The Tether Ponzi Scheme
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However, I wasn't even aware (not trading crypto at all) that Binance offer 'affiliate' programs where influencers can earn Tethers. It's kind of funny - it works literally like a ponzi scheme - influencers bring in new 'investors' and earn 'tethers' (which are just printed out of thin air) - they can buy crypto with those tethers - and then guess what ? They sell them to the new 'investors' they just brought in.
It works until it doesn't.
Yes. You print USDT and pay someone then lie about not printing it.
For the love of god, don't hold any USDT. Its really convenient to exchange cryptos but don't be holding it when the cards fall.
1. bitfinex asks some influencer to do some influencer things for them
2. bitfinex hands them a $100 bill
but the following isn't fine:
2. bitfinex hands them 100 USDT tokens
But hold on, corporations don't often pay people using paper bills, they pay them using ACH, so is the following fine?
2. bitfinex transfers $100 to their bank using ACH
Probably fine right, given that there isn't really a difference between getting paid in ACH vs paper bills. But some companies are old fashioned and don't do ACH transfers, they issue checks instead. So is the following fine?
2. bitfinex writes them a check for $100
Well, a check is just an IOU right? It's only a promise to pay them something. If you try to deposit the check and the check bounces it's not like the FDIC will save you. You'll have to chase after them for it. Given that fact, and recognizing that USDT is just an IOU, is there any difference between the above and
2. bitfinex gives them 100 USDT tokens
?
Bitfinex could either issue some USDT, convert it to USD and hand that to the influencer, or issue some USDT and hand that to the influencer. Can't really see the difference here, except if they hand over USDT that will hype the market a bit as well? As long as the conversion works they two are functionally the same.
Same with USDT. Cash it for Bitcoin and then provide services.
Even the staunchest believer in crypto will have a hunch there's something funny going on with Tether, but so far most people have been willing to look the other way as Tether and other stablecoins answer a genuine need: how to represent fiat money in the crypto ecosystem when centralized banks refuse to play along with their own downfall.
1. is paying influencers USDT going to increase liquidity or decrease it? From a maker-taker model, I'd think that will decrease liquidity because those influencers are probably going to place a market order which reduces liquidity.
2. Is the typical influencers (or the average influencer they hired) going to have trouble converting USDT to USD? My profile of them would be 18-35 year old, middle to upper class, living in a developed country (or at least not a country that's subject to USD sanctions). It doesn't seem hard for those people to accept a USD wire transfer.
>Even the staunchest believer in crypto will have a hunch there's something funny going on with Tether, but so far most people have been willing to look the other way as Tether and other stablecoins answer a genuine need: how to represent fiat money in the crypto ecosystem when centralized banks refuse to play along with their own downfall.
Agreed, I avoid holding USDT where possible.
It seems to me the crypto folks on one hand complain about the governance of USD, but then also "need" it to stabilize their own currency. I thought crypto was the currency of the future.
It's not that different than if we had a "cat picture" coin that anyone with a cat could manufacture cat pictures at will and sell them.
Granted Bitcoin is a little bit more governed in terms of technical difficulty and cryptographic security, but that doesn't change the fact that it's printed out of thin air in a decentralized fashion.
If I developed some hardware in secret that could mine Bitcoin 10X faster, there would be nothing illegal about using it to my advantage. If I had a hypothetical device that could print it 1000X faster, I could do that too. Maybe I do. You wouldn't know if I did.
Bitcoin is a Ponzi scheme as well.
That $1T market cap of Bitcoin? Was there really $1T USD put into it? I don't think so.
I know Ponzi schemes are bad. I think your money is bad. Therefore, your money is a Ponzi scheme. That’s the entirety of the logic employed by the comparison.
Just wait until you hear what they’ve done with the term “market capitalization”.
But a private entity (based in Bahamas) can do that with Tether. And you can use those to buy 'real' Bitcoins. It works perfectly until somebody tries to convert a big enough amount of those Tethers to real USD.
In real world, I'm not sure it's a very good example, so feel free to challenge it, would be:
- somebody prints perfect fake 100$ bills and floods the market with them
- prices of real goods go up significantly
- at one point somebody notice that those fake dollars have a small red dot in a corner
- they become instantly worthless, and all prices crash as there is suddenly much less real dollars than everybody thought
It's not a great analogy as there is nobody guaranteeing the conversion of those fake dollars to true dollars in the first place. Tether pretends to be doing that - but it appears more and more that they are just printing them out of thin air.
Sure you can. If your "counterfeit miner" secretly works 1000X faster than the miners everyone uses, you can still most certainly say "here is my Bitcoin" and it will be usable.
If the hashes you generate are indistinguishable from the hashes generated by an AntMiner, you have made Bitcoin out of thin air.
Yes, creating such a "counterfeit miner" would involve technological feats. But that shouldn't be the deciding factor here. It's still a PoW coin and assuming you are a super-powered genius hardware inventor with an insanely advanced lab, you can do the work much more efficiently without anyone knowing. And the coins would be actually legal to use.
Which is VASTLY different from USD in that if you have a secret lab to create USD bills that are indistinguishable from the real thing, it's still illegal.
With Bitcoin, it's still decentralized, i.e. printed out of thin air. If the coins you generate work with the system, they're legal and valid, it doesn't matter how you generate them or how much work you really did.
I have no idea where 'counterfeit miner' even comes into this. If you're the best at mining, you get the most coins. That's not controversial, it's a decentralised system, who would even be deeming you counterfeit? Were the first ASICs 'counterfeit'?
Exactly, so I'm demonstrating that Bitcoins are printed out of thin air by doing some arithmetic. The fact that a concept of "counterfeit" doesn't even exist demonstrates that ALL of them are printed out of thin air. You don't need to pan for gold, you don't need to save a kitten, nothing. All you need is to punch some numbers into a GPU or ASIC and voila you have thin air printed Bitcoin.
As opposed to USD, where the person who has the most coins isn't the one who can print a physical dollar bill most efficiently. There is a notion of counterfeit, there is centralized governance, and thin air printing is not allowed at the threat of arrest by that governance.
Besides, why is panning for gold or saving a kitten fundamentally any different? A difficult physical process must take place, the fact it happens to be digital does not make it magic, despite how complex these devices may seem.
> Sure you can. If your "counterfeit miner" secretly works 1000X faster than the miners everyone uses
You can in theory but not in practice. The person you're responding to was talking about practice, not theory. Practice is what matters in this case.
[0] https://ag.ny.gov/press-release/2021/attorney-general-james-...
If you want to kill Tether and Bitcoin, you don’t need to go after Tether directly or wait for some price drop. Subpoena all of the exchanges and ask for their commercial relationship with Tether to be documented, and for them to disclose all of their loan obligations, collateral and so on. But, your friendly politicians aren’t going to do that, because Coinbase and Binance and the others have locked up some very high powered lobbyists at this point. That’s where Madoff went wrong...
One of the craziest things is actually USDC — an attempt to replace Tether with a cleaned up, legitimate-looking version of the same nonsense.
Compare to the capital ratios of your average bank, though.
[1] https://www.coindesk.com/tether-first-reserve-composition-re...
Madoff was extremely well connected, and numerous reports to the SEC were ignored as a result. His empire came down when he confessed to his sons, who immediately called the FBI.
Note that attestations are easy to fake: the article mentions the case of Tether
> Failing to complete an audit and settling on an attestation “for transparency”. The morning of the attestation, tether moved $380m from sister company bitfinex into a bank account to pass the verification
Illegal in crypto as well. https://www.cftc.gov/PressRoom/PressReleases/8369-21
FYI Madoff did have high-powered friends, and was never caught despite numerous tip offs. Madoff turned himself in when the GFC hit and his marks wanted their money.
Not a good way to start the article. I think Tether can crash without affecting MSTR or COIN, for example. A short on GBTC might be more obvious connection. But... that's another article for sure.
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Otherwise, the news on Tether's sketchy drum has been beaten for almost 5 years now, at least by my own memory. Tether could very easily survive this most recent crash by... whatever mysterious means its survived before.
This blogpost adds a $18,000 BTC price as the time they think everything falls apart. An interesting theory. Maybe we'll get there in a few weeks and see if the theory bears any fruit. Its an objective price point for sure, so its an easy one to test if the price shifts lower in the future.
I remember reading some advice from some seasoned traders years (maybe ~decade ago). Knowing the future is overrated. Timing is everything.
Even if you knew that Tether was worth $0 as of the year 2025 with a magical crystal ball, if you don't know all the price points between now and then (and therefore are unable to make an appropriate "timing" for placing your bet), you'll lose money.
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I think a lot of us around here are willing to bet Tether is worthless. But when does everyone else realize it? That's the big question for any bubble. Timing is everything, even when you are correct.
In the meantime, Tether will be worth $1 or so, and "be operational". So even a perfectly accurate crystal ball seeing into the future doesn't help you in the now.
They obliterate your short position, and once you're margin called, they go back to their printing Tethers business. You can't win at this game.
The best move is to just sit back and wait for the chaos to unfold. Even then: what if USDT becoming worthless causes people to hoard BTC? What if BTC-USD spikes severely, as people "rush to safety" ? Is there reason to believe that a Tether collapse would in fact bring down BTC with it?
>They obliterate your short position, and once you're margin called, they go back to their printing Tethers business. You can't win at this game.
I'm not sure whether that makes sense or not. I guess it's worth doing for revenge reasons, but if there are people willing to pay $1.1 for a $1 IOU, that seems like the perfect opportunity to decrease your deficit.
I brought it up in another post here in this thread, but I think the easiest way to know when Tether is genuinely in trouble is to keep an eye on the settlement iFinex reached with the NYAG [0] and if it's unable to fulfill it. Until then, be as sketchy as it may, it's "safe".
[0] https://ag.ny.gov/press-release/2021/attorney-general-james-...
I’d like to think that even if I really disagreed with the article, I’d still appreciate the disclosure, but might just use it for fuel to ignore the content. IDK.
1. difficulty adjustments are a thing, so it wouldn't halt, only be slow until the next adjustment
2. there isn't a single profitability point for all miners, so all the miners won't drop off at once, so barring a massive collapse (eg. 95%) the network won't halt.
Give how much BTC fell, by now he would have been better off just buying the google-amazon-facebook-tesla-microsoft portfolio instead. He was up up a lot but not anymore. And at the rate things are going insolvency cannot be ruled out anymore.
Tether is definitely shady af, but I don't understand the obsession people have for calling anything they don't like (bitcoin/gamestop/nfts/etc) a ponzi.
Tether does not promise any returns. It’s not an investment. It’s a stable coin. It’s traded near $1 to 1 tether. Most traders don’t redeem tethers. They sell them on an exchange when they need to go back to dollars.
[1] it's literally a shiny yellow rock. You can argue that there's some intrinsic value for use in jewelry or electronics, but given the demand breakdown (https://www.statista.com/statistics/299609/gold-demand-by-in...) and the current price, anyone buying right now is going to experience massive losses should a collapse happen
>[1] it's literally a shiny yellow rock. You can argue that there's some intrinsic value for use in jewelry or electronics, but given the demand breakdown (https://www.statista.com/statistics/299609/gold-demand-by-in...) and the current price, anyone buying right now is going to experience massive losses should a collapse happen
I've also been curious since the inception of Bitcoin. As the power plants don't accept cryptocurrencies, someone should pay the bill in cash, which inevitably means there will always be less money in the market than there needs to be. How does the cryptocurrency supporters explain this structure?
Things can be fraudulent or unethical without being a ponzi scheme.
Tether could be called maybe an indirect type of pump and dump on the crypto space. It could easily be called a confidence scheme. It called also involve accounting fraud and securities fraud as well as outright fraud if any of the audits were deemed to have not really happened.
None of these make it a ponzi scheme because it fits essentially none of the characteristics of a ponzi scheme
There’s your Ponzi returns.
that describes most speculative bubbles.
You are describing the law of supply and demand in an open market place.
You keep saying "this isn't a Ponzi scheme" but I haven't seen you elucidate your objection. Promised returns? A charismatic wealth manager? What is it that you feel defines them?
Explain to me what would happen if I was holding an Oz of gold or copper and suddenly the entire bid side of the market dissapeared (ie there was no inflows to the market). What is the new market clearing price for the commodity. 0. That's literally what buying a thing is(in all cases and for everything). It's a an asset inflow exchanged for an asset outflow.
Now replace gold or copper with any equity. Let's assume one that doesnt pay a dividend not to complicate things. Literally nothing changes. The sale value of your equity is zero when there are zero inflows to the market.
Markets can be made and they can be manipulated. Things don’t have to have an active bid/ask to have value. Is the value of $TSLA zero overnight when NYSE is closed? I would agree with the quote “ There's no such thing as a ‘free market’”
With a pyramid scheme, the initial schemer recruits other investors who in turn recruit other investors and so on. Late-joining investors pay the person who recruited them for the right to participate or perhaps sell a certain product.
Call Tether whatever it is but it's neither a pyramid scheme nor a Ponzi one. The funny thing is that people don't really understand that banks are not able to cover in case everybody wants their money at the same time either and their dollars are stretched as much as Tether is. If people have confidence in Tether it will hold, if people don't it will crumble.
[0] https://www.investopedia.com/ask/answers/09/ponzi-vs-pyramid...
All of it is backed by dollars[1]. That is what people want, they want more dollars so they get more out at the end. There is vastly less dollars sloshing around the system than the current ~$1.6T valuation of all crypto.
Crypto as a business would have ~$1.6T in liabilities with maybe a few $10B of actual cash on the balance sheet. It is very balance sheet insolvent. Once outflows exceed inflows for a sufficiently long amount of time so that the cash drains to zero it would then hit a liquidity crisis or cash insolvency.
This is basically the same thing as a Ponzi scheme, but there's no one person or entity running the whole thing.
[1] Yes, really its all priced in dollars, everyone investing in it wants the number to go up, nobody barely remembers "in it for the tech" or "1 BTC = 1 BTC" these days, we're all watching the dollar value of bitcoin bounce around because that is what ultimately "backs" Bitcoin. It isn't an alternative currency at all.
This is precisely what happened to Madoff when he had no cash to meet redemptions as the market crashed in 2008. This is what is going to happen to crypto eventually, but there's no one person in charge of crypto. Hence, distributed Ponzi scheme.
There's an underlying cash flow to the business you're buying and the stock is supposed to give you a claim to dividends paid out by the corporation from those cash flows.
The fact that the stock market is acting more and more like a Ponzi scheme doesn't make crypto any less of one. We're just forgetting how the stock market is supposed to operate.
Oh also Madoff's Ponzi was an investment scheme where he just produced above average return on investment. He always beat the market, so people invested. He dealt with charities which didn't extract money often, so he had more predictable withdrawals. He was operating like a mutual fund. He wasn't promising a fixed percentage interest, he just always beat the market claimed to never lose money.
me >This is the most egregious of misdefinitions of a ponzi scheme that gets thrown around because it literally fits the profile of every security and commodity in existence.
You are describing the law of supply and demand in an open market place.
other person >> Surely we can agree that every security in existence does not solely rely on inflows from new investors in order to pay out old ones.
me >>> Surely we cannot agree on this.
Explain to me what would happen if I was holding an Oz of gold or copper and suddenly the entire bid side of the market dissapeared (ie there was no inflows to the market). What is the new market clearing price for the commodity. 0. That's literally what buying a thing is(in all cases and for everything). It's a an asset inflow exchanged for an asset outflow.
Now replace gold or copper with any equity. Let's assume one that doesnt pay a dividend not to complicate things. Literally nothing changes. The sale value of your equity is zero when there are zero inflows to the market.
What Tether is not:
- A Ponzi Scheme. Tether makes no guarantees on returns for investors. If you have $1 worth of tether it will never be worth more or less. This is as opposed to a Ponzi scheme where your $1 increases in value (on paper) but those returns do not represent an actual increase in value, but just a gamble that enough people won't try to withdraw their money.
- A scheme to pump up the price of cryptocurrencies by creating unbacked tether from thin air and using that to buy cryptocurrencies. The balance sheet summary published shows that they have reserves equal to the amount issued, with varying amounts of liquidity. In addition, this was the conclusion reached by the NYAG. Note that "absence of evidence is not evidence of absence", this could still be the case but there is no credible evidence of this.
- Backed entirely by bank deposits or by bags full of dollar bills. They are instead using a number of debt instruments of varying degrees of liquidity. Although this is contrary to their initial claims, it is not dissimilar from any organization purporting to hold "cash", like corporations, etc. And realistically at the scale they are at there is no realistic way to hold that amount of money in the traditional banking system.
Tether is still bad! Read up on Rohan Grey's critiques of stablecoins from a systemic risk perspective; he's a very clear thinker in this space with a vast knowledge of historical antecedents for exactly this kind of thing. It's just not bad for the reasons that people think it's bad.
This is very misleading. They are backed by the very assets they buy using the tether they create! It's a perpetual motion machine, not reserves.
Yes, it is. You’ve glossed over some very important issues and dismissed them. If I told you I grew wings and could fly, you don’t need evidence that it’s not true. There is enough information about other rules of the universe to suggest that probability of this is zero. The same is true for Tether.
An insignificant offshore bank has not suddenly become the beneficial owner of 3% of one of the most important markets in the largest financial sector in the world. And they certainly haven’t accumulated 1% in a matter of weeks as they would purport. This would cause monumental moves in systemically important markets (the GFC catalyst was commercial paper markets locking up…)
The reasonable assumption here is that Tether (the entity) does some sort of embezzling in the background, which means that their assets will at some point be so much smaller than their liabilities that there's no way to maintain the illusion that 1 Tether is worth 1 dollar.
Ergo money has to keep flowing into Tether to maintain its price. That's close enough to equivalent to the critical part of what I understand a Ponzi scheme to be.
That balance sheet was unaudited though.
If it doesn't drop below $18,500 there could still be danger. Of course danger means it will then drop, well, you know ... below $18,500!
Does every country that has a pegged currency have 1-to-1 reserves? No, the only difference is that they don’t claim they do, and people don’t base their trust on this false fact.
Assuming USDC has no funny business like tether seems to, how is this any different than companies like PayPal, which presumably also don't just have a bank account sitting with billions of dollars cash, backing all of their virtual cash?
It just didn't happen.
I will add that the problem is roughly 2x worse. Tether is only ~60% of the stablecoin market: https://coinmarketcap.com/view/stablecoin/
This is what banks do, but Tether is not a bank.
That being said, I don't keep large deposits in PayPal, and I've never had trouble getting PayPal money directly deposited into my bank account via ACH. Can the same be said for USDT?
https://www.eidebailly.com/insights/articles/2020/4/federal-...
So there goes that regulation. At least there's FDIC?
Banks have fractional reserve because they take their customer funds and reinvest, make loans, etc. So they will never have one dollar in their vaults for every dollar they get deposited from their customers.
Tether is not doing any of that, they are just minting ~1.3 USDT for every USD they get deposited. What they are doing is criminal and should never be accepted as "just a known risk".
The list is basically exchanges and large traders.
- they believe that tether is shady and aren't interested in owning, using, participating or encouraging its existance and use
- they still want to own and use cryptocurrencies
- they like the ease of use, low fees and coin offerings on binance compared to the competition
?
But here’s a creative way.
Step 1) Borrow USDT (tether) somewhere.
Step 2) Sell it for either a stablecoin you trust more and/or is trading below $1: Whether that’s USDC, GUSD, BUSD, DAI, PAX, or TUSD.
Step 3) Wait a long time for Tether to implode.
Step 4) Buy back Tether for 15 cents on the dollar to close your position.
Do I recommend you do this? No, not really. It involves taking on debt. I don’t think one tether FUD article is enough material for you to base an investment decision.
I don't know how reliable of a prediction this could be.
It is possible that Tether is a ponzi, but if it is, it's at least mostly backed. It's certainly true that the company is shady, and probably doing riskier things with the capital than it should be, but the idea that Tether is a complete ponzi that's been used to inflate the entire market is just demonstrably false.
If we're doing child-like examples, if the central bank prints a trillion dollars in notes and then sends them to the moon and promises never to use them, is anyone really poorer?
Also inflation in the range of 1%-3% is considered a good thing because it helps encourage trade and prevents deflation. The amount of interest one can earn in a savings account or CD should also be taken into account.
The money weren’t distributed proportionally to the wealth of the people. Another reason, which though applies only in short- and mid-term, there are various nominal rigidities: contracts mostly use nominal values.
> The second question is whether inflation if it does occur is net bad/good and for who.
Well, that’s a whole nother question. You can create inflation using direct deposits to the holders of money.
https://www.investopedia.com/binance-vs-coinbase-5120852
> FDIC-insured USD balances
> Binance security features also include [...] Like Coinbase, all USD balances are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) and held in custodial bank accounts.
Anything in a coin, even a stablecoin like Tether, USDC, DAI etc is not USD. Stablecoins really are not as "stable" as USD for the insurance reason. They are merely pegged to the USD.
Coinbase and Binance are not SPIC insured which covers some securities but not losses, only situations where the exchange, or bank, fails much like with FDIC.
Most brokerages are both FDIC for USD deposits, and then SPIC for deposits and some securities, not on losses on the market though [1]. Robinhood I believe is only SPIC still [2], but most brokerages are FDIC AND SPIC insured.
FDIC is backed by the US treasury. SPIC is a private company ultimately and not as backed as FDIC but it is the main securities insurance most brokerages use.
Tether is like an individual stock though, even if Coinbase, Binance or other exchanges had SPIC insurance, if Tether (USDT) fails it would be like a stock failing, there would be no insurance even then. The insurance is really at the bank/exchange level if they are insolvent or have no reserves/capital.
Side note: A good use of stablecoins is buying into that stablecoin and then converting to other coins you want, that minimizes fees but keeps tax hit at 1-to-1 since they are pegged to the USD, makes all the cost basis and other accounting easier. A common technique is buying into USDC or DAI and then converting to other coin to reduce purchase fees. Stablecoins are also a "home base" or refuge when the market is falling without going back to USD fully, that is why volume of USDC, DAI, and USDT is so immense right now.
[1] https://www.investopedia.com/articles/stocks/08/sipc-fdic-ba...
[2] https://www.cnbc.com/2018/12/14/robinhood-debate-highlights-...
Isn't the idea that if many people try to convert USDT to USD, they won't be able to, So they won't have FDIC insured USD?
It's not like the FDIC will honor your withdrawal request the same day you made it.
And none of these Tether hit pieces ever attempt to explain this in the slightest. Until they do, there's not really much to see here. The explanation given in the piece is utterly transparent nonsense.
If the peg breaks more significantly, it'll be worse.
Where was this event recorded? Is there a USDT/USD chart somewhere?
1. Exchange deposits/withdrawals are slower and more expensive because of ethereum network congestion
2. Other assets have larger price disparities across exchanges
Because of this reason, arbitrageurs have better pairs to arbitrage with their assets during these busy times. Why make 10% on usd/usdt when you can make 15/30% on eth or altcoin price dislocations across exchanges?
In America's situation, FYI, that insurance is supplied in the form of a gigantic economic engine and lots of guns to get more money if needed - elsewhere in the world this risk will often times be subsidized by the IMF.
Ponzi schemes do keep paying out, for as long as they are growing.
Where? How? People have posted bounties for anyone able to show demonstrable proof that they've successfully had Tether exchange their USDT for USD. No-one has claimed them.
Last I saw, two things, 1) Tether's TOC said they had no obligation to redeem, and 2) in the hypothetical event you wished to, it was an onerous situation requiring holdings of six digits, being non-US, and requiring "90-180 days" of processing time.
Anyway, Bitcoin is not going to drop to 18k anytime within the next 8 months, so funds are safe for now.
Suppposedly it's FDIC insured to $250k per user.
Supposedly it's FDIC insured to $250k per user.
TUSD, PAX, and UST also exist.
It depends on what’s offered on your exchange but I think most people trust those first 4. Tether has a big target on it’s back with a lot of other stable-coins vying for it’s position.
> "Every tether is backed by a reserve and their reserve is more than what is in circulation," said Gregory Pepin, Deltec Bank's deputy CEO.
What business does the bank have in auditing Tethers? Why would they care? They're just holding funds.
> “We can see it firsthand, so I can confirm that.”
That to me more reads like Deltec is heavily involved in the actual day-to-day operations at Bitfinex/Tether. Which wouldn't be surprising - after all, remember when Bitfinex and Tether were claimed to be entirely separate and independent entities.
It's a little bit of a stretch to say that Bitfinex has been able to get Deltec on board with keeping this all going by providing a "partnership" above and beyond the usual "banking relationship", but that's very much the vibe I get from all this, and as I said, to me, it just increases the sketchiness of everything.
Oh, and WTF, I watched the video of the interview with the "Deputy CEO" of Deltec Bank, self-described as a "50-year-old bank [whose] customers range from asset managers to high-net-worth individuals"
It's a damn "kid" who looks to be 30 (edit: 33) at most, sitting in his gamer seat with red slashes in the black, wearing a Razer gaming headset.
He has almost no photos on the internet, his LinkedIn profile is full of multiple spelling errors ("Independance Weath Management"), who claims to be a Professor of Finance at a University in Lebanon (a year after graduating from a Lausanne University) while working for numerous Swiss funds, oh and in Jacksonville, Florida, simultaneously.
How the hell are people taking this seriously?!?
And according to his profile he apparently graduated with a Masters in Science from HEC Lausanne (prestigious Swiss university) when he was FIFTEEN. I'm sorry, I'm crying now with laughter.
Funnily enough, Deltec bank removed him from their website when this interview was published, then re-added them when people asked questions, and then arranged a very quick website complete "redesign" (I use that word lightly - this looks like a WordPress template that they've struggled to fill with any content whatsoever - most of the pages are effectively empty, many of the buttons to "learn more" are not linked to anywhere). Oh, and in among the re-design, the bank went from 55 years old to 70 years old in the space of six months...
Sources:
- https://wallmine.com/nasdaq/tenx/officer/2087842/gregory-pep...
- https://www.linkedin.com/public-profile/in/gregory-pepin-0a8...
(Virtually every corrupt country in the world is eagerly pouring fiat money into USDT at an accelerating pace)
This seems like a really poor data point when also considering that it shows relative rather than absolute interest in a term so we can't compare countries.
Some additional good reading https://www.mymoneyblog.com/tether-stablecoin-risk.html
Modern finance is regulated. Schemes that aim to generate a return have to file a prospectus and must be audited and exposed to legal liability should they fail to follow the rules.
This is why I stick with defi stablecoins.
Those gas prices tho :C
The global financial system is just money created out of thin air, redeemable for nothing, yet every week HN has to upvote some screed about Tether being a scam.
I guess there's a "where there is smoke there is fire" element, and something could happen. But... where's the beef?
It's almost as if the author has no sense of irony:
1. A crash in most company's stock would lead to utter disaster as interest rates, future fundraising, and executive compensation are all closely tied to the share price.
2. Stock buyback have been enabled by lax policies and a Fed only too happy to bend over backward with QE.
3. Many companies have little to no "money coming in" on a net basis.
Tether is a time bomb, there's no other way to put it. But if you're going to raise the alarm there, you might as well be fair about it.
Why does this really matter? As a user of USDT the only thing that matters is that the people in the market amicably agree to trade it at around 1 USD, which they seem to be doing.
Being "backed" by something is a concept of a bygone century that doesn't really apply to the Gen Z economy. What is USD backed by anyway?
If people disregard this article as irrelevant because we're all just amicably agreeing that one USDT is still worth one USD then there isn't a problem (today - the potential for a problem doesn't go away). Economics is like 90% whatever people say it is, and if we say this isn't a problem then it isn't - if we say it is that's when people start accepting USDT at fractional values of what USD is and then USDT will quickly hit hyper inflation and become worthless... down to a limit! And that limit is the reserve they have, which is why a 100% guaranteed currency backing for a coin like this is so critical since, if users start refusing to accept coins at 80% of USD value then middle men will step in to happily execute the transaction at full value in a different medium and the only result will be that the consumers that refuse to accept the coin at stated value will lose their ability to compete with consumers that do accept that value due to losses from arbitrage.
If confidence is done and the backing isn't there then we can expect to see a quick inflation - if the confidence isn't done or the backing is there then we're safe. But if we're relying on confidence alone then at some point that rug will be pulled from under our feet - and this effect will be accelerated if the company loses confidence dramatically fast (i.e. by being exposed as fraudulent).
Also, whenever this happens it's not unlikely that the fuse will be partially lit by some people that are hedging bets against USDT by having, for instance, outstanding options to buy as part of an ongoing non-instantaneous transaction.
- Hype IS value. Investors mostly invest in hype. Bring something of scientific or humanitarian value to the table without some fancy story and they 100% won't invest in that. Doesn't matter if it's stock market public investors or crypto investors or private investors, they all go after the hype, time after time, demonstrating with their wallet that hype IS in fact what they value.
- Currencies don't operate around scarcity, and their value is not fully correlated with scarcity, their value is more correlated with the intrinsic value they provide as a product, e.g. dApps and NFTs; USD provides none of that
- Manipulation is legal, part of the game rules, embrace it. Manipulation and trick shots are legal in table tennis, too, the only rules are physical.
- Money itself is a joke, for the most part
- We are in the midst of a revolution in which we are exploring new models for financial governance
Don’t tie these thoughts to a generation as if everyone in the generation expects the outcome you do. I have a hard time believing everyone in Gen Z understands what you’re saying, much less wants what you do. There is no watershed moment for uprooting the world economy that only people of a certain age understand. Revolutions do not happen on Medium. You’re discussing the economy. There are militaries involved.
You are interacting with forces far beyond yourself and acting like you have all the answers. Our entire existence is defined by the economy, and rejecting it wholesale is interesting for a blog post but a complete nonstarter for actual reform. Since humans mostly subsist as a product of economies, you realize poor economic reform kills people, right?
I’m going to reiterate that last point in clearer terms because it needs to get into that bubble with purpose. Say the world stops being stupid and sees your light. Now you need a phone to eat. Do you think those people you just starved to death are going to go “well, Gen Z economy!” or do you think they’re going to arm themselves and start killing everyone involved? History is a guide here and human subsistence is not something a bit of Go can just fuck with because you say so. Good luck!
Addition: also the democratic principle should be kept in mind. Sovereign currencies are a resource of their respective people.
What are they currently doing wrong, in your view, and what should they be doing better?
Lots of fed hate on HN nowadays. I personally think that they are doing a so-much better job than '08 and am happy that academic economists seem to at least be learning a few lessons.
As you've mentioned, I don't think deciding what industries we should focus on/invest in is within the purview of the Fed.
Btw, I don’t think there’s a simple solution here, and banks aren’t necessarily to blame here. They’re merely reacting to the incentive structure. To solve the problem we need deep structural changes in how we view economics. I’m one of those people that like aspects of both MMT and crypto assets.
Addition: since my comment is a bit too light on practical solutions, I think we should have a decentralized way in which local communities can direct money creation towards productive long term projects that help that community. And the same can be done at the federal level for very big projects (rockets, dams, infrastructure etc)
This may seem pedantic but that's because economics is pedantic - things can appear to be running fine for a long time but if some basic assumptions are violated the whole thing can topple like a house of cards.
If it didn't matter then why make the promise in the first place?
Elon Musk's "net worth" is 146 billion, is that backed by something? No, TSLA shares are manufactured just like USDT.
Now that is obviously supported by the US Military. But to state without context 'it's the US Army' is just false.
There's a lot of question marks about how Central Banks do money supply, but it's part of governance, their books are public, at least now they are.
That Tether can still exist even though it's a proven fraud is at the core of the problem: the new RobinHood Armies (not just them of course) are keeping everything buoyed up.
Nikola is a similar thing - they have vapour, and yet are worth billions.
A lot of this froth exist in regular stocks as well, across the board, but even in Google, Tesla etc..
It's a problem.
A lot of this might go away with slightly higher interest rates. When things get close to 0 then a lot of weird leverage things happen.
2% -> 1% interest is one thing, but 1% -> 0% (or negative) and systems start to go weird.
https://www.worldometers.info/us-debt-clock/
I don't see a whole lot of difference between this and USDT honestly.
It's simple. You take the loan in dollars, then pay us back in goods, sold at a discount in dollars. If you don't, we sanction and embargo you. You try to break the embargo, we sink your ships. You try to make your own regional currency, we assassinate you. This is why you can afford to purchase expensive goods yet the people who produce them can't.
This is the fundamental basis of the modern world. That more people aren't actively aware of this is the powerful result of ideology.
This is mostly a conspiracy theory.
And this: "It's simple. You take the loan in dollars, then pay us back in goods, sold at a discount in dollars. If you don't, we sanction and embargo you. "
Is essentially not true in any broad sense.
Also, there is no such thing as a 'world reserve currency'.
The US does use some leverage to require that Oil is traded in USD, particularly with Saudi Arabia, but that's the price of effectively keeping that nation relatively stable, which is not unreasonable.
Outside of Oil, there's really no reason for any nation to transact in USD or to keep reserves other than for what makes sense to them.
Oil is a key issue in the equation, but it's not actually essential.
The USD is mostly a reserve currency because of the size, openness, and relatively integrity of the US system.
The Euro is definitely a 'reserve currency' along with UK pound, but proportionally so.
The RMB isn't really a reserve currency because of lack of transparency in China, that said, the sheer power of China means that nations that trade with it will adopt it as a reserve on some level.
Cryptos unfortunately don't really solve the problems in this geopolitical equation.
But someday, they may help to.
> Outside of Oil, there's really no reason for any nation to transact in USD or to keep reserves other than for what makes sense to them.
This, however, is fundamentally wrong, and smacks of naive libertarianism. In a "rational" universe, where gravity of a feather falling to earth is frictionless and I trade my two eggs for your bottle of wine, maybe, sure. In the real world, no. The reason is violence. We won the war and we got to set the rules which benefited us at the expense of others. This is undeniable.
Other nations transact and hold reserves in dollars, and occasionally Euros, because of the system of force I described earlier. This why the IMF exists. Everything else is ideology.
China's Belt and Road initiative is their own alternative to the IMF. They are able to do this because they have a military force which they believe is now capable of standing up to the United States, by which I mean they will be able to impose their violence rather than ours.
[1] https://en.wikipedia.org/wiki/List_of_countries_by_public_de...
Tether is backed by a shady company who's been caught lying numerous times. The claim that 1 USDT is backed by 1 USD is what was meant to establish it as creditworthy. This has been walked back so many times - it's not USD, it's a basket of goods. Those goods might include cryptocurrencies. Those cryptocurrencies might include coins we've minted. Et cetera. It is not reasonable to have faith in their statements. It is not reasonable to consider them creditworthy.
You can't keep USDT pegged to $1 if the organization backing it can't be trusted.
Why should I have faith in the government?
> USG has a 200 year history of paying it's debts
Wait what? https://www.worldometers.info/us-debt-clock/
Yes, the national debt is rising. Debt is being issued faster than it is being paid. So what? Are coupon payments being missed? Is there any reason to believe that the government will default?
Because you’re allowed to be this naive on a computer forum on an international network of high-tech computing devices, some of which you own, openly call for economic reforms you don’t understand, and not find yourself up against a wall with seconds to live. That’s why.
Your ability to study crypto instead of working a field to feed your family under the watch of rifles, crypto’s entire existence (arguably), the fact that you’re ostensibly literate, the food in your stomach, and countless other secondary concerns that add up to you making this comment right now only happened because you are subject to a government that permitted it and created an existence for you where you can have all of those things. The other side of that wall has guns pointed at it. Note that specifying status quo does not communicate an opinion on it.
There are real concerns with every world government. On the other hand, it’s naive young people who assume their comfortable existence is “just the way it is” for everyone universally and their ethnicity and sovereign power has nothing to do with it. You don’t have to trust the government to tell you the truth. You do have to implicitly trust that governments worth paying attention to can, and will, exercise actual power when they consider it necessary and consequently create a free existence where you are allowed to flourish. Those are different things. That’s what “backed by the full faith” means. Not that we trust the government to be honest about who it’s talking to late at night on Snapchat. The world implicitly trusts the Third Fleet.
“What has the government done for me?”, you’re essentially asking, on the downstream consequences of a decentralized government command and control network experiment which also happened to feed you your entire economic worldview in a society where limits on education are mostly forgotten, particularly by you.
But I might be wrong. I'm just a lay-person in this or whatever. Maybe I'm misunderstanding things.
Will your bank?
What about the Tax Man?
In the case of USDT, everyone accepts them, so why shouldn't I?
You and I have very different ideas of what "everyone" means. USDT is not even accepted by everyone that deals with crypto, even less if you actually start thinking about the financial institutions that are looking into crypto, and the amount of people who would take USDT is infinitesimally small compared to those that would accept greenbacks in a regular transaction.
USDT is only accepted at shady exchanges that couldn't find a banking partner and their ignorant/SOL users who were forced or "incentivized" into taking USDT for a premium.
If it's so unimportant then why did Tether lie about it? This, on its own, seems like a pretty big red flag to me. The kind of red flag that smashes you in the face.