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Comment by polygamous_bat | Hacker News Reader

I think people are underestimating the problems that a blanket Tether ban from North American markets would cause. You think a Tether ban would cause people to switch to USDC? Ok, but that means some Tether needs to vanish and some USDC needs to be created. How does that happen? Ideally, it goes from Tether -> USD -> USDC... and there lies the problem. We don't know if there is enough USD in Tether's coffer to redeem all the withdrawals. And if there is not, or even if there is a doubt about it, then it becomes a game where the last person to withdraw loses. How would that look for crypto in general? How would people react to USDC if they or someone they know just got burned by another stablecoin last week?

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> We don't know if there is enough USD in Tether's coffer to redeem all the withdrawals.

Isn't that a good reason to get away from it? Since, it seems to just be a massively fraudulent vehicle that has been a direct cause of both booms and busts in Bitcoin?

This is from 2017: https://www.wsj.com/articles/large-bitcoin-player-manipulate...

>> seems to just be a massively fraudulent vehicle that has been a direct cause of both booms and busts ...

Ya. It's crypto. Any and every aspect of crypto is at least partially deserving of such description.

What about the stocks that make up the S&P500/the ETFs/mutual funds that track it? I know it isn't on the scale of "crypto scam" but a lot of people think along the lines of:

can you trust the U.S. government to do the right thing/be efficient/effective? not really

therefore, lots of debt that'll never get paid back

corporations barely turning a profit. https://finviz.com/screener.ashx?v=111&f=idx_sp500&o=-pe ton of stocks with high P/E or no earnings in the S&P

wall street/robinhood "manipulating" markets, basically designing it almost like a casino to extract money from those who get addicted to "trading"

stock market is where wall street + U.S. corporations (greedy CEOs/boards) + government/politics (regulation, interest rates, etc.) all meet

and it's less fraudulent than crypto?

i'm not saying this is what i think. i read a lot of this (pretty much MAGA crazed conspiracy theorist weirdos) on stocktwits. a non zero amount of people think this.

Okay? A non zero amount of people think the Earth is flat. That doesn’t mean we need to take them seriously.

Maybe you should be more discerning about what MAGA crazed conspiracy theorist weirdos you read, and what MAGA crazed conspiracy theories you spread.

I wouldn't say I'm aiming to spread them. I'm asking a bunch of people more educated than I (HackerNews readers) if there is any truth/concern to any of it.

You can find 10 posts in the past 30 days where people here are saying "omg, greedy corporation does greedy thing".

Just the other day we had a post saying "maybe the U.S. economy won't continue to grow forever and the stock market won't continue to return 7% a year"

Asked ChatGPT

> Is Wall Street known to be trustworthy and moral?

> Over the years there have been many instances of scandals, manipulation and fraud on Wall Street, which has damaged the reputation of the street.

Asked it this as well

> Are there instances of the U.S. government hiding the truth/lying to its citizens/being inefficient with taxpayer money?

> There have been instances in history where the U.S. government has been accused of hiding the truth, lying to its citizens, or being inefficient with taxpayer money.

I'm just trying to have a conversation. These MAGA people get a ton of power when you shut them down because they can point and say "see! listen! they don't want our points to be voiced! that means we're onto something"

Of course you wouldn't say that, but what matters isn't where you claim you're aiming, it's what you're doing: parroting MAGA crazed conspiracy theories.

"Argument from ChatGPT" is much worse than Argument from Authority. If you can't come up with your own arguments, then don't quote ChatGPT's arguments to me, just admit you're out of arguments.

Oh no, by shutting down and not listening to MAGA conspiracy theory parrots like you, I'm giving them power, because then they'll point fingers and lie, you threaten??!

Well they'll certainly point fingers and lie even if I listen to them too, so be it.

Hmm, now where have I heard that "I don't believe what I'm saying, I'm just askin' questions" line before, again and again?

Tucker “Just Asking Questions” Carlson Wants to Know What Putin Ever Did to You

https://www.vanityfair.com/news/2022/02/tucker-just-asking-q...

Fox News is 'Just Asking Questions' About the Safety of Vaccines

https://gizmodo.com/fox-news-is-just-asking-questions-about-...

Seth Meyers Nails Tucker Carlson’s ‘Just Asking Questions’ Nonsense

https://www.thedailybeast.com/seth-meyers-nails-tucker-carls...

> Of course you wouldn't say that, but what matters is what you're doing, not were you claim you're aiming.

How is me trying to discuss what somewhere between 0 and 50% of registered American voters believes in regards to "crypto fraud versus Wall Street fraud versus the stock market has been running on 0% interest rate money is basically fake fraud" whatever it is you're accusing me of doing?

I'm surprised somebody who has been on this site since 2014 with 20,000 karma is this rude/accusatory.

I and your other down voters are shutting down conversations about MAGA conspiracy theories, because this is not the place for them.

It's also not an appropriate place to post ChatGPT output instead of writing your own arguments.

Is it ChatGPT who told you to point fingers and play the victim of oppression if somebody tries to shut you down for spreading MAGA conspiracy theories, or did you come up with that yourself?

The point is that when you are spreading their conspiracy theories and telling people to let them speak and not silence them or else, that makes YOU one of those MAGA people you're warning us about. Witting or unwitting, you're useful to them.

I’m sorry but if he didn’t include that last paragraph this would have led to an interesting discussion because what he wrote is true. I disagree with the summary he’s made from that, or perhaps I disagree with the weight he’s giving to US default risk being close to that of crypto, but he’s hardly spouting some MAGA conspiracy like QAnon.

He literally admitted he hears what he's parroting from MAGA crazed conspiracy theorist weirdos, and while he claims not to believe them, he still spreads their conspiracy theories anyway, and on top of that tells people not to shut them down or else they will point fingers and play the victim. So what? Let them. They won't suddenly act reasonable and tell truth if we don't shut them down.

"i read a lot of this (pretty much MAGA crazed conspiracy theorist weirdos)"

Take it the other way, “I’ve read X by conspiracy group Y. I think I believe it but I want to ask others first as I think they’re crazy weirdos.”

We’re not bulls, we don’t have to charge when we see red (hats).

When Tucker Carlson says "I'm just asking", he's not just asking questions, he's spreading misinformation on purpose.

And again I repeat, since you seem to be ignoring it: he tried to quote ChatGPT to support his lack of a valid argument. Nobody comes to this site to have arguments with ChatGPT, and ChatGPT and language models were certainly not the topic of this conversation. He might as well have been quoting his cat walking across the keyboard.

He was unsuccessfully trying to use ChatGPT output to prove his point. If he had a valid argument that he thought of himself to support his point, then he would have posted it instead of first parroting crazy MAGA conspiracy theory weirdos (which makes him their tool, witting or not), then parroting ChatGPT (which makes him a fool).

Even if he frames himself as merely a self-appointed ambassador to HN for crazy liars, he's still spreading their crazy lies. And if he trusts everything ChatGPT says so much, then he can PRIVATELY ask it "I’ve read X by conspiracy group Y. I think I believe it but I want to ask others first as I think they’re crazy weirdos." instead of trying to spread those crazy lies and conspiracy theories here.

Hacker News is not an appropriate forum for parroting crazy MAGA conspiracy theories or ChatGPT drivel as fact, or whining about how you're the victim of oppression and censorship for being downvoted and shut down when you're clearly breaking the rules.

And his threat not to shut him down or else he'll point fingers and claim to be the victim of censorship doesn't matter if crazy liars will spread crazy lies in retaliation for being shut down, because they spread crazy lies no matter what you do, so his threat that we should not shut him down for spreading crazy lies because it will make crazy liars spread crazy lies is tautological and meaningless.

> Tucker “Just Asking Questions” Carlson Wants to Know What Putin Ever Did to You

In the interest of geopolitical curiosity and fairness, what exactly did Putin do to you?

ChatGPT's answers on questions like this aren't going to be usefully correct: they're merely going to repeat at best a synthesis/summary of what people have said on the topic in extant writings. But this is a question about trust and morals, which cannot be decided merely by consensus; any meaningful answer to it must be rooted in an actual value system and an understanding of trust.

> ChatGPT's answers on questions like this aren't going to be usefully correct: they're merely going to repeat at best a synthesis/summary of what people have said

It might repeat what some people have said. ChatGPT isn't designed to determine a consensus or to use a representative sample.

Fair. My point was largely that it doesn't "know" or "understand" anything itself, in order to draw conclusions; it merely has a whole lot of text in it and a model that allows it to associate that text very convincingly to look like it knows stuff. Thus, any answer it gives on a question like this will not be based on a comprehensive analysis of data, but rather on what the model predicts people would most likely say about the subject.

I think it's a good point, and I hate to nitpick, but a precise understanding of ChatGPT and related tech is critical.

> the model predicts people would most likely say about the subject

Is that truly the design and the output? What "people"? Is "most likely" the goal or output? Is it structured by subject?

Maybe you know, but many people are leaping to conclusions.

> Asked ChatGPT

Are you using ChatGPT as a source of truth? If so, what do you think about the obvious accuracy issues?

>> therefore, lots of debt that'll never get paid back

The last time the national government of an English speaking nation defaulted on its debt was on January 2 of 1672, with the Stop Of The Exchequer:

https://en.wikipedia.org/wiki/Stop_of_the_Exchequer

We've now seen 351 years of debts being paid on time, so why would you think the government is suddenly not going to pay its debt? You'd need a strong thesis to explain why the 351 year old trend is coming to an end.

Never said I don't think we'll pay our debt.

https://fred.stlouisfed.org/series/GFDEGDQ188S

How will that not limit us going forward / is the current rate of "just add it to debt/never pay it back" sustainable?

If people are willing to lend to the gov't (by purchasing bonds), then why is it not sustainable? Those who are doing the lending is effectively proclaiming that they don't foresee a stoppage of future lending.

just because we can doesn't mean we should?

Type "At what level does debt-to-GDP ratio hinder a nation?" into ChatGPT

I'm not talking about collapse, I'm talking about hinderance going forward

Raising debt, gotta service it, gotta raise taxes to pay for it or cut costs, no?

https://www.pewresearch.org/fact-tank/2019/07/24/facts-about...

The level at which GDP growth is higher than interest payments.

The more important aspect is not that there's debt, but how it is spent and what is being spent on. If the spending is poor (aka, the spending is malinvestment), it doesn't matter that the current or projected future servicing is OK.

Using a metric like debt to GDP does not tell the whole story.

> Type "At what level does debt-to-GDP ratio hinder a nation?" into ChatGPT

Wow, is this what we’ve come to? This is a valid thought process now?

I have no strong views on your point. But I really don’t think it’s safe to trust the very-convincing and very-possibly-incorrect responses generated by ChatGPT to inform your views (on anything).

ChatGPT would only have a cogent answer to that if there were a well-accepted cogent answer in the extant literature.

To the best of my understanding, any answers to that question in extant literature are either going to be highly theoretical, or about situations that are not sufficiently similar to that of the modern US to be helpful.

Please stop using ChatGPT to write your comments. Nobody here is here to have a conversation with ChatGPT, and anyone who wants to talk with ChatGPT instead of actual human beings can do that privately without polluting the conversations of real human beings.

Not sure how far we can go but Japan's debt is currently 266% of GDP, so the USA debt of 120% is less than half of the Japanese debt:

https://en.wikipedia.org/wiki/National_debt_of_Japan

Furthermore, this number only increases when the increase in the debt is greater than the increase in the nominal GDP (a number much higher than the real growth of the economy, since the nominal GDP includes inflation, which, in this situation, can be thought of as a good thing). If the debt grows at 5% a year and the nominal GDP grows at 5% a year, then the ratio of debt-to-GDP remains largely unchanged, especially during eras when interest rates are low.

In 2021 the euro area (17 countries) had a quarter when their nominal GDP growth rate was an astounding 45%:

https://data.oecd.org/gdp/nominal-gdp-forecast.htm

The point is, we can increase the debt every year, from now till the end of time, and that is sustainable, so long as the growth of the debt is less than the growth of the nominal GDP.

Sorry, I guess this is a tangent, but wouldn't that depend on how you define debt?

IIRC the US government failed to pay pensions for Civil War or WW1 soldiers, and the British government did something similar regarding bonds or pensions for WW1 or WW2 soldiers.

I should have been more specific, this is about paying the capital and interest on national bonds.

I know they're probably not what you were thinking of when you wrote "English speaking nation", but Belize defaulted on their debt twice in 2021:

https://www.bloomberg.com/news/articles/2021-05-24/belize-de...

Right, I don't think there is a good phrase for it, but I believe when economists make this statement they mean Britain, Canada, the USA, Australia and New Zealand. I could say "Anglosphere" but some people think that phrase is racist.

> corporations barely turning a profit...ton of stocks with high P/E or no earnings in the S&P

In the first 20 companies you compare to scams is Amazon, a company with $500 Billion dollars in sales last year [1].

[1] https://www.macrotrends.net/stocks/charts/AMZN/amazon/revenu...

I used to believe this wasn’t the case. Even the ICO craze in 2017/2018 didn’t sway my opinion. I genuinely thought crypto was the future of finance. This most recent bull cycle from 2020 to late 2021 changed my mind. I believe crypto use cases don’t extend far beyond fraud, gambling, or purchasing illegal goods. Every new project that claims to have some inherent value is just a disguise for gambling, and or straight up fraud.

> *don’t extend far beyond fraud, gambling, or purchasing illegal goods.

There are many use cases outside of these. See Cross-border payments, censorship-resistance, trust networks, access to credit, etc.

> Cross-border payments

My impression is that cross-border payments are a pretty small use case, especially if you mean legal cross-border payments. I.e., “something the law allows you to do but you can’t find a financial institution to do it.”

> censorship-resistance

Sure, but again, fairly niche at this point in time in western countries. Most financial censorship cases I’ve heard of in the U.S. sounded pretty well deserved.

> trust networks

This is a niche of a niche outside. You could just say “cryptography enthusiasts” instead.

> access to credit

Example? As in, someone with bad credit can still borrow on crypto?

>> See Cross-border payments, censorship-resistance

Both being illegal. If something is censored by government, the tools to bypass or defeat that censorship are likely illegal, especially if used to distribute uncensored copied of that material. If governments have regulated payments across a particular border, bypassing those regulations is also very likely illegal.

Crypto is the greatest solution in search of a problem we’ve got in the tech world.

Incorrect. Before crrypto a censorship resistant asset never existed. It’s the only asset that can bypass censorship.

Don't expect people from non-corrupt-government countries to understand the importance of this though.

I understand the pain point, but I just don’t see crypto as an industry capable of solving it. Just look at how centralized some of these new networks and tokens are.

Until the government shows up and starts breaking your legs

What about gold, jewelry and precious stones, cash? They can be stored on one's person or in a secure place. They also have underlying value. They're also actually censorship resistant, compared to cryptocurrencies which have been banned in multiple countries, and any determined state can block at the ISP level.

I think the point is you can't get away from it if the liquidity doesn't exist.

Not everyone can, but until there's a proper bank run, (small) gamblers can get out while the currency still has some liquidity.

March 31, 2021 reserves breakdown

This was published as a result of the agreement Tether made with the NY State Attorney General. If the NYAG had not taken action against Tether, would they have ever released this information.

https://tether.to/wp-content/uploads/2021/05/march-31-2021-r...

Note the percentage of cash and the percentage of "commercial paper" for which none of the issuers are disclosed. Are those issuers banks. Are they other crypto startups. Are they affiliated crypto entities (like Alameda was to FTX).

Perhaps I have missed the other pages of this financial disclosure from Tether, where further details are found.

> https://tether.to/wp-content/uploads/2021/05/march-31-2021-r...

This PDF URL permanently redirects (HTTP 301) to https://tether.to/transparency

https://webcache.googleusercontent.com/search?q=cache:https:...

The latest report [1] shows < 0.1% assets held in commercial paper. They didn't disclose individual issuers, but they've previously disclosed the credit ratings for the commercial paper and most were A-2, A-1, and A-1+ (equivalent to BBB and better for bonds). Since they were able to rotate out of the commercial paper, the credit worthiness of it was good enough.

There's a separate line item for "Secured Loans" which is where money lent to affiliated crypto entities would go. Tether previously stated that these loans would also be wound down. [2]

[1] https://assets.ctfassets.net/vyse88cgwfbl/1Xfu4398CIoMiuKjPh...

[2] https://tether.to/en/tether-addresses-fud-around-secured-loa...

If Tether is insolvent then better to ban it earlier than later, before it becomes even “too bigger” to fail.

This exercise will likely make Tether fail

Exactly everything is insolvent. If tomorrow people were like hey everyone USD is going to fail you’d get the Great Depression unless the fed printed money. And there isn’t nearly enough paper money for it.

That's wildly and obviously untrue. Let's look at the definition of insolvency[1] "when an individual or company can no longer meet their financial obligations to lenders as debts become due."

Take a trivial example - a person with no debts. You have to concede such people do exist in the world.

They are by definition not insolvent, and cannot be. Even if the currency completely collapsed and USD had zero value this would not make them insolvent because they have o debt and therefore no financial obligations.

[1] https://www.investopedia.com/terms/i/insolvency.asp

Then they didn't deserve to succeed.

> This exercise will likely make Tether fail

Insolvent companies usually fail anyway. It's better to catch them early before they can make things even worse for their customers and investors.

Not really, if they fail because of bank run reasons, it might be better for them to liquidate the assets slowly first, to stave off the run. Ymmv, check the accounting.

There is no possibility of a "bank run" if tether is actually 1:1 backed with USD. But it's almost certainly not, and that's why it's effectively fraudulent

They could be backed in USD denominated illiquid assets that may take time to unwound (it's kinda dumb from a treasury management POV if you keep everything in cash).

They can use overnight instruments, and its still pretty much impossible for there to be a bank run.

But it begs the question, is Tether meant to be a viable stablecoin, or is it a fractional reserve piggy bank for the Tether owners to earn interest from?

Clearly they're running it like the latter. Why would the crypto industry consolidate on something scammy like that?

That's a good point. If it's a pure stablecoin, would it be sustainable? It doesn't make sense to run a stablecoin as a charity/loss leader as there is a very real cost to treasury management and depreciation unless Bitfinex is trying to commoditize their complement.

Plenty of money market funds run with 0.1% fees. SGOV for one. These things aren't expensive to manage, it's pretty much on autopilot.

Ideally a stablecoin would be non-profit and run strictly for quality purposes with audits etc. Why would you ever need more than one? The desire to skim some off the top is far too pervasive in crypto

If it's a bubble then better to pop it sooner rather than later.

If it's insolvent it already has failed - this exercise is just about admitting that failure and making the facts known.

Finally!

> We don't know if there is enough USD in Tether's coffer to redeem all the withdrawals

We can be pretty confident that they don't. If they did they would have a third party accounting firm provide an attestation that they did

You mean like these ones? https://tether.to/en/transparency/#reports

The most recent was Sep 2022 by BDO.

They have a mix of assets (as you'd expect, because they have different liquidity requirements). But the majority is in short term (<45 day) US Treasury Bonds or Cash and Bank deposits. The other largest asset class is money-market funds, which is a pretty well understood asset class.

What auditor are they on now? When even one’s in the Caymans don’t touch you that says something.

Note that an attestation isn't an audit.

It's not nothing though - certainly more than FTX had.

I'm sure FTX looked great on paper before it all blew up

I'm not defending them.

But I am noting they do have 3rd-party attestations (NOT audits!) which is the same as what Circle does with USDC.

FTX used their FTT token to prop up their balance sheet. This attestations says USDT isn't like that.

As a matter of historical fact it didn't. Their balance sheet was an excel sheet with random entries like "fiat@: $8B".

(I don't trust any entities in the crypto space, but just for the record)

Weird how they said they were going to release monthly attestations through them and then did exactly one 4 months ago, and then in December BDO said they were going to stop dealing with crypto companies.

Oh well, probably nothing!

> they were going to release monthly attestations

Did they say this? I thought it was quarterly (same as what Circle does with USDC)

> in December BDO said they were going to stop dealing with crypto companies.

Yeah who would blame them?

Can someone explain to me how did they manage to mess it up?

Issuing stable coin seems like an easy business on paper. You collect $$$, mint coins, collect interest on those $$$ in a bank and that's your profit. Does everyone become greedy and lose the treasury in gambling instead, or what?

> stable coin seems like an easy business on paper

For one, finding a bank that will hold your money will be tough. They’re taking on significant liability, for the AML officer, personal criminal liability.

Ok, but they could still do some wealth management solution that's practically risk free. With the amount of deposits they don't even need to beat inflation to turn significant profit.

> they could still do some wealth management solution that's practically risk free

Mechanically, what does this mean? When someone buys Tether from you, to which bank account do you have them wire the money? By the way, your suggestion is a reasonable leap. But it still involves handling U.S. dollars, and now you've added a new regulated area (wealth management).

It's easy to imagine the transgressions starting small. Say you have someone ready to wire you $100mm. You don't yet have a bank account, but you're working on it. Do you tell them to pound sand? Or do you temporarily use a side account, to hold the funds until the main one is ready?

How is this issue relevant to keeping vs. losing the treasury funds?

> How is this issue relevant to keeping vs. losing the treasury funds?

It's relevant to the difficulty of launching and operating a U.S. dollar stablecoin.

Fine, operating a stable coin is not trivial.

What I meant by saying 'it seems easy on paper' is that the need to be profitable shouldn't force you to make decisions which eventually lead your treasury to not being valuable enough to back the minted coins.

Also: Perhaps I don't understand how tether works, but I don't see why they need to be liable for holding customer funds. Why do they need a deposit/withdrawal process at all? Can't they just do the following?

IF USDT on open markets is <$1 THEN buy coins and burn them

IF USDT on open markets is >$1 THEN mint coins and sell them

And then they can do whatever they want with the treasury, no? Store it in banks or buy US treasury bonds, etc. Just don't lose it.

How about something like "You buy US treasury bonds, then give those bonds to us in exchange for xyzcoin"? Likewise redemptions always paid in treasury bonds?

I'm not very familiar with how treasuries get bought/sold/transferred between parties. But they seem pretty cash-equivalent, Uncle Sam will sell as much as you want, and your profit margin is baked into it.

> Likewise redemptions always paid in treasury bonds?

This is better! But a couple issues. One, this means the U.S. Treasury has an open book into your in and outflows. Not sure that's Tether's vibe. Two, you've limited yourself to people who can transfer Treasuries. Given Tether doesn't provide consumer redemption, this isn't a huge issue. But transferring Treasuries takes more financial savvy than wiring cash, and that savvy is likely to ask for their interest (as is common in collateral arrangements).

Because your execs are affiliated with other companies and suddenly those other companies lack liquidity and need a loan. If you’re Tether, that other company is Bitfinex. If you’re FTX, that other company is Alameda.

If the other company makes good use of the loan and recovers to pay the original company back — great, you still have enough assets to cover your deposits. That may be what happened with Bitfinex. On the other hand, the other company might go tits up. Now the first company has no money to cover deposits, declares bankruptcy, and if all is right in the world the execs see some punishment.

> Can someone explain to me how did they manage to mess it up?

Ideas: Greed, incompetence, a combination of the two.

Just guesses out of thin air: Collect $1b, don't just keep $1b sitting around in low-risk instruments 1:1. Take $200m for yourself. Try to turn it into $1.2b through risky investments.

Because at that point, they are a bank. Nothing fancier, nothing further, a bank. They aren't going to be a better bank than the bank at which they deposit the real money, so what do they do instead? Just say that they're totally not a bank, not at all, and that's why they don't need to do any of the fancy paperwork or background checks or meet minimum reserve requirements, because those are things that banks are required to do, and they're definitely not a "bank".

So now there's a business where the only way to make money is to break the regulations that exist to stop banks from doing exactly what they're doing. It's in the cryptocurrency environment, where the entire culture is made up of scammers, chumps, and chumps who aspire to be scammers. And in that environment, there's a big pile of money that could be transferred out without any oversight at all.

At that point, it isn't just that people "become greedy", but that every single aspect of the situation is aligned to select greedy people and create a situation that rewards theft.

> So now there's a business where the only way to make money is to break the regulations that exist to stop banks from doing exactly what they're doing

so it worked for uber & AirBNB, i'm sure these companies doing this are asking why not for them?

Hotels are locally regulated, with side effects for maybe one town if a few go backrupt. This gives nationwide startups leeway to out-innovate regulators. Banks can have a much larger reach if they fail, and so are federally regulated. This prevents the same from happening. There are no startups seeking to out-innovate the FAA, for example.

Where do you suggest they park all that USD $$$. Banks wont touch them. You can't just buy Treasuries, as that requires having banks. Even in a bank such a high balance is not FDIC insured, so what if there's theft/fraud/etc. Its not as trivial as it sounds, and eventually you'll end up needing to create what amounts to a bank.

So what does Tether do if it doesn't use banks?

> Can someone explain to me how did they manage to mess it up?

You're assuming an intent to make (all) customers whole.

In Ponzi Scheme you collect $$$, mint coins or forge other confirmation, move money to Panama or spend it and when asked to pay out, you use other investors money. The only reason for making some customers whole is to keep the scheme going.

The problem for Ponzi operator starts when too many victims want they money back and there is no big enough source of it to cover payouts.

Your whole argument is let’s not dig, so we don’t expose a fraud?

That was my understanding at first, but re-reading, I think it's just pointing out that digging is likely to expose a fraud with massive consequences (which I agree with). Of course, we should still do it

The end game here and rug pull will be a mass conversion on exchanges to any and every other asset from usdt. Most likely this will far exceed almost every exchanges actual reserves and they will internalize the buy side and add some numbers to a database. Exchanges will attempt to redeem all the USDT they now hold, the USDT they didn't also fabricate out of thin air that is. This bank run on Tether exposes Tethers own lack of liquid reserves causing both Tether and said exchanges to become insolvent taking everyone down with them. After an event like this the utility of crypto will remain but the money won't return for a long long time. This is how I see this all going. I think places like coinbase, kraken etc Will survive but almost no one will care when the shell game is over.

Absolutely 100% this.

The bank run on Tether exposes Tether's systematic lies and inherently unworkable business model.

> We don't know if there is enough USD in Tether's coffer to redeem all the withdrawals

I'd take it a step further and say that we know Tether's USD coffers aren't deep enough to cover withdrawals. They've fully and publicly accounted for the assets that back UST and it's almost entirely in cryptocurrency which will nose dive the second people start divesting.

You seem to think that ignoring this glaring liability will somehow make it go away or will buy enough time for people to safely divest. It simply won't. The only cure for this cancer is sunlight and an ugly haircut for Tether holders.

The only way to fix this is for unstable stablecoins to fail hard and have it serve as a warning for future investors not to play with fire.

Most Tether users either aren't in North America and/or are directly holding on-chain. Add up all the US and Canadian centralized exchanges, and accounts for much less than 10% of Tether's outstanding float. Now I certainly don't know if Tether has enough reserves to redeem 100% of their supply, but I'm almost certain they can redeem 10%.

How are you certain of this? Most countries' largest banks can't sustain a 10% redemption of deposits. That would be a bank run.

Banks have short term liabilities (customer deposits and certificates of deposit) and long term assets (business loans, mortgage loans, etc.). A bank cannot call its business and mortgage loans from the borrower, so the maturity mismatch can create credit crunches for banks.

Tether has short term liabilities (tokens) and short term assets (T-bills, money market funds, bank deposits, etc.). Because most of their assets are in short term "cash equivalent" assets with lots of liquidity, Tether can more easily deal with large redemptions as they did in April - July when their market cap went from $83B to $66B.

> Tether has short term liabilities (tokens) and short term assets (T-bills, money market funds, bank deposits, etc.)

they claim.... We don't actually know what assets they really decided to hold.

They claim and BDO Italia attests that these are the assets they hold. USDC likewise posts attestation reports, so we "know" Tether's assets as well as we do USDC's.

You assume tether will allow redemption of $1 USD for each 1 tether it receives. I believe tether makes no such guarantee you can actually redeem USD for your tethers.

These are valid concerns but I don't think are reasons not to have a blanket ban. Delay in addressing the issue is simply going to result in a worse outcome for recovery because if it is a fraud[1], the ongoing costs of operation and any outflows to insiders are just going to eat away at the assets that should go back to victims. If by some strange turn of events it's not a fraud a ban would cause the backers of Tether to see sense, be transparent etc and get back on track.

In the stock world, you can't have an ETF without credible audits, regulatory checks etc. Generally speaking that means if I have an ETF which someone says will track the SPX, it has an underlying asset basket comprising the stocks in the SPX and a redemption/creation mechanism where creating new units is contingent on assets being added to the basket to ensure redemption is later possible. Vice versa, redemption involves selling those assets to give back cash.

You don't get to just say "don't look behind the curtain. Your gold is there but you don't get to look at it".

[1] Which I have said for a very long time that it very likely _is_ simply on the basis of logic. If it's not a fraud there really is no reason whatsoever not to allow an audit and have full transparency about underlying assets. They don't do this and therefore are most likely a fraud. The reason they have always given (that giving transparency about their list of assets would allow others to duplicate their strategy) is the epitome of weaksauce and reason for concern in itself. For the people creating an ETF, the ETF is a source of funding because you have the ability to swap basket assets for units and do creative things when you see units available for purchase in the market. The edge doesn't come from having super seekrit strats about what goes in the asset basket. Any alpha from teh basket contents would cause undue volatility and the ETF not to track the reference index properly.

ATM, Binance needs a lot of cash, as they are still having >$50M a day in withdrawals.

We know (from chats that were made public by FTX employees) that they are working with Tether to make sure that everything looks backed and solid and regain confidence.

It is not impossible that Binance is already in the hole, and using some of Tether's cash, or that such a position is imminent.

If we give Binanace time to stabilize before there is a run on Tether, then their combined coffers will be much larger, thus preventing the crash.

> How would that look for crypto in general?

It would look amazing.

It’s all make believe. People playing house.

We know that for banks too but that never seems to be a problem.

Can't it just go Tether -> BTC -> USDC?

That exposes you to the price of BTC. USDT and USDC should both be pegged to USD, so (in theory) the market won’t move against you while you’re trading.

How is that exposure material for a typical holder given the supposed "velocity of crypto"?

Or did mean that the implied trade is direct USDT -> USDC?

P.S. Genuine question; I don't dabble in crypto.

A BTC transaction can easily take 30 minutes to confirm. In that time, the price of BTC fluctuates and if there’s an exodus from tether to BTC, it could fluctuate a lot.

So from what you're saying, I gather that in a hypothetical USDT -> BTC -> USDC repositioning, even if you were to execute the first USDT -> BTC leg, you wouldn't be able to execute the next BTC -> USDC leg until after this first transaction to BTC has been "confirmed", and each leg of the trade "can easily take 30 minutes to confirm" all the while exposing the position to BTC downside volatility risk?

I find it very strange that crypto exchanges don't handle execution, confirmation and settlement in the same way as traditional markets.

Also, wasn't the major sell point of stablecoins to enable direct crypto-to-crypto transactions without ever needing to first settle in fiat currency, e.g. USDT -> USDC, as opposed to USDT -> USD -> USDC?

>I find it very strange that crypto exchanges don't handle execution, confirmation and settlement in the same way as traditional markets

I'm not sure what he is talking about. On centralized exchangers execution, confirmation, and settlement happen nearly instantly. Unlike with stocks there is no 2 day settlement time.

For decentralized exchanges you can do it in 1 transaction executing both trades atomically. Modern token swaps will look for the optimal series of trades to make from available DEXs to give you the best rate. It can automatically check if it's better to go straight from USDT to USDC or if it's better to swap to bitcoin first. Sometimes it makes sense to split it up so some of it is direct swap and the other part of it uses an extra leg to get a better deal.

> I'm not sure what he is talking about

I’m not a big trader, but people send me BTC about once per week. It takes 30 minutes easily to get the transaction confirmed on the blockchain. Before that, it’s not clear the transaction is legit. And I have had one or two transactions that don’t reach the magic number of 6 confirmations. I’m not sure how the sender pulls that off, but I alert them of it, don’t deliver the goods, and they haven’t complained (knowing they sent a fraudulent transaction? I don’t know)

It’s my understanding those confirmations are being done by miners who get a small fee that me or the sender’s pay.I see this labeled as “network fee”.

If someone is trading between USDT and bitcoin they are not going to be doing it on the bitcoin network. They are going to be doing it on a CEX where there is no confirmation time or they will be using a derivative such as wrapped bitcoin on another network such as Ethereum.

The 30 minute wait would only make sense if you were to trade USDT for bitcoin on a CEX, then send that money using bitcoin to another CEX to execute the next trade to USDC.

> you wouldn't be able to execute the next BTC -> USDC leg until after this first transaction to BTC has been "confirmed", and each leg of the trade "can easily take 30 minutes to confirm" all the while exposing the position to BTC downside volatility risk?

Precisely.

> find it very strange that crypto exchanges don't handle execution, confirmation and settlement in the same way as traditional markets

You don’t have to use an exchange to trade crypto. You can send crypto from one wallet to another without any exchange or anyone else in the middle (Except miners who are paid to confirm the transaction)

Are there no direct Tether/USDC pairing anywhere?

https://curve.fi/#/ethereum/swap

Curve protocol has a ton of decentralized usdt pools with massive liquidity. Most people on this thread aren't really into defi, you can tell..

Yeah I'm more of a hoodler than a trader, but it seemed unfathomable to me that you wouldn't be able to trade them directly. It's just common sense.

I’m ok with this.

Why can’t it go from USDT to USDC directly?

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