Tether USDT is depegging from dollar
pro.coinbase.com
pro.coinbase.com
If you have any such sources to back up that claim, perhaps you could post them here to support your deletion request?
https://news.ycombinator.com/item?id=31723438
Although both are secondary.
But I don't think deleting the post is necessary. When a more permanent source becomes available, @dang can switch the link and in the meantime we can keep discussing the chart.
If this drops below 0.95, it's popcorn time.
These headlines come out every couple of months, nothing ever happens. In fact, odds are that Tether makes a bunch of money every time this happens.
Stablecoin issuers have basically two jobs. One is to maintain the peg. But the really important job is to convince people that even if the peg temporarily breaks: the money is still there and it won’t be the start of a collapse. Tether does neither of these things. And worse: they have a financial incentive to sweep their customers into periodic panics, so they can buy up Tethers at a discount. Nobody should be anywhere near this ecosystem, and in a world where competing options exist it’s amazing to me that people are.
B) You aren't doing any favors to the reputation of crypto bros by doing such a hard core ostrich impression.
So it will need a big big run until they start hitting their dodgy reserves in metals and loans
That's of course unless the attestation is BS or defrauded which is entirely possible
The nature of tail risk is that it seem completely impossible until, one fine day, it manifests explosively. Various other corners of crypto have recently been exposed to this lesson, often at some expense. It doesn't seem unreasonable to expect more damage to the ecosystem before the lesson is well and truly learned.
You can't take a tether and redeem it for a dollar, so it doesn't really even have a price. Tether is just a placeholder for a dollar in the crypto-world.
Furthermore, Bitcoins aren't really priced in United States Dollars anymore, they are priced in Tether Dollars. The price reported on CNBC is tether dollars.
It's so synthetic, even that chart doesn't really matter. So, where can we find real dollars being exchanged for Bitcoin? We can find that in the GBTC trust. I would argue the actual price of a Tether is equal to the GBTC discount, which currently sits at 37%. So, a tether dollar is actually about 0.62 dollars.
If the latter, how is this not the most perilous currency to hold?
Banks are not obliged to exhange currencies for you either, by the way. Many do, at a rate favorable to them.
Thanks.
I don’t know in this case but it sounds like people don’t trust GBTC.
At an over-the-counter exchange? You can literally give paper money and receive crypto and vice versa.
You can redeem tether for a dollar anytime on their website [1].
Bitcoin has multiple markets on multiple exchanges. Some markets are between BTC and USD, some are between BTC and USDT, some are between BTC and BUSD (Binance's coin that is pegged to USD etc.). The reported price is a weighted average of these markets. It is never just USDT.
There are 7 exchanges on the first page of CoinMarketCap where you can buy Bitcoin with dollars directly [2]. Look for BTC/USD pair.
You could also withdraw your money from Bernie Madoff up until the day the Ponzi scheme collapsed because the money ran out.
So the question is whether the money could run out, or whether they have 1:1 reserves.
Unpopular opinion: This could be investor panic and a temporary liquidity squeeze.
In May Tether weathered a significant liquidity crunch and recovered.
In April 2017 Tether went down to 0.9213 USD and people cried it was the end of Tether. It recovered too.
Don't get me wrong, I think eventually Tether will fall, it's all just too shady to survive long-term. But I don't think it seems it's happening now and I'm not sure it'll even happen like this. It'll start out with rumors that people can't redeem their USDT for USD, and people will pull out in a flash crashing Tether/Bitfinex in the process. It'll be faster and harder than what we've seen before.
And by the metrics so far, it's not fast nor hard enough to cause this.
Currently at 69,613,437,846 USDT.https://coinmarketcap.com/currencies/tether/
It would be very suspicious if this number doesn't go down on their next update.
Update: I get it thanks, so 1 USDT == 1 USD, but the USDT token in itself could be bought/sold at any price. I mean that's pretty obvious but I never thought of USDT as a separate instrument, I thought it was a literal "map of USD into the crypto world" (which it is, kind of, but not really, dang).
So, USDT is pretty much a future backed by USD, right?
You can sell it at a discount but why if you can get $1 for it. That makes no sense.
For tether to depeg something else must be going on
There is a huge amount of friction. It's not clear whether they run market-maker operations to pick up the spread between Tether and $1. As always, the question is what actual assets Tether has to meet its claims.
Of course they do.
On Bitfinex the peg has held strong because Bitfinex have a close relationship with Tether and enabled customers to convert USD/USDt freely (for now)
Other exchanges are experiencing either a temporarily blip (will eventually get arbitraged away) or it's the beginning of Tether being insolvent. Time will tell
This doesn't make any sense. Either you can sell it for $1 or you can't. If you can then it's free money to buy tether from people selling below $1 and selling it back to tether for $1.
I would describe the relationship between tether and bf as more than "close" they have the same owner.
assumption: bitfinex has "dollars" to backup every USDT.
If bitfinex will buy a USDT for a $1 if it drops below $1 to maintain the peg, they can do this because they have "dollars" backing each share.
however, they would also have to destroy that USDT on purchase (as they just spend the $1 backing it). They could print more USDT (/ sell that back) for $1 and they would be whole again, but if there is downwards pressure on USDT, one should expect to see the market cap for tether to drop while bitfinex is buying/destroying currently existing USDT.
If one doesn't see this drop, wouldn't that be indicative of a problem?
Though the minimum redeemable amount is $100k https://tether.to/en/fees
Why they are depegging is people are selling for under a dollar on coinbase (perhaps in panic); and Alameda Research (re: FTX exchange) who normally makes a ton of money doing the arbitrage between dollars and tether is having liquidity problems, so not doing it currrently.
The fact that people are willing to trade their USDT coins for less than 1 USD means that they do not believe those "real-world assets" exist in sufficient quantity. In other words, they are afraid that Bitfinex (USDT issuer) is scamming them and prefer to convert to American dollar, even at slight loss.
Asset. Not assets.
There is only one asset that an operation so big and trusted by so many should hold and that is U.S. Treasuries.
If you feel frisky you could do G-8 govt. bonds but that's about it really. And you are taking a chance on the forex exchange.
FTX just imploded because they didn't realize this simple fact. If you are a custodian and you are not advertising yourself as an active asset manager you should stick to US Treasuries and even that could be considered a breach because you should keep USD in a bank.
Keep USD in a bank and you have nothing to fear.
Tether themselves seem to be based in Taiwan: https://assets.ctfassets.net/vyse88cgwfbl/RPHIloRD3eE4J5QYNR...
Taiwan's extradition situation is .. informal. Because Taiwan does not officially exist. But there have been extraditions from Taiwan to the US.
They fully knew this. There is no business in keeping USD in USD (or US bonds for that matter.)
1 real billion > 20 make believe
You can officially redeem USDT 1:1 for USD. If you believe that it's fully backed and that the company honors all redemptions, you would buy a lot of USDT below $1 now, redeem it, and make a good profit via arbitrage. These buys will drive the price up again so that it goes back to $1.
Thus, the price reflects the trust in USDT backing.
Just a lot of misdirection, bs, and confirmed cases of people not being able to actually do it despite promises.
> “I’ve been minting/redeeming USDT on an institutional scale for over 3 years with multiple desks!” – said Ryan Salame, Head of OTC at Alameda Research, before adding
https://www.trustnodes.com/2021/01/05/alameda-research-revea...
Got it.
Do you have any others?
> It's sort of funny hearing people claim that you can't create/redeem USDT for $.
> Like, I don't know what to tell you, you can, and we do.
That is the same entity controlled by the same dude above. The one that is imploding due to a liquidity crisis. FTX.
Which is at least partially imploding due to…. Not being able to get customer funds out in the form of cash?
So again, do you have an example of an actual individual able to get actual cash out?
Preferably also not someone neck deep in the Tether mess, with huge incentives to make stuff up, and not actively in the middle of going bankrupt?
Edit: even better, it looks like FTX committed blatant fraud. So yeah. I’m taking anything they have said as likely the opposite of true.
From the trustnodes article, there's a link to: https://etherscan.io/address/0x1E65141A6ea081F382B737141137f...
There, we see the Alameda and FTX transactions, which we know the Alameda transactions are for redemption and we know FTX (via Sam Bankman-Fried) says redemptions work. We also see that Binance has sent the same sort of transaction (e.g. From Binance 4 to Bitfinex 3).
You started with: "Can you give an example Tether actually doing redemptions?"
I sent the trustnodes article.
You then criticized it based on the ongoing Alameda/FTX fiasco. Sure, that's all a mess and any statements like "FTX is fine" were nonsense and there's zero reason to trust them with your money. But, does that mean that they lied about their experience redeeming Tethers?
It seems that for some folks the only way they'll ever believe things like, "Tether does redeem for USD" is by actually going through the process. For Tether, that's a process requiring $100,000 to figure out. And if it works, why would you bother posting about it on the internet when Tether itself continually reminds people that redemptions are being processed?
They have the exact same issue.
Binance is literally completely untrustworthy here.
Literally the only people who say they can do anything regarding redemptions with Tether appear to be insiders with a vested interest (in the billions to tens of billions of dollars) in it looking like you can do Tether redemptions.
Which is my whole point. And you keep reinforcing it while not realizing you’re doing so.
Tether got prosecuted by the US Treasury department because of flat out lies about currency and assets backing it. Have you read the indictment? It’s pretty damning, and has a lot of concrete information in it regarding what little actual banking infrastructure they had, which was essentially none (or at least little to no LEGAl infra).
Tether has a long history of flat out lying on exactly this topic.
My exact point is, there is zero evidence from anyone who isn’t deeply in bed with Tether.
But this is people buying and selling their USDT, in a market, they can try to sell for a any price and if there is a lot of people trying to sell and not so much trying to buy, it naturally goes down in price
This variation though, while large, isn't that uncommon AFAIK
But the key word there is "IF".
The crypto-world is essentially mass scale "creative-accounting". At the end of the day the MAXIMUM amount of money that can come out, is what went in.
And "money out" includes not just the operating costs, mining fees, and other real-world resources used, but also the staggering number of thefts, rug-pulls, etc.
E.g. you're financing a factory, that takes a thing and turns it into a more valuable thing. Or a software company which ultimately saves people time. Dig deeply enough into it and you see an actual rersource-generating activity at some level of abstraction. The net resource-consumption of crypto AND the cash outflows (rugpulls, exchanges, VCs, phishing) is truly staggering.
It doesn't matter if you convert that real-world loss into casino chips, then 17 credit cards, then chocolate-coated Monopoly money. Those abstractions aren't serving a purpose. They're there purely to obscure that clear underlying resource-loss as long as possible.
Indeed, and these schemes tend to fall apart when money is no longer free (i.e. there exists a non-zero interest rate).
Also, in the process of the interest rate becoming non-zero, existing bonds fall in price (because investors would prefer the newer, higher-yield coupons).
The mistake (and also the reason for existence) of Tether was the ability to invest the money. Fractional reserve.
When your business model counts on investments always going up, you might go out of business.
The mechanism here is facilitating commerce.
A simple analogy is: You're selling oranges. I'm selling apples. Bartering is inefficient so we invented currency.
I don't have any money right now. I buy your orange with debt, you buy my apple, the fruit is used instead of rotting, etc.
Essentially we only make a deal because we want what we're getting more than what we have. So we're getting something worth (to us) e.g. 130% of what we're giving.
So every trade multiplies the effective resource by e.g. 30%. Debt facilitates the trade, while simultaneously creating the value.
Up. to. a. point.
Without spoiling the ending that everyone knows is coming... crypto is not this. Crypto is not facilitating any (legal) economic activity. Nobody is taking this and buying machinery with a resource-generating payback period.
Debt only creates value if it can be repaid. If Tether can not maintain the peg, it represents insolvency, and a net loss for the investors (rather than a win-win as a loan is supposed to be).
Seeing they also own non-USD-denominated bonds, it is not guaranteed that the principal returned will be the same dollar amount, even if held until maturity.
https://www.cnbc.com/2022/05/19/tether-claims-usdt-stablecoi...
But, what the crypto people are not telling you is that the US Government would step in and take ownership of the bank and give everyone their deposits back in checks within a few months or weeks. And because this feature of US Government regulation exists there is not going to be a bank run on Bank of America. Tether does not have this protection, so, people can panic, for good reason.
Surprise! This is inevitable without something (government perhaps?) to force transparency and accountability. Blockchain certainly can't do it.
Lacking this, everyone is essentially flying blind. It's impossible to read events in the "marketplace" without reliable data --- conditions tailor made for scams.
As it currently stands, the crypto "marketplace" was built by scammers for scammers. Swimming with sharks, it may be possible to pick up an easy meal --- but it's equally possible that you will *be* the meal.
Who do you trust more --- Binance/Bitfinex or Government?
The part you're missing is that individual and public interests arguably coincide with those of government more so than crypto exchanges.
Wake me up when it’s below 95 cents
People have been warning about this for quite some time [1]. Tether is clearly under capitalized, and if you believe the worst rumors, was basically a perpetual motion machine being used to prop up Bitcoins price.
[1] https://coingeek.com/even-binance-thinks-the-tether-stableco...
Unlikely to bring down certain exchanges that actually keeps peoples currencies around and doesn't lend it out, or fuck around in other ways with peoples deposits. Coinbase comes to mind, where if everyone would take out their money and cryptocurrency ("bank-run"), everyone would likely end up actually getting their things out, although the company in that case would still be fucked.
These exchanges are so big that a run on them would cause a run on the institutions they bank with, so you'd still get a liquidity squeeze somewhere, even with everyone acting with the best intentions.
And given recent history it's hard to know which exchanges haven't been loaning out their capital.
But this is what Coinbase themselves say:
> There can’t be a “run on the bank” at Coinbase. As you can review in our publicly filed, audited financial statements, we hold customer assets 1:1. Any institutional lending activity at Coinbase is at the discretion of the customer and backed by collateral. We have no gating for client loan recalls or withdrawals.
This is from https://www.coinbase.com/blog/our-approach-to-transparency-r...
Without such interventions a run on treasuries would be a possibility. This would lead to cascading failures as they are used in leveraged bets far and wide, from hedge funds to pension funds.
You can't hold your own coin as an asset! This is what blew up FTX.
I don't get what's the point of holding your own stable coin except to potentially double the money they have?
Lets say they have $100M in cash(from wherever). Now they print 100M BUSD with the earlier $100M backing it up. Now they have $200M that they can borrow against?
But sure, there's still too much leverage in the system probably.
The story is getting old. Like a permabear seeing financial doom behind every corner.
Also, BTC dropped 5% today and recovered.
Bravo if its a deliberate homage
I really hope it gets destroyed, really plays with peoples hopes & dreams to get rich quick.
I'd pay real money to someone sending me an SMS with a URL in it to watch.
If that were to happen to a traditional money market account it would be front page financial news.
Why is that "nice"?
>It's nicer than the alternative (to explode even later)
These two outcomes are mutually exclusive. You're speaking nonsense.
Is the most charitable reading you can give and I think it’s outside of peoples expectations of what a peg means.
I’m actually quite fine with tether having whatever redemption rules they want, but that is not the traditional definition you’d see with something like a money market. I would never say usdt is pegged to the dollar.
[0]: https://en.wikipedia.org/wiki/Fixed_exchange_rate_system
[1]: https://en.wikipedia.org/wiki/Crawling_peg
[2]: https://en.wikipedia.org/wiki/Linked_exchange_rate_system_in...
Of course, this is all predicated on you actually having the massive assets required to fight a speculative market. That shouldn't be a problem for something like USDT which should be backed 1:1. So let's sit back and enjoy some price discovery (though I wouldn't be caught dead in USDT).
I think the major issue is that there seems to be a lot of evidence that it isn't.
What if we all know it’s backed 1:1 by junk bonds?
The CME.BTCX22 has a 5% spread against spot.
How would you feel on USDC with what you just saw on USDT
Well, is pretty obvious (and everybody knew it) that is not the case.
It could mean a great deal or not much at all, and doesn't really tell us anything about the proportion of collateral unless it depegs much more and they fail to get it under control.
This can happen even if it's actually fully backed (which I doubt).
You'd only need to believe - reasonably or not - that you could potentially increase your net return on betting on a rebound in another coin by more than the depeg.
That says nothing about whether or not those sentiments are reasonable, of course.
It's pegged because they have enough money to cover their evaluation!!!!
If tether is worth 100B in market cap, they must have 100B in assets (collaterals) to cover their evaluation!
It's not a sentiment what the hell are you talking about. Economics 101
If that's the case tomorrow someone can create a new token, say is 1-1 with USD, collect a few billions and run away?
If a big investor is willing to sell enough of their tether at a lower price to affect the conversion rate (of a 70B currency), means they figured something that you didn't.
I don't know who's holding the majority of the tether and/or who's driving this discount but certainly they did the boring thing... Not looking at the *sentiment*
Hasn't that happened a few times? Luna, Celsius?
If I'm confident I can get $1000 for 1000 UDST but it will take on average a month, well, do you know what else is worth $1000 in a month? $996 at 5% APR. So 1 USDT == $0.996
To have a currency pegged 1-1 with USD (or any other currency to that extent) you must have enough collaterals to support the evaluation
Otherwise if, collectively, people put 1 billion USD in tether and then want to get it back altogether how do you think they can do if there's not an asset behind to cover the valuation?
1. Tether claims they have collateral.
2. As long as the market thinks this is true it will be pegged to $1.
3. If the market stop believing they have collateral it will depeg from $1.
4. You don't need to have collateral to peg it. You just need to make the market think you have it.
6. Likewise it can depeg even if you actually have collateral if the market thinks you're lying.
* Every 1 USDT is backed by exactly 1 USD
* Ignore the haters, it's 1:1, we promise!
* Ok well it's 1:1 cash equivalents but that's just as good!
* Ok that includes commercial paper, but live a little! To the moooon!
* Ok so it's strayed a bit and now is not exactly backed 1:1, but it's only 2.5 cents out, come on that's barely anything
I wonder what the next stage will be.
Don't forget about the transparency page [0]. It's all true! Trust me!