Tether is starting to depeg from USD again
ftx.com
ftx.com
Right now, when you can buy a tether at $0.997 and (in theory) sell it back to tether at $1, there's not much scope for profits after costs. So there's not going to be a lot of money pushing the price back up. IOW it's kind of 'expected' that a stablecoin might drift tiny amounts away from its theoretical peg. It's just not worth it. (n.b. even Tether themselves charge a 0.1% fee to redeem their coins)
If/when tether drops below (say) $0.99, and there's no influx of money trying to support it, that's when USDT is in trouble.
But instead Tether is drifting low, quite low. I agree it's not quite a depeg, but it shows that many people distrust Tether and want to get rid of it at times like this.
Obviously as the price drops it becomes increasingly profitable to buy on the open market and sell back to Tether, depleting their fiat reserves and bringing closer the moment when they stop exchanging at face value, and it all ends.
If instead, people are getting out of crypto altogether, they won't be holding USDT, instead they will be getting hold of actual dollars (which, depending upon the coins, might involve selling a random coin for USDT and then trading that for USD). In that case, there would be selling pressure on USDT.
Just a worrying signal.
If some exchanges are making the second step much harder than the first, then a lot of people attempting to depart crypto could have the effect that we're seeing.
To elaborate tether is making the switch to dollars harder so people are preferring other stable coins?
People don't want stable coins, or any coins, they want fiat (they got into unstable coins as a way to get more fiat).
Stable ground is not a cryptocurrency, what is stable are USA national bonds. The Federal bonds of the USA are the safest asset in the world, and it is what all traders go for when they need safety. No national government of a English speaking country has defaulted on its debt since the Stop of the Exchequer in 1672, and the USA has a huge military which further protects its bonds
This means that there may have been "effective defaults" where instead of defaulting on the bond, the currency was weakened.
There's also the question if the CSA were ever really a "major English-speaking country" because they did default: https://en.wikipedia.org/wiki/Confederate_war_finance
If I'm reading the sources correctly, the CSA never technically defaulted until it ceased to exist as a meaningful entity. The CSA never paid the interest on the junk bonds, but those bonds appeared to have a clause permitting it to defer any payments while the war was ongoing; the cotton bonds were actually serviced in full throughout the entire war.
No, you can't. Not even in theory. You have no right to redeem. They can choose to buy it back from you for $1, but it's not a right of the token.
Why are mistruths like this always presented so strongly and at the top here? Are you all so heavily invested in this belief?
You can sell tether for usd, all day every day, I guess screaming into the void and getting upvotes is more valuable on an emotional level.
What do you mean? You just have to complete the fairly simple KYC process and you can start redeeming.
Perhaps you mean that fairly few entities have bothered to do this?
If you work for Tether and you created a new Hacker News account to offer to onboard us, that sounds great :)
https://www.businessinsider.in/cryptocurrency/news/terrausd-...
Ignoring that the last person who tried to create a digital token pegged to USD.
Ignoring all the AMC/KYC risks
You'd actually be happy? You truly wouldn't just move onto accusing them of facilitating money laundering on a massive scale as tethers can move across borders for a few cents?
I doubt this.
Which, at <1$/$, tether should now be bankrupt. It's presently advertising free money: just buy at <1 and sell back at 1. If it were actually possible to do that, tether would be out of capital tomorrow.
I think a lot of commenters get confused about why big crypto firms don't defend the peg more aggressively. The reason is that defending the peg less aggressively is more profitable.
the argument is that nobody, not tether and not any exchange, is committed to maintain this exchange rate peg. in fact the topic of this thread is a discussion on how (long) and whether the peg can be maintained.
Tether undoubtedly has several large trading partners that buy and sell large volumes of coins from them. If they stopped redemptions, you can bet that everyone would soon hear about it.
Now, it's absolutely true that their crappy terms & conditions give them complete freedom to refuse redemptions from anybody at any time for any reason. And that (in my view) makes it a very dubious company to rely on. But you are completely and utterly wrong to say that "No, you can't. Not even in theory".
You cannot REDEEM the coins. Which may look a lot like just selling it back to them for $1 but it's not the same. That's a problem. They can stop buying tethers whenever they want and, theoretically, you have no recourse. It's only going to keep going while it suits them.
edit: and, importantly, you cannot even SELL tether back to them for $1. They just won't do this right now. They'll do market price at best.
If I had a $100mm Tether they refused to redeem, the last thing I’d do is talk about it.
1. dump on the market
2. take out a huge short position
3. tell the world that Tether refused to redeem
If you can trivially redeem tether for $1 why is it trading for less than that?
Money market funds are considered to have broken the peg the minute you can’t get a dollar for dollar out of them, why are we redefining the term for crypto?
An analogous money market fund example would be if I can't redeem until tomorrow noon yet need to urgently meet some financing need today, I could sell to someone for a tiny discount and they can redeem tomorrow.
If the answer is that they don’t have faith they can get the redemptions to cover their positions that’s also breaking the peg.
If Tether is pegged to a range against the dollar that’s fine and normal! Just claim that.
Or better yet don’t claim a peg at all if you have no mechanism to actually defend it.
Tether.to, although they will charge you a 0.1% fee unless you negotiate a better deal with them.
>If you can trivially redeem tether for $1 why is it trading for less than that?
It's also trading (very slightly) higher than $1 on other exchanges, such as Bitfinex. Such is the nature of order books.
Edit: Apparently it can do Chrome but has issues with Firefox.
Ironically, every once in a while an article or post about something like the Dunning-Kruger effect comes up, everyone is suddenly fully aware of how this applies to them.
https://news.ycombinator.com/item?id=31720277
Tether is known to have lent Celsius at least $1 billion last year:
https://www.coindesk.com/business/2021/10/07/tether-has-lent...
It's great that you relish other people losing money. Sort of like how you tried to relish being right about Covid-19 with your hashing scam.
you might have seen it already, seeing as you're tagged, but thought it was worth mentioning
Whether you agree with the regulatory state then colours whether this is probably the dawn or end of civilisation.
I think that may be more a failure of imagination than a likely failure of the regulatory environment.
For example, cash transactions are largely anonymous. Financial regulation seems to cope ok by focusing on the points it interacts with the rest of the financial system and controlling it in the large. I can easily imagine it doing the same with the likes of Monero if it so desired.
I have a hard time seeing, logistically, how I would get $10k worth of cash to you. I'd need to organise planes, couriers, figure out your address (there'd be a paper trail from that too). Assuming I was willing to cover the transport costs there'd still be quite a lot of risk at the endpoints of someone walking off with the money, and a massive paper trail/fingerprint across a couple of third parties. Probably issues at customs and it'd be a slow process.
Technically you can argue that this is the same thing, but I don't think it is. The practical differences are big.
> I think that may be more a failure of imagination than a likely failure of the regulatory environment.
Maybe. I'm quietly confident. Go in to detail here. Say, hypothetically, I just bought a house from my mate Morris for $350k and you think I also gave him an off the books $100k in Monero to avoid paying taxes. You're the regulator, what happens next? How do you police this? How do the costs of policing this compare to traditional measures?
I wouldn't think that was feasible with cash, it'd be too obvious I was gathering $100k, the risks of something happening to that cash would be too high & there'd be $100k in cash sitting around for police to find in a raid. But good luck proving that I have a secret 2nd crypto wallet. If I do, which I might not.
It was always naive to think that finance wouldnt just absord crypto as yet another asset class.
Soon they’ll realise why central banks exist and after 10-20 years they’ll learn why the gold standard stopped being cool.
However, that story neglects many things.
1. A worker can buy many more loaves of bread (not to mention other things) with a week of wages than two thousand years ago. So, who cares about the price of gold?
2. Everyone is free to buy gold with their money, anyway, if desired [0].
3. A moderate amount of inflation is not bad, and in fact what most central banks target for, and what they have achieved for decades.
4. If you have a lot of money lying around, invest it in the markets (or into gold), don't leave it in currency.
5. A gold standard would remove the central bank's ability to control the money supply, and hamstring its ability to conduct monetary policy. Gold standard proponents consider that a feature, but almost all modern economists consider it a bug. An instructive parable is the story of the Babysitting Coop [1].
My overall take is that
good fiat > gold standard > bad fiat,
and policy should be focused on good fiat, ie keeping the central bank competent and politically independent and with a clear mandate.
[0] There have been exceptions, eg in the US in 1933, see https://en.wikipedia.org/wiki/Executive_Order_6102
[1] https://slate.com/business/1998/08/baby-sitting-the-economy....
(Given nature's love of pattern reuse, finance on micro ()individual), should resemble finance slightly more macro (family), dhould resemble finance even more macro, (industry, state, nation))
Whereas what we have now is some horrible abomination where at the top-end, we get these debt fueled monstrosities that continually push asset prices into more and more ludicrous places where barrier to entry gets higher and higher, and the requisite concentrations of resources one must accrue before the power laws start kicking in relegates a greater and greater portion of the population to basically treading water in the hopes less than a single percent of it makes good capital allocation decisions.
Call me a contrarian nut if you want, but something is completely off. I accept unintuitive things can exist, but modern economic theory requires too mich fairy dust (Dude, trust us) to keep churning along for my liking. .
The gold standard has its problems, but putting hard limits on currency creation and manipulation is prudent.
But I always feel like I should reply to people who argue via a link (whether re: the gold standard, COVID-19, or any other topic) with http://web.archive.org/web/20160112000701/http://www.timecub... .
I am always curious why silver never gets any love from the "gold is the only true currency" crowd."
See: LA
If you want to constrain growth in a controlled fashion, you still need a central bank managing the supply of currency.
I have to agree with Satoshi that these central banks have not done a great job at that haha.
Cryptocurrency supporters like to mythologize about everyone managing their own wallet and running their own nodes, but practical reality shows that to reach any kind of scale you need trust.
Somehow all the cryptocurrency advocates who pan trusting central banks don't seem to have nearly the same issues with trusting a company like Tether or Binance who have far less accountability..
I'm not even sure what this is supposed to mean? Los Angeles? What does Los Angeles have to do with Growth? Or is this some crypto coin?
Have you not seen the absolute mess of stable coins? Tether has 'printed' the equivalent of 86 billion dollars from nothing.
>There should be hard accountability on anyone who can create money.
The bigger issue is a lack of accountability on the political systems. Most of which have been rife with corruption.
They print dollars and give it away with 0 accountability of whether economic value is returned for what is being printed.
High speed rail, national broadband, national healthcare, upgraded powerlines, renewable infrastructure, desal plants. Food for kids in schools, shelter for the homeless, high rise infrastructure (rather than shitty suburban shits that bankrupt cities in 50 years).
The above are effective, efficient and provide multiple dividends for the initial capital. Yet are viewed as socialist policies frankly and hence political suicide.
The Government can't even recognize how cryptocurrencies are by itself a negative sum game and hence should be heavily taxed or made illegal.
Because governments are massive borrowers and the gold standard tilts the market towards people having to repay their debts from time to time?
Literally the reason not to be on a gold standard is to enable money creation. Creating money has winners and losers - the losers shouldn't be happy about that. I own enough assets that I've been making out like a bandit (eg, by owning gold) but the situation is hardly fair to people who think that working productively at a job should be linked to better outcomes.
The linkage in the banking system was to the price of gold, as fractional reserve lending slowly increased the amount of deposits in the system, the price of gold drifted up, and the amount of lending increased with it.
Then the entire system eventually broke apart (several times), because gold wasn't evenly distributed, and so the resulting rates of money creation drifted apart in different countries.
The returns for gold have been absolutely trounced by just about every asset out there. It's worth less today than it was 10 years ago. I know, because I also own some. Even with inflation, it has a ton of ground to make up versus real estate or SPY or BTC.
So, pray tell, how have you "made out like a bandit" by owning gold?
You're dating yourself with this comment, you hit a pretty small window around 2012 to manage to lose money. I didn't buy then so I'm doing well. Now, admittedly, the reason the price was high in that window was because a lot of people panicked and wanted to buy in so there are probably an unusual number of stories of people who managed to lose money.
But the rest of the time gold is posting (alleged) real returns. Which is fantastic work for a shiny rock. People call what is happening in bitcoin crazy, but the idea that I'm making a productive contribution to society by owning a rock is bananas. Really it just means that money is losing value faster than the powers that be admit.
> The returns for gold have been absolutely trounced by just about every asset out there.
Well yeah, it sits there and does nothing. The return is not competitive with more productive assets. Still crushing the poor fools who think that they should be using inflation as a reference point to plan/negotiate their finances. Or anyone who thinks they can use wages to get ahead; they're getting washed out by the money hose that has been pointed at assets for the last 15 years.
The point is, the amount of money needs to correlate with the size of the economy.
There's no single physical good that naturally has the required correlation, so using physical goods as the basis of money is foolish.
Ironically that did end the Great Bullion Famine, a decades long period where not enough bullion being mined lead to Europe-wide deflation.
How much those systems are controlled by their users rather than just different concentrated groups holding a majority of power and wealth is in some ways a measure of that success. I am not too optimistic about this for bitcoin and systems based on it, but bitcoin is far from the only game in town.
Whether or not the space needs to learn every lesson, no matter how obvious, by regularly losing money reproducing each crisis in turn remains to be seen. As someone who spent a long time in finance and can see that many of the experiments/"products" in crypto are dumb and won't work, I would certainly hope we can do a bit better, but if that's what it takes, so be it.
[1] Hopefully we can at least improve some bits of the actual products and systems along the way as well as getting the basics in place, too.
The system we have today requires surveillance and control of governments to function. The parallel system or systems on the internet would also require some form of external, i.e. off blockchain, control to function as well as the current system. So far humanity has not invented anything better than democratically elected governments to implement such controls.
Blockchain cannot in principle replace governments because governing comes down to use of violence. Unless, of course, you are advocating going back to times when barons fought each other with private armies.
Two issues here:
1. The assumption that such, let's call it "government style" control (or at leaast a significant part of it) is necessary for such a system to function as well as the current one (a whole other question is what "as well as" means here). That seems possibly reasonable, but is certainly an assumption worth testing.
2. The assumption that you need a government to exert this "government style" control. Maybe humanity hasn't invented anything better and never will. But also maybe such things can exist, especially within a limited field like finance, and even if they can't, I'd take the Democratically Elected Government of Cyberspace[1], should such a thing be needed/emerge, over the squabbling and overreach of nation state governments into the internet.
There are already plenty of projects experimenting with "on-chain governance" and there are a myriad areas of research into governance of decentralised systems. It is perfectly possible that a system of financial (or other) projects/protocols might emerge that all subscribe to a protocol for such governance, which could even go as far as enforcing collateral ratios, risk reporting, whatever, but would still be fundamnetally controlled by its users in a way outside of government control. Or perhaps individual protocol level governance will be enough. Either way it seems completely unlikely that the present system is the best we can do.
In this case, there would still of course continue to be the wild west of systems outside that regime, in competing regimes, or even working within the legacy financial system, but that freedom to innovate is a feature not a bug.
> Blockchain cannot in principle replace governments because governing comes down to use of violence. Unless, of course, you are advocating going back to times when barons fought each other with private armies.
This is why I qualified the goal with "on the internet". If you have privacy, pseudonymous participation, Tor (or Tor-like networks/blockchains, like Nym) , etc. and smart contract platforms that can issue, move, and lock up/control funds using composable code, run entirely on chain, then of course you can build protocols and systems that govern them that sit outside government control as long as they manifest themselves only virtually.
It is only at the edges, where you interact with and move to and from virtual (the internet) and physical society that you become subject to state violence. Blockchains and related technology might help organise the push for some kind of change to how governments work (as the internet itself has), but whatever happens, you can probably do what you like when it's purely online, and you will probably still need a good answer to questions like "where did you get that money?". I think that's OK.
Second: you can't eat blockchain, you can't fill your gas tank with blockchain, blockchain won't protect you from cold rain. You have to convert your cybercoin to real-world goods at some point. That means a contract "BTC 1000 for 1 loaf of bread". This contract has to be enforced off blockchain because 1 loaf of bread is not on blockchain (no, NFT is not a loaf of bread, you can't eat NFT). And you guessed it right: this contract has to be enforced with a threat of violence. That means off-blockchain government.
> There are already plenty of projects experimenting with "on-chain governance"
I bet you a $1 none of them will go anywhere. Like all those experimental applications of blockchain that IBM, Maersk, and many others played with. Hard no useful outcome, complete failure each and every time for fundamental reasons. Like a complete failure each and every time anyone tries to build a perpetuum mobile.
There is one ONE (hard 1, like in math) use case for blockchain: circumvention of regulations. Once regulations are implemented on blockchain, it would lose its one and only use case.
There are things the government cannot know, and therefore things the government cannot control. Yes, they are ready to use violence to enforce their rules, no that doesn't help them read my encrypted data/messages/transactionds if I don't give them the key.
It doesn't matter if the governance on the blockchain can't use violence if it also controls how some system you wish to use works, as long as that control is sufficient to build a useful version of the system (which, again, from the above, can work on the internet without the support of a violent governmnet).
> Second: you can't eat blockchain, you can't fill your gas tank with blockchain, blockchain won't protect you from cold rain. You have to convert your cybercoin to real-world goods at some point. That means a contract "BTC 1000 for 1 loaf of bread". This contract has to be enforced off blockchain because 1 loaf of bread is not on blockchain (no, NFT is not a loaf of bread, you can't eat NFT). And you guessed it right: this contract has to be enforced with a threat of violence. That means off-blockchain government.
Once again: on the internet. I am not saying you can live a completely parallel physical life, and again, if the government of wherever you live ask where you got the money, you're going to need a good answer (and perhaps proof that breaks your anonymity). That's completely outside my point.
Firstly, you can choose to abide by the relevant local laws while also operating in a system that allows you the freedom to break the law. You do this when you drive a car within the speed limit or use end-to-end encrypted messaging legally. This alone is enough to justify building such systems. It is unacceptable to have compliance enforced on us as the current financial system does (and it's honestly crazy to me how many people who would not let governments agents regularly search through their stuff are fine with it when it comes to data or financial transactions), even if we intend to abide by all the rules under the threat of government violence.
Secondly, you may think a parallel online society/financial system is not useful if you can't turn its money into your government's favourite fiat currency, but I strongly disagree. There are many interesting and important uses, for such a system. These include organising activists, civil disobendience and protest, resistance of corrupt or authoritarian regimes, etc. as well as emerging online communities and "places" like the metaverse. (No, I can't think of any reason to NFT a loaf of bread either.)
> I bet you a $1 none of them will go anywhere. Like all those experimental applications of blockchain that IBM, Maersk, and many others played with. Hard no useful outcome, complete failure each and every time for fundamental reasons. Like a complete failure each and every time anyone tries to build a perpetuum mobile.
We'll see. I'd take that bet — I certainly expect some forms of governance (not necessarily government) to make sense on blockchains and work out to be pretty useful, though I'll reserve judgement on exactly what that will look like for now.
> There is one ONE (hard 1, like in math) use case for blockchain: circumvention of regulations. Once regulations are implemented on blockchain, it would lose its one and only use case.
Not that I agree with this statement, but if the alternative is round the clock surveillance and authoritarian enforcement of regulations then it's incredibly important that this use case succeeds and is available to everyone!
You are mistaken. There is a technique called "rubber-hose cryptanalysis" which works wonderfully in cases like the one you described. Once applied, you will gladly give up your key and anything else they ask for. That's what violence means.
If you do not control real world then you do not control anything. There is no way around violence. At least for as long as humans have physical bodies and live off blockchain.
> unacceptable to have compliance enforced on us as the current financial system does
You are arguing that because the current system is excessively regulated, then a system with no means to enforce the rules will work better. The problem with that is that blockchain is a lot more expensive to operate per transaction that the conventional systems. Because of that it can only be used when the conventional system cannot be, specifically for circumventing the regulations, i.e. breaking the law.
> but I strongly disagree.
You say you disagree, but you actually agree. All the cases you listed are cases of "circumvention of regulations".
> We'll see.
It's been long enough to see. Believing otherwise is like believing that this contraption with a few more tweaks will produce perpetual motion.
> some forms of governance
It's either able to enforce the rules with real-world violence, or it is irrelevant. It's really that binary 0 or 1. Nothing in between.
> Not that I agree with this statement
It's basic math as in 2 greater than 1. It does not matter if you disagree with it.
> but if the alternative is round the clock surveillance and authoritarian enforcement of regulations
That's not the point. Blockchain is a tool that helps you circumvent regulations (good or bad authoritarian or not, does not matter). It's a tool which has only one use: to facilitate circumvention of regulations. The point is if blockchain is regulated then it's no longer a useful tool for breaking the law and consequently irrelevant.
You aren't really engaging seriously. There is a difference between expensive targeted violence to coerce specific information from individual citizens, and dragnet surveillance and the power to freeze or seize money from anyone's account at will.
> You are arguing that because the current system is excessively regulated, then a system with no means to enforce the rules will work better. The problem with that is that blockchain is a lot more expensive to operate per transaction that the conventional systems. Because of that it can only be used when the conventional system cannot be, specifically for circumventing the regulations, i.e. breaking the law.
As one small example, to give a case where I actually know the numbers. I've done cost per trade analysis for major investment banks (while working at them, with full access to their internal data) and it's certainly not the case that blockchains always cost more per transaction, even with the current irterations of the technology. Not even close.
> You say you disagree, but you actually agree. All the cases you listed are cases of "circumvention of regulations".
Avoiding surveillance is not circumvention of regulations unless submitting to that surveillance is legally required. Certainly where I live, it is not. We can use cash, we can spend crypto, and if the government want to know what we did, they have to ask us (or coerce it out of us) with proper legal basis. There is no regulation requiring submission to constant financial surveillance that I'm aware of, but using the current financial system (ex. cash - so all electronic money and sll financial products) involves submitting to it anyway.
> It's been long enough to see. Believing otherwise is like believing that this contraption with a few more tweaks will produce perpetual motion.
Says who? I don't remember learning about a time limit to turn new technological develpoments into practical or useful inventions or companies. What about new aglorithms and research that have come about since the first networks were built, do they get to reset the timer and have a chance at it too or do they have to stop building because bitcoin didn't meet your targets by the cut off?
Really, there are many reasons massive technological change can, and usually does take a long time. Many layers of abstraction need to be built. Take the internet - we had networking, then TCP/IP, then many protocols some of which were "big" for years and are now dead, then HTTP, then TLS, and JavaScript and "Web 2.0", and cloud hosting, etc. etc. This literally took decades and is still going on! All the while the software was maturing, integrations were built, and adoption took off - first very unevenly and then everywhere.
I wouldn't be surprised at another 10-20 years to see really pervasive use of blockchain technology, but I see leaps toward that future all the time.
> It's basic math as in 2 greater than 1. It does not matter if you disagree with it.
Really no idea what you are on about here. Use cases are not mathematical. The technical use case for byzantine fault tolerance is to reach consensus on a set of facts (or operations or data or whatever) within a group of actors that you individually distrust, without needing to appeal to authority. If you are telling me you can (mathematically?) prove that the only possible use for that is to circumvent regulation, I'd love to see the proof, but without it I think it very much does matter that I see no reason to believe it.
> The point is if blockchain is regulated then it's no longer a useful tool for breaking the law and consequently irrelevant.
If "blockchain is regulated" goes as well as "speed limits on motorways are regulated" and "copying of digital media" is regulated, not to mention the war on drugs, then I think the application of regulation to it is likely to be of little practical concern to those who do want to use it to break laws.
Do you really want to switch discussion to personalities?
> and dragnet surveillance and the power to freeze or seize money from anyone's account at will
You still miss the point. Crypto is money only if it can be used to buy real world goods. If I control the real world then you can have all the crypto you want and still not be able to buy a loaf of bread.
> I actually know the numbers
Actually no. You are comparing apples to oranges. A transaction in a centralized database is always cheaper than in a distributed one. No exceptions.
> Says who?
I do. All your arguments still miss the fundamental issue with the distributed ledger: it's more expensive to operate than a centralized ledger. It's really that simple. 2 > 1. No amount of research and algorithms will change the fact that 2 is greater than 1.
The only reason you would pay more if you cannot get it for less. In case of a distributed ledger you would use it only when the centralized one is not available. The only known case when the centralized is not available is when it's unlawful.
> This literally took decades
No. All the techologies you listed were immediately useful. Blockchain has been around for more than 10 years. It's still not used for anything but circumvention of regulations.
> Really no idea what you are on about here.
Yes, I noticed.
You're also subject to control as soon as you try to interact with financial products or "the financial system", even with cash. Try opening a bank account or buying equities without giving a real name and address.
I would like a type of cash that works wherever the other parties happen to be. I'd also like to see that privacy and freedom to transact extend across the full system.
I needed to do this, sorry.
And it was super obvious that if only a few rare truly exceptional dreamy philosophers, among the horde that pushed beautiful magic internet money back then had any knowledge of this at all,
then of course the same thing would happen again.
Please stop thinking of what the current system is as "fractional reserve"—re-lending of savings—as it is not accurate. Tobin called it the "Old View" in 1963:
* https://elischolar.library.yale.edu/cowles-discussion-paper-...
It and the idea of the money multiplier just confuses things:
* https://www.pragcap.com/what-is-fractional-reserve-banking/
* https://www.pragcap.com/r-i-p-the-money-multiplier/
It might useful for a "101" course in high school Econ or first-year university, but it should be moved past ASAP.
I don’t understand your comment.
Even some central banks openly take this point of view, these days:
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
I also don't think that there is consensus across central banks about how money creation actually works, which is pretty fascinating, considering that they all do more or less the same thing (at least the ones that aren't pegging their currency to another one), but apparently under completely different models...
Your bank can loan out as much as it wants as long as it's happy with the risk, regardless of its current holding. This is because the loans come first, and any reserve requirements are then taken care of after the fact. So if there's a good loan opportunity it is issued, and then the bank goes looking for available reserves.
And this assumes reserve requirements even exist, which they have not in several countries for decades:
* https://en.wikipedia.org/wiki/Reserve_requirement#Canada
Reserve requirement are irrelevant to loan creation. Per the Fed itself:
> Changes in reserves are unrelated to changes in lending, and open market operations do not have a direct impact on lending. We conclude that the textbook treatment of money in the transmission mechanism can be rejected.
* https://www.federalreserve.gov/pubs/feds/2010/201041/201041p...
See also the S&P paper "Repeat After Me: Banks Cannot And Do Not 'Lend Out' Reserves":
* https://www.hks.harvard.edu/sites/default/files/centers/mrcb...
The 'money multiplier' does not exist:
* https://research.stlouisfed.org/publications/page1-econ/2021...
You have 10 well behaved dog pups running around and a single bloody mouth foaming pit bull on a leash. You decide that leashes are evil and cut the pit bull loose. The pit bull kills half the pubs before you have him back on the leash.
You come to the conclusion that it is natural for all dogs to go on bloody killing sprees.
https://www.amazon.com/Lying-Money-Legendary-Frauds-Workings...
The "we" is clearly mistaken.
Grifters certainly jumped on a hype cycle, which shouldn't be a surprise.
Be interesting to see what is still going when the hype cycle dies.
My guess is another hype cycle. Crypto tech has no value beyond finding a bigger sucker to hold the bag.
Unfortunately the crypto tech bros are uninterested in history, sociology and psychology. You don't solve the human condition with computer code.
When that trust is violated, there needs to be a meaningful way to resolve disputes. Legal tender (as in government issued) has literally thousands of years of experience with this problem, and it's no mistake that the entity with a monopoly on violence (government) is expected to resolve this kind of dispute - because resolving it may very well require violence.
The problem of course is that you're at the mercy of the arbiter resolving the disputes, but moving to crypto doesn't remove the need for an arbiter, it just removed absolutely all the legal safeguards and requirements for that arbiter. Turns out most of the "Source of trust" in crypto are scammers.
2. opportunists build an opaque system on top and promises retail the world
3. opaque systems collapse, retail gets burned
I've provided details here: https://twitter.com/brandonjcarl/status/1536310742261047296?...
By itself that's not enough for Tether to "fail". It does mean that the asset is in a position of very high risk and subject to a run.
It also seems like without catastrophic retail investment losses, politically there isn‘t much to gain with implementing such a regulation, and potentially much to lose. Reacting too late to prevent harm seems to be the logical outcome.
A lot of protections have been put into place since then. There's a reason we prosecute Ponzi schemes, offer FDIC and SIPC insurance, stress test banks, etc.
As you can see, the rates don't map to any significant overcollateralization.
I agree with you that Tether is very risky, but I think your revaluation of the "digital coins" class. In its attestations, Tether claims to value digital coins as "cost less impairment," so effectively at the minimum value the coin has reached since its purchase.
With that methodology, it is erroneous to apply "down 60% from market highs" to estimate the current value.
That said, we can speculate endlessly about Tether's ultimate solvency because we don't have a detailed enough balance sheet. I think it's clear, however, that despite acting like a bank Tether's capital could not possibly meet Basel 2-like risk weighting standards. Even with completely above-board operation, Tether would be reasonably likely to collapse if we experienced a repeat of the 2008 financial crisis.
To do this correct you'd need purchases and sales versus assets.
All that said, it's why I put a rough estimate of 30% (instead of 60%) and hadn't included any losses in broader commercial paper (which has dropped). So the overall estimate is defensible.
Also agree on Basel 2-like risk. The primary issue with Tether is the marketing around stability and the transparency. If it was treated like any other "money market" with better NAV reporting, position reporting and rules around withdrawals then we'd mitigate some of the risks.
https://coinmarketcap.com/currencies/tether/?period=1d
Perhaps the sky really is falling this time, but I don’t see that from the data.
Once people start attacking it by eg buying them for $0.97 and exchanging for $1 thrn it might be over for tether.
Who's to say tether did not just print that money BTW? We simply don't know.
I have no love for Tether and love to see it crash and burn. But until it gets close to $0.9 again, I'm sitting back and not enjoying the show, yet.
USDT is shady. USDT is not depegging. USDT FUD is a classic bear market move. Whales make a killing swapping USD for USDT and pocketing 5% for zero risk.
It feels like we'll just keep repeating the same story of tether depegging, without anyone actually looking at the redeem process and what would it truly mean for USDT to depeg.
What you're seeing is USDT-USD slip on an exchange that provides that trading pair. As it is with any other traded asset, if all of a sudden you get this huge demand for USD trading, to the point that the liquidity dries up, of course this will push the price up. Take that graph and zoom out, perhaps looking at 5 year scale. This slip actually happens once or twice a year, depending on the FUD that's on the market. Market is in extreme fear with cataclysmic level events occurring (Celsius and Terra events are close to what happened to banking in 2008 or worse) weekly. Obviously every news will cause increased sell pressure on USDT and eventually arbitration between entities will not occur fast enough.
Now let's look at what happened during the last "depegging". Price dropped to .90 cents per dollar and after a while it returned to 1 USD. Look at the circulating supply of tether - in the aftermath of Terra people actually cut 20% of all supply of USDT and converted it into alternative stable coins BUSD (by Paxos/Binance) and USDC (by Coinbase/Circle) being the primary benificiaries of the flows.
Now let's look at the "depegging" claims. Tether would need to not honor the promise of USD payout when you send them USDT. BitFinex is the exchange thats behind tether and you can redeem tether for USD. During the height of the last "depegging", you could always send your USDT there and get USD back at ~1:1 ratio (https://trading.bitfinex.com/t/UST:USD?type=exchange).
While we can talk about the USDT reserves and we can talk about shady/enron level practices and the court trials, we can also say that after 5 years of they have yet to break USDT. They've cut 20% of their circulation without breaking a sweat. USDT will not crash until there is a bigger functioning alternative. All the key players will ensure that; it's game over for crypto otherwise.
Edit: Apparently there's some news: https://news.ycombinator.com/item?id=31723878
Or, alternatively, Tether is printing money every time someone posts a sell order for USDT at less than $1.
At 0.97 that would be an immediate 3% profit for each USDT they buy.
This page is irrelevant. They are not obligated to redeem your tokens. They're not liabilities. They may pretend they are, but they're not, and if the money stops flowing, they can leave with all the remaining money in the bank laughing at their idiot customers.
I think we agree on all the rest; I also believe that it’s a scam.
It reflects their desire to have is seem that way. Given Tether's well established history of lieing to try to seem more stable, this provides zero evidence for their real attitude.
That's the real question that all the bros and shills try to hide. It isn't about when Tether's price can't be kept stable, but about when Tether decides they can't make more money off the market so takes their marbles and goes home.
It is possible that Tether wouod decide to keep holding the peg, all the way until they run out of reserve assets, but it seems highly likely that there is a tipping point well before that where Tether decides to keep their remaining assets and let the peg die.
The big question seems to be whether they do have these.
Am I missing something? That's literally how stablecoins are supposed to work. Arbitrage creates demand which maintains price.
For arb, I think the trade here is: can I buy USDT and redeem fast enough that I make a low-risk spread, or am I further exposing my funds to risk over that redemption period? Versus selling USDT for USDC, for example, which I can do immediately if I trust USDC. I imagine the latter is what's happening on-chain.
EDIT: Clarified my lazy language around low-risk arb versus peg speculation.
If tether fails to redeem USDT arbitrage will stop and nothing will prevent USDT from falling more.
That's not an arb, that's just buying low and selling high at a later date. The arb is buying something for $0.97 but then getting $1 back, minus fees. The more people doing that the closer the peg stays to $1 through supply/demand. That's the whole basis of how a peg is maintained, arbitrage players provide huge amounts of liquidity and make small margins for doing so.
we don't care when banks only have 50% of their client's money but we do when it's tether for some reason.
1) Banks don't run their own currencies.
2) Banks don't claim to have a dollar on hand for every dollar in account balances at all times.
3) Banks are FDIC insured. Even if the bank collapses, you will get your money back.
Crypto bros, it's time to stop defending Tether. It will collapse and you will look just as foolish as the people who backed Luna and Safemoon and all the other scams.
Some do, namely the Scottish and Northern Irish note issuing banks. These have to be fully backed though.
https://www.bankofengland.co.uk/banknotes/scottish-and-north...
[1] you may want to search for terms like "regulatory capital" or "capital adequacy"
That's inaccurate. The entire idea of a bank is to connect supply of and demand for money across heterogenous creditors and debtors, which includes retail depositors and commercial lenders. There isn't a "secure savings account department" and a "risky commercial loans department"; it's all on the same balance sheet.
What does protect retail depositors (to a certain limit) are schemes like FDIC. Any retail deposits not covered by that, and any commercial deposits, will receive a haircut when the bank goes under. In the EU and UK, this has happened at least twice in the last few years.
Edit: Re-reading your comment I understand the confusion. I’m assuming Tether, if it were a bank, would function and be regulated like the Trust Department of a bank.
A bank has liabilities (customer deposits, financial contacts with other banks etc) and assets (loans, cash in a vault, their central bank balance, real estate of their office locations, office furniture etc). These are absolutely all on the same balance sheet, and the difference between the two is the bank's equity. Take a look at the Fed's balance sheet, for example: It explicitly lists the land that its branches are located on, and owned by it, as an asset [1].
What's regulated is, among other things, the required equity in relation to total assets/liabilities (capital adequacy requirements) and a high enough ratio of liquid reserves to total liabilities to handle various stress scenarios (liquidity requirements).
Importantly, and this cannot be stressed enough in this context, Tether is not a regulated bank.
[1] https://www.federalreserve.gov/monetarypolicy/bst_fedsbalanc...
The Fed is not a good example of how banks typically operate or how banking regulations are typically implemented because the Fed is not a typical bank.
12 USC 92a: https://www.law.cornell.edu/uscode/text/12/92a
12 CFR §9.13: https://www.law.cornell.edu/cfr/text/12/9.13
Securities are a different story – in that case, a bank or brokerage really only acts as a custodian for the accountholder, not adding them to their balance sheet.
I remember when Tether was $0.9. Current Tether price is $0.9973. Wake me up when it gets close to $0.9 again.
Except so far each "then fine" is more fine than the previous fine (speaking about BTC historically).
Possibly a more accurate title would be Right now it is profitable to help put Tether out of business.
Apparently there are transaction fees that can allow it to stay there instead of $1, also the fact that tether doesn't give you the right to redeem for $1, but i still see it as a ticking bomb.
Crypto has been interesting to watch from the sidelines this year.
Is this a big deviation from the peg? No. But is it the first such deviation? No. Did it recover previously? Yes.
But the only thing that matters is how deep the reserves are to maintain the peg. That's it. Can that survive the turning tide of confidence in it when it eventually happens? We'll see. But my money is that psychology will win the day.
If your financial position depends on the stability of this or any algorithmic stablecoin (or probably any stablecoin) I would strongly advise you to correct that. Depending on a peg is, as Warren Buffett once put it, like picking up pennies in front of a bulldozer. Low reward and low reward but the downside is very, very large.
If I owned some stablecoin and I saw the peg slipping, I would trade everything away from the slipping side, in turn making the slip even worse in a positive feedback loop.
I'd probably write logic to do that for me automatically too...
And if just a few people did that, you'd expect the peg to hit some threshold point and then slip almost instantly to near zero...
Which isn't what has happened here.
However, TerraUSD was algorithmic, making it extra fast to collapse, while Tether's backing is much more obscure and its owners have more levers to pull to try to pop it up.
Edit: Fixed percentage, math is hard
I imagine offering 30% interest on deposits[0] helped?
Does anyone know why?
Edit for down voters: it's still not de-pegged, sorry to disappoint with facts.
Thank goodness. Every time I hear about another one falling apart, it's a joy.
I have sympathy for people who got involved, just like those who got involved in an MLM. But there is a limit to that.