Tether starting to lose its peg too, after Terra did
community.intercoin.org
community.intercoin.org
Let's say for example, Tether is 20% backed and there's $100Bn of coins so the backing is $20Bn, and people start flooding out of it. Let's say $10Bn floods out. So the guys running it have handed out $10Bn. They now have $10Bn left, and money is still flooding out. Do they really continue to hand over the cash or do they say "Well, the whole thing is about to explode anyway, I'd rather keep the $10Bn cash I've got left". At which point the holders of the coin have to play "Find these fuckers and sue them" which will be difficult since they've got $10Bn to fight/flee/hide.
> Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all.
Which would defeat the point of crypto currencies
I thought the whole point of crypto is that it's not regulated. And that also meant that if you got screwed then you are SOL.
Not sure if there have been similar lawsuits in the crypto world yet.
On the other hand maybe people holding a lot of USDT wouldn't not want to tell anyone else if they were unable to redeem it before they had sold it all on the exchanges...
What am I missing here? That the 80 bill has been badly spent on papering over some exchange losses?
The issue is that it's true that for every 1USD you give to Tether, there's 1USDT, but it's not true that for every 1USDT Tether mints, there's 1USD in some bank. Estimates are in the low 10%, but it's probably less. They have essentially a money printer.
(Some) people really believe that USDT is pegged to the dollar, so they really believe that if they have some ETH for instance, and they sell that ETH for USDT, that the translation ETH -> USDT -> USD is maintained, but that's the whole problem, nothing stops them from minting USDT without the real USD existing. So nothing stops them from "buying" your "hard earned" ETH/Bitcoin/whatevercoin with USDT pulled out of thin air.
That's why New York said essentially "these people are liers and nothing they say is true". It's just that people continue to play this game. And why is that? Because no financial institution would give you Bitcoin/ETH/whatever for dollars, because if they do, they are essentially banks and all the KyC rules / regulations apply.
So they came up with this charade, these "stable coins" are nothing more than a workaround for on and off ramps, because people have FIAT money (real money if you ask me). This is why Bitcoin doesn't go lower than 30.000, because there's huge amount of Tether being used to buy Bitcoin and keep the price up. Once this money printer charade goes bust we will see the actual price of Bitcoin, Ether, NFTs and so on.
Not entirely unexpected to see a dip of that magnitude due to limited liquidity at nighttime when most USD payment rails are offline (market makers don't have infinitely deep pockets), but also not exactly confidence-inspiring.
Now, it is basically correct that banks create money (when they lend, because the created loan (debt to the customer) is an asset to the bank, and at the same time they create a liability (to the bank) that is the deposit (the money loaned)), as you can read about here [1] from the Bank of England. But that’s not a secret, it’s just not commonly known.
What Tether is doing, of course, is different, because they seem to create money out of nothing without having the assets to cover them, and/or without the licensing to create assets (loans), which of course carries with it obligations like capital adequacy requirements to be able to cover expected losses with capital (not deposits, a real bank isn’t actually allowed to use customer deposits for lending, but they are used as part of the liquidity that the bank needs).
1. https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
> DollarCoin: We propose skipping the middleman and providing direct proof-of-dollar with a blockchain that consists of videos of burning US $1 notes. Each video will be unique as the hash of every block header is required to be written on the dollar bill to be burnt; the block header includes the previous block’s hash, which means that each block is forced to build on every previous block, forming a valid blockchain
http://sigbovik.org/2014/proceedings.pdf
The fact is, people have convinced themselves that this is somehow a good idea. And then half the time, the person behind it doesn't actually burn any money and just arbitrarily mints coins. It's absolute lunacy.
it's alright as a snarky line, but outright saying "the best summary of proof-of-work that I've ever seen" is misleading to people that didn't actually know, and now have a completely incorrect idea of what it is.
You're adding a bunch of risk for literally no upside.
The only thing you gain is to to trade that on the blockchain, which is really a response to the oracle problem.
So you've greatly increased your risk with no upside to slightly increase your utility. That doesn't seem like a good deal.
Stable coins can be exchanged against other crypto currencies on chain. So if you are willing to trade crypto currencies, stable coins are more practical than USD.
There are also tax implications: Depending on where you live, crypto-to-crypto profits are not taxable. You will be taxed if you sell crypto currencies for USD, but not if you sell crypto currencies for a stable coin.
I think the "investing" in tether is really only the best match to "Let me see, where can I park my money in the least volatile way on this crypto exchange".
EDIT: Interestingly, if tether breaks, then USDC is the last man standing and will have to work hard to maintain the peg. Under such circumstances it's quite possible that BTC is the next best "stable" coin.
Well, yes? Isn't that enough to explain it? Normal US electronic dollars can't interface with Blockchain smartcontracts. So if you wanted to invest in e.g. a vault or liquidity pool, you would need to turn it into a stablecoin first.
You mine a Bitcoin that 'should' be worth 5k USD, but is instead selling 60k USDT. So instead of selling that Bitcoin for 5k, you instead sell ~8% of your Bitcoin for 5k USDT, pay your expenses, and keep the other 92% of the Bitcoin you mined.
The actors (looking at you, Tether), might not necessarily be.
Tokenized dollars allow to benefit from the tech (smart contracts), which is itself great and opens a lot of possibilities.
What's not is: Ponzi schemes (Terra), crooks (Tether?).
Edit: There are valid stablecoins like USDC (they hold sufficient reserves) and even valid algorithmic stablecoins e.g. LUSD, backed by Ethers and with a legit protocol for ensuring over-collateralization that is also immutable.
Those reserves are sufficient until they are not. There are always risks of losing the peg and anyone investing in them should be aware of and track the main ones. My 2c.
It's too bad Terra ever existed. I took one look over their plan to keep their coin stable and noped out of there.
What's the difference, besides the pollution?
Waiting 2 days isn't good enough for many applications, that's a lot of risk to take on.
yet, somehow, I am not in any way, shape, or form surprised
Similar over at UST. Price is back up to $0.60, but volume is far above normal.
Remember, with a stablecoin, there is no upside to holding. Any indication of risk means it's time to get out. Even if Tether has enough reserves to get the price back to $1, there will be substantial cashing out.
That's why a stablecoin has only two stable points: 1 and 0.
People are using the opportunity to net an instant 2% return. Buy $10M USDT at $0.98, redeem at Tether for $1, take home $200K of profit instantly.
Thing is, this will only last until Tether runs out of liquidity. Then all bets are off.
https://en.wikipedia.org/wiki/Black_Wednesday
There were more people wanting to sell the pound for Euros at the rate mandated by the ERM than resources the UK had to maintain the arbitrary exchange rate and "it did not end well".
Is the redemption window really open? That's something people have been extremely skeptical of.
Find me one person that has ever done this. Just one.
I will wait.
Ok I have a bridge…
As always people around here tend to see the world from their point of privilege. If you are in Turkey, Sudan or Venezuela right now there is a huge upside in holding a stable coin pegged to the dollar. Only 13% of the world population is lucky enough to live on a stable democracy with a stable economic system.
Crypto is the safest in that sense for me, and a stablecoin is ironically more trustworthy than my country's currency in general.
Yet I don't trust USDT or UST so I'm on relatively more trustable USDC or BUSD.
It may be a compliance issue, of course. If you want to stay on the good side of the US Treasury, compliance could be expensive, especially in certain countries.
But the basic premise here is that USDT's risk premium is worth it as the cost of avoiding compliance, which, sure, I guess.
Especially right now, with the market going down rapidly, a lot of people probably sold coins on the way down with the intention of buying back into the market at a later point in time. A substantial number of these traders temporarily hold their value in USDT in the meantime, because that's easy to transfer between crypto exchanges.
Volume on USDT/USD is going down right now btw, while it stabilizes at around 0.986. I wouldn't bet on this drop having been the last one in the current market disturbance, but I'd bet on USDT not collapsing the same way UST did, at least not within the coming days.
Easily crash by loading 10,000,000 arbitrage for free $200k grab sums.
This is a domino effect.
Surely this is related
> Remember, with a stablecoin, there is no upside to holding.
The people running Tether has a stake in the upside. It's this moment where they need to convert their supposed holdings to sustain the price. It's not going to be expensive (maybe even profitable) given the high yield of USDT right now.
Is that true? Where is this price coming from? Unregulated exchanges can display whatever numbers they want on their ticker, right?
Emphasis on the "supposed to be", since many, many, many unanswered questions have been raised about Tether's reserves and they've previously been caught straight-up lying about them.
Is that the case or is there genuine belief it is fully/mostly/partly backed?
"receivables from loans" can be worth nothing if it's a loan to someone with no assets.
I believe the whole thing is intended to be sufficiently backed to not collapse easily, but is by no means 100% backed with actual cash.
why anyone would keep usdt if not actively trading is beyond me
The counter argument is that Tether's growth is the exact same as USDC's growth and other stablecoin's growth, especially those that are structured in the exact same way, with 1:1 redeemability for fiat somewhere. Some of those, people like the level of validation they show, others have undermined trust and never show the level of validation that people want.
Tethers are primarily created upon deposit into Bitfinex. Any fiat deposit. And are only destroyed upon redemption, but people rarely do that because they often just trade out or sell the Tethers. This is akin/analogous to Robinhood creating a RobinBucks whenever a deposit hits. We would see the growth of RobinBucks redeemable 1:1 for dollars. We don't see that because Robinhood and other exchanges don't do it that way. But if a popular exchange did that, we would see what that really looks like and say "ah, this isn't strange actually, we just weren't used to this level of transparency". Redemptions would be low because people don't really leave their brokerage/investing accounts, they just sit in cash waiting to buy a dip... in their brokerage accounts.
Finally, multiple US authorities have looked into Tether multiple times. Typically their fines have been about a combination of A) not being 100% backed by dollars at some point in time and B) not disclosing that. Meaning that at one point and subsequently, Tether did match their level of review, and at one point was backed 100%. Tether has had skepticism from the day it was created nearly 10 years ago, and a US authority got all the information was like "well that one time in 2018 we didn't like that". Tether is not 100% backed by dollars, it mostly is though. The standard is better than other respected financial institutions.
Let there be a run, I don't like to use Tether. I don't like algorithmic stablecoins more. There are options now, those options are holding up. Regardless, Tether isn't as complicated as people think. There are other reasons to avoid Tether and all centralized stablecoins that can be frozen address by address, or by losing access to their bank account. Remember when that was the criticism? Probably not.
Its also easy to see how and why it does work so swimmingly, despite all the questions and criticism. And thats because someone can arb really well and reliably.
They are essentially taking shorts on bitcoin over the last 7 years.
I'm expecting the talking heads to have to spend time on "why there won't be a bitcoin bailout" today or tomorrow.
What is happening right now that is causing the price to fall, what prevented it from falling over the last few years, and why isn't that thing preventing it from falling now?
Of course, this isn’t always the case, and with Tether, there has been much scrutiny over the years that they do not have the USD collateral to back their stablecoin.
Ok, but let’s assume Tether has the USD. Why is it depegging? This is most likely due to sell pressure and Tether’s ability to liquidate their USD holdings. I think Tether has more than enough real USD to deal with the sell pressure we’re seeing now, but the system is having a hard time keeping up.
It's "worth" whatever price the bid-ask spread meets at.
It's exchangeable for USD to the company. As long as there isn't a bank run where they'd stop fulfilling exchanges, when the price drops below $1 anyone can arbitrage it. It reached like 95 cents earlier, anyone could've bought millions of it and got USD for it at like 6% profit. It creates buy pressure/price support as the price falls.
What is currently happening is because of too much volume they have hard time putting more money back into the ecosystem (which is the good scenario, it means they have money but things are going just a bit slow), or they are running out of money (which is a bad scenario that would cause many things to go down with it).
"1. You wake up one morning and invent two crypto tokens.
2. One of them is the stablecoin, which I will call “Terra,” for reasons that will become apparent.
3. The other one is not the stablecoin. I will call it “Luna.”
4. To be clear, they are both just things you made up, just numbers on a ledger. (Probably the ledger is maintained on a decentralized blockchain, though in theory you could do this on your computer in Excel.)
5. You try to find people to buy them.
6. Luna will trade at some price determined by supply and demand. If you make it up on your computer and keep the list in Excel and smirk when you tell people about this, that price will be zero, and none of this will work.
7. But if you do a good job of marketing Luna, that price will not be zero. If the price is not zero then you’re in business.
8. You promise that people can always exchange one Terra for $1 worth of Luna. If Luna trades at $0.10, then one Terra will get you 10 Luna. If Luna trades at $20, then one Terra will get you 0.05 Luna. Doesn’t matter. The price of Luna is arbitrary, but one Terra always gets you $1 worth of Luna. (And vice versa: People can always exchange $1 worth of Luna for one Terra.)
9. You set up an automated smart contract — the “algorithm” in “algorithmic stablecoin” — to let people exchange their Terras for Lunas and Lunas for Terras.
10. Terra should trade at $1. If it trades above $1, people — arbitrageurs — can buy $1 worth of Luna for $1 and exchange them for one Terra worth more than a dollar, for an instant profit. If it trades below $1, people can buy one Terra for less than a dollar and exchange it for $1 worth of Luna, for an instant profit. These arbitrage trades push the price of Terra back to $1 if it ever goes higher or lower.
11. The price of Luna will fluctuate. Over time, as trust in this ecosystem grows, it will probably mostly go up. But that is not essential to the stablecoin concept. As long as Luna robustly has a non-zero value, you can exchange one Terra for some quantity of Luna that is worth $1, which means Terra should be worth $1, which means that its value should be stable.
All of this is, I think, quite straightforward and correct, except for Point 7, which is insane. If you overcome that — if you can find a way to make Luna worth some nonzero amount of money — then everything works fine. "
But if the crash keeps getting bigger, will they get away?
And this doesn't only apply to crypto, look at how many countries with currency pegs can maintain that when their economy turns down, and then look at how many people actually seek to own the currency at that point rather than a currency backed by something (like a gigantic economy).
The sad reality is that many poorer and financially illeterate people have been tricked by VCs and other grifters into this with billions of dollars spent in advertising. So, no, they don't deserve to lose their money to these assholes. These assholes need to be prosecuted, fined and put to jail if necessary.
People saw the meteoric rise of Bitcoin and got a serious case of FOMO. Everyone wanted to be on the next Bitcoin. This, ultimately, is the American Dream: to get rich by doing nothing other than getting lucky and being able to say how smart you are. Not by creating any kind of value.
People should be honest and admit (at least to themselves) that they didn't understand what they were investing in let alone believe in it fundamentally. They just wanted to get rich.
I’m sorry, but it’s worse than that. Whenever I’ve said “Tether is a scam waiting to blow up, and the evidence is obvious”, none of my smart peers had anything to say, either.
The BTC price is hells high by this fake USD money printer.
At least people are collectively waking up.
Brrrr.
Sunday I was watching Formula 1.
Crypto.com Miami GP was the name of the event, starting straight full of crypto.com ads.
Watching Inter vs Juventus Italian Cup final: crypto.com event sponsor, with Inter sponsoring Inter fan tokens.
It's interesting how desperately crypto space needs $ and euros.
Yes they do. But for reasons other than that. They also typically have extremely poor risk management (or are completely oblivious to it), and more importantly, they are buying a financial instrument they don’t even understand.
You know how many people listened to me? None of the people who asked me for advice, and got the above advice indicated in any way that it would keep them away. There was a lot of greed pushing the clueless into poor choices. So now who do we blame?
Honestly there’s enough to go around.
> they don't deserve to lose their money
Do you not believe that people should be responsible for their actions?
It's sad when people make decisions that lead to them losing money. But that's part of freedom: the freedom to fail.
People who engage in this stuff get very little sympathy from me. They were complicit in an obvious lie because they thought they’d make some easy money.
The latter are not financially illiterate; they just thought (incorrectly) that they could time the scam better than the other little guys. I have correspondingly less sympathy for them.
I'm a consumer of tether. I know the risks, and I take a calculated risk in using it for some applications. I perceive almost everything in the space as an experiment, and I'm willing to run that experiment. I personally believe that my sentiment is common among those who use and hold crypto assets. Cryptocurrencies are widely perceived as experimental and subject to large unexpected rice declines, hacks and other risks. That goes for stablecoins too.
I don't want you to forcibly prevent people from making any offer they want to me. By doing so, you are violating my right to free association, and assuming you know better than me what's best for me. I am not a child.
Maybe we can give people an option to suspend their rights as free citizens, and subject themselves to your political camp's centralized control, and leave every one else alone to decide for themselves, in accordance with the basic principles of liberal democracy. Is that a fair compromise, or are you going to presume large sections of your fellow citizens are not only financially illiterate, but also are too poor in judgment to realize they are better off under the control of people like you?
> These assholes need to be prosecuted, fined and put to jail if necessary
Who gets put in jail when assholes running a country swindle their people's currency and the peg slips or otherwise they steal from the social wealth of the nation?
This is victim blaming. Nobody deserves to be exploited, robbed or otherwise for any reason.
Well they tried to exploit, rob or otherwise me, that is, getting money from thin air without creating any value. How is that fair in any moral system?
(That wasn't what GP said tho.)
It's like if you burn your money in a Las Vegas casino.
Surely you just mint the tokens in exchange for dollars, and then put ~50% of the dollars in zero risk investments (some form of treasury bonds), and then take the 0.5-1% interest per year as your revenue. Tether currently has $81b marketcap so you could be making $400-800m per year doing basically nothing?
It also takes a long time to get this going and there are moderately high costs to a minimally viable financial entity (reporting, compliance). A few years ago they only had a couple billion which makes it hard.
And all of that sets aside the allegation that tether has been printing tethers it’s entire life — that it’s basically never been fully backed by dollars.
Step 1: find someone willing to give you dollars in exchange for a token that's guaranteed to be worth something between 0 and 1 dollars.
Step 2: find a bank willing to let you be a money transmitter for millions of anonymous pseudo-dollars whose owner you have no idea of, setting off every single money laundering alarm in the building.
You do exactly this, but you don't proof it to anybody. Then there is constant doubt and the price can fall down a bit, e.g. to 0.97.
Then, you buy back your stable coins and you make an additional nice profit.
As long as there is no other more trusted stable coin demand will increase again and you will regain your market share.
Literally the only new thing about blockchains is an ecologically destructive brute-force solution to the byzantine generals problem. However, it turns out nobody except CS students cares much about that, so they have to dress it up with cartoon apes and web3 buzzwords.
Tether have a great business model but seem to spend 90% of their time falsifying reserves instead. It certainly gives the impression they're planning on taking the capital rather than interest. They're already in breach of the NYAG agreement, with three+ more cases pending.
It actually seems like a great project for e.g. Fidelity or Vanguard to set up a mutual fund that doesn't pay interest. With the name recognition it would be immediate #1 stablecoin assuming they offered the same level of audit scrutiny and reserves breakdown as their other products (i.e. 100x anything offered in the cryptocurrency space currently).
You're assuming "bodging" wasn't part of the plan all along
Btw, not only sovereign nations have these issues. Your bank also tries to maintain a peg between one dollar in its account books and one dollar in government money. Similar (but more roundabout) for things like Amazon gift cards.
For a country without an established, credible central bank a currency board can be a big economic improvement over trying to issue their own native fiat currency.
(Even better from an economic point of view is for the country not to issue a government currency at all, but let the market handle that.
When the government is particularly inept, you can see the (black) market trying to fix currency issues even when the government actively tries to prevent that.)
Let's say you're a hedge fund looking for a one-way bet that will profit massively in a crypto crash (that stablecoins can't survive) and has no downside except carrying costs. Enter Tether, Terra, etc. Risk of loss at initial sale of 1, very low because tokens will not increase in value to 1.5 or 2. Profit potential? 100%. Everyone with a dash of creativity and a fund probably already is short these coins and has been for some time. "The Big Short" of 2022.
Oh, is that all?
To have a zero-risk peg you need to have as much reserve currency as you have issued currency; if you issue 1e6 fun-bucks that are pegged at 1:1 with the USD, you need 1e6 dollars.
If your country has banks, and you allow those banks to engage in fractional reserve banking, and you make guarantees to depositors that you will make them whole no matter how terrifyingly bad those banks are at their job, then holding dollars at 1:1 is insufficient. And depending on what kind of reserve requirements you have, the multiplier can get very large very quickly.
If you allow commercial banks to operate, then, as they say, you can fuhgeddaboutit. No amount of assets backing your peg can possibly be sufficient. You can push the tail out further, but such guarantees will only make your commercial banks more aggressive and increase the systemic cost of a failed peg.
If you choose to issue sovereign debt in your pegged currency, or support pension funds for your citizens, or anything like that, then ... don't peg your currency. Issue your own sovereign currency and get yourself some nuclear weapons.
Though, the mess with TerraUSD has clearly knocked a bunch of people's confidence in Tether. I wouldn't be entirely surprised to see it crash.
Just as it has quickly every other time this has happened. It reconverges, unlike UST, because they actually redeem your Tether for dollars when you ask.
Free pizza on whoever is wrong.
You mean like the USD?
They invested $$$ and the company became insolvent?
Don't the investors loose?
Would you feel the same way about people who loose money to “I’m calling from Microsoft IT”-type scams?
For example, at Kraken the margin cost is currently typically 0.02% per 4 hours. This is not something you want to maintain while waiting for an event that could take years to materialize. And that's for modest leverage (up to 5x), I imagine it's even more expensive for the 100x leverage you were looking for.
https://support.kraken.com/hc/en-us/articles/206161568-What-...
If you meant that seriously, it’s extremely poor quality advice. Leverage is neither free nor cheap. And taking 100% leverage is obscenely risky. Your characterization of it as ‘risk free’ is the most dangerous part. At 100% leverage, small swings could lead to calls you simply cannot afford.
In the short term, this is more of a classic bank-run. The Terra-coin + Luna scared a lot of cryptocoin holders, and now they're running away from another stablecoin.
Even if Bitfinex had the money, the amount of traders leaving USDT has to be a colossal amount. The amount of money Bitfinex can transfer at any given time is limited, so the peg will bend and buckle.
-------
The big question is: does Bitfinex have enough reserves to weather the storm? Not just this short-term storm, but the whole shebang that's about to happen? We will find out... eventually.
UST / Luna had substantial reserves. But it clearly wasn't enough. Probably because Anchor promised 20% gains and there was simply more UST in existence than the amount of USD put into that system.
> @paoloardoino GM Reminder that tether is honouring USDt redemptions at 1$ via http://tether.to . >300M redeemed in last 24h without a sweat drop. 12:38 AM · May 12, 2022·
Sure it's been really stable for a long time now, but might this just be another "bump"?
Commercial paper is not dollars, so tether effectively admits it is not backed. The risk of default on commercial paper is huge compared to dollars held in reputable banks' accounts.
Practically? Yeah, it's goner.
If you can't read the Y-axis on a graph, and you only look at the last 7 days, then it looks like Tether has gone off a cliff.
If you read the Y-axis you'll see it's barely moved, and if you zoom the graph out, it's barely a blip compared to previous deviations in price.
Now it may well be that Tether is also heading to zero, but it's very different from the Terra fluctuations.
Check the following graphs for both 7 days and all time
1) There are an incredibly large amount of people selling Tether. This indicates low confidence in Tether, low confidence in crypto as a whole, or both.
2) Tether's price stability mechanisms are not particularly robust, and struggle to handle spikes in people selling Tether. This calls into question Tether's claims of stability.
Of course, it also may just be a momentary dip that is fixed after a few days. But the entire crypto market is balancing on a knife's edge right now, and this could be what pushes it over.
TerraUSD's de-peg wasn't supposed to happen and combined with Luna, it was dragged it way down fast. Knock on effect being USDT which basically sold as too big and too collateralized to fail has shown weakness in the armor.
If there's a run on USDT, you would expect it to go to BTC, ETH. Then if people start saying they want their money out all together then the run on BTC, ETH would decimate the market as a whole.
USDT will be a lot harder to take down - conversely if it falls, it'll take so much more with it.
The CTO of Tether issued a statement earlier today stating that Tether has significantly reduced its exposure to commercial paper and now holds the majority of its reserves in US Treasuries. That should be super easy to verify, yet he refuses to release any details, saying to just wait for their next quarterly update on reserves (which in the past has just been a one pager someone typed into Excel).
This way, each time the market was down, he would answer, me paraphrasing: "nothing to worry about, I was liquid".
Seen from outside, this feels the same... now suddenly backed by something way more secure, no external audits.
As somebody totally outside of the crypto currency bubble, I looked for the first time today at the official market capitalization of these currencies, these are mind blowing, I simply do not understand how they can be so.
[0]: https://en.wikipedia.org/wiki/Madoff_investment_scandal
While Tether is certainly opaque (you could say shady), it's incredibly doubtful that it's unbacked to a significant extent. Even if it's only backed at 50% (which would be really shocking to me), it would take 39B$ to flow through the system to actually cause a depeg. That's very unlikely, and just the logistics of it means it would leave a lot of time to Tether to clear the air.
Consider that being "nakedly" unbacked (no underlying assets) in any meaningful capacity would qualify Tether's leadership for a quick trip to prison — as they've repeatedly said they were fully backed.
The real risk is them sitting on "commercial paper" (short term debt) that is now worthless or significantly discounted. I still doubt they would have lost more than 50% of reserves this way.
I think it's also interesting that SBF (FTX's founder) is fairly confident in Tether (of UST he said months ago "we know how this ends"). He seems better informed than most, and it seems unlikely to me he'd stake his company (which has extensive dealing with Tether) on a system that cannot be sustained.
I have no chip in this fight, and honestly, I do agree Tether is riskier than alternative, which is why I've never even held it. But UST and Tether are vastly different beasts in term of risk profiles.
They said on their website they were regularly audited, too, and never completed one. There’s years worth of clear lies from Tether.
Why would that be shocking? It seems clear to me that they are full of shit.
Maybe it's 80% or 8% or basically 0% . Who knows..
Is it shocking? Aren't traditional banks only backed by a tiny fraction of what they give out?
It's actually almost never exactly at $1 and the reason why it's immediately pegging back to $1 is because there is an arbitrage opportunity, assuming there is enough backing so that in the worst case the custodian would just buy back the tokens for exactly $1, no matter what the market price is.
Seeing USDT at 0.97 temporarily doesn't mean much more than there is an insane amount of money exiting right now. One exchange can quickly fall to something like 0.97 if there is not enough buy power closer to $1
"Tether tokens are referred to as stablecoins because they offer price stability as they are pegged to a fiat currency. This offers traders, merchants and funds a low volatility solution when exiting positions in the market.
All Tether tokens are pegged at 1-to-1 with a matching fiat currency (e.g., 1 USD₮ = 1 USD)"
$0.95 is not $1.00 and a 5% drop is not low volatility.
Eh you might be right, but there are orders executing at 0.95 now.
Will you buy in for a “free” 6% ROI?
I was planning on buying a couple of GPUs, but now I think I should wait a bit just in case ETH crashes lol
Edit: Yeah you should have put your money where your mouth is. It’s back up to 0.988.
I mean it makes sense, if you have many millions invested in Tether you're probably better off selling now at a 2 % loss than hoping it will go back to 1 USD. Downside risk is much larger than upside potential as Tether will never go above 1 USD, so rationally it makes sense to withdraw all your fund from the coin as soon as even a small instability occurs. On the other hand it's mostly exchanges that hold Tether if I understand correctly, and those have a strong incentive to keep the system afloat so they shouldn't sell, though not selling will increase their risk as more and more of their customers offload their Tethers. Hard to say who will win in the end, but I guess we might find out how many USD reserves Tether actually holds.
Community Prediction: 33%
My Prediction: 50%
I think if it goes too far below you will see the major exchanges go into "maintenance mode" since they're all deeply invested into keeping it alive.
Mind you, I'm no fan of USDT, obviously not backed by anything but hopes and dreams, but lets at least be accurate when we shit on things :)
It's entirely normal for stablecoins to fluctuate in minor ways like this [1], even USDC (which is literally backed by actual US dollars in a bank account) fluctuates +- 1 cent regularly. This is because these prices come from a variety of exchanges trading these currencies, with different supply pools.
Arbitrage remediates this very quickly (Tether, at time of writing, is at $1.00). Not defending Tether, it's backing is definitely sketchy, but there's no indication it's in trouble at the moment, and this being on the front page is incredulous to me since it seems to be just some random dudes pulling up Google Stocks and speculating?
[1] https://www.coingecko.com/en/coins/tether (look at 14d window)
And I don't even think Tether is a particularly good idea/stablecoin, something like Dai is much more trusted, has an incentive scheme that makes sense (ie. not Terra/Luna) and doesn't rely on a central authority
Wouldn’t surprise Me to wake up to sub $20k BTC
> Tether Holdings Limited do regular assurance opinions every quarter
And from the latest report:
> We have examined the assertions by the management of Tether Holdings Limited that its Consolidated Reserves Report as of 31 December 2021 at 11:59 PM UTC (the “CRR”), a copy of which has been included in Appendix 1 to this report, is correctly stated based on the balances set out therein.
Thats the account attesting that yes, they were provided with a report. The report, as stated, is internally consistent. Where does it say the independent accountant audited the holdings?
Being "audited" by a company nobody ever heard of,
not disclosing what commercial papers they hold for "privacy reasons",
being the seventh-largest holder of commercial papers without any traders seeing Tether buying anything.
The UST collapse will accellerate regulations, with Ms Yellen already commenting on stablecoins. More regulations will force USDT to show its hand with its assets, likely proving that it's technically insolvent.
That will collapse it.
What about USDC? As long as they act ethically, they need 1 'physical' dollar to mint 1 USDC. If USDT is backed by mostly air, then the USDT > USDC migration can't happen without actual reserves changing hands.
This likely means a crypto collapse, as more people will learn that value < money.
There are 10114 different coins listed. Even if cryptos will deliver on the promises of the fully decentralized future, are we going to need that many different instruments?
Today practically all merchants takes Visa and Mastercard. Some even take Amex, and a minuscule amount take BTC. Does anyone take a coin from page 73 of coinmarketcap.com?
You could say the same thing about a $5 Starbucks gift card --- you'd be hard pressed to spend it directly against any other merchant, but you could feasibly try to sell it for < $5 real dollars and if Starbucks went under, it would be worthless.
And at least 10110 are shitcoins. We're now dealing with 2nd order memecoins. Dogecoins were the original memecoin but now we have Shiba Inu coins. Is there really any reason for anything other than BTC, ETH, and maybe XRP to exist at this point? Maybe XMR since it fulfills the original intent of privacy and anonymity, if not for the fact that governments are trying to stamp it out most exchanges don't want to touch it.
It's from a forum shilling yet another token experiment ("Intercoin"). Zero source material presented. Zero analysis. Zero value to those who don't care about Intercoin.
This article is of abysmal quality. I do appreciate the emotions the headline induces. But if it's information ye be after, this ain't the place.
There are a lot of dumb and careless people trading in this world
So it’s wild to me that so much of Bitcoin is basically propped up by Tether printing.
I probably have reddit comments from years ago pinning Tether as a major risk to the entire bitcoin ecosystem. If you can't reliably move bitcoin to and from USD then Bitcoin's utility starts to rapidly approach 0.
But you can whether Tether exists or implodes or goes rogue or not. Take 5 minutes to understand why and come back with a better understanding of the crypto ecosystem? You're one of the 99%+ that you're referring to, that's just not trading.
I have since added a comment there, emphasizing the broader danger for crypto:
If Tether drops this could undermine the thesis that Bitcoin and other similar cryptos are good stores of value, because currently their value comes 1% from their utility and 99% from the collective belief (HODL etc.) which is circular and self-reinforcing, similar to various religions etc.
The “full faith and credit of the United States” or the exchangeability of banknotes for gold isn’t the main factor that has been backing the money we use. Real-world currencies that enjoy mainstream adoption in a given area are actually backed by goods and services they can be exchanged for readily in a certain area. Not so for cryptos (excluding services of remote workers such as software developers, which does represent a serious economy).
Here is what we would need to do in order to move the crypto space towards web4 and finally gain mainstream adoption of crypto in the real world:
The sad reality is that many poorer and financially illiterate people have become partners with the grifters by preaching the crypto religion to anyone who would listen --- knowing that every new convert would likely do the same and help push their own crypto assets higher.
This is nothing new --- it is the same marketing scheme that religion has been using for centuries.
This is good for Bitcoin.
Get the popcorn, we're in for a ride (I hope.)
And then you need to take your 1 million USDT to Tether, become a verified customer (I'm guessing this takes time as well) and exchange them for real dollars. Which they will then probably take a few days to deliver to you.
So I can see how that may make sense for someone that's already through most of those steps and at lower prices like the 0,95 from this morning. But at the current 0.9944 sell price I don't think it's worth it for many people.
https://trade.kraken.com/charts/KRAKEN:BTC-USD https://trade.kraken.com/charts/KRAKEN:BTC-USDT
I wonder how long it'll take things to ripple through the ecosystem if the price of tethers continues to be other than $1.
(edit - and I may be wrong, but it looks to me like the USD price is following the USDT price by approximately that offset, so as tether regains some of its peg, the USDT price doesn't move much, but the USD price heads back up towards it. Feels like the tail wagging the dog..)
Tether inevitably drops to $0, evaporating in the order of $100B of funny money. Crypto market collapses, trading is halted on the large platforms, big exchanges go bankrupt.
This shocks the regular markets to a significant degree. Calls for strict regulation will follow, ending the state of crypto as we know it today.
When it comes to crypto overall, my impression is that it needs to get bad before it can get good. There are benefits to being able to make binding promises to strangers using open source software, but I see that more as a public benefit than as something to become ultra rich on. BTC, and with it all crypto, MCAP grew massively on the back of largely non-existent funds (Tether), and that's the part that needs to go.
Do they? That's an honest question. They only provide attestations and no audits. And those only showed a lot of Commercial paper. If they sell an exchange $1B for Commercial paper related to that exchange. It costs the exchange a lot less than buying $1B in fiat dollars.
(2) It might not and this is the beginning of the end. And I am so glad it is finally here. I am so sick of crypto.
Unsurprising. [0][1]
I mean you can’t just lever up 2x on treasuries risk free… a 10x leveraged position on 30 year treasuries would have blown out an account within a few months…
Would their risk committee have pushed them to sell it all if USDT behaves like this?
> The basic structure of the trade is (1) Ponzi, (2) acceptance, (3) diversification, (4) permanence
But it seems backing it with a virtual currency that can go to zero and diversification with another virtual currency wasn't a sound plan.
https://www.bloomberg.com/opinion/articles/2022-05-11/terra-...
Crypto has become forever mired with the worst parts of banking and none of the benefits of currencies backed by entities with reserves that have value, and supported by laws, taxes, and large militaries.
Does intercoin cure cancer?
It’s just nuts.
You can go to Tether and they will give you 1 dollar for 1 USDT?
Then, who was selling 1 USDT for $0.95 ? Why didn't those people juts go to Tether and get 1 dollar for 1 USDT?
"verified customers (in allowed jurisdictions) are able to redeem USDt on Tether.to for USD$1."
A lot of people aren't "verified customers" in "allowed jurisdictions".
I'm hearing that Tether is still honouring $1 withdrawals, over a certain amount i think $100k.
What's stopping me from buying 100K in tether at 98c, for $98k and then redeem it from Tether at $100k, making $2k with zero risk?
Surely i can't do that because that would autocorrect the price back to $1 ?
If you think they will redeem, this is indeed a good trade.
If Tether goes to 0, probabilities are, your winning bet on a crypto exchange is worthless anyway.
https://webtwoboomer.com/real-people-are-getting-hurt-by-fak...
There are bitcoins. They get mined and etc.
There is ethereum, it processes transactions and people pay for the processing with "gas". Gas is ETH. ETH need to be mined and etc.
This could all happily work in a self-contained world, where there's no actual underlying assets reflected in BTC or ETH. But that's not "real" as in, gains/losses can't be turned into fiat currency, which is the government approved way to pay taxes and debts.
So now someone wants to be able to convert BTC/ETH/XYZ/ABC into USD (or AUD or CAD or etc "trusted" fiat currencies).
So the stablecoin is created, supposedly backed 1:1 with fiat USD. However, there's only vague assertions that this is correct and none of the bank regulation that ensures that banks actually are backed.
That stablecoin, Tether, is unaudited and no one actually knows what it holds. But for some reason, people "trust" it.
Now there's another "stablecoin" called Terra, which isn't backed by any assets in the real world. It's entirely "backed" by the fact that it can be converted "freely" into Lunas.
For an even more abtruse reason, people were "trusting" Terra.
Then the tide went out and Terra/Luna is actually naked.
Now that has focused attention on Tether and people are testing it. Because Tether has real assets, it can (for now) convert at 1:1. But it has artificial limitations on that conversion, limiting it to a minimum of USD100K.
So unless you have 100K of Tether, you're relying on finding some other buyer of it if you want to sell. People are desperate to sell, so the "price" of Tether is dropping relative to its USD peg.
Someone is buying that Tether on the market, accumulating at least 100K and then going to tether and converting to real USD.
But Tether have put a whole bunch of artificial time restrictions on that conversion, which means that the tide hasn't gone out yet.
When it does, either Tether does have 1:1 backing of all the Tether out there, in a way that can be easily liquidated so that it can pay out, or it won't, and the "peg" will collapse.
When that happens, anyone holding Tether is left holding the bag.
And that means anyone that had BTC "backed" by Tether is out of luck, so is anyone with ETH, or any of the other endless coins out there.
So the whole thing collapses, those that get out early and convert to fiat will be rich and everyone else screwed.
Gee, sounds like a standard bank run but with extra steps and without the Fed.