Hacker News Reader

Comment by Animats | Hacker News Reader

Another one?

Tether is looking stressed. In the last three months, a lot of Tether has been cashed out. Look at the chart for Market Cap -> Last 3 months.[1] From US$82 billion to US$66 billion. Today, US$200 million was cashed out. Every few days, their market cap drops suddenly. At this rate, in a few months we'll find out how much backing Tether really has, because it is being paid out.

Stablecoins have two stable values: 1 and 0.

[1] https://coinmarketcap.com/currencies/tether/

View on HN

Tether's market cap dropping without a price drop is indication that they are liquid and able to handle (to date) almost $20 billion in withdrawal over a 1 month period. That is impressive and a sign of their robustness. They are passing a stress test so far.

Their blog counters much of the FUD out there: https://tether.to/en/news/

"The valuation of the assets of the Group have been based upon normal trading conditions and do not reflect an unexpected large-scale sale of assets, or the case of any key custodians or counterparties defaulting or experiencing substantial illiquidity, which may result in materially different or delayed realisable values. No provision for expected credit losses was identified by management at the financial reporting date."

Yesterday, Voyager could have said that.

Whats the limit on withdraws before they have liquidity issues? Easiest way to make investors confident is due a full audit with a top 4 auditing firm.

https://tether.to/en/transparency/#reports

They claim 85% cash/cash equivalents, 15% less liquid assets. Cash equivalents is broken down also, 55% is Treasury bonds.

Thats meaningless unless it's an audited by a top 4 firm.

You mean like Earnst & Young who was just fined $100 million for overlooking cheating by their employees on the ETHICS portion of the CPA exam? I agree something is severely broken about Tether, but it’s also clear that auditing firms can be crooked, too. I would not trust an audit to expose Tethers shortcomings. After all, the auditors can only report on the documentation provided to them … they specifically do not determine the legitimacy or validity of the documents provided (iow, false documents are not vetted in any way).

Remember WireCard’s fraud? If not:

https://en.m.wikipedia.org/wiki/Wirecard_scandal

E&Y: https://www.msn.com/en-us/money/markets/ernst-26-young-cheat...

If you’re arguing the auditing firms can be games and Tether can’t seem to pass an audit by them, that seems worse

they have committed to being audited by a Top 12 accounting firm, which is laughable

https://twitter.com/WatcherGuru/status/1538815060298063873

Their audit has been forthcoming for over 5 years at this point. I wouldn't hold my breath.

(Also note that attestation ≠ audit.)

One only needs to look at the "signature" under the attestation doc to know its fraud.

It seems like it would be pretty binary. That is, withdrawals would be orderly... until they are suddenly not. It's not very good evidence for the state of their backing now. Maybe they've chewed through all their liquid assets and will explode tomorrow, maybe not.

That is, withdrawals wouldn't shake the Tether price at all until someone is told "no you can't withdraw today" and decides to sell their Tethers on the market at a discount instead of withdrawing at par.

That’s an often stated truism that is false.

You could have a situation where Tether is 80% capitalized, in which case one USDT is worth $0.80.

Or a situation where they have money locked in Treasury bonds for 1 year. In that case, the value of USDT depends on your discount rate and is around $0.95.

Yes, it’s possible that Tether is suddenly unable to be exchanged for dollars, but it’s pretty impressive they’ve been able to handle a sudden outflow of 20B. They’ve certainly proven their most harsh critics wrong, but there is still risk of course.

I dunno, if I put $80 of cash into a black box and pull out $20, that doesn't tell you that much about the remaining $60, just that the box wasn't secretly a paper shredder the whole time. Which is great news for the lucky early redeemer. Not much use to later redeemers though, if it turns out that the remainder was eaten by hungry rodents.

Depends on how you see it, I am impressed there was even $20 in the box given how poorly and non transparently they are governed.

The current global market climate makes it tough to keep the $80Billion in investments both liquid and on par even if they invested in traditional portfolio baskets, a traditional bank would likely struggle if quarter of their deposits liquidated in a month and may not be able to easily meet cash reserve ration requirements to support future withdrawals.

I think this FT article suggests the blog isn't entirely comprehensive

Tether’s mystery commercial paper exposure - https://on.ft.com/3yzXTua via @FT

Madoff was able to handle withdrawals until one day he wasn't. Only then the Ponzi collapsed.

This is not a very good way to distinguish a fraud from an honest business, especially if you're not the one who already withdrew.

“FUD” is what all the coiners say it all is until the blog post happens and it’s all over. It was the same with LUNA.

Any intelligent and comprehensive assessment of the information on tether will tell you that it’s likely to be outright fraud.

The have had to unwind a double-digit percentage of their portfolio, in a down market, in a very short amount of time. The total net effect of doing so has been to collect something like 0.00001% net profit. That is simply not credible.

You do understand that Charles Ponzi’s ability to meet early redemptions is exactly what gave him credibility?

Nonsense. All they'd have to do is have $20 billion in cash to satisfy $20 billion withdrawals. It doesn't mean anything about the rest of the money. The next $1 withdrawn could bankrupt them for all we know.

why?

> At this rate, in a few months we'll find out how much backing Tether really has, because it is being paid out.

As someone who's been watching Tether since it's inception, I say don't count on it. They've managed to continuously escape the consequences of running a dangerous fractional reserve system.

The main beneficiaries of this system are now companies with incredibly deep pockets who aren't afraid of deploying that capital to keep the system afloat.

I used to think Tether would fall apart with a long enough bear market. Now I think it will stay afloat until it's captured by the US government. Or until it's acquired by a U.S. company that's willing to turn over customer trade data to a "5 eyes" nation in exchange for their help and leniency in restructuring it so it can continue to operate with the government's blessing.

Have you ever considered for a nano-second the alternative that they actually might have the reserves to back it all up?

Based on what evidence besides their word? There's been innumerable investigations and analyses which, while not 100% conclusive, raise mountains of evidence to the contrary. And they've already been caught lying with Bitfinex.

It's not really proven they have full reserves but it's not proven that they do not. It's all speculation really.

Like the OP said, there is no evidence that’s true and enormous indications that it’s not true. You’re essentially saying this on faith

Tether is an inadvertent pump and dump scheme similar to Mt Gox that is surprisingly still working.

https://www.theverge.com/22620464/tether-backing-cryptocurre...

They just keep launching coins in a desperate attempt to raise capital. They are launching a new coin pegged to the British pound.

This isn't "launching coins in a desperate attempt", it's providing stablecoins in the FIAT currency that the market would want - in this case one of the world's most popular currencies.

Do they make money from this? Yes or no.

Yes: from creation and redemption fees, and interest on the float, which is gradually getting higher.

Reply on news.ycombinator.com