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.
I would say this is an incredibly stupid trade to try because you're relying on Tether actually paying out as promised.
The entire point of Tether is that you can absolutely trust them with $100K, $1M, $10M, or whatever. It's backed, it's robust, it's tethered, and they guarantee payout. The promise is essentially the AAA security of the crypto world, the equivalent to US Treasury bonds or whatever.
Meanwhile, the sentiment I keep hearing is yours: "You'd have to be absolutely nuts to trust these guys!"
Which is not only diametrically opposed to the picture Tether is trying to paint, but it's saying that AAA is actually a CCC− and hence that there is nothing in the crypto world that's above, oh, I dunno, B- or thereabouts.
But the entire point of Tether hinges on it being perceived as AAA.
Take for example the US dollar treasury bonds. Even countries and people opposed to the United States and everything it stands for agree that it is AAA. People that hate the US agree that the USD is a stable currency and their bonds are secure. Literal enemies, legally at war will prefer to use USD over their own currency for many transactions!
Meanwhile it's hard to find anyone that hasn't apparently drunk crypto Kool-Aid that thinks Tether is anything but a trash fire.
It's just so bizarre...
No, they don't. This is what Tether says in its ToS at https://tether.to/en/legal :
"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."
So, instead of redeeming your $1M in USD fiat, they can give you an equivalent amount of Dogecoin or Chinese commercial paper.
Furthermore, they say: "In order to cause Tether Tokens to be issued or redeemed directly by Tether, you must be a verified customer of Tether." You are not a "verified customer" of Tether if you exchanged USD for USDT at Coinbase or Binance.
Strongly analogous to the eurobond crisis, and the mortgage tranche issue; there was a period in 2008/9 where all sorts of things were downgraded overnight.
> Take for example the US dollar treasury bonds. Even countries and people opposed to the United States and everything it stands for agree that it is AAA. People that hate the US agree that the USD is a stable currency and their bonds are secure. Literal enemies, legally at war will prefer to use USD over their own currency for many transactions!
Yes - and this is why Americans panicking about financial mismanagement always come across as so out of touch. USD is the currency everyone else runs to for safety.
No, the entire point of Tether hinges on everyone pretending that it's AAA, and just letting the Tether money printer lift all crypto boats.
Anyone paying attention knows its a fraud, but are happy to look the other way, because it's the reason BTC is $30K, instead of $600 right now. Sure, they'll lose whatever they have invested at the moment when the house of cards collapses, but if you can't predict when the music will stop, the smart move today is to keep playing.
The smart move while the music is playing is to sell the tickets, not buy an instrument of your own.
It's like selling spades during a gold rush.
It's why bubbles grow. The optimal move for anyone but a precog is to keep playing, right up until the end.
Very few people in this case actually mint and sell tickets, most of them are hangers-on who are either hoping to dump to a bigger fool, or are also selling tickets (but are also utterly dependent on the music to keep playing.)
So what is your point actually?
"Counterparty risk"
This is what killed MtGox, their over-reliance on banks to hold the collateral needed to make them solvent. Carl Mark Force IV was a DEA agent who was basically blackmailing MagicalTux, forcing him to invest in fake crypto projects, and if he didn't play along, Karl would use his DEA powers to freeze MtGox's bank accounts. This prevented people from cashing out, which was a problem. Major exchanges learned that touching actual US dollars in bank accounts is poison, and something that major exchanges can't really do without devoting massive (crippling amounts) of resources to legal and compliance teams.
Better stablecoins exist now, from a US regulatory standpoint (USDC) and from an algorithmic pegging standpoint (DAI), but the people who run exchanges still like using Tether between themselves for historical reasons, which is fine. I will never hold Tether, and probably every person who reads this should never hold Tether, but not because it's necessarily bad, but because it's not for you. It has a very specific utility to certain crowds, and IMO that's fine.
Find me one person that has ever done this. Just one.
I will wait.
I think what the OP is saying is that there is not a reliable account of someone going to Tether with 100k USDT and having Tether give them $100k USD.
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.
If you want to buy crypto using rubles, Lebanese pounds, Venezuelan bolivars or anything else, you need a counterparty who will accept that currency as payment. And if your currency is losing a lot of its value every day, with no end in sight, your counterparty will not give you anything approximating the official exchange rate, even on an open market, because accepting payment in that currency immediately exposes them to that currency's inflation.
Unless your bank kicks you out by some reason (incompetent compliance). Unless foreign bank refuses your transaction because the bank doesn’t like the color of your passport. Unless somehow banking system wants to cut extra from your transaction (2.5-4% for transaction) because of double currency conversion you didn’t ask for, because you didn’t specify correct correspondent bank and your bank didn’t tell you about that.
All that happened.
These are all problems invented by Crypto bulls to build a narrative for why Crypto is widely useful.
There are a handful of small, very poor countries where Crypto might have been better than holding local currency. But you also had to be poor in those poor countries for it to make sense for you to buy Crypto instead of hard assets like land or housing - if you were merely interested in bypassing monetary devaluation - and not interested in EXTEMELY risky speculation to get absurd returns.
The total money for people this might even have made a little bit of sense for is maybe $1Bn. Considering Crypto had close to a $3T market cap at some point - this is not a talking point. It's noise.
The real story - and the only story - is that Crypto is and always has been speculation.
These are real things that have happened, although they're not very widespread. The question is whether using a risky system with no safety net is better than risking this: https://www.telegraph.co.uk/personal-banking/current-account...
There are many downsides to Tether. Why is it worth the risk in comparison?
Additionally, there's simply not enough money in Tether compared to the $80B to talk about. It's a distraction.
For instance, most devs I know that work remote jobs for companies abroad, they ask for them to pay in crypto because if you try to get paid in the legal way you get 50% less off the bat in the forceful conversion from usd to pesos and then you get an additional 20-30% less due to taxes
These problems happened to me and still happening. Swift transactions in USD from US to UAE are getting double converted (at cost of 2.5-4% of the total amount) and it’s very difficult to get meaningful answer from the bank support about what’s happening
2. Stable coins make no sense for anyone who has meaningful wealth even in those countries because they have other, better options available.
3. The amount of money in Stable coins is >$100Bn - this is far more than what would go in to resolve any of these problems. Mentioning these problems is noise / a distraction.
4. The primary purpose of stable coins is for people to get in and out of / time trades in cryptocurrency (speculation).
Do you honestly believe people collectively parked >$80Bn in a shady company using it purely as a bank account - because that was really their best option? If not - then these talking points aren't really worth talking about. My whole point.
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.
Tether on the other hand has invested mostly in commercial credit, who’s counterparty they decline to identify. Given that they constitute something like the 5th largest commercial credit fund in the world on that basis & the other funds deny seeing them in their markets, it seems that they’re lending to ... lets say unorthodox counter parties.
Some have suggested that they’ve been lending to Chinese builders, but it seems more likely to me that they’ve been lending Tether to cryptocurrency trading houses and marking it up on their books. This would create a self-feeding circular dynamic at one or two removes; if so the whole thing could unwind quite spectacularly.
Long-term stability wise I think crypto will outperform gold anyway.
As a smart contract developer who knows a bit about the inner workings of crypto, I picked it.
But frankly yes gold would also be a good option. It has its own risks but safer than my country's currency for sure.
Converting back to cash at a reasonable rate is probably a lot harder.
(UK note: new gold is subject to VAT. Buy used.)
That does not mean that it is trivial to smuggle gold out, but if you need to do so, the chance of success is pretty high. Much higher than smuggling out fiat money held in a government-regulated account during capital controls. My 2c.
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.
This is public knowledge and has been well documented for years. Tether is likely to be the least trustworthy actor in the entire industry.
[edit] Indeed, as dgellow commented, Tether actually does not strictly guarantee the redemption of USDT to USD. They use sleazy legalese in their Terms of Service to reserve the right to "delay" a redemption in case of illiquidity, without specifying how long that delay may last, so effectively they can simply "delay" your redemption for an infinite time.
Surely this is related
Imagine you have multiple games of monopoly in progress but all the monopoly money is managed by a single monopoly money bank.
Two monopoly games (Ethereum and Avalanche) both needed more monopoly money for the game to go on smoothly, so the banker transferred some money from their main bank (Tron Network) to these other games that are in progress. The total amount of monopoly money in circulation did not change, but the amount of money available in each in-progress game has changed.
Presumably it is due to cost efficency of TRON but I suspect it's also to do with highly effective marketing or strong industry contacts etc.
> 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.
[1] https://theweek.com/articles/479867/federal-reserves-breatht...
Is that true? Where is this price coming from? Unregulated exchanges can display whatever numbers they want on their ticker, right?