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Comment by dcolkitt | Hacker News Reader

> There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try.

There is an easy way. Swap USDT to USDC on Curve. Deposit USDC on Coinbase. Convert USDC to USD on Coinbase. Withdraw USD.

I'm not saying I disagree with your overall thesis. But this specific point makes it sound like USDT is some sort of roach motel ("you can get in, but you can't get out"). That's not true, it's fairly easy to get back to USD at low cost. The fact that USDT is trading at near parity with USDC on Curve indicates that most of the market doesn't perceive a risk.

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> There is an easy way. Swap USDT to USDC on Curve. Deposit USDC on Coinbase. Convert USDC to USD on Coinbase. Withdraw USD.

Then what is your explanation for why it is not possible to directly exchange USDT for USD, there must be a reason that no exchange wants to do that.

> that most of the market doesn't perceive a risk.

That is absolutely no indicator for safety.

> Then what is your explanation for why it is not possible to directly exchange USDT for USD, there must be a reason that no exchange wants to do that.

https://global.bittrex.com/Market/Index?MarketName=USD-USDT

Do they process withdrawals in a reasonable time?

I have not had problems with them, but I'm also not doing any large transactions.

Also note Kraken, withdrawals are as fast as a wire transfer (so a few days): https://www.kraken.com/en-us/prices/usdt-tether-usd-price-ch...

What I'm not sure is how that market connects to Tether's bank accounts increasing or decreasing in holdings. This is all third-party exchanges, presumably with other customers as the counterparty.

Dunno about Bittrex but Kraken also has a USD/USDT pair. Withdrawals via wire transfer take around 2 days.

> That is absolutely no indicator for safety.

Currently, several billion in value is locked into Defi-based liquidity pools with USDT. If USDT collapses tomorrow, the stakers will lose nearly all of their principal. (Fast traders will quickly swap worthless USDT for all the USDC in the pool, before hardly anyone has time to remove liquidity.)

The largest of these pool, currently pays about 2.6%.[1] Even if all of that return reflects USDT credit risk, that market implies a 1/50 chance of USDT collapsing within the next year. I'm not saying the market is necessary correct. But what I am saying is that very deep, liquid markets are not pricing any significant USDT risk.

If you really disagree, you can even short USDT, by borrowing USDT on Compound at 4.2%. Then use that to buy USDC and supply it on Compound at 4.9%.[2] If USDT collapses, you'll make nearly 100% as you'll only have to buy back now worthless USDC. In fact the market will even pay you take this position, with the only risk being if USDC collapses relative to USDT.

[1]https://www.curve.fi/3pool [2]https://compound.finance/markets

> If you really disagree, you can even short USDT, by borrowing USDT on Compound at 4.2%. Then use that to buy USDC and supply it on Compound at 4.9%.[2] If USDT collapses, you'll make nearly 100% as you'll only have to buy back now worthless USDC. In fact the market will even pay you take this position, with the only risk being if USDC collapses relative to USDT.

This trade involves risk, and not just the direct USDT risk. If it didn't, there's no particular reason multi-billion dollar hedge funds wouldn't buy this down to the yield of an equivalent US treasury or similar.

> If it didn't, there's no particular reason multi-billion dollar

This is true in theory but in practice it seems much more commonly false. Even in vastly more mature and liquid markets, straightforward arbitrages can persist for years and in some cases decades, even after an inefficiency becomes public knowledge

That's fairly easy?!?! That's a textbook yak shaving exercise if I heard of one, and seems like it would have to involve multiple parties during the exercise.

Many exchanges have pretended for a long time that USDT is 'the same' as dollars, and there are going to be a lot of folks pissed that it isn't actually the same thing.

>That's fairly easy?!?! That's a textbook yak shaving exercise if I heard of one

This. If Tether truly were just a token backed 1:1 with USD on deposit at a commercial bank, you would not need to make multiple hops across multiple entities to actually convert it to dollars.

Also imagine how "well oiled" this financial transaction's machinery will work during a market contraction.

There was a similar situation the last time the NYC AG tried to shut down Tether and withdrawals from Bitfinex were blocked (June 2019). What happened was that Tether started trading at about $0.93 and USDC/DAI started trading around $1.04, as the supply of other stablecoins wasn't quite adequate to accommodate all the people fleeing Tether. Bitcoin actually ended up being the reserve currency instead: the price of Bitcoin spiked from $5200 -> $8700 over the course of a couple weeks as Tether holders dumped it to buy Bitcoin and move it to other exchanges.

Personally I'm surprised the risk premium wasn't more, but Tether is still around today despite both Bitfinex and Binance blocking withdrawals and the NYC AG initiating fraud charges against them, so ultimately the folks who decided it was nothing were right. Then, at least.

>There is an easy way.

How many fees have you paid through the 3 or 4 steps to get to this "easy" solution? Is that solution available to everyone worldwide? (I'm not familiar with Curve or Coinbase and whether they're US only or something of that nature)

I’m wondering how high volume would need to be for the first step (from USDT to USDC) before something breaks?

Why don’t more people use USDC anyway?

>Why don’t more people use USDC anyway?

USDT got there first.

Well, because Tether is happy to look the other way for money launderers, cartels and other bad actors. USDC can't.

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