend a little more there. Take you money out when you have decent returns without getting too greedy.

Ever hear about Softbank and WeWork?

Most aren't putting more than 5% in. Tesla is one of the larger buys I think they put in around 7%. Still, if it goes to 0, it won't matter much at those percentages. Conversely, if it ends up going up more, it'll probably go up a lot more since it's still a small asset class relatively. $1.5T market cap is nothing compared to the stock market and still a lot less than Gold.

And with interest rates so low and all other asset prices ballooning, cryptocurrencies probably looked cheap to a bunch of fund managers. Up until a few months ago, BTC was still sitting below its all time highs.

So I think that's the mindset people are taking. Even with big money behind it, it doesn't mean BTC is now a safe thing to buy, but the upside is still so massive that it's worth taking a chance on despite the risks.

A few of the thousands of publicly traded US companies have bought some bitcoin, the others have not. If you assume institutional investors do their homework, why are the 99.99% of companies who didn't buy bitcoin wrong?

> If you assume institutional investors do their homework

We're talking about predicting the future here. "Doing your homework" may not be the relevant factor in predicting the future compared to "luck" or "power to manipulate" (insider trading, SEC in the pocket, priority at exchanges, CNBC market manipulation, etc).

Wow, Elon got scammed to buy Bitcoin?

What does the ex-CEO and former largest single shareholder of PayPal know about digital money?

What does the world's richest man know about money?

Apparently not much.

Definitely not more than you, since you know that Bitcoin is a scam.

It is far from clear that Elon’s investment in Bitcoin is because he genuinely thinks it will go up in value; the man is clearly a finance troll and has enough money to do stuff like this for the lulz

Same reason institutions invest in startups; want some high risk high reward assets.

Elon in particular can manipulate Bitcoin price so out of them all he's actually one of the most rational. As for the rest, I would not necessarily consider institutional investors an infallible authority, they are prone to groupthink and have a pressure to diversify. Overall, we've been riding a long bull wave juiced up by the spineless Fed, and as the saying goes, everyone is a genius in the bull market.

You're worried about Elon manipulating the Bitcoin price when Tesla eventually owns < 0.1% of all Bitcoins (assuming he buys at 48000 USD and assuming no other large parties like Apple buy in)?

I find this kind of unsubstantiated doomsday thinking rather interesting: BTC overall is an insignificant market[1] compared to the stock market or the global illegal drug trade just to name two random examples. I strongly feel the markets and exchanges that trade BTC are infinitely more "fair" and "free" than the stock markets and forex markets will ever be. I also believe this is the main reason (besides loss of trust in USD fiat) why Bitcoin is so "expensive" and will keep going up in price. Think about it: even if all crypto exchanges in the world would collapse in 5 minutes, you'd still be able to trade Bitcoin in 10 minutes. The same can't be said for digital fiat dollars or stocks that are held without physical certificate (AKA all stocks).

If the ongoing GameStop saga has taught me anything, it's that the stock markets are completely rigged in favor of "big money" institutions. They control everything from mass media (CNBC being the most blatant example) to the very rules that clearing houses, brokers and lawmakers create and follow. And they can change these rules to their liking within seconds, on the fly, without warning.[2][3] The systemic risk because of conflicts of interest/corruption right now is massive and I would not be surprised in the slightest if in a few months the stockmarket crashes worse than 2007/8 because of this. I estimate this risk is both more real, more critical in time and a whole lot of orders of magnitude worse than the negative impact BTC or USDT can possibly have on global society in the very worse case.

This is not just whataboutism: I'm not just saying there are worse problems to focus on than Bitcoin. I'm saying Bitcoin might be the only (temporary) way out of global financial system crashes for (retail) investors. Just like gold has been for thousands of years. In my opinion Bitcoin is not the problem, it's a bandaid for the common man in case of real problems.

I think this is why Elon Tweeted: "in retrospect it will be inevitable" while referring to Bitcon.

I don't think Tesla is buying Bitcoin as an investment, rather they're buying insurance against the upcoming loss of buying power of USD.

[1]https://www.visualcapitalist.com/all-of-the-worlds-money-and...

[2]https://finance.yahoo.com/news/bad-words-lead-gamestop-share...

[3]https://www.bloomberg.com/news/articles/2021-02-17/sec-data-...

I assume the accusation is that Musk has a Twitter account where the tweets get replicated to the business section of most media outlets globally at the moment.

He also has a history of dropping financial information through Twitter (the taking Tesla private tweet). Plus the rabid groupies stacked with Crypto fans.

I'm not sure how tweeting something that pumps the Bitcoin price, and the selling a bunch plays out legally. But he didn't seem too bothered about it in relation to Tesla stock.

This. Elon cannot manipulate Bitcoin price based on fundamentals (mostly because there are no fundamentals) but he controls the narrative. Every stock or asset he mentions goes up and I am sure he knows how to use it to his own advantage.

GBTC market cap is $37bn. USDC has a market cap of $7bn+. CME future contracts are also in the billions. No one knows for sure how many bitcoins are changing hands privately (offline liquidity). Tether is just one of the venues of trading with bitcoin.

Why are you arguing against your wife doing this? Even if you are technically correct about the value of bitcoin, it might still be a good idea, if it's money you can afford to lose.

You both might learn something. It might be fun. It might be a good story. Your wife might appreciate your trust, and trust you to take some other risk that you believe in.

Life is not a competition to make the most rational and well thought out economic decisions.

Starts with: "The lawless rollercoaster of bitcoin enriches few investors, while many often lose everything."

Not true, It is another ATH day for BTC, so literally anyone that bought BTC in the past and held is in the money. "Many often lose everything" is absurd.

There isn't anything radical or new discovered here, and is trying to drum up 2021 "Tether FUD". Heard it all before. Hasn't crashed. Works on several more cheap, smartcontract blockchains now than expensive ol' ether in '18. Powers billions in defi, loan and other radical new financial instruments. Few believe that there are literally bank accounts backing this 100% today, and you know what? Who cares?

Do I trust an ECDSA signature more than I trust a nameless brick and mortar bank holding some corporate funds. Hell yes. Computational security. Hard laws of math. I'd rather not hold tether in general, but IMHO it is less at risk than funds in bank accounts. I know this might sound strange to you dear reader, but you may not have experienced a time where bank accounts got haircuts, or your bank started freezing your funds. You cannot trust a bank! Be your own bank!

Too many folks are holding onto old ideas of what money is, and do not see what it is turning into. While I do not claim that tether itself is non-controversial, its behavior in the cryptomarkets general is non-controversial in that it holds a peg 1:1 with the USD, and is generally fungible and easily converted.

Chill on the tether fud, next cycle you will probably be sick of it too.

> Not true, It is another ATH day for BTC, so literally anyone that bought BTC in the past and held is in the money. "Many often lose everything" is absurd.

If we all only buy and never sell or spend or use it, the price can only go up!

> I'd rather not hold tether in general, but IMHO it is less at risk than funds in bank accounts.

That's not even remotely true. Funds in bank accounts are FDIC insured. Tether depends on the liquidity of exchanges to buy your Tethers, which would collapse across the board if problems with Tether were announced.

> I know this might sound strange to you dear reader, but you may not have experienced a time where bank accounts got haircuts

The linked article literally talks about the haircut that Bitfinex users had to take when they lost money.

> Be your own bank!

The reality is that people do not want to be their own bank, nor do they want to pay tens of dollars in transaction fees every time they want to make a deposit or withdrawal. They especially don't want to lose all of their money if they forget their password. That's why most retail investors just leave it in an exchange, which acts as their bank.

Sure, they could technically withdraw to a Bitcoin mind wallet and walk around with the password in their head, but that's not a great solution for 99% of people out there.

Banks are fine.

I prefer to think of it as "depreciating fiat currency worth less every year", but sure. FDIC insurance is 250k per account, in the US. Only 323M/7.6B can take advantage of this. Don't forget the USDT liquidity in the defi markets, which is a growing area too: https://defimarketcap.io/protocol/uniswap-v2

I think my point is that at this point even the solvency of tether corp is actually irrelevant to the value of their USDT. People believing in it seem to work well enough. Until people no longer believe in it, it will seem to exist.

Bitfinex haircut is yet another reason why you don't store money in exchanges. Please stop assuming that people don't want to custody their own funds -- I have spent a great deal of time in the recent months and years convincing folks to install wallets and take custody their funds. Most find it easy and painless. There is a light bulb moment when people realize they are in control of their funds, and nobody can take this away from them. Exchanges are like internet banking, boring in 2021. Money over the internet, however, is really cool.

Always stress the importance of backing up the seed phrase, and folk's wont lose access to funds. People like it! Its like a magical incantation to recovery coin anywhere in the universe.

Negative interest rates are coming for your dollars. The bank is not your friend.

> I prefer to think of it as "depreciating fiat currency worth less every year", but sure.

How is a dollar worth of Tether less impacted by dollar inflation than a dollar in a bank account?

That was more at point for fixed emission currencies like BTC vs fiat USD but running with your interpretation:

* bank could start charging negative interest rates

* tether could start providing interest yield to holders

* banks could start freezing funds

* tether could start freezing funds

lots of things are possible. Will they happen? Unknown.

>It is another ATH day for BTC, so literally anyone that bought BTC in the past and held is in the money.

To actually make money you must sell - to someone, higher than you bought. Then that person is in the same situation. Bitcoin is a zero-sum game (negative if mining is taken into account - billions of losses per year) so for every realized profit there's an equal loss somewhere else.

While technically just one (formerly extremely rich) person could be the source of profits for everyone else by buying enough btc at ath from every holder, leaving everyone else in profit, the more likely distribution is Pareto with 20% winning and 80% losing.

Ahh, I feel that you don't believe bitcoin is money. You don't need to 'sell' it for fiat. What matters is the purchasing parity power. It is money already.

I do not agree that it is a zero-sum game. This assumes that it provides no utility outside speculation, and everyone just wants back into USD. As the markets grow, there is less desire to hold depreciating assets like dollars, especially with negative interest rates.

> You don't need to 'sell' it for fiat. What matters is the purchasing parity power. It is money already.

If it would be money I could go into just about every shop and purchase whatever I want for crypto. Which, obviously, I cannot.

I don't only believe that crypto currencies are not money, but a huge pyramid scheme, which will result in many, many losers. Some of them having lost their life savings.

I'm pretty sure that we vehemently disagree on that. But claiming that crypto is money really stretches the definition of money.

You literally can with payment cards do this today. The largest cryptocurrency exchange released a visa card where you can 'spend crypto'.

I hate it when starbucks doesn't take my Krugerrands. What if cryptocurrencies can buy things that fiat currencies can not? Not everything is sold in a physical store.

What if /the payment card industry/ converted cryptocurrency to local fiat for you? Right now there are several psuedobank providers that will do this (for years now), but we are talking about the card network themselves doing it themselves. Cryptocurrency does certainly stretch the definition of money. That's why it is exciting.

Pyramid schemes are something different, pyramid schemes are about recruiting folks to pay you, and them getting them to repeat the same trick, with money funneling to the top. What you are thinking of is a Ponzi scheme, in which early investors are paid by later investors.

Now this is where the definitions get blurred. Most asset classes act this way, and we don't consider SPY a ponzi, nor housing in major cities, nor the USD market itself.

I am not trying to recruit, or even encourage you to convert your hard earned funds on magic internet money. But this dismissal of cryptocurrency is injurious to your future wealth.

Payment cards that allow you to 'spend crypto' don't make cryptocurrencies money any more than a card that allowed you to spend gold or shares or cabbages (if you happened to own a warehouse full of those) would make those things money. BTC isn't 'real money' in the conventional sense as long as people aren't transacting in it directly, and I can't see a path towards people ever doing that - who wants the buying power of their savings and income to swing wildly from day to day? As far as I know that only happens in countries with serious economic problems.

> with payment cards do this today

These cards don’t pay with cryptocurrencies. They pay out dollars and do finance on the back end to abstract away the credit and conversions. (They’re a great idea.)

There are bitcoin credit card that exist.

By your definition, USD isn't money either, because none of the shop here accept it. I first need to change it to euro to be able to pay in a shop, just like bitcoin.

Bitcoin is not a pyramid scheme, because there is no promise of gain. Everyone is saying it is a risky asset and in that sense it's just like any other speculation.

Where in the world do you not need to exchange BTC in order to buy things with it? Can you point to any shop where things are priced only in BTC? Your bitcoin credit card is just an on-the-fly exchange, that doesn't mean bitcoin is money.

There was the silk road. I guess there are new market place pricing in bitcoin. Also some ransomware were you can buy your files back. Maybe there's just some libertarian community somewhere with a few people using bitcoin.

If I go to any shop they not will not accept dollars. I still think it's money.

>Ahh, I feel that you don't believe bitcoin is money

It's a fact it isn't. Money isn't a matter of belief, money must be backed with something. What is bitcoin backed by? Nothing. It goes up when speculative frenzy heats up and collapses violently when speculators lose interest. If every corporation in the world bought it to 'store value' it would moon. Then a depression comes, corporations start selling to cover operating costs. Except it turns out everyone wants to sell and nobody wants to buy, resulting in a violent collapse.

Dollar is money because it's backed by all dollar denominated debts, including taxes. Any American is forced to sell a double-digit fraction of income for dollars. That's backing. It's true the value slowly falls, but no other asset with such a widespread demand source exists - it can be thought of as a utility fee.

The prevailing (false) meme in bitcoin circles is that it's going to be less volatile once it grows bigger - on the level of us dollar. Yet much smaller currencies are money and are significantly less volatile - because they are backed by their respective states enforcing debts.

>This assumes that it provides no utility outside speculation

Whether there's actual utility or not, it's captured by tx fees. Tx fees go to miners, btc holders don't gain anything.

Don't get too caught on in memes, btc only ever existed during a global bull market. People and companies are flush with cash they have no idea what to do and part of it goes to play on bitcoin. If you manage to dump on them then congrats - you took their money. The moment the global bull run ends and people are forced to try to get their 'stored' value back it's over. There was a temporary example during the covid crash.

> You don't need to 'sell' it for fiat. What matters is the purchasing parity power. It is money already.

Uhh I do if I want to pay rent, because as much as you want it to be so, it is in fact, not a real currency.

Collectively crypto-currencies burn enormous amounts of energy for what? For a sub-par digital currency run by a collection of people with some ideological opposition to mainstream economics?

>>Not true,

It is literally true. People who bought at $50K around this week, have to hope there are people who will buy at $60K, then those people have to hope there are people who will buy at $70K, then $80K, then $90K....

From that perspective this looks like a kind of a Ponzi scheme already.

Of course like most Ponzi Schemes the early investors reap massive gains. It's the ones who come later who suffer.

By your logic any investment is a ponzi scheme. You buy a stock with the hope that you'll sell it at a higher price later on, etc.

>>You buy a stock with the hope

I don't buy anything on hope. I do lots of analysis fundamental and more.

I invest only if the company is and will, with, enough metrics to support it will perform in the future. The stock price is backed by the health and growth of the business.

The easiest way to to do this is an index fund. Which by some definitions tracks large segments of the economy itself.

You buy based on maximum expected value for your risk tolerance and then hope you don't end up on the low end of the distribution of outcomes.

Example tail outcomes:

- Anti-capitalist uprising destroys all records of ownership.

- Massive fraud in companies you invest in.

- Competitors outside your holdings outcompete and take the market share.

It's pretty reasonable to bet that these won't happen at a sufficient scale to affect you, especially with international diversification, but you do also hope they won't.

Also, the stock price is backed by people's perception of the health and growth of a business, and by the price and performance of alternative assets. Pricing is hard. Obviously fundamental earning power influences price, but it's not the only or biggest force in price discovery, especially on <10y scales. As we have seen in the past year, expectations of money supply have a drastic nonlinear effect on stock prices across the market. A major (and unlikely) Fed strategy change could halve the market and keep it below ATH for a decade.

Not at all. Investing in a stock is the same thing as investing in a business, since you literally own part of a business. And businesses produce income, aka profits. Bitcoin doesn't produce income. Your profits from "investing" in bitcoin can only come in the form of capital gains.

From 3rd Jan 2009 until today, "Many often lose everything" is not true. All holdings are in the money. We don't know of the future.

BTC is no more a ponzi than any asset class. Take a look at https://assetdash.com/ BTC is currently the 6th most valuable asset class by market cap (ignoring that market cap for coin isn't quite the same thing). Literally every asset on that list fits this definition, eg: 'Hope for a greater fool'.

The thing is, in all asset classes, it tends to be the way that early investors reap massive gains. Housing. Stocks. Cryptocurrency. The great thing for you is it is still very early days for Cryptocurrency. It was only invented in 2009!

What should be concerning is the sustainability of a 'scheme'. When unlimited USD can be printed at the desires of the administration, how can a fixed emission asset NOT outperform something inflationary?

>>From 3rd Jan 2009 until today, "Many often lose everything" is not true. All holdings are in the money.

This is correct if you bought on 3rd Jan 2009. It depends on when you bought it. Whenever you bought it, you need some ready to buy it from you at a higher price. So as long that is true, you make profit. In fact that is profit and loss by definition.

>>We don't know of the future.

Exactly, ensure some one will buy from you at a higher price. So as long as you do this, you should be fine.

>>The thing is, in all asset classes, it tends to be the way that early investors reap massive gains. Housing. Stocks. Cryptocurrency.

Not true. Take housing for example, Housing tracks people ready to stay at a place for employment and other opportunities. Its value is tied to the businesses around. Stocks themselves are tied to how the company does well.

What does Bitcoin track? Electricity spent to mine it? Speculative people hoping the next idiot comes along to bail them out? Well electricity isn't exactly scarce. Supply of electricity is unlimited for all practical purposes.

>>The great thing for you is it is still very early days for Cryptocurrency. It was only invented in 2009!

We don't know. Only the next people ready to invest $60K for a coin can decide that. And then the ones ready to put in $70K. Eventually some body needs to be present who can put in something like a $500K or a million.

>>What should be concerning is the sustainability of a 'scheme'.

Indeed.

>>When unlimited USD can be printed at the desires of the administration, how can a fixed emission asset NOT outperform something inflationary?

Because unlike USD backed by US government and its military. Bitcoin owners are in no position to invade some country like Iraq to liquidate themselves.

The most beautiful thing about bitcoin is it needs no government or military, it just is. Math > Militaries.

Value of money is tied to its supply. What happened in 2020? https://fred.stlouisfed.org/series/M2

No the most beautiful thing about Bitcoin so far is having people who are ready to buy it at $XK/coin helping those who bought it at $X-1K/coin.

The ugly thing about Bitcoin will be when coin holders realise there are no people ready to put in $X+1K/coin, so people who bought at $XK will be ready to sell at $X-1K, and those who bought at $X-1K will eventually sell at $X-2K.. then $X-3K, then $X-4k...

It's ok for people who bought at less than what is selling now. Not that much for those bought above it. In all this those who bought at $XK, will be happy to minimise their losses at $Xk - $1K and so on...

I'm sorry dude, you really don't understand how this works. It isn't about finding a greater fool willing to pay $1k more than you did. The reality is there are plenty of people that will keep buying. There is no 'run out of buyers'. Years ago we spoke of 'buyers of last resort'. This used to be suckers like me. Its now large institutions playing games with each other. This world is far larger than you are imagining.

I will buy BTC as long as I am able, with fiat currency, regularly. I do this as a hedge against inflating fiat currencies, and as you can buy a part of a coin, the actual price per unit doesn't matter as much. What matters is the store of value over longer times, in an deflating asset class.

Can I recommend you watch some of Andreas videos at https://aantonop.com/videos/ to inform yourself?

> the actual price per unit doesn't matter as much. What matters is the store of value over longer times

Contradicting statement. Or how do you define "store of value" if not in USD?

I wanted to follow up and say: a) you can buy part of a coin, it scales to 8 decimal places! You don't need to buy a whole coin. b) it is money already, there is no need to 'sell' c) profit and and loss by definition gets a little weird with currencies. Purchasing parity power comes into play. When trading shells for widgets, you might end up with more or less widgets, but they can be more or less valuable per unit. If you are still thinking folks are playing the "buying btc with usd to sell for more usd later" you haven't quite grasped what is actually going on. :-)

>>If you are still thinking folks are playing the "buying btc with usd to sell for more usd later" you haven't quite grasped what is actually going on. :-)

Then please explain us in clear words what is going on.

They think BTC will replace fiat altogether such that anyone left holding dollars/"shitcoins" will be royally f-ed, and have to beg the coiner fiefs for the chance to rent a humble plot on their lands in perpetuity. /s, but not nearly as much as it ought to be.

> Housing tracks people ready to stay at a place for employment and other opportunities. Its value is tied to the businesses around.

To a certain extent, but ask the people in Vancouver what's going on with housing prices (tip: it's being used as a store of wealth and for speculation by Chinese people and others) Many, many houses sit empty so it has nothing to do with people wanting to live there.

>Well electricity isn't exactly scarce. Supply of electricity is unlimited for all practical purposes.

Tell that to the people of Texas!

Some of these assets have a component which tracks to real world utility, but often other factors dwarf the so-called fundamentals.

Long term investors in stocks hope those companies generate value for others, producing profit, and that fundamental reasoning is why the stock should either go up or dividends be paid. Proxy capitalism. Money goes from everyone to the owners (wealth gap rises).

That's not to say stocks aren't also priced by market dynamics of speculation and meme spread. However, very long term trends in stocks should beat inflation in the currency those stocks are most exposed to. Stocks are a liquid representation of the most productive asset you can own (the work of other people and technology), so a good deal of the money created ends up in the stock market. Plus, companies own various tangible assets. That reasoning creates a strong price dependence on money supply.

Bitcoin's relatively fixed monetary base makes it theoretically stable under fluctuations in fiat monetary base. However, at the moment, partially due to low relative market cap of crypto compared to the entire stock market, meme spread and sketchy actors create huge amounts of price movement, leading to distrust. Long term that could definitely change but it also might not. Currencies have a network effect. Until critical mass is reached (historically by government sponsorship), the value of a floating currency will be unstable.

Also, you mention Bitcoin is fixed-emission. This is true and worth noting - around 18.6M out of 21M coins are minted. Right now inflation is ~2.2%. Relative to fiat this is pretty low, and there's only ~13% inflation left. https://charts.bitcoin.com/btc/chart/inflation

> BTC is currently the 6th most valuable asset class by market cap

TIL commodities, real estate, intellectual property, factories, bonds and private equity aren’t asset classes.

If you want a more nuanced understanding of the "Bitcoin is a ponzi scheme" claim then I'd highly recommend:

https://www.youtube.com/watch?v=zT2e6dnY-Co

“With enough investment, you too can be a part of the crypto hype train, ready to on-board more people into buying into crypto!”

> Do I trust an ECDSA signature more than I trust a nameless brick and mortar bank holding some corporate funds. Hell yes. Computational security. Hard laws of math. I'd rather not hold tether in general, but IMHO it is less at risk than funds in bank accounts. I know this might sound strange to you dear reader, but you may not have experienced a time where bank accounts got haircuts, or your bank started freezing your funds. You cannot trust a bank! Be your own bank!

People have a very short memory. Citizens of Europe/US are generally not concerned because they think their governments will back their promises. Citizens of less fortunate countries do not mind the risk of Tether/Bitcoin because they national central bank is riskier and more corrupt/scammy.

People often say that if Tether collapes, it will make Bitcoin crash as well.

But why?

If people want to sell their Tether for $1 and do not get it - why would that lower the price of Bitcoin?

Tether funds the buy orders and bids. Without them the market price falls

How so? The Bitcoin/USD exchange ratio is from orders that trade Bitcoin for USD. How does Tether have an impact on this?

Tether is a USD token used by many exchanges and accounts for much of the volume

Citation is definitely needed here.

For example Binance and gate.io USD pairs are actually USDT pairs.

Well you could Google it. The amount of tether in circulation is within the billions. Thought it was common knowledge

For people not aware of Bitcoin trading

$136,273,340,188.23 Tether 24hr volume

Volume on Chinese exchanges is unreliable

But the trading volume is obviously significant

$33,139,949,239.15 in tether tokens

https://coinmarketcap.com/currencies/tether/

So you claim that Tether Limited is not buying Dollars when they issue Tether but rather Bitcoin? Why would they do it?

They also make up a portion of the sell orders and asks.

Anyone know the proportion of buy vs. sell pressure accountable to it and how that's trended over the last few weeks/years?

Maybe USDT keeps reserves in BTC. But anyway, in panic moment on crypto markets the real USD will be in demand. Some exchanges may not survive the run as there is not enough money there to pay everyone even $1k for BTC. Exchanges collapsing will take a lot of BTC with them (see history).

Because Tether has been "minting" more Tether coins (recently added 2B in one week[0]) which they then use to buy Bitcoin, which in turn pumps the valuation of Bitcoin.

If the backing of Tether is questionable, then they're just creating new money out of thin air, and so Bitcoin's market cap is artificially high - having been effectively purchased with monopoly money.

I recently read an interesting article about the sketchy unregulated banks that Bitfinex / Tether are associated with. I'll try to find the link.[1]

[0]: https://www.coindesk.com/tether-mints-record-2b-usdt-in-one-...

[1]: https://www.coindesk.com/think-stablecoins-are-solid-remembe...

Why do you think they are using their freshly created Tether to buy Bitcoins?

The theory is that there's a correlation between heavy Tether minting and Bitcoin value pumps.

I can't wait until the Tether situation finally comes to pass. Then we can finally stop hearing about how Tether's fraud is some kind of argument against Bitcoin, and also those with a legitimate interest in Bitcoin might be able to purchase it at a cheaper price once Tether's influence is gone.

Ah yes, an 'All time high' attracts new people and new research and, as with every cycle, people find out Tether is a big risk. And as strange new financial products are hyped and the market drops in a few months, people flee to Tether, but less so and maybe more to DAI or what ever the flavor of the month is.

Then, the price is low enough and some company tweets something and the Matrix is reborn and everything old is new again. And someone, somewhere, who is currently just ignoring the whole Crypto thing, will limp in and at some point, discover Tether, do some research and report about it.

As I then read the headline on HN, I shall gaze out the broken window and take in, one last time, the burning remnants of a once thriving civilization. And smile.

I will invest something in Bitcoin only when this "tether / bitfinex" thing will blow up.

I've been wondering if shorting Tether (though dont think e.g. Binance has it on the list but some new dexs with leverage might allow it) isn't an extremely safe bet - no chance it will increase in value and a significant chance it will collapse eventually..

Or it could just stay the same for years, and you bleed interest on the funding.

Let me tell you about the swiss franc. It held a government peg 1.20 to the EUR, until one day in 2015 it didn't. Many traders (and whole forex brokerages) who held positions, believing the 1.2 line could never be crossed were, as they say, rekt.

There are several ways to take a short position on USDT. You can trade USD for USDT on Kraken exchange. A short position would be depositing USD and placing a limit order under 1:1. This involves locking up capital for the order. If it never loses the peg, you lock up capital forever for 0 gain. You can also borrow Tether via various defi loan markets, but you will have to provide collateral and interest payments.

Both have costs, be it fees, interest rates or opportunity cost. No safe bets in this game, except buy and hold bitcoin for periods > halving period.

Considering how heavily manipulated these crypto markets are, I'd say there's no "extremely safe bet".

You have some serious counterparty risk if the short is on something exposed to a btc/crypto drop

I've been reading stories about tether's imminent demise for years and years. It's still going. Sure maybe one day it will collapse. Just don't bet on it happening any time soon.

The problem with gambling on the complete collapse of a financial system is that you not only need to be right - you need to have a way to compel the guy on the other side of the trade to pay up.

All those exchanges use Tether substantially. A trader takes on all the tether risks by using them

What if Tether (the organization) has been buying buying Bitcoin, and for some reason Tether imploding doesn't cause a crash in BTC?

It's entirely possible Tether actually have collateral worth more than their claimed 1:1 peg NAV.

The 1:1 peg is arbitrary and since they don't allow direct redemptions they could easily pull a stunt like repricing it to $1.50

"The amount of energy necessary to refute bullshit is an order of magnitude bigger than to produce it."

– Paul Kedrosky

I think AxisOption wallet and exchange platform is the best. For one, I earn passively while holding my crypto on the axisoption from their wallet systems and when I sell bitcoins on their platform, I receive very fast payments.

I earn as high as 10% interests for holding my bitcoins on the AxisOption bitcoin wallet platform.

How would you short bitcoin right now the stock exchanges? Which ETF has options?

ledgerx.com is a US based futures and options market. Short bitcoin at your peril :-)

bybt.com should give you an aggregate across different exchanges where you can short. It's very risky, even if BTC was to fail eventually, you can never predict what it'll do in the short term.

https://www.deribit.com/ and there are a number of decentralized crypto options markets out there as well.

Deribit is bitcoin-settled and heavily leveraged-- IMO it's probably not the best way to short Bitcoin, esp for someone who is long term bitcoin-skeptical.

Future options would be the way to do it imo.

I would recommend LedgerX -- A US based CFTC regulated derivatives clearing house and brokerage. They're available to US persons and organizations including retail. I believe non-US persons need to form a US company to use the platform currently.

The swaps and options on LedgerX are fully collateralized and physically delivered.

You can short Bitcoin there by depositing USD via wire transfer and buying puts.

You can see the current list of contracts: https://trade.ledgerx.com/live

The contract size is 0.01 BTC and prices are quoted per Bitcoin (similar to how equity options are usually 100 share contracts and quoted per share).

I've been a customer since 2017 and have been pretty happy with them. If you have questions, I'd be glad to answer them: I'm a seller of puts and would always welcome more people taking the opposite side on the platform. :)

How do you sell puts on LedgerX?

Get an account on there, get USD in somehow (either wire in funds the old-fashioned way or send in BTC and sell swaps/futures/options), and then you can sell puts at any strike/date that you want, as long as you have the USD collateral to lock up to maintain them.

So if e.g., you wanted to sell 100 contracts (1 btc worth) of $40k puts for June 2021, you'd be "locking up" $40k until you exit that position, which would be June at the latest. You could also unlock some or all of that money early by buying back some of those contracts on the market, possibly at a profit or loss depending on how things move. Or you could ride it out until expiration and hope BTC is trading above $40k at the end of June.

Does that make sense?

I wouldn't risk speculating on cryptocurrency with credit whether it is margin trading or opening long/short positions. The market is highly volatile, irrational and unpredictable.

Last week 1.9B was liquidated [1], mainly longs due to a pullback which was now long surpassed. At the same time on the rise, shorts got liquidated too. I am all for putting your money where your mouth is, but caveat emptor.

1. https://cryptonews.com/news/usd-1-9b-liquidated-as-overexube...

2. https://ambcrypto.com/57-million-in-bitcoin-short-positions-...

should I trust bitfinex

I posted this a few days ago: https://news.ycombinator.com/item?id=26106281

The problem with doing a DAI-USDT short is that they're correlated: if Tether implodes, it may take down DAI as well.

How are they correlated in such a way that this mechanism exists? The only correlation they have is that they're pegged to the same asset. Tether, if it truly has 1 to 1 backing, has no fear of losing value. DAI can lose its peg. I'd still put my money on DAI because I understand its mechanics and they're very good and I don't think for a second Tether has 1:1 USD backing. But aside from the USD hyperinflating or something, what other mechanism exists between the two?

Your Tether-DAI bet has to be made on an exchange, many of which are shady and unregulated; for example, we know Bitfinex is closely tied to Tether itself. When the tide goes out, we'll also find which exchanges have been putting their hands in the cookie jar, and many will implode Mt Gox style.

You’d at most lose what you staked, right? Like if the bet is truly 100:1, and you bet $100 and win but the exchange implodes, you only lose the $100 correct?

Mind you not sure how it can be a risk free 100:1. I think this assumes the leverage is on the same exchange that goes bust.

hey EGreg,

When exactly is NYAG poised to make their announcement? On the 19th, over the weekend, or on next Monday?

No clue. Does anyone here know?

Iirc they set the date at roughly a month later. In other words, no set day or firm deadline, but around next week.

So if I understand correctly:

1. You go on an exchange and bet on margin, say 100x

2. The bet is that DAI rises compared to USDt.

3. If, say, you bet $100, then you are wagering $10,000 via margin. So, if tether rises two cents, you lose $20,000 (or $200?). But if tether drops ten cents, you make $100,000.

A couple questions about your bet:

1. I’m assuming people think tether is much more likely to fall than to rise. So would the odds not be asymetric and you would lose much more if something happened to DAI? Such that you might lose $50,000-$100,000 if USDT rose?

2. If tether really blows up it could take down a lot of exchanges. If the exchange failed, what’s your max loss: just the original $100?

3. Supposing you win big but crypto implodes, your winnings are priced in...DAI, ETH or something else? If they aren’t priced in usd the value may be less than 100x if the whole crypto market falls.

I do enjoy losing money so I might give this a shot.

I already have puts on RIOT and MSTR. With Elon jumping in perhaps he has some insider info that I don't, or he just enjoys manipulating markets and pump n' dumping. If Tether collapses and it dings TSLA, maybe that's just his way of telling everyone the stock price is too high.

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