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Comment by mcintyre1994 | Hacker News Reader

mcintyre1994

Not clear. Tether is back at $0.9988, and the 9% decrease in that headline is market cap not price - it never got anywhere near 9% below peg. I’m very skeptical of Tether’s collateral, but it seems to have withstood this and maintained its peg for now.

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As you say, there’s reason to be very skeptical of their collateral. We know 9% of market cap has been paid out in a matter of days. If they were only, say, 10% collateralized by liquid assets, then they would be on the edge of collapse right now. That may be pessimistic but we can’t know because they don’t provide audited reports.

Exactly, thats the thing people seem to look past. A stable-coin could theoretically be entirely stable up until they were absolutely insolvent. They just allow redemption and treat everything as business as usual until their collateral runs out. Then they close up shop and everyone else gets 0.

Plus: Say everyone assumes that USDT is about 60% collateralised with very liquid stuff, and everyone holding USDT is comfortable with that undercollateralisation. Now USDT has just lost 10% market cap, so now they're just 55% collateralised (before: 60/100, now: 50/90). You might still be comfortable with that cushion, but some people might not. They'll redeem their USDT.

Etc., we have a classic bank run.

It's consistently 1/10th of a cent below the peg.

That's not maintaining its peg. That being said, it has been stable at that price for several days now, but let's see what the next few weeks hold.

This is due to the redemption fee. Per se, it’s not an alarming sign.

There are more than enough red flags with Tether already !

I'm as cynical about Tether as any sane person, but it's important to disambiguate between value on an exchange and redeemable value. If USDT is $0.90 on every exchange, but you can still redeem 1 USDT for 1 USD from Tether, then it is maintaining its peg. UST's value on an exchange was the peg by design, because it was algorithmic, but that's not true of non-algorithmic stable coins -- i.e: Tether.

IIRC to redeem you need a minimum of 100,000 USDT. So being a little off the peg still loses a bunch of "retail" investors money.

That is correct, and additionally:

> Tether charges a 0.1% fee for withdrawals up to a maximum of $1,000, which means Tether is redeemable at $0.99 for up to $1 million, and then $1 above $1million in terms of money in the bank.

Wait, so they charge an _actual_ transaction fee in addition to whatever "gas fees" are already in place?

I mean I get it, it's all a scam. But, this feels so...callous.

It’s peg is isn’t entirely accurately described as $1.

> Tether charges a 0.1% fee for withdrawals up to a maximum of $1,000, which means Tether is redeemable at $0.99 for up to $1 million, and then $1 above $1million in terms of money in the bank.

Plus a $100k minimum to withdraw and a $150 fee for KYC.

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