Tether's USDT Stablecoin Slips from $1 Peg | Hacker News Reader

Tether's USDT Stablecoin Slips from $1 Peg

coindesk.com

90 pointstop_sigrid50 comments

And back up to 0.99 on Coinbase as I type this: https://pro.coinbase.com/trade/USDT-USD

Meanwhile, Alameda (SBF/FTX's trading arm) is apparently shorting Tether. https://twitter.com/mhonkasalo/status/1590665714490544128

Which is particularly interesting since they're known to be one of Tether's largest customers. The only rational explanation I can think of is that they think Tether is primed to tank, and they're trying to beat the rush to the exits like Goldman Sachs pouncing on Bear Sterns.

Shorting tether can simply be a hedge against falling tether if you are holding large amounts. Doing that with stocks is completely normal and nothing to raise an eyebrow about.

Out of curiosity, why is shorting better in that situation rather than just selling part of what you're already holding?

I mean, why is being long $100k USDT and short $50k USDT at the same time better than just being long $50k USDT?

I don't have trading experience so this is not very intuitive to me.

Edit: oh, I think I get it. So if you were short $SOMETHING/$USDT then you're effectively long $USDT so if $USDT falls/crashes (i.e. loses its peg) even though $SOMETHING remains equally as valuable (as measured in other currencies), then you could lose a lot of money even though the underlying value of $SOMETHING hasn't really changed. So you could short $USDT/$USD to mitigate $USDT crashing when you're only interested in shorting $SOMETHING. I guess that makes sense?

sometimes you do this to delay tax events.

I'd say it's more of an issue that they are still trading when potentially insolvent

Large holders of Tether would be pretty dumb to short it, as they'd be shooting themselves in the foot. If Almeda indeed knows something the rest of the market doesn't, they would (assuming rational action) quietly be exiting their position.

They could do both, cut their losses by selling and selling high, buying low other people's Tether, depends on how much of their own holdings they can liquidate.

depends on the payout if your short is better positioned than your holdings...you short. Like Deutsche did 2008.

Did I count the zeroes right? How is a 250k short worthy of notice. It’s more like FTX still gambling using the last scoop of their customer’s money.

Everytime tether goes 0.99c these wishful thinking threads appear. No thread is created when the value is 1.01. Perhaps those fluctuations are the norm price on exchanges?

I’m not defending tether (I’m going to be downvoted to oblivion anyway because these types of threads are based on spite rather than logic) but it always have the “raises fist this time I got you spider man” vibe.

Actually, it went to ~0.95 (and apparently went 0.93 on a single exchange). 0.99 is not really significant (and is usually not pointed out anyways).

Correct me if my data is incorrect, but checking on historical data it seems that (except for its early days) Tether didn't went above 1.02, so that's maybe the reason that all of reports were dips?

Sure, it's FTX, but Tether traded up to $1.20 yesterday.

https://ftx.com/intl/trade/USDT/USD

To add to this, USDT:USD reached $1.20 on FTX yesterday, and has spent most of today and yesterday above $1.01 with around ~$10M trading every hour. Even though FTX has halted withdrawals and is presumed dead, this type of trading activity is useful in understanding how stablecoin markets perform under extreme stress.

https://ftx.com/intl/trade/USDT/USD

"A representative for Tether told CoinDesk in an email that issuer Tether Global is unexposed to both Alameda and FTX."

Well, except in the broader sense of crypto contagion. Tether is certainly exposed to BTC and ETH, both of which are plummeting this week.

> Tether is certainly exposed to BTC and ETH, both of which are plummeting this week.

Why certainly? It would be quite remarkably dumb. In theory, a fiat-backed stablecoin is only supposed to be exposed to the fiat it is backed by.

We had that recent-ish case in the New York courts that uncovered that USDT is mostly not backed by fiat currency, and that they had been lying about this since at least 2017.

I understand that they deviate from theory (e.g. with commercial paper, treasury bills, etc.) but backing USDT with BTC/ETH would be next-level stupid. Did the case you mentioned uncover that USDT was backed by BTC or ETH?

They have said they are backed by commercial paper, but as many financial journalists have pointed out they would have to be one of the largest traders of commercial paper and none of the people who deal with commercial paper in the US have them as a counter-part. That would leave Chinese commercial paper which is the sketchiest thing in the world. You would only buy that to skim money in kickbacks, it would be a terrible reserve.

Also: We just saw a supposedly reputable exchange blow up. These are the people who have lied enough to actually prompt US regulators to act: a hard bar to clear.

It's not "next level stupid" -- they will make billions. You could say (particularly with hindsight) that they could have made a fortune with a legitimate stable coin. But I don't think the economics would have worked for a legitimate stable coin to scale up fast enough to keep up with the scam ones.

I wasn't claiming that USDT was fully backed by US dollars. I was disputing the claim that their reserves are certainly exposed to BTC/ETH. I just don't see why that would be the case. Even if they were running a proper scam with basically no USD reserves, it does not follow that they are exposed to BTC/ETH.

It found that they are seemingly desperate to prevent the public from finding out what’s actually on their balance sheet.

I guess folks need to make their own decisions about whether being shy of sunlight suggests a need, or a lack of need, for disinfectant.

(Also, the original claim I was responding to was not that USDT is not backed by BTC or ETH, it was that USDT is backed by currency reserves. I don’t really know enough about these things to know if the goalpost needed to be in its original position, but I do feel obligated to point out that I see it moving.)

Because cryptbros are incapable of taking the wise choice when the greedy choice is on the table. So predictable.

crypto, stocks, derivatives - greed is the major propeller of all of them

Yes. It would. And yet they do.

I assume that holders of USDT are, perhaps, concerned that Bitfinex and Tether are similar to the FTT token. They may wonder if Bitfinex has Tether on its balance sheet and that the Tether is not actually backed by reserves as claimed.

In May, Tether weathered a significant liquidity crunch and recovered its peg by July.

I really don't know enough about this topic to judge the impact, but from the data I can see this looks like it depegged lower than in the previous incident that was widely reported. That one was to 0.995 and this one is to 0.990 (at the moment I looked it up).

I believe the all time low of tether is 0.92$. So it has recovered from worse.

Yeah, it's a non-story, it's almost never exactly 1:1 in secondary markets.

The primary market for tether has huge transaction fees, so any collapse will happen on secondary first.

I am not a markets expert, but I would guess that straying far from $1.000 on the secondary markets for any length of time at all is a sign that something very bad is simmering under the surface. There should, I would think, be enough liquidity in a fungible, theoretically stable asset like this that such a glaring arbitrage opportunity can only exist on quantum time scales.

I am waiting for a panic spreading tweet from CZ. He has his own stable coin so it would make sense to spread panic here. But this may be giving the game away a little too obviously, so maybe now isn’t the time.

I do expect unless something else drops that Tether will survive this.

> He has his own stable coin so it would make a bit of sense to spread panic here.

Yeah that couldn’t possibly backfire

It’s seeing significant borrowing on the DeFi platforms too, perhaps in anticipation of a price collapse (which would make it easier to pay back):

Aave, 60% to borrow: https://app.aave.com/reserve-overview/?underlyingAsset=0xdac...

Compound, ~40% to borrow: https://compound.finance/markets/USDT

6 months ago as well: https://news.ycombinator.com/item?id=31349988

> USDT is trading at 97 cents on several bourses, and briefly fell as low as 93 cents on the Kraken exchange.

Is bourses crypto jargon I'm not aware of?

> Is bourses crypto jargon

Much older than that, it's more general finance jargon. The relevant definition[0] is:

"A stock exchange. (figuratively) Any place, real or imagined, where the value of a thing is settled."

[0] https://en.wiktionary.org/wiki/bourse

It's a common term for a stock market in non-English speaking countries.

Bourse in French means a sac/purse, scrotum, a scholarship, a market, and the stock market. Not sure what the origin is but it's not Latin.

Edit: It's from Greek inspired mediaeval Latin bursa meaning leather

It translates to market or marketplace

Strange that the price has dropped a lot less on Binance, to 99.8, while it's 97.x on Coinbase

Presumably Tether run market-maker operations to stabilize it, but that requires keeping actually valuable cash at exchanges, which has its own risks. They can run out of firepower, and it's not as simple as it sounds to arbitrage between exchanges.

it doesn’t sound simple. if i’m understanding correctly it sounds like it could very quickly lead to competing demands of more and more money from competing exchanges

Looking like it might drop below 98 cents soon. Interesting

97 cents on Kraken now

I don’t really follow in detail. What am I getting when I Google search “usdt price”?

(97.5 currently).

And yet it's a bit over one dollar on Bitfinex. It's gotta be bad, they're not even bothering to make it subtle this time.

Bitfinex and Tether are effectively the same company, so the Tether price there is disconnected from the rest of the market.

It finally has begun.

https://xkcd.com/1656/

Is this the same as breaking the buck?

Yes, if it sticks, but Tether has had a couple of scares before and bounced back.

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