55% of all Tether, $25B, were created in 2021 | Hacker News Reader

55% of all Tether, $25B, were created in 2021

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50 pointsdaolf66 comments

1 USDT is meant to represent 1 USD in the bank in the custody of Tether.

In 2019 Tether was proven to be only 74% backed by fiat and fiat-equivalent assets: https://www.coindesk.com/tether-lawyer-confirms-stablecoin-7... This means it's not 74 literal cents per USDT but some proportion of a liquid asset and fiat.

Tether has long since refused to release any concrete of proof of reserve and even when they were heavily pressured to only admitted to a lack thereof (74% in 2019 and that 74% isn't even fiat-only).

Tether is nothing but bad for the crypto-space as when it eventually DOES collapse a lot of people are going to find themselves holding something, USDT, which isn't as backed as they thought it was. Would you give me a dollar right now if I gave you back 74 cents?

The only sensible stable crypto asset is DAI from the MakerDAO which has been battle tested and proven under the worst possible scenarios (2017/2018 bullmarket crash) where it still held it's peg.

I don't know how this extends to USDC etc but for USDT I wouldn't touch it with a 20 foot pole.

>Dai was battle tested and proven under the worst possible scenarios

Yes and it failed horrible and resulted in 9 million dollars loss because of a design flaw:

https://blog.makerdao.com/the-market-collapse-of-march-12-20...

If it was actually perceived as risky, wouldn't it be trading at a discount to USDC? However if you look, you can currently convert a billion dollars of tether into USDC with _positive_ slippage: https://1inch.exchange/#/USDT/USDC?network=1 For DAI, as of posting, you can covert 10 million.

So to answer your question, yes, I would be happy to take you tether for USDC or DAI

I'm no crypto expert or remotely experienced with finance, but my understanding of USDT is that it's simply a bridge to simplify moving funds between fiat and crypto. It even simplifies converting one crypto to another where there is no direct route on exchanges.

It's much less volatile compared to other coins and if it fluctuates a bit that's not really an issue in the short timeframe I do my conversions.

there was a news about tether couple of weeks ago. What do you think about it ? Do you think it is legit ?

https://www.bloomberg.com/news/articles/2021-03-30/tether-re...

The problem was the NYAG who asked for proof and Bitfinex couldn't provide proof. So they paid a modest fine and got banned from operating in the state of NY.

74% backing sounds pretty good for a cryptocurrency. I wouldn't touch tether myself as USDC is better in every way, but I don't think there's going to be the fireworks that people predict if the peg falls only to 74 cents.

That was years ago when the tether issuance was a tiny fraction of today.

Crypto fans will write a few articles why it doesn't matter tether is backed and suddenly it won't matter.

DAI is not scalable. See https://medium.com/@hasufly/maker-dai-stable-but-not-scalabl... for a detailed explanation as to why. Tldr: the supply of DAI is bounded by the demand for a particular kind of liquidity, which doesn't scale with demand for DAI.

BTC has nothing backing it whatsoever. The crypto space doesn't seem to mind.

The minds managing the crypto space have never depended on reason or financial integrity, just a means to excite the masses onto their scheme.

> BTC has nothing backing it whatsoever....

Bitcoin can be verified and cannot be forged or arbitrarily created. That is its backing.

What is the backing of the US dollar at this point asides from threat of violence against challengers ?

> What is the backing of the US dollar at this point asides from threat of violence against challengers ?

That is part of the backing of any government issued currency and it's not a bad one. Usually currencies don't collapse or hyperinflate. If society breaks down locally the question is whether some crypto asset or the thing backed by guns will prevail in the mid term.

In war time: I'm betting on the people with the tanks.

>What is the backing of the US dollar at this point asides from threat of violence against challengers ?

That's pretty much as strong as it gets. I joke all the time that at some point someone will found a Bitcoin nation with its own military.

Aside from the very thing that is the foundation of all large societies, you mean?

What does it need other than that?

The backing of a national currency is productive capacity of that nation and the control of the government over that capacity.

This is the closest thing to correct, more specifically USD is backed by some real-estate and mostly TBill which is the government's ability to pay it's debt.

There's some sketchiness there, but generally it works, and of course, there are externalities like petrodollar but generally it's a sound currency.

It's not a super store of value, but it's not meant to be, there are other assets for that.

BTC is about as financially relevant as a GameStop mob, so if we're going to understand it, its' for the populist psychology, not for anything else.

Here is the 'backing':

USD [1]

Canadian Dollar [2]

Euro [3]

Bitcoin -> nothing.

[1] https://fred.stlouisfed.org/series/WALCL [2] https://www.bankofcanada.ca/research/ [3] https://www.ecb.europa.eu/pub/annual/balance/html/index.en.h...

I was curious how this compared with USDC, the smaller but also more reputable tokenized US Dollar service affiliated with Coinbase. It looks like 65% of that was created in 2021.

USDC is seriously late on their attestations too: https://www.centre.io/usdc-transparency

Last one was January 31st at $6 billion. There are now $11.3 billion USDC.

Yea I'm not sure why we should be surprised that in another bull market where BTC is well above previous all time highs and DeFi protcols have billions in deposits, that "most" of Tether would have been minted this year. It's like they haven't considered that if Tether was theoretically 100% above board that quoted statistic would still be true. "What would legitimate look like?" in other words.

Perhaps a controversial view, but why does this matter?

I was having this debate with a friend a few weeks back.

Tether was the first crypto coin pegged to a fiat currency, but now there are so many more: USDC, BUSD, TrueUSD, DAI, GUSD...and that's just a fraction of the ones pegged to $USD.

The entire market's _daily volume_ is 5+ times the entire Tether cap. Plus you have Automated Market Makers (Uniswap & co.) where you can trade directly between crypto pairs and even Binance/Crypto.com debit cards which ensure a closed circulation loop for stablecoins within the exchanges.

If it turns out that Tether is printing USDT without backing anymore how would this impact the crypto market? I expect another USD stablecoin would just take its place and life would go on.

Crypto trading/hodling is just too irresistible at this point. The last _3 months_ saw $1Tn of new money poured into crypto from all sides.

I would be curious to know what does HN genuinely think about this USDT controversy, if possible without the shilling and emotion?

Did you follow the archegos capital implosion? That's what happens on a smaller scale than tether. What you'll get is a price drop, a pretty significant one, because it will happen suddenly.

There is no foundation for the current prices of cryptocurrency, so if people get the impression that its propped up by frauds it runs the risk of dropping precipitously.

Also, I think you underestimate the follow-on effects of 20% of a market's daily trading volume pulled out of a market all at once.

I've only followed Archegos from afar, but I see your point. Basically it all boils down to people's trust in Tether, which if lost could cause a ripple effect and massive dump of USDT.

I think there are just too many unknowns to predict the market-wide impact, but Archegos is a good case study (in a way so is Ripple/XRP who went through a somewhat similar dump for different reasons a few weeks ago).

The dangers from Tether is as I understand it:

1. People holding USDT realize they are holding nothing. The potential losses could scare crypto holders and create a bank run to sell for FIAT.

2. The demand for BTC that drives up the price is inflated. Bitfinex does not actually have anything valuable to be exchanging for BTC. This would certainly cause the current bubble to pop.

In the end every holder wants to know when the next pop is going to happen, no?

>sell for FIAT

It's interesting to think about how in the short term at least, people would sell USDT for anything, particularly BTC, ETH and other stable coins like USDT or DAI in this scenario, so I would expect a price spike in BTC if there was some critical event where USDT collapsed.

I guess it would reflect a false value of real liquidity in the whole crypto market so would have to depress BTC price for a time after the dust settles.

Price spike as measured in USD or price spike as measured in USDT?

Dollars simply because it is an increase in demand. Of course, the relative dollar increase would be less than the USDT denominated increase. If USDT is pennies on the dollar, but these fractional dollars are bidding for BTC, BTC will go up in dollars.

Most people don't hold a lot of tether at any given time. If you bought any tether, you probably did so with the expectation that you will sell it for some other currency, either crypto or fiat, very soon.

This isn't true because with DeFi yields averaging in double digits, many people are holding all forms of stable coins to accrue this massive yield. Some people are entering the stable coin market with fiat simply to get this yield and have no interest in buying Bitcoin with it.

It is also irrelevant to frame the situation from what "most people" do when the question is what are the people holding all the minted tether doing with it? It does not disappear; if it is not cashed in for fiat then it is still being held by someone.

Who pays those yields on crypto currencies and why?

See: "Where do the Yields come from in Crypto"[0]

It is no secret that in a crypto asset bull market, people are "shorting" fiat to leverage long rising crypto assets. Additionally, just by virtue of overall liquidity entering the space longing assets there is demand for speculation and transaction volume, thus demand for fiat, across the space.

Various protocols on ETH are providing decentralized trading (Automated Market Makers), as well as other financial primitives like lending and borrowing.

So... yields accrue to those who supply fiat liquidity to borrowers (who yes, are speculating on crypto assets; "shorting" dollars). They also accrue to suppliers of liquidity to AMM's in the form of transaction fees to the various protocols. So, "monetary velocity" is high in DeFi and crypto now, so yields go to those enabling it.

When bear market comes, it is almost certain the double digit fiat yields will decline. But will they still be higher than pitiful bank and sovereign bond yields? Maybe. Also at that point perhaps lending crypto assets to those "shorting" ETH/BTC and longing fiat will mean decent yields on that side of the trade.

Ultimately these decentralized DeFi protocols are cutting vast layers of middle men where traditional banks and monopoly players take huge cuts of the overall economic value and velocity[1]. Instead of NASDAQ or Goldman Sachs or whoever to take a tiny cut of transaction fees from financial transactions, you do by supplying liquidity to decentralized finance platforms. So there is room for some decent yield to be sustainable. We'll see.

[0] https://www.youtube.com/watch?v=TJ6MQsjOS0I

[1] https://blog.bitmex.com/yes-i-read-the-whitepaper/

Who? The greater fool. Why? For the hopes of being able to sell to an even bigger fool eventually.

Crypto currencies do no business, and will never pay dividends, do stock buybacks, deliver interest, or perform any other function of actually generating yield.

You realize someone holds all of the Tether outstanding at all timed, correct? It doesn’t just vanish.

Further, there are many sites paying 12+% interest for people willing to deposit their Tether. This serves as an incentive for people to keep money in Tether rather than BTC/ETH or fiat.

Someone still holds all of the CryptoKitties. It doesn't mean they've got any value left.

Who does everyone sell their tether to? Someone must be holding it.

> The last _3 months_ saw $1Tn of new money poured into crypto from all sides.

Market cap is based on the price of the last transaction multiplied by the number of coins. It's not related to the total capital flow.

I assume they are conflating the $1T increase of the total crypto market cap with how much new money has been poured in, however, that's just wrong - you need much less than $1T to increase the market cap by that much.

You're correct, sorry my bad. I was looking at these charts but indeed they show market cap not capital influx:

https://coinmarketcap.com/charts/

> The last _3 months_ saw $1Tn of new money poured into crypto from all sides.

What’s the source on this? It seems implausible, given the commotion about Tesla’s comparatively tiny $1.5 billion entry.

Sorry, for some reason I can't edit my own comment, so adding a new one. The $1Tn figure is Market Cap; I was looking at these charts but indeed they show market cap not capital influx:

https://coinmarketcap.com/charts/

It’s too far gone now to matter. Initially we cried scam but there’s too much liquidity and too many clones to stop at this point.

25 billion is a drop in the bucket. USDC pays higher interest than <insert bank name>

If you, personally, do not care what the exchange rate between Bitcoin and USD is, then maybe you need not be concerned over whether a Tether bubble is going cause that rate to crash. I guess, however, that a large majority of those holding Bitcoin care a good deal about that rate, and if so, then a crash in that rate will have a significant effect on how Bitcoin is viewed and used. The question for you to ask yourself, then, is whether those changes will adversely affect whatever it is about Bitcoin that you value.

How? If a USDT-denominated exchange holds a certain amount of USDT and a certain amount of other cryptocurrencies, a change in the dollar value of USDT won't make them unable to make customers whole.

That just shows how much money flows in cryptocurrencies. Tether and USDC represent tokenized dollar deposits on exchanges.

It's incumbent on them to prove that. So far, there is little evidence that they are backed by anywhere near the dollars they claim.

It seems to me the debate is no long whether tether is a scam, it’s just if anyone cares it’s a scam.

About 40% of all Dollars were created in 2020:

https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

That chart shows the federal reserve assets, not the total supply of dollars. It's a pretty interesting chart, but it doesn't support the statistic you quoted.

The chart for M1 (currency, demand deposits, and other liquid deposits) looks similar: https://fred.stlouisfed.org/series/M1

That's about 30% of all US money supply created in 2020.

I'm sorry, I don't have enough information on what those statistics mean. I'm not sure what that chart measures, but it shows a 4x increase in early 2020 which leads me to think it isn't saying what you think it's saying. While I don't doubt it relates to how the Fed manages the money supply, it doesn't say what you want it to say.

If you are going to sell this point, you need a source that undstands and can break down the subject matter to explain what these charts are measuring and how that relates to the supply of US currency.

The Fed is the only source of Dollars. Banks only produce IOUs.

Almost as bad as some governments, the way they are printing money...

So you are suggesting that bitcoin, far from having shed the problems of government-issued currency, is going through the process by which irresponsible governments can destroy a currency.

> So you are suggesting that bitcoin, far from having shed the problems of government-issued currency, is going through the process by which irresponsible governments can destroy a currency.

As far as I know, Thether is not Bitcoin and coins are issued randomly (usually, multiple times a week) by the creators, unlike Bitcoin. There is no proof of work, or proof of stake here... just plain issuing "pre-mined" coins. A bit like the currency in most countries nowadays.

I have no clue why Bitcoin was brought up.

Look at this: https://twitter.com/search?q=%22minted%20at%20Tether%20Treas...

It is nuts.

It's the reverse. Someone prints counterfeit USD and convinces everyone that they are just as good as the real thing.

Reminds me of a Matt Levine quote:

"It is not original to me, but one thing that I think and write a lot is that cryptocurrency enthusiasts keep re-learning the lessons that regular finance learned decades ago, and that you can see a lot of financial history replaying itself, sped up, by observing cryptocurrency."

I see this play out a lot. While ironic, it is (to your point) instructive to see the cryptocurrency ecosystem learn the same lessons of traditional financial history all over again.

[1] https://www.bloomberg.com/opinion/articles/2018-05-16/high-f...

But Tether is not a traditional cryptocurrency and has nothing to do with Bitcoin besides the fact that they buy Bitcoins with Tethers... the creators can issue as much of it as they want, just like the governments.

"far from having shed the problems of government-issued currency,"

Government currency is backed by assets, or the governments ability to pay debt.

BTC is backed by nothing and they issue currency on the basis the ability to do fancy math problems.

So which currency has a 'problem' now?

Those USDTs weren't "created" per se, they were just converted from regular USD which were created out of thin air

Do you have any evidence that they were, in fact, created from USD? Given the strong incentives to produce such evidence and the complete lack of it I am highly skeptical.

I think it was a comment that fiat itself is created from thin air since it is the social contract of accepted value which gives any currency its value. It could be just made up numbers or more legit, it doesn't matter because people act on the belief that it is worth its US equivalent ... therefore it is.

The problem is that you cannot spend TUSD directly, if paypal accepted it or your local grocery store accepted it nobody would question its authenticity. However, since TUSD has to be converted to USD this assumption is just wishful thinking.

They were audited and it was found that every USDT was backed 1:1 with a fiat equivalent, why am I getting downvoted?

Serious question: what happens when I buy USDT using another currency than USD? e.g. EUR or BRL. How can USDT maintain its parity with USD under such circunstances?

That would be just a regular trade like BTC/USDT. No issuance of new USDT backed with real USD

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