Time to get worried about Tether, the “stablecoin” at center of cryptocurrency | Hacker News Reader

Time to get worried about Tether, the “stablecoin” at center of cryptocurrency

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21 pointsRickJWagner20 comments

I don't get Thether. It's an embodiment of everything cryptocurrencies are supposed to be against:

• It's issued and controlled by a central authority that you must trust.

• It's pegged to an inflationary government-issued fiat currency.

It's not a cryptocurrency. It's just a dodgy private bank with a very over-engineered inefficient API.

To your first point, I think the cryptocurrenc[y|ies] that get issuance and control from a central authority right will in the end come out the most successful, as control of issuance lends itself to enabling modern economic levers any state may want to pull--for various reasons.

Of course there's an argument to be made that cryptocurrencies as we now know them will only ever have intended use as a secondary currency. In which case, fair enough.

People are in crypto because of money, no because of some philosophical questions about who should control money.

It doesn't matter it it's a stable coin, a pump and dump scheme, or a regular fiat currency. If they see the chance to get a x10 or x100 profit in a year they'll go for it.

So Tether to them is just a tool that allow them to buy and sell crypto and make profit.

Exactly. To be certain, most people/firms would prefer to hold another stable coin vs tether, but if I have to have some tether exposure to earn some returns (as sometimes is the case), then that's what I'll do.

Regardless, for the tether skeptics, they should put their money where their mouth is and short it.

PS: I personally think tether is sketchy, but it's not something I lose sleep over. However it is prudent for one to think about what will happen in the case of a tether depeg (both minor and major), and plan accordingly so you won't become destitute if it happens.

I mean, at this point they openly admit they have Chinese commercial paper in their 'reserves.'

Makes sense since undoubtedly the vast majority of those reserves are inflows from Chinese nationals looking to export capital, but kinda shocking the crypto community is letting them get away with this.

Evergrande et al show that even CP in China is anything but risk free, regardless of the notional currency.

> Makes sense since undoubtedly the vast majority of those reserves are inflows

I don't quite follow. How does a Chinese national move money outside China by issuing commercial paper?

Edit: Do you mean something like issue commercial paper and then use proceeds to buy Tether?

This is why when I go to a stable coin, I'll go into BUSD and USDC instead of USDT.

Tether has issues without a doubt. Yet as a long time media watcher, the concerted media push feels suspicious. Wouldn't be surprised if this becomes yet another way to rationalize CBDC.

How can you feel Tether has issues but blame the media? If Tether isn’t legitimately backed then it’s a mega-scandal and indicates cryptocurrencies were inflated by fake money. That’s a huge deal. My only question is what took so long for the media to focus on the fact that we should get to the bottom of it.

Cryptocurrencies aren't "inflated by fake money". Tether is inflated by fake money. And even then, probably only as fake as the corporate bond market. (Which is pretty fake lol)

Tether going to zero would mean almost nothing, usdc or the even more safe busd is waiting in the wings to fill the liquidity gap.

That's the problem with these hot takes about the crypto market being dependent on tether, it's just fud.

Exactly. I can't wait for the scam that is Tether to become unraveled. I always thought it was hot garbage since it first came out and I read up on it. Iirc it's totally centralized and there have always been questions over whether they had the $$$ to back up their coin.

If tether disappeared overnight I'm not sure if it'd even affect the rest of the market given that it's inevitable failure is probably baked in or at least wouldn't be a huge surprise.

In traditional finance their is a concept of HQLA (High Quality Liquid Asset) collateral, this is mainly things like treasuries, JGB's, Gilts etc. Tether is for all intents and purposes HQLA in crypto, layers of rehypothecation and leverage are built off the back of Tether deposits, this is between exchanges, leverage/margin exchanges extend etc.

Tether suddenly becoming impaired IMO would certainly have massive effects on the rest of the market, you cannot remove ~$70b of HQLA from a system worth ~$1-2T and not have negative effects.

Following some sort of credit event, I expect a period of massive volatility (hours to days), I would expect USDC to trade at a premium for several days, ETH and BTC would whipsaw, but likely end up at higher relative levels as tether holders flee/get liquidated and in turn bid up (relative) "safe haven" assets.

10's of DEFI protocols would go bust due to the peg breaking and AMM /Yield farms would likely also see massive loss of AUM and substantial impermanent loss applied to LP positions.

It will be messy, but necessary for the long run health of the system. Anyone holding tether or who has long exposure to tether at this point is taking hefty credit risk (a risk they are not being compensated for - which is a total amateur move) with total disregard for the many blatant red flags. Their is very little opportunity cost for using something like USDC over tether, it should be a simple decision for most users...

Usdc has the same problems as tether irrc. BUSD is almost completely dollar backed, usdc still hold a lot of paper.

https://blog.seedly.sg/best-stablecoins/

Fwiw, I still use tether daily, the markets are far more liquid. If I'm holding it overnight I convert to busd or hard currency.

If tether majorly depegs, let's not kid ourselves, it would absolutely devestate the crypto ecosystem.

I honestly disagree. Tether is easily replace by busd. The markets are already ready for it.

What would happen to all the future and swap denominated USDT contracts? What would happen to all of the AMM pools? What would happen to all the firms who keep tether reserves to trade with?

It would be a blood bath. Almost everyone who works professionally in crypto agrees with this statement.

Moreover, BUSD is kind of a joke and the only thing I ever use it for is trading a couple BUSD denominated binance swap products.

I for one can't wait to see the blood bath from crypto "professionals" who foolishly got tangled up in tether!

> Cryptocurrencies aren't "inflated by fake money". Tether is inflated by fake money.

What if loads of people buy a lot of Bitcoin using Tether, thereby increasing the price of Bitcoin?

From what I understand, this isn't a hypothetical.

If you don't think Tether, which has been the source of free giveaways by exchanges for years, has inflated cryptocurrency prices, I don't know what to tell you.

There may have been many people that agreed to pay the inflated price but that was without the knowledge that it was inflated in the first place by fake money. Not to mention the pumping and dumping that was done to turn their fake money into real money. That should damage confidence, in Bitcoin especially, but it won't because people are blinded by thinking they will get filthy rich off of it.

Just another great opportunity for high inflation countries to use cryptocurrencies as legal money linked to their national currencies.

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