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Comment by cypherpunks01 | Hacker News Reader

Wouldn't Tether have unraveled during the huge amount of withdrawals during the Luna collapse? I thought it was going to, but surprised that it appears to have made it through processing everyone's withdrawals.

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Tether (and the various exchanges that use it) has enough liquidity to process withdrawals, and likely has enough slack in the system to process periods of higher then normal withdrawal amounts.

As long as Tether has some liquidity, things will keep operating as normal. However, if the amount of money withdrawn is greater then the amount deposited, eventually Tether's reserves will dry up. Once that happens, anyone with outstanding USDT will be stuck with a worthless asset. Only Tether knows how close we are to that point, and they aren't saying.

They are likely not solvent (i.e. they have enough liquid funds to cover everyone withdrawing their money all at once), but they apparently can cover a high percentage of USDT withdrawals. It is still very fishy b/c if you look at the lending rates on Bitfinex there is currently an 18.825% APR for USD. If there was really zero risk with USDT I think you'd see a whole lot more volume pumping through that system.

How much of those are to cover the leverage of customers?

Very few people converted to cash. It was mostly crypto to crypto iirc (Luna -> Terra -> Tether -> BTC/ETH)

Also Terra was the algorithmically pegged stablecoin to Luna (not Tether in case that was the confusion)

UST is the algostable, terra is the chain

There was sufficient pressure on USDT, as well as cashing out to the point of USDT briefly dropping in price by a few cents, so this isn't quite accurate.

USDT experienced it's longest de-pegging event ever during the Luna collapse. It didn't drop as low as previous events but it went on a long time.

>USDT experienced it's longest de-pegging event ever during the Luna collapse.

This is not true: https://trading.bitfinex.com/t/UST:USD

A $1 stable coin being worth 99 cents is a depeg, and it was at that price for nearly a month after Luna/Terra collapse.

But it was not the longest period of de-pegging, which was your original claim.

What was? I can't really get that by just looking at some charts on an exchange...

Why can't you see that on a chart?

https://i.imgur.com/FQbszHZ.png

A quick eyeball has January to July 2018 where a Tether was worth less than $1.

It depegged for much longer periods in 2019.

EDIT: Screenshot https://www.tradingview.com/x/I92ccibV/

How do we know they processed withdrawals to plain USD and how much? Is there any tracker on that? Thanks!

I think a good way is to check out CoinMarketCap's Market Cap tracker. Let me elaborate.

I think Market Cap = (value per asset) * (total # of assets in the market). So the Market Cap of USDT SHOULD BE roughly equal to the number of Tethers on the market (assuming the price of a single Tether is stable, which isn't a bad assumption right now).

Since "every Tether is backed 1:1 by USD" and Tether is (more-or-less) pegged 1:1 to USD, if you see the market cap drop by a significant margin, it's likely that the drop was an outflow to currency. If we check the Luna crash event (~early May - ~early June 2022), we can see that USDT lost ~18B in market cap over that period. So (I think) we can assume that there was (roughly) 18B of dollar outflow over that period.

If any of my statements here are incorrect, please correct me. I'm a software engineer, not a finance artist or an MBA, and the last business class I took was summer school in High School in like 2006.

> we can assume that there was (roughly) 18B of dollar outflow over that period

Couldn’t Tether burn tokens it holds on its own or affiliates’ books to create that impression?

This is a good point - the issuer of Tether (iFinex?) could burn USDT that they hold without paying out to currency. I'm not sure how holding Tether would benefit the issuer of Tether, though, since anytime anyone transferred USDT to the issuer they would expect a cash payout. So I guess my statement "USDT is backed 1:1" should actually be "circulating USDT is supposedly backed 1:1 by USD." Any "burnable Tether" should be subtracted from the Market Cap to find the actual "backed Tether."

I don't know of any way to find how much USDT is held by the issuer of Tether (or their coparties) and how much is held by other wallets at any given time. I suspect that calculation would require a significantly greater knowledge of the blockchains that USDT is on than what I have.

You can see the "Authorized but not issued" numbers at https://tether.to/en/transparency/ and a detailed outside analysis of redemptions http://jpkoning.blogspot.com/2022/06/watching-tether.html

> "every Tether is backed 1:1 by USD"

Tether does not make this claim, I'm not sure why you put it in quotes

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