Alameda and Cumberland are the 2 biggest liquidity providers in crypto trading. Tether is the source of liquidity for many of the exchanges that they trade on. So of course they'd use Tether to on-ramp into the crypto ecosystem and trade.
I suppose the real news here is that Alameda and Cumberland haven't redeemed much Tether (proportionally), so if Tether collapses, it could blow them up?
They may be able to extract enough $ to cover it by the time they actually have to show reserves, that's what they did previously.
My understanding is that Alameda is trading with fairly high frequency, so they would keep funds in USDT in order to facilitate those trades. Further, the on-chain data suggests that they don't trade out of USDT to USD – otherwise we'd see high corresponding USDT burns.
When you call the OTC desk and wire them dollars they mint stablecoins using their account with - presumably - Bitfinex. Bitfinex issues Tethers no different than Coinbase/Circle issues USDC in a just in time transaction.
You either receive the Tether you asked for to make your own trades, or they keep the Tether and purchase the crypto you really wanted. In either scenario, someone besides the OTC has the Tether now.
There is no reason to use custodial exchanges for your fiat onramps. They put you at a major disadvantage in speed.
It is strange that this is to be the smoking gun for people against Tether. These kind of juvenile inexperienced arguments (seen in other comments) are why more serious scrutiny of Tether takes so long, because its mixed up with all this benign stuff put in front of regulators who have a huge learning curve already.
So instead of buying coins directly, people are buying Tether then immediately selling that Tether to… someone? Who apparently is okay holding on to huge quantities of Tether?
It’s weird that crypto proponents always act perplexed at why anyone would hold large amounts of fiat losing out to inflation, but when that fiat comes in the form of a cryptocurrency representation it’s actually okay and perfectly logical for huge amounts of it to exist in the crypto system, sitting in a few very large accounts somewhere.
Comparing Tether to USDC is also conveniently ignoring the fact that Bitfinex and Tether tried to mislead everyone into thinking they were unrelated companies, when in fact they were tightly coupled this whole time.
Liquidity providers are the ones okay holding large amounts of tether. Just look at the liquidity pools, they all earn commissions from other people routing trades through those pools onchain, and many of them yield farm too. The risk is tolerable for them, Tether has had much greater crisis of confidence in the past and didn't implode, trading at worse 15% away from $1 for prolongued periods of time so if those werent going to make holders lose all their money than (compared to the 99% drops in most crypto assets) then people have more confidence amongst the universe of pricing confidence. That's where we are.
Like I said, and what you walked directly into anyway: Bitfinex and Tether’s poor management and governance and opaqueness are issues, randomly picking any Tether headline as validation of those issues are a distraction, as it clouds everyone’s ability to focus on real issues with Tether.
The Bitfinex loan to Tether literally had the same two signatories on both sides of the loan.
Fed wires are only available 8-4 weekdays. Us wires are not very liquid.
Compare contrast with usdt and it’s instant settlement 24/7. So yeah the exchanges prefer it vs tradfi.
I would suggest to you that maybe it’s said from a place of significant experience that the cryptocurrency community simply doesn’t possess at 11 years old.
That aside, the notion that your problems as an individual begin and end at your “onramp” (which is a terrible term for it’s own reasons) are incredibly naive.
If massive amounts of the value in the market is fake money, as has been alleged, then what’s the value of a [COIN]?
Is it $1M? Is it $30k? Is it a song?
You’ll only find out when more than 5% (20:1 issuance:redemption) of people try to take profits, at which point I don’t know how you turn all of those unbacked IOUs into real money? Sorcery? Sassy remarks about “boomers” not “getting it”?
What do people want to hear? If the issuing organization has no liquidity for its commercial paper or literally non existent assets then people cant redeem their tether.
OTC desks using bitfinex as advertised isnt news and has nothing to do with speculating on an opaque reserve issue with Tether. That was my entire point.
Knowing the answer doesn't make me a proponent of it.
If you get caught holding the bag that's what happened. Congress won't step in. A stronger variant will emerge. Nobody wants a regulatory sandbox hellbent on nothing ever going wrong, while holding up projects indefinitely because something might go wrong. Get out the market if you can't handle that. In the mean time, regarding Tether, I wish they weren't the dominate stablecoin and I don't feel I need to preface my responses with that just so crypto skeptics will respect what I wrote. I've seen greater fractional systems which I believe are very commonplace in the industries that Congress will step in on. Nobody is confused about Tether's potential to be insolvent in a bankrun or asset forefeiture.
I realise this was just addressing the general "you", but I sold what little I had a couple of years ago for this exact reason.
I've only become more convinced it's a house of cards over time - although each to their own, I fully get that I'm one random on the internet and could be proven utterly wrong on this.
I just really wonder what the price is of any of these things? I don't think anyone knows. For anything else the free market is usually what decides the price, but this information undermines confidence even in that. How much of the money coming in was ever real? 50%? 5%? more? less?
On one hand I get that's why it's so volatile and some people have made a fortune on paper, but there's just so much that could go catastrophically wrong at any moment that I just don't have the stomach for. I also get very weary when people say they intend to keep buying and holding forever - that really is placing an all-or-nothing bet on this.
I get that stocks/real estate/whatever can crash too, but at least you have something of intrinsic value in each of those cases.
In any case this was a good back-and-forth and it was nice to hear a perspective on the other side of this without the non-stop acronyms and emojis on Reddit and Twitter :-)