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Comment by LatteLazy | Hacker News Reader

By 2.5 usd cents?

That’s a huge deal for something that’s supposedly pegged.

If that were to happen to a traditional money market account it would be front page financial news.

Unless it goes below 0.92 USD (all time low of USDT, in 2017-2018, which it recovered from), I'm not sure it's as big deal as you make it sound like.

I would argue that means it’s not pegged (which is fine!). But people seem to think there is a peg on usdt and there isn’t, at least not as the term is used in traditional finance.

Going in with full naivety, assuming the company actually has enough USD to redeem every single USDT in existence, but it’s a slow, manual process only offered to big holders. Wouldn’t the peg still not always hold in a volatile situation, like the current one? All that’s required is enough people not trusting Tether Inc.

“it’s a slow, manual process only offered to big holders”

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.

So instead of a peg [0], it’s kinda like a crawling peg [1], or an even better match, the linked exchange rate system in Hong Kong [2]

[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...

It will go there. The ponzi will break sooner or later. The nice thing is, that the more it continues, the bigger the fall will be.

>The nice thing is, that the more it continues, the bigger the fall will be.

Why is that "nice"?

It's nicer than the alternative (to explode even later)

>The nice thing is, that the more it continues, the bigger the fall will be.

>It's nicer than the alternative (to explode even later)

These two outcomes are mutually exclusive. You're speaking nonsense.

Both outcomes are nicer than the alternative (all crypto-bros become billionaire and everyone else staying poor and being enslaved)

Money market funds sometimes are priced above or below $1 due to market conditions. It’s rare but does happen.

If a large money market fund is priced 2.5% away from peg I suspect it is either a huge arbitrage opportunity that will get arbitraged in minutes if not seconds, or a strong signal that this fund is toast. Not an expert, would be happy to be refuted.

https://www.investopedia.com/terms/b/breaking-the-buck.asp

That's precisely how you would keep a peg: let the market enforce it and bear the brunt of the speculative action, then intervene brutally to restore the peg and reward those who held the line with profits. If you do it a few times, nobody will bet against the peg ever again.

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).

Reminded of when the UK was unable to defend the stablepound against, er, Soros: https://www.investopedia.com/terms/b/black-wednesday.asp

> which should be backed

I think the major issue is that there seems to be a lot of evidence that it isn't.

> That shouldn't be a problem for something like USDT which should be backed 1:1.

What if we all know it’s backed 1:1 by junk bonds?

So the progression thus far as I see it has been:

* 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.

Minute to minute peg breaks have nothing to do with backing. You might not believe tether is properly backed. That's fine. But let's not pretend this is connected...

That's big! Theoretically you can make a lot of money on the spread ("beware picking up pennies in front of a streamroller")

Wouldn’t that arbitrage put increasing pressure on the backer? If you’re taking on risk that your 98¢ USDT is actually worth less than that, presumably you’ll want to redeem it ASAP.

You do get some pretty juicy spreads in Crypto though...

The CME.BTCX22 has a 5% spread against spot.

It can cause a bank run. Would you trust Tether or USD if you're uncertain?

If I had USDT, I would simply switch it to USDC for the moment.

If many people think and do that, it will do a bank run on USDT.

How would you feel on USDC with what you just saw on USDT

USD short term EUR and gold long term

98 cents is not a stable state for a stable coin. Either it gets back to $1 or is forced to liquidate at however much their assets fetch in a sale.

Ya how is possible? They supposed to have a 1 to 1 with collaterals to cover the valuation.

Well, is pretty obvious (and everybody knew it) that is not the case.

What do you mean? The market sets the price so it's not like it's magically fixed at 1. If it depegs it's because people lose confidence in it and don't trust the $1 value, but there's otherwise nothing special with it.

This can happen even if it's actually fully backed (which I doubt).

if you have a buyer (tether itself) that will always buy usdt at $1, then the price can fluctuate slightly in other exchanges but should always return to $1 since any fall in price becomes an arbitrage opportunity. you buy the 0.98 tether and sell back for $1, making 2 cents on the dollar. If the price keeps falling it’s because people don’t think they can get $1 from tether because they realize it’s actually worth $0. so you sell at the price you can get until the party is over. it’s not clear that this has happened yet, but it might, since tether has been extremely cagey about the assets it has backing usdt 1:1, so cagey you might suspect they are undecapitalized

Time matters too.

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

It's not even necessarily confidence (though there probably are also people who are freaking out). If people have their money in USDT and fear losing out on other action (e.g. if you believe there'll be a rebound after the big drop of a lot of the coins the other day), you may be prepared to take a loss to sell your USDT even if you have a 100% confidence that Tether will get it back under control.

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.

Lol?

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 that's the case tomorrow someone can create a new token, say is 1-1 with USD, collect a few billions and run away?

Hasn't that happened a few times? Luna, Celsius?

Exactly my point. USDT might fall into the same category

What exactly do you think you're looking at when clicking the post link? Their balance sheet?

Yes. Welcome to investment, that's how decisions are made: looking at balance sheets and boring numbers (collaterals/assets etc).

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*

All it takes is for there to be low demand on one or more exchanges and for them to not quickly enough place buys to prop it up as people choose to sell lower rather than hold.

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 doesn't indicate anything about the collateral, its a measure of sentiment and fear.

It's not! You crypto bros have no idea what are you talking about.

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?

Are you being intentionally obtuse? Let me make it clear for you once and for all:

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.

Delusional

Most pathetic Tether shill I've seen.

LOL, I've never invested in any crypto for the record. This is the secondary exchange it doesn't directly interact with bitfinex, someone would have to gobble up 100k USDT minimum to attempt to redeem at bitfinex.

Reserve Primary fund made history going to $0.97

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