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Comment by bibabaloo | Hacker News Reader

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bibabaloo·

Can someone explain why the bank run on Tether hasn't already happened?

We've seen with FTX that it only takes a little FUD for people to get scared and start withdrawing.

It's not like there isn't more credible stablecoin alternatives, USDC looks a lot more credible.

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A (partial) bank run on Tether already happened. From May 2022 - July 2022, Tether capitalization went from $83B to $66B ($17B withdrawn).

The recent bank run has so far been a lot smaller. From Nov 9th to today, the move has been from $69.75B to $67.25B ($2.5B withdrawn). Maybe if the FTX contagion extends, we'll see more redemptions.

https://coinmarketcap.com/currencies/tether/

A bank "run" where it successfully honors redemptions, and the vast majority don't need to redeem, isn't really what is meant by a run.

There's no real offramp from Tether to USD. And its likely that Tether is all crypto and not much actual USD involved at all, and it looks more like crypto collateralized loans. I doubt that Tether dying kills crypto, but probably the other way around and crypto dying obviously kills Tether[*]. And the "redemptions" are likely loans being paid back (which is just Tether being returned and burned) rather than $USD going out the door. It is very simply not at all believable that the $17B drawdown in the float earlier this year was $17B of USD going out the door -- that interpretation of how Tether operates has to be wrong if you think about it for longer than a few seconds.

Destroying Tether would trigger a crash that benefits no one in crypto.

A casino going bankrupt means gambling addicts will be able to seek treatment for their illness.

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