Tether ownership and company weaknesses revealed in documents
wsj.com
wsj.com
It's not a pyramid because it was always made explicitly clear it was exchangeable for nothing, like if I sold you pieces of paper with my signature on it.
They also refuse to disclose the nature of their reserves beyond unaudited attestations, and are known to have lied regarding their reserves multiple times before and admitted as such in a settlement.
> Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all.
> 14.8. any delay in withdrawal or redemption, or loss of value of Tether Tokens or the Reserves backing such Tether Tokens resulting from failure or insolvency of any bank, depository, custodian, borrower, or payment processor holding or processing the assets backing Tether Tokens, or from the theft of such assets, or from freezes, seizures, or other legal process asserted by a Government; or
> Any use, whether actual or suspected, as described in this paragraph shall constitute a “Prohibited Use”. If Tether determines that you have engaged in any Prohibited Use, Tether may address such Prohibited Use through an appropriate sanction, in its sole and absolute discretion. Such sanction may include, but is not limited to, making a report to any Government, law enforcement, or other authorities, without providing any notice of you about any such report; confiscation of any Fiat, funds, property, proceeds, or Digital Tokens in any Digital Tokens Wallet that you have on the Site; and, suspending or terminating your access to any Services or Fiat, funds, property, or Digital Tokens from any Digital Tokens Address.
So they can confiscate all of your funds if you engage in prohibited use. What might that entail? In addition to the normal money laundering, committing crimes, etc, they count such dastardly things as:
> 8.8. use the Site or any Services to engage in conduct that is detrimental to Tether or to any other Site user or any other third party;
> 8.14. where you are subject to prohibitions or restrictions as set forth in paragraph 3 [Identifying yourself as being from the US], access the Site or use any Services utilizing any virtual private network, proxy service, or any other third party service, network, or product with the effect of disguising your IP address or location, or access the Site or use any Services using a Digital Tokens Address in or subject to the jurisdiction of any Prohibited Jurisdiction or Government or Government Official thereof; or,
> 8.15. violate, cause a violation of, or conspire or attempt to violate these Terms of Service or applicable Laws.
So if you break their TOS, lie about being from the US, or engage in conduct that's detrimental to Tether, they can just take all of your money and tokens per their TOS.
Participating in a run on tether is detrimental to tether, ipso facto every withdrawal is up to tether's sole and absolute discretion.
There’s something to reflect on right there.
First, all money is delusion, that's a documented fact (or to put it nicely, currencies rely on user's faith/belief to function).
Second I do agree with you, but I believe it's only part of the story.
I think tether also does actually provide a tangibly useful service to the crypto world, specifically high-speed liquidity to exchanges which is why the scam is allowed to continue.
My bet is that the day a legitimate (as in: transparent, properly audited by both traditional accounting firms and blockchain techniques), incorporated in non-banana-republic jurisdiction, etc ...) competitor comes around, Tether will die in an instant dumpster fire.
Startup opportunity y'all.
You can't square that circle because the money laundering controls aren't solvable enough to be in a regular jurisdiction and have psudonymous permissionless blockchain transfers.
The thing that they didn’t anticipate is that the market wouldn’t care.
I’m going to predict that the crypto markets will suffer much more compared to even FTX and anything before tether finally goes under
How have the crypto markets suffered from FTX's collapses?
There was a temporary dip at best.
FTX and other exchanges are the very negation of what makes crypto interesting:
- centralized
- not transparent
- customer abandon custody of their money
Tether is an altogether different beast.
It's indeed very likely a scam, but it seems that it is filling such a huge and legitimate need in the market that has allowed it to survive for so long.
USDC which is more scrutinized is 1/10 of the Tether volume. BUSD 1/4 (not bad!) [1]
[1] https://coinmarketcap.com/ (sort by volume)
tether/bitfinex basically scammed there way into solvency
plenty of other scams need attention
How long will this charade last?
In tether, there is no real way to short it because of the counterparty risk -- if you short Tether and win, when the time comes for the payout your counterparty would have gone the way of Tether itself, and you will have no one to collect payouts off of.
any yet, back in the GFC, people shorted mortgage bonds so much that paying out would've bankrupted the banks (as they are the counterparty). So why doesn't that apply here? As long as you are the first to collect the short, you will still win.
(There are still ways to guess right, but lose big on a trade, like shorting a company, whose stock collapses, and then gets delisted!)
In the crypto world, your counterparties might, quite literally, run off to Singapore, leaving you holding a worthless bag of toxic garbage.
You then have a different risk though, protocol (smart contract) risk. As long as the smart contracts don't have exploits, you'll be able to withdraw your collateral after repaying your borrowed Tether.
Of course, this also means you have to be fairly overcollateralized. If you want to short say $100 of Tether you'd do well to deposit $200 of funds as collateral, because each asset has its own collateralization ratio that's not 1:1 to protect against liquidity crunches.
Aave and Compound (v2) would be safe places to execute a strategy like this, as they've been battle-tested for years at this point and have received multiple audits.
There's always risk of course, but I don't think this is any more risky shorting through a centralized exchange, and much more transparent than something like shorting traditional securities
So the liquidity is enough for small fishes to take bets that they don't know is actually swindling them out of their money. However, it is not large enough for an institutional/activist investor with a few billion in capital to take up a real position against Tether/Bitfinex.
More people borrowing drives up the supply rate, until more suppliers come in.
You can probably only get so much Tether into the protocols that way, maybe $5-10B
I didn't realize you were talking about shorts of larger size though. I think you'd have a hard time shorting, say, 20% of the supply of a stock also
This of course doesn't prove that they don't the reserves, it's just that this is a bad argument.
Tether continues to survive for one simple reason, up to this point anyone has been able to redeem 1 USDT for 1 USD through Bitfinex and that ultimately is what holds the peg. Bitfinex themselves buy up USDT when it dips below 1 USD which is actually one of their sources of revenue and about 60% of all USDT is held on Bitfinex.
What do you mean "up to this point anyone"?
For several years Bitfinex (who also assured everyone that they had NOTHING to do with Tether) or Tether would only let you redeem if you were a "whale" with over $30K in holdings, were a non US-national, were subject to a six month waiting period. Random people absolutely could not redeem say 10 USDT.
Also during that period people would post bounties, some of which were a couple of thousand dollars, for -anyone- to demonstrate that they'd been able to redeem, and none of those bounties were ever claimed.
Things might be different now, but let's not try to claim that it's all been all good so far.
Who can actually profit from it falling? The problem with shorting it is that you have to find someone who will remain solvent when Tether collapses to take the other side of the bet.
That kind of sounds like magical thinking. On the other hand trying to short USDT sounds insane from a practical point of view.
I think the reality is that we talk and think about all crypto way more than they actually are going to matter, particularly relative to the amount they are actually used. Not the BS "market cap" which is phoney in so many ways. Can we admit that maybe this isn't very important?
I don't have any doubt that tether is up to all manner of funny business (e.g. printing unbacked coins and loaning them out for people to 'invest' in defi ponzis), but mostly its used to trade against varrious altcoins that are only traded on off-shore exchanges not used to trade against Bitcoin. The arguments that it plays some major role with bitcoin from what I see appear to be conjecture and logically unsound reasoning rather than clear and convincing evidence.
If you're aware of something better-- I'd love to see it.
Absent that kind of connection I wouldn't be surprised to see demand for Bitcoin _rise_ once the instability fear cleared: prior to tether being used to purchase sketch-coins at offshore exchanges Bitcoin was the exclusive option for that purpose.
The price of bitcoin will never fall faster then the time it takes to login to a darknet market and update a listing.
This is already being frameworked. “Coffee shop” sales of cryptocurrency (even BTC) is now de facto illegal in the USA. You can’t post a Craigslist ad saying “hey I have 100 BTC willing to exchange for USD”. The feds will (and have!!) arrest you for violating AML/KYC.
XMR is currently being considered for an “asset non-grata” classification where any exchange doing USD/XMR transactions would be held accountable for facilitating money laundering because participation in XMR inherently assists in laundering money.
Suppose I buy a bored ape or whatever, and then I sell it, and then the person I sold it to uses one of those non-KYC exchanges to buy XMR. How are the feds going to know whether it was me on both sides or not?
Are they going to correlate my IP to McDonalds wifi and subpoena the security footage and get me via facial recognition? At some point it's just too expensive to chase down.
US financial sanctions are very intense. The bank/instution that is converting fiat to XMR would be a complete pariah, unable to participate in any global banking or have any transactions with any bank which needs to participate with other global banks.
If you are an institution selling XMR and taking peoples fiat, you would have nowhere to store the fiat. You would have no one (Stripe/Visa/SWIFT/ACH/PayPal/etc) who would process those payments. You would be unable to travel to any western country. Anyone who does business with you could also get similar sanctions.
You could perhaps trade XMR<->ETH or something like that...but eventually someone with the XMR will want to convert it to fiat, and that would not be possible. Anyone doing a lot of BTC/ETH<->XMR trades could be found via blockchain analysis, and similarly investigated and prosecuted for participating in XMR, because XMR facilitates money laundering.
If the US government wants to ban an XMR, it can ban XMR.
The only way I see this kind of works is if they ban crypto in general, and then ban cash in the mail too. Oh yeah and ban foreign trade, because as long as it's legal somewhere else you can spend XMR in THAT country in the form of importing goods to the US and then sell those goods for cash. We're talking about bits in the ether, and unlike with bitcoin at least to our knowledge the public ledger is not traceable. Seems like a tall order.
I mean, yeah this is already done. Over $10,000 requires you to file a FinCEN Form 105. The point isn't "you can't send money" its "The US government only wants to allow systems to exist in which it knows who/what/when/where about any non-trivial sized transaction."
If there's an auditable/subpoenable record, they're happy. If not, they're not. Right now they're "not happy" about XMR. Some day they'll ban it.
As for ETH/BTC<-> XMR they'll probably ban that too. Not from a technical perspective but more like "if we catch you sending ETH to that Russian XMR exchange we'll prosecute you."
I cannot offer legal advice here, but my understanding is if Bob in NY has the fantastically idiotic idea to send $100k through the mail to cousin Suzy in CA, he wouldn't be violating in laws by not filling out the 105 or IRS 8300. He's not engaging in a trade/business and the money is not leaving the borders.
And even if they didn't, that BTC could indeed no longer be allowed in the US controlled banking system (which is far larger than the West).
Of course, if your friend were able to redeem buy actual goods for XMR and send those back to you, great. But what goods vendor would want to own XMR in a world where no institution that does business with banks would want it?
Note that what I'm saying is not purely theoretical - this is the status of Tornado Cash - where they went so far as to arrest developers of that. And banned BTC also exist - there are BTC that are illegal to own, and wallet addresses that are illegal to trade with.
I suppose if they could buy XMR with BTC and see which output addresses were involved with that transaction--those would be addresses controlled by users of the DEX. And then they could buy BTC with XMR, harvesting a few more addresses.
But if they run analysis like that continually they're going to end up paying a lot of money to the DEX in fees.
In fact, the exchange might not even need real users at all. They can just generate enough noise to attract the government's attention, and then soak up the government's money while letting the government spy on a bunch of robot activity.
It's gotta be one of these:
- ban crypto entirely
- give up on drug prohibition
- burden taxpayers with an endless game of whack-a-mole which slowly transfers value out of the US economy without achieving meaningful enforcement goals
I've got a guess about which one it will be.
For instance if you receive $5 and then later send $5, your wallet can just send it from a single address, so none of the other addresses in your wallet can be correlated (via chain analysis) with that transaction. On the other hand, if you have addresses with $2 and $4 and you wand to send $5 then both will be involved in the transaction, plus you'll be getting a new address where you get the change ($1) back.
It would be the same for an exchange. A single address (or a hard-coded list of them) would be a centralizing feature, if it has that, it's not a DEX (because whoever controls the keys for those addresses controls the exchange). A DEX would have to make buy/sell orders happen based on some set of addresses that were not around for the founding of the exchange. Likely, those addresses would also not stay around for its lifetime. You'd generate them as needed and forget them when they no longer served you (I suppose "you" are a DEX node in this scenario).
What's uncertain is just how interconnected they'd have to be. On one hand, you want to keep the list of known associates small so that token taint doesn't spread to all users of the exchange (which is what you described in your previous post). On the other hand, maybe you want the list of participants to be large enough that it's not practical to send an agent to kick down each door in the list.
If anybody can find the maximally infuriating size here, I'd trust that it's the kind of person who would write a DEX.
It's kind of like a company's war chest bank account: no matter what happens, the value of the asset is worth at least that much.
But it's a little more pernicious than that. Tethers are typically emmited conveniently at times where the price of crypto is going down, propping the value up. If the current value of BTC exists because of artificial upwards pressure, it's likely that the value should settle back down to where it would have been if not for said pressure when released from it.
In theory, slightly depegged tether is actually to their advantage, assuming they have enough capital.
why is that? Do you mean that they could buy tether back at a lower price than they issued it at, and thus pocket the difference?
Even if they were undercapitalized in the past my guess is they are fine now
What do you mean by that? What do they do with the tether they issue then?
Which would explain why nobody in the financial industry knows them even if they supposedly manage 60B$.
They’re your own IOUs [1]. Imagine if SBF had Tether.
[1] https://ag.ny.gov/press-release/2021/attorney-general-james-...
https://tether.to/en/tether-banking-relationship-announced/
From https://www.deltecbank.com/2022/09/01/the-history-of-stablec...
> Tether
> Launched in 2014, Tether (USDT) came to extraordinary success with a current market capitalization exceeding 67 billion USD.
> This stablecoin fixes the issues inherent in the previous three. It relies not upon volatile reserves or the idea of persistent arbitrage trading, but on hard reserves of fiat currency. For every Tether coin in existence, there is one US dollar in a vault backing its existence.
> In this way, the stablecoin handles a complete theoretical rout with ease. Tether continues to serve the burgeoning digital asset space while garnering the implicit affection of regulators.
Interesting relationships with FTX - apparently SBF gave them a $50 million loan to keep operating, and they’re neck deep in that mess.
https://www.forbes.com/sites/davidjeans/2023/01/15/ftx-delte...
Might want to give them a year or two before figuring that isn’t another smokescreen.
Deltec's response is that they're awaiting instructions on how to repay the loan:
https://www.deltecbank.com/2023/01/16/deltec-bank-trust-limi...
Aka it stinks.
Of course, someone somewhere in the future will be left holding the bag. But if they can keep it going, and if they do manage to sell some USDT for real money (which they certainly did), then they can still make a load of profit.
While the treasury market is large the players are small and no one claims to work with tether.
You can’t roll billions in treasuries without all the major players knowing who you are.
And if they did they would release their cusips and put this to bed as there is only downside for them by withholding the cusips
Attestation reports from BDO Italia state that they hold US Treasuries and that this makes up the core of their holdings.
https://tether.to/en/transparency/#reports
> While the treasury market is large the players are small and no one claims to work with tether.
Even firms like Cumberland who are known to participate in the Tether creation/redemption process do not talk about working with Tether
https://protos.com/tether-minted-usdt-stablecoin-crypto-two-...
For the US Treasury market, the players are not small. Maybe that was believable for the commercial paper dealings for Tether, but you can just directly buy from the US Treasury at auction, or go through a banking partner like Deltec Bank, and none of "the players" will know anything about you.
> You can’t roll billions in treasuries without all the major players knowing who you are.
Of course you can. Direct and indirect bidders for US Treasury bills are routinely in the dozens of billions. No need to go through a primary dealer.
> And if they did they would release their cusips and put this to bed as there is only downside for them by withholding the cusips
Would you honestly be convinced if their attestation reports included CUSIPs? Do you think that people would still clamor for an audit and just move the goalposts to "anyone can look up CUSIPs for US Treasuries. Why aren't the primary dealers confirming their purchases?"
Yes because that would be verifiable and we could know the counterparty holding them and ask for verification. If they verified they are holding those cusips for Tether then we're good.
And I don't' think you understand the treasury market as well as you think you do. Its a very transparent market. Everyone knows all the players, especially at the 10's of billions size.
If they honestly were buying treasuries through Deltec then we would know, I assure they they are not as Deltec doesn't really participate in this market
> Billions Of Tether’s Reserves Were Stored At Cantor Fitzgerald, Capital Union And Ansbacher
So, the big player in the Treasury market, Cantor Fitzgerald, knows about Tether and their holdings.
but now you have a (theoretical) liability of $1 as well, because you have an obligation to allow redemption.
Unless, of course, you assume no redemption, or you intend to not honor the redemption.
A liability is a responsibility to pay. If you have no responsibility to pay, you have no liability.
if you can explicitly write into the contractual agreement that you don't pay out, then may be it would not be illegal not to store it.
But then who would actually give you the $1?
NB. "Withdrawals" here means what the article calls "redemptions". It means recovering the fiat currency that one surrendered in order to participate in the Ponzi scheme.
Bitcoin could have "collapsed" weeks, months or years ago, but how would anyone know. A Ponzi scheme can be undetectable until the victims try to withdraw their funds.
As long as websites publish a purported "quote" then people reading may continue to believe it. People can argue about the "value" of BTC until they are blue in the face (watch for the replies to this comment) but until they actually withdraw the funds they committed in real money to participate, let alone any purported gains, it is all speculation. There are no guarantees because crypto is unregulated.1
These crypto entities are not required by law to disclose anything. How does anyone verify if what they disclose is actually true. If someone believes BTC is truly worth what is published on CoinMarketCap, then they should try cashing out and prove it.2 The ones who cash out early will get their money, but if enough people try to cash out in a short period, then the Ponzi scheme will be exposed. The schemers cannot cover the withdrawals. Most BTC owners will lose their real money.
But then, who wants money when one has BTC. If one believes in crypto then perhaps one believes money (fiat currency) is ultimately useless.
Tether had to be sued by the NY Attorney General for it to release basic information. Ths sad reality is that the only effective means to getting information about what crypto schemers are doing has been to bring civil or criminal proceedings against them.
1. With respect to the US, crypto is unlike shares of stock, the issuance and trading of which must comply with securities laws. Tether is not registered with the SEC.
2. "Cash out" here means convert to real money (fiat currency). The article refers to this as "redemptions".
Not sure what you mean here. Do you mean conversion?
With BTC, 99% of users could withdraw their BTC from the exchange and it would have relatively little effect on price (although there might be volatility). Trading for USD would impact the price, and I'm suspecting that's what you mean by "withdrawal".
But trading anything into anything else devalues it relative to the other thing. You could say the same thing about a stock. If everyone holding Alphabet decided to try to sell it tomorrow, the price would crater, because that's how markets work. This not the same thing as a Ponzi scheme.
Contractually, Tether doesn't allow redemptions from most people. New Yorkers are excluded thanks to the NYAG settlement. US persons are (or were when I checked) blanket excluded in their terms. Of the remainder, only their 'customers' as defined at their sole discretion are eligible for redemptions. Then, you have to meet minimum transaction size requirements ($100K I believe) and also pay their fees.
What individual would bother doing all that when they can hit 'sell' on Coinbase?
So once the retail rubes are ruled out, you've really only got gigaholders whose fate is so tied to USDT's continued existence and value that pantsing the emperor leaves them rekt.
Edit: for your later addition:
>What individual would bother doing all that when they can hit 'sell' on Coinbase?
In addition to the above, someone doing an arb play during any one of tether’s many “it’s gonna die this time for real” depeggings.
Letitia James says:
> The OAG’s investigation found that, starting no later than mid-2017, Tether had no access to banking, anywhere in the world, and so for periods of time held no reserves to back tethers in circulation at the rate of one dollar for every tether, contrary to its representations.
The CFTC says:
> As found in the order, Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.
I don't personally think that it's impossible to redeem, I think they're almost guaranteed not to be good for all outstanding Tethers. I think they keep some small pool of liquidity to satisfy certain key partners, and gamble with the rest of it hoping for yield they can take off the table for themselves. I strongly suspect they got ruined during the downturn. They had a ton of Celsius equity, for instance.
I think they loan tethers to institutional players in the space without collateral, too.
[edit] I'm not sure BFX actually arbs the peg, I think they stopped? I'm trying to find my source. However, I do know Alameda arbed the peg.
> Edit: for your later addition:
Sorry for the ninja add.
What's not really speculation? The new goal post you moved to, or the point I was originally contesting, before you retreated to an unrelated argument for which you could dump piles of (also unrelated) evidence?
You were claiming[1] that Tether isn't honoring redemptions, based on the fact that no one's screaming "Hey, look at me, I just got some USD back for my tethers, 1:1" -- even though people could also point to tether's failure to redeem, and even profit from advance knowledge of the imminent crypto collapse it would trigger.
Now, with no acknowledgement of what just happened, you're moving to this argument:
>>I don't personally think that it's impossible to redeem, I think they're almost guaranteed not to be good for all outstanding Tethers.
It looks like you have no aversion to making a baseless claim, and then firehosing evidence of a different one when called on it. I don't think that makes for a productive exchange of ideas.
I mean, if you really believed that Tether was honoring at least some redemptions[2], why would you casually make the argument that, gosh, we don't have reports of successful redemptions, they must not be doing any at all?
>I'm not sure BFX actually arbs the peg,
Yep, another point I never made.
[1] https://news.ycombinator.com/item?id=34635720
[2] >> I think they keep some small pool of liquidity to satisfy certain key partners,
> You were claiming[1] that Tether isn't honoring redemptions, based on the fact that no one's screaming "Hey, look at me, I just got some USD back for my tethers, 1:1" -- even though people could also point to tether's failure to redeem, and even profit from advance knowledge of the imminent crypto collapse it would trigger
I was trying to say they claim to (or have in the recent past claimed to) allow redemptions, but in reality, they don't honor all redemptions. They don't, because their terms of service say so. They don't honor redemptions to NY residents, any US persons, to anyone requesting less than $100K, etc. This is all on their tether.to/legal site. They've updated this wording many times.
I don't think in [1] I said they don't honor any redemptions.
Yes, nobody's screaming about it. I think once you exclude the above group (who sell at exchanges), then the remaining are either going to be taken care of out of a small pool of liquidity, or know not to ask for cash.
There's a ton we don't know. We don't know if Tethers are actually being issued in exchange for deposits. They could be issued to institutional players on faith, in which case a 'redemption' wouldn't be a cash withdrawal but instead they tear up the promisory note and return the USDT to the treasury. That seems within their capability.
I further maintain no big players but Trabucco and SBF have said 'they were good for our redemption requests' so I have no reason to believe they are, given their legal issues, questionable track record, and the suspicious folks in charge.
> I think they're almost guaranteed not to be good for all outstanding Tethers.
There's nothing baseless about this, they have a history as detailed by the CFTC and NYAG settlements. I have no reason to trust they're suddenly good for it. So I have no reason to believe they'd be good for all redemptions in the future.
I hope that clarifies my position.
That makes it a very unforced error. If you had come into the discussion in good faith, you wouldn't have to remember which ridiculous, over-the-top claim you made, in which subthread, and you wouldn't be addressing arguments someone never made (like about the NYAG stuff). You would have one model, one truth, and you could just argue from that.
Re-read [1] and the two levels above. Can you honestly imagine anyone going away from that believing (or believing it's your opinion) that Tether is regularly honoring withdrawals?
Even now, you don't look like you're arguing in good faith: your "proof" that Tether doesn't honor withdrawals is ... what? That their ToS has long said they don't honor certain types? Okay, but by that definition, Wal-mart isn't honoring gift cards either, simply because their ToS reserves the right not to in some cases (e.g. old card, belligerent customer). No one would seriously try to cite that has proof that no one has been buying goods with Wal-mart gift guards.
In a good discussion, the claim that Tether "isn't honoring withdrawals" would be that they aren't honoring ones that, on the face of it, meet their criteria. Using a few long-standing caveats as your "out" is dishonest.
I hope to see you do better in the future. Some people look up to you, and you're letting them down: https://news.ycombinator.com/item?id=28795594
Don't be silly, you're just being argumentative and trying to read something into my replies that isn't there. You failed to get my point. That's on both of us. Pretty much end of story.
I'm sorry but I'm not going to continue this because you are not having a conversation in good faith. Enjoy your weekend.
If you don't want people to dispute that "Tether hasn't honored withdrawals", then don't make that argument!
Good faith = honest attempt to reply to what someone actually said, not changing the topic, not talking about weekends.
Where, specifically, did you think I broke that?
I strongly encourage you to re-read what you wrote in [1] again and see if you can find any reasonable interpretation whereby someone would think you were saying Tether was regularly honoring redemption (as you now claim you meant after being called out). It just isn't there.
It doesn't matter that your general conclusions about Tether might be correct. "Good faith" means not saying things like, "They claim to [have redeemed USDT for USD] but nobody has posted proof that they got their money."
If you want to have a good-faith discussion you can't just recklessly spray negative remarks about the villain. You have to stick to things you actually believe -- or at least, recognize when you were out of line and acknowledge the moved goal posts. It's really not a big ask.
If they knew that Tether wasn't honoring redemptions, they could take out a large amount of Tether-denominated loans backed by their own collateral. Then they could go public with their information and profit.
The market can remain insane longer than you could remain solvent in that case.
In this hypothetical situation, you have information that would apparently "crash the market" if it were to become public, so what happened for the last decade isn't really relevant. Remember, this conversation started talking about Tether redemptions failing to go through and whether or not people would go public with that information. Someone said they wouldn't go public because it would crash the value of their assets, but I was pointing out that you could profit from the crash in value as well.
And this information has been public for years, including the NYAG evidence which is very damning, but no one seems to actually care - or it’s being propped up successfully regardless.
Even in this thread there are folks who refuse to believe things Tether themselves have admitted to under oath and things Tether says in their own TOS now.
At this point, even if you had authenticated video of the Tether founders admitting it was all a giant scam, would it change the market behavior? I kind of doubt it.
It’ll keep going until it doesn’t, then who knows.
Do you have a way we should be trying?
Not necessarily - Alphabet could prop up the price by using its cash and taking out loans on the company itself, if the price of the shares is truly in line with the value of the company.
From the article:
"Like other stablecoins, its value depends on a simple notion: Investors expect that Tether the company will swap $1 for one tether, or one tether for $1. Central to that is the assertion that Tether has enough reserves to redeem all the roughly 68 billion tethers in existence."
Or "withdrawal" could mean "exchanage", e.g.,
"3. Putting your savings in Tether
Tether is usually worth $1, and you can earn far more interest lending it than you would with the best high-yield savings accounts. Based on that, doesn't it make sense to put your savings in Tether instead of the bank?
Not quite. While they may seem safe, Tether and other stablecoins are a much riskier place for your money than a bank account.
Tether makes no legal guarantee that 1 Tether can be exchanged for $1. Most banks offer FDIC insurance that protects up to $250,000 per account in the event of a bank failure. Tether isn't FDIC-insured, so if the company behind it fails, you'd have no protection.
There have also been controversies with Tether and its reserves in the past. Tether Limited used to claim that every Tether was backed by a U.S. dollar, but that turned out to be false. In a recent reserves breakdown, Tether Limited revealed that 2.9% of Tether was backed by cash.
https://www.fool.com/the-ascent/cryptocurrency/articles/the-...
Also "withdrawals" could mean withdrawals by the Tether company from their own bank accounts to cover redemption requests from Tether customers.
"As long as people believe that Tether is fully backed, or that Tether and Bitfinex probes won't impact the price of bitcoin, the game can continue. But if too many people start dumping bitcoin in a panic and rushing toward the fiat exits, the truth - that there isn't enough cash left in the system to support a tsunami of withdrawals - will be revealed, and that would be especially bad news for Tether execs."
https://amycastor.com/2021/07/26/the-dojs-criminal-probe-int...
Currently Bitfinex will exchange 1 USDT for 1 USD and they hold a substantial about of USDT, they also buy up USDT when it falls below 1 USD. I'm sure Bitfinex is happy to see reports about Tether's demise spread, because it's free money for them.
If at some point it's not possible to redeem 1 USDT for 1 USD, then Tether will collapse like the other stable coins and that's really all there is to it.
> Currently Bitfinex will exchange 1 USDT for 1 USD and they hold a substantial about of USDT, they also buy up USDT when it falls below 1 USD. I'm sure Bitfinex is happy to see reports about Tether's demise spread, because it's free money for them.
No, that's what they say they do. We have no evidence. The last people who stuck up for them in this regard, SBF and Trabucco, are in some pretty hot water. It could be Tether/Bitfinex, but it could be anyone else with an interest in perpetuating the ecosystem. Some exchanges mortally locked in perhaps?
> If at some point it's not possible to redeem 1 USDT for 1 USD, then Tether will collapse like the other stable coins and that's really all there is to it.
It may not be possible right now. Their terms of service say they can deny basically any redemption at their sole discretion. Anyone denied would not be incentivized to declare the emperor naked.
[1] https://ag.ny.gov/press-release/2021/attorney-general-james-...
It's entirely fair to say there is no basis for trusting the company behind Tether, and by extension Tether. It's unfounded FUD to definitively claim that it's a scam.
Letitia James says:
> The OAG’s investigation found that, starting no later than mid-2017, Tether had no access to banking, anywhere in the world, and so for periods of time held no reserves to back tethers in circulation at the rate of one dollar for every tether, contrary to its representations.
The CFTC says:
> As found in the order, Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.
It's literally not FUD, it's something they paid significant quantities of penalties over.
>>> As found in the order, Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.
You're leaving out critically important context, which is that Tether held other assets as reserves:
>>The order further finds that Tether failed to disclose that it included unsecured receivables and non-fiat assets in its reserves
Reading your comment without this context would lead a casual observer to conclude that the assets backing the issued USDT held a value of 27.6% of the USDT's face value, which is entirely different than reserves equalling ~100% of USDT in value, but with a significant fraction of assets constituting those reserves not being of zero-risk fiat as the marketing arguably implied.
That's just one example.
There is, and I can't stress this enough, literally no reason for you or anyone else to trust these people. They've never published audits, one of their auditors (Friedman LLP) literally walked away once they saw their books.
Then for some of the attestations, they literally wired money in the same day from Bitfinex, then wired it out the next to make it look like they had the reserves.
> If there was this massive shortfall/scam that you are alleging, those press releases would have spared no details in describing them.
They did. [1] Also, it was covered in the NYAG settlement and the CFTC settlement I linked. I strongly suggest you give them an actual read-through. The entirety of the section III of the PDF covers it in painstaking detail.
> Reading your comment without this context would lead a casual observer to conclude that the assets backing the issued USDT held a value of 27.6% of the USDT's face value, which is entirely different than reserves equalling ~100% of USDT in value, but with a significant fraction of assets constituting those reserves not being of zero-risk fiat as the marketing arguably implied.
Not only is that is than an obvious misreading of the comment, it wasn't my comment, it was a direct quote from the CFTC website - but then you go on to claim something I never claimed.
Let me be clear then:
1. There periods they were physically unable to fulfill demands because they had no bank account access [4].
2. At other times, their peer organization raided the kitty and literally took the money (because the same executives gave almost a billion dollars to a company indicted for laundering money for - among others - the Colombian cartels, without a contract, and whose execs are in prison or on trial). [2,3]
3. At other times, they invested in illiquid securities and got rekt (they invested in Celsius for instance).
Stop giving these people a lick of credit, stop apologizing for them, and demand some proof.
[1] https://www.coindesk.com/markets/2019/04/25/bitfinex-covered...
[2] https://www.coindesk.com/markets/2019/10/25/polish-police-ar...
[3] https://www.coindesk.com/business/2022/04/25/reggie-fowler-p...
[4] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
And like I said from the beginning:
>>It's entirely fair to say there is no basis for trusting the company behind Tether, and by extension Tether. It's unfounded FUD to definitively claim that it's a scam.
I will concede that some of the evidence you provided shows a company behaving suspiciously, and at times dishonestly, but this impression one gets from the Tether critics, that USDT is a total scam backed by nothing looks like baseless FUD at the moment, no matter how valid your claims that the company behind Tether shouldn't be trusted.
I can't say without an actual honest-to-goodness audit that they are backed fully. But hey if they come up with one I'll be the first to eat my hat.
That's a fair assessment.
Not arguably implied. Literally and directly stated.
Their website at the time said: "every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USDT is always equivalent to 1 USD." The lie detector test determined that was a lie.
Please I'm begging you, I'd love you to reply to this but only after you read the entire NYAG settlement PDF I linked you. It is actually something of a crime thriller so I promise you'll enjoy it.
Also you can't redeem USDT if you're a U.S. Person, or if you don't meet their definition of customer, at their sole discretion.
> In order to cause Tether Tokens to be issued or redeemed directly by Tether, you must be a verified customer of Tether. No exceptions will be made to this provision. The right to have Tether Tokens redeemed or issued is a contractual right personal to you. Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all.
Now they've been through very significant bear markets, some theft of funds and still are solvent.
I don't understand the criticism about high amounts and verification for directly redeeming it either. If they did neither of those things it would be a money-laundering haven and they'd have men with guns raiding their homes tomorrow. You can redeem it through kraken and other domestic exchanges for cold hard cash, it's working perfectly fine.
Tether will be looked back as an example of how dramatically wrong "common knowledge" can be in internet communities, some people are so mentally obstinate and committed to the idea that it is simply too hard to admit they might be wrong, this is fed by others in the community with the same affliction.
Is Tether the equivalent of USD? No. It is not USD.
Why is Tether valued at 1 USD per coin? I'm not sure. But it almost certainly will not be if the value of crypto broadly falls enough to compromise Tether's collateral. The value of that "paper" is a nonlinear function. The "collapse" would happen so very slowly... and then all at once. Good luck.
How did you determine they are solvent?
Note that even a literal Ponzi scheme could honor withdrawals for a time, so producing $1 for 1 USDT (or even several billion) is not proof.
The only reports I'm aware of are either paid for by Tether (e.g. the latest report from BDO--whom I know nothing about) or from governments (e.g. the NYAG and CFTC reports--which I trust--and show that Tether was, in fact, not telling the truth about reserves).
That they keep paying out billions each year in dollars to those who request it?
Where can I find the info on billions that they exchange yearly?
Shows a decline in market cap from $83B in May 2022 to $66B in July 2022. That represents $17B in redemptions over a few months. That represents Tether net paying USD to USDt holders.
Rule 2 (which answers your question): the market can stay irrational longer than you can stay solvent
The worse parts are that they were once fined. But it's a tiny amount and most banks get fined regularly by all sorts of regulators.
Other than that, is it meant to collapse because one of the founders once played hockey in a movie as a kid? Or because another one is asian?
Go back and read it. It's not factually wrong, it just couches facts negatively ( eg Jean-Louis van der Velde is also known as Jan Ludovicus van der Velde, but who cares? So he anglosized his name? Teddy Roosevelt was actually called Theodore you know, Ted Cruz is actually Rafael Edward Cruz)
None of this would put me off investing in any given company outside for crypto. Would you refuse to buy shares in a company with a CEO who was asian or a CFO who used an anglosized name? I assume not.
They were forbidden from doing business in New York. That doesn't happen to most banks.
https://ag.ny.gov/press-release/2021/attorney-general-james-...
If there is actual evidence for why they should be banned, NY should share it. If not, step off the hose.
But like the CEL (Celsius) a lot of the "market cap" of the coin is held in companies that are essentially insolvent. Like CEL, they use their big balance sheet and the relatively thin amount of trading to prop up the value of USDT when necessary.
That's just an idea. I am not someone who would know. One thing I have learned in life is that people can know there is a problem in a market but the chickens don't come to roost until the last person is convinced they can't make money. Mortgage backed securities were like that. For a couple years people thought it was a problem, then probably most financial people thought it was a problem, and then a long time later it crashed. It really was waiting for the last person to think they couldn't make any money by trading them.
What insolvent companies hold tether?
If they did this would be the first thing they would unload as hey can always get park value for their tether.
One of the famous SBF screenshots showed Binance's CEO deeply concerned about someone selling US$250k (not M! K!) USDT, because they were afraid that might upset the apple cart, even though USDT is notionally backed by $68B of assets.
Exchanging $250k into USDC, DAI, BTC, or ETH is practically nothing compared to the daily volume, and exchanging one of those to USD in a bank account through an exchange is also not a big deal at all. 250k is a small amount.
If an exchange worries about $250k, it’s dead in milliseconds. There must be some huge context missing in that post.
* and even in this case a book will just swallow it at the expense of a market-order side and drift back in under a second.
But judge for yourself, here's what SBF has entered into the Congressional record:
https://imageio.forbes.com/specials-images/imageserve/63981b...
https://imageio.forbes.com/specials-images/imageserve/63981b...
I still don’t get how this could be interpreted as a “deeply concerned about someone selling $250k”, when the answer is “no I don’t think 100x that size would succeed”. From this I see one guy (C Z) who’s probably concerned about a supposedly systemic action with unclear goals, and another one (blue) fooling around a specific transaction.
I mean they could be deeply concerned as a person about whatever they projected about it, but it’s technically impossible with $250k which they admit right away. The way it was stated in the comment above is editorial, to say the least.
I mean, i've read those chats and that's not at all what CZ is saying. He even clarifies that selling 100x that amount would do nothing to depeg tether.
he just said a particular trader and one specific trade was a pain for his exchange.
And that doesn't in anyway change what I said that if someone was holding tether then they could still mark it at par and be fine with selling the entire amount.
Most people exposure to Tether is temporary. The market cap is the tip of the iceberg. Since if you trade 68bn everyday, that's around $25Trillion per year. Purely insane.
For some illiquid exchanges, buying a bitcoin may cause a huge price impact such that there is room for arbitrage. Someone would buy a bitcoin at a cheaper price at another exchange and sell it to Alice at a higher price for profit. In this case, the trade volume is doubled (i.e. 1 bitcoin at this exchange and 1 bitcoin at another exchange).
So while trade volume is very high, only a very small percentage of it is customers' own money.
The problem for me is that I can't tell how much of that is wash trades. Maybe very little, but maybe a lot. That is one place where a regulator would help.
The Ponzi schemes of history collapsed when the guy at the top got arrested, ran out of money, or ran off with what was left.
With Bitcoin, every time one person does one of those three, two more arise.
Why doesn't it collapse?
1. It took one twitter post by CZ to bring down FTX and it had one of the cleanest images around. Maybe people just "ran to the bank" and were able to get their funds back at the expected rate so the panic went down.
2. There's one major FUD about USDT every month published by major sites. If a bank run stemming from a news post was gonna crash it would have happened already.
- Tether sells 1 USDT for 1 USD
- Tether will buy back 1 USDT for 1 USD
- Tether is also traded on crypto exchanges
When people start to lose trust in USDT, the price of USDT on the crypto exhanges drops. Lets say 1 USDT becomes worth $0.99 on the market. Tether then buys USDT on the exchanges for $0.99, even though they had previously sold that USDT for $1. They have just earned $0.01 on every USDT bought.
This accomplishes two things:
1. This pumps the price up so Tether doesn't fully collapse on the market
2. Tether makes money
Tether doesn't need to keep one USD in reserve for every USDT out there, they just need to keep enough that if the prices start to drop they can buy back USDT for cheaper than they sold it for and prevent a full bank run.
As long as there's a cycle of people periodically losing trust in USDT, Tether skims cents off of the trading market at high enough volume to pay their employees and make a tidy profit.
It is indeed a very interesting question.
The scamminess of Tether is pretty much obvious to everyone in the crypto world at this point (this article brings fairly little that's new to light).
As I mentioned somewhere else in the thread, I believe the explanation might be that Tether fills an absolutely essential role in providing liquidity to Cryto markets.
So fundamental that everyone allows it to continue to operate in spite of knowing how rotten to the core the whole thing is.
This means that potentially one of histories biggest ponzi schemes is being run by someone who has an entire documentary (An Open Secret) about them running a child prostitution ring and whose roommate was convicted of child prostitution and was also named in the related civil suit.
https://www.imdb.com/title/tt3677412/ https://www.youtube.com/watch?v=4TAnAYa8gas
Or Excapsa - the other main person running Tether - who was convicted of enabling cheating on the online Poker platform he worked at.
It’s all kind of insane if you go down the entire rabbithole surrounding these people, though sadly, also a bit undeniably hilarious. A lot of money is to be made with sufficient hatred & absolute lack of morality.
I think that's the more relevant part, and we can leave it at that.
Reeks of a lifelong grifter. If you can’t put the 2+2 together of a lifelong grifter & immoral individual being at the top of tether…
Anyways, I patiently await the collapse of it all as somebody who’s been around since the near beginning of blockchain cryptocurrency.
None of this was convicted.
Lots of people are accused of all types of things. Some people get convicted of stuff they didn't do, but this happens much less often than wild accusations.
By convicted I’m presuming you think I’m implying he broke some laws?
I did not say that he broke any laws, nor do I believe that what he did was illegal in the slightest?
When things related to things are so easy to find with a pretty serious paper trail behind it, I can only imagine your saying this to try to defend the perpetrator in some way.
I don’t think that’s the case, so I digress.
Company IGE tried to make virtual in-game currency sweatshops. IGE was headed by Pierce & Bannon. This is something that happened and there is not much more to it.
If you’re simply unfamiliar with MMORPG & related videogames - I can perhaps understand. In short - I assure you, there is a near endless amount of people who shove very large amounts of $USD into virtual trinkets in these games. Always have been, hence their exploitation since the early 2000’s
>> Where they literally tried to create slave farms to obtain these in game currencies?
'literally tried to create slave farms' makes me believe you did think he was doing something 'illegal in the slightest'.
Edit: https://www.washingtonpost.com/investigations/steve-bannon-o...
Do you have some charts that show that correlation over the whole (or partial) history of tether?
I have trouble even noticing tether on long term bitcoin charts.
Look at a tether volume chart vs a btcusd chart
Perpetual futures contracts are also a big part of the market. They are the most common derivatives on crypto assets. It isn't always BTC, but BTC is the biggest asset in the space.
Derivatives in general need to be denominated in something. Tether is the most accessible on exchanges outside the US (e.g. Binance). These contracts settle in the Tether stablecoin, not the contract's underlying. As all crypto asset prices go up, those contracts need to be settled in more Tether.
When one party shorts a derivative, a counter-party needs to long the same derivative. Same thing happens with non-crypto derivatives. In the end, they cancel each other out, but the total amount of Tether would increase as the asset value increases. That money could come from other assets or USD.
On the exchange-side something like this might happen...
party 1 sends USD to Exchange > longs BTC contract > USD collateralizes contract
party 2 sends ETH to Exchange > shorts BTC contarct > ETH collateralizes contract
If ETH drops in value as it relates to USD or party 2's contract expires out of the money, the exchange would likely give party 1 the value of the contract in tether.
Similar misunderstandings happen in the stock market. People will point to the notional value (amount in $) of margin debt, but ignore the total value of the market. Of course, higher debt would be needed to collateralize a more expensive asset (e.g. SPX).
Also, when sending non-USD currencies to an exchange, I would guess the exchange is likely to convert them to Tether, or at least gives the option. I wouldn't want to have YEN in my account as the value sinks when I have a Tether backed contracts. That may be another source of new Tether.
What? Tether is supposedly minted in response to fiat deposits. They accept real dollars and give Tether IOUs in return.
The concern is that Tether minting seems to generate BTC price spikes. The story goes that investors are giving their money to Tether, which gives them Tethers, and then they take the Tethers and buy BTC. Nobody can seem to explain why these people aren’t just giving their money to exchanges and buying BTC without the extra steps, though.
> Tether minting seems...
> The story goes...
This is all very hand-wavey. Never concrete statements.
The minting happens at the portal (eg Binance). There's no sense for an exchange to mint a liability without collateral.
I gave an example of liquidations resulting in new Tether. I don't know what you count as a spike, but liquidations happen all the time. The exchanges report liquidations publicly. A lot happened recently with BTC's move up. You can also see open interest increase or decrease on liquidations depending on if a short or long position is liquidated. Again, those contracts are settled in Tether, so it would make sense for Tether market cap to increase on asset price increases.
There are also funding requirements at different times. The more people short a contract, the more they pay to their counter-party until they close the position. Same is true for longs. One side or the other are incentivized with higher or lower rates to keep the contract in line with spot price. This is an ongoing cost. It fluctuates throughout the day.
It's a well known signal to watch stablecoin market caps as a ratio of total crypto market cap - (USDC+USDT)/Total. This ratio is currently at the midpoint. Leverage increasing means stablecoin MC increases. Leverage decreasing, means stablecoin MC decreases. It doesn't go down 100%. You will see it trend up.
Here are a couple examples I quickly found:
https://twitter.com/WClementeIII/status/1552380899857235969
https://twitter.com/chestbrook/status/1513150205973118981
> they take the Tethers and buy BTC
Even when it was down 77% from its high in Nov. 2021, people were saying this. Still down 64%. Of all the assets in the world Tether could buy with their "IOUs", I don't know why people keep saying they're buying BTC. I don't know where this idea came from, or how it possibly makes sense.
FYI - USDC market cap increased more than USDT in 2022. Where are the "Circle is buying BTC with IOUs" conspiracies?
The only part of this equations that's new is that blockchains are public and therefore you can see it happen.
Would it be wild to you to see "money moves from private bank account to goldman sachs account = shares go up"?
They literally didn’t even have bank accounts or access to the banking system for most of this time (and may still not)
Letitia James says:
> The OAG’s investigation found that, starting no later than mid-2017, Tether had no access to banking, anywhere in the world, and so for periods of time held no reserves to back tethers in circulation at the rate of one dollar for every tether, contrary to its representations.
The CFTC says:
> As found in the order, Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.
How exactly am I wrong? And please be specific. It's something they paid significant quantities of penalties over.
The shit I've been saying is literally in government PDF form now.
I suspect I'm not the one who needs to let it go.
There were fundamental flaws with how Terra worked. A reductive way to describe it is, Terra was backed by Luna. Luna's price was determined by the market. Luna's supply was infinite. The price would go down if market demand didn't keep up with supply increases. Doomed from the beginning.
https://www.marketwatch.com/amp/story/bitcoin-pizza-day-lasz...
But now I’m wondering, that was because the collateral you post against your short was assumed to be posted with the entity you borrowed the Tether from.
But can’t people make deals where they post collateral with a proper bank, and then if the counterparty goes bankrupt you just pay the estate back worthless Tether and keep the dollars posted with the reputable bank?
I’m not involved in these types of dealings so perhaps this is a silly question but I would have thought this was how things were done.
That's also a problem. No self-respecting bank is willing to touch this toxic pile of bs and bring down extra regulatory hassle on themselves.
So, by all means, find a venue to short USDT. Build one if it doesn't exist. If lucrative enough, you will likely find parties willing to take the other side of that bet.
Redemption is when Tether the entity is the buyer - aka someone takes USDT and goes to Tether the entity and gets dollars for it, 1-1. That’s what seems to never happen, except perhaps for specific Tether insiders. Though the ones I’ve seen claiming they’ve done so (SBF being the prominent one), are far from credible sources now.
If some random person wants to give me $1 for my nominal $1 of USDT, that’s cool - and that happens on exchanges regularly right now.
That depends on market perception, etc. though and has only the potential connection to perceived ability to redeem. Which has been kept sustained, as you can see by this thread.
By comparison, Verifying someone can deposit and withdraw cash from Wells Fargo is pretty easy. Just stand in any of their branches for an hour or two, and you’ll have tons of evidence. Something no one has of Tether still, after all this time.
By the way, the flow of Tether inbound is the flow of market participants purchasing USDT with cash equivalents. So sure, "the flow of dollars into the stock market is the only thing keeping META from its natural price of $5" is a statement anyone can make.
What, in crypto? I thought no one in their right mind dares short this stuff due to counterparty risks.
The lack of a good way to short Tether with a reliable counterparty is a major reason why Tether has lasted as long as it has
https://fakemoneynews.substack.com/p/shorting-tether-for-fun...
HN discussion: https://news.ycombinator.com/item?id=34299618
That's the only way I can think of to avoid crazy counter party risk.
What kind of an impact are we expecting on, say, Coinbase?
On top of that, Coinbase needs a stable coin to operate at any non-trivial scale.
I'd say the impact would be severe. That is unless crypto investors just pretend nothing happened, and some other bullshit stable coin immediately takes care of the liquidity issue, which I'd call likely.
As to it going up today, it's still a 20b company with huge operational costs and no profits operating in funny money world full of scams, regulatory risk and having very little growth potential (after 13 years of crypto there is still no use case other than going around or breaking the law and it already reached its Super Bowl ads state so it's not like any more adoption is likely).
Yes, you already missed the biggest gain as it's already worth about 25% of what naive public paid but there is still one way to go.
The only counterparty risk is the collateral that you use. Ether, BTC, usdc, etc. Some exchanges also support fiat currencies (eur, usd)
Some hedge funds have been running tether shorts for a long time, maybe they cashed out when the rates spiked, if not they're just losing money.
There's nothing new in this report. Tether/Finex's founders are well known for many years
Also FYI, tether has been able to redeem > 20 billion$ in a few days, something that I am not aware of ANY other company, not even banks, being able to do - and def without CB/govt support
That's not really painting an accurate picture. If Tether goes to 0 (you win the short) there's a strong possibility your counterparty cannot pay you. So, you're either wrong and lose it, or, you're correct and lose it. That's not the making of a good trade.
1) Deposit any other stablecoin into AAVE/(a decentralized lending platform) as collateral, borrow USDT from there, & sell USDT for another stablecoin.
This method (semi-unfortunately) allows for rehypothecation: If you're ultra-convinced USDT will fail, it makes sense to do the above sequence again, this time using the received stablecoins that you now have from selling USDT. The risk is massively increased with each iteration of that sequence.
2) Insurance contracts, wherein you deposit funds into a pool that watches USDT's price. If the peg breaks, the funds from the other pool that bet against you will be used to pay for the rewards, and vice versa.
Y2K finance has this in place, wherein there are 2 pools to choose from for each stableasset: One that pays out if the peg stays stable, and another if the peg breaks. This method is great for insuring stableasset values, & helps to provide downside protection.
Tether got fined a tiny amount, much less than any tier 1 bank pays in a year. And one of their investors was once in a movie. Who gives a shit?
Meanwhile they have a brilliant business model for the current market: take dollar deposits, invest them and keep the interest, then return them with no interest or adjustment for inflation. Who wouldn't like a 4% profit on $86bn?
Good for them.
Very convenient though!
So of Tether's $68bn "market cap", no more than $10bn was actually bought? Which means some subset of that are bag holders, with the rest being affiliated exchange obligations? (EDIT: Nvm.)
Maybe it's not a deal if it's banned and collapses.
The issue at that point will be that exchange volume is the business value behind the "paper" that justifies Tether's USD peg. So declining crypto trade will generate sell volume against Tether and also pressure the peg.
Which is all another way of saying-- this is like when Enron or whatever other financial scandal you pick-- gave shares to an off-balance-sheet vehicle and loaned itself money from the vehicle. It's designed to fool someone into injecting real money into a funny system. Thus, an alternate mode of failure is that whoever did the injection wakes up and calls the bluff, notwithstanding the technical quasi-market-based peg.
There are many 'sudden problems' that come up when people try to cash out...
Hence it's in the best interest of many parties to keep Tether up to avoid a market collapse.
The main difference? When you send money to scammers in Nigeria, it does something to equalize resource inequity internationally.
PSA Tether will collapse, soon. Bitcoin, also, will collapse, but slower.
People could still use USDC on-chain. According to https://ultrasound.money/, on the Ethereum network, there's $39.277B USDC and $32.35B Tether. Tether's popularity might be different on other networks.
I could be wrong, but I think the exchange needs to work with a US-based bank to process USDC redemptions/withdrawals. I know this was the case for Binance recently.
Any stablecoin is just a company that holds the denominated value in some form, and provides the ability to get that value back. Circle manages USDC. They have to bee more willing to work with partners abroad. Is that because of KYC/AML laws? Not sure.
Tether has been willing to work outside the US before Circle, and they did it back when crypto was demonized by all banks, more-so than today.
Also, I mentioned in another comment how Tether is used for settlement on derivatives. I don't know of that happening with USDC anywhere.
In May 2021, Tether had lent Celsius tether worth $1.8 billion, collateralized by $2.6 billion of Celsius’s crypto assets, the report said. Tether had to manage the risk of the loan as crypto prices fell. Eventually the loan was liquidated and Celsius suffered a loss. In addition to lending to Celsius, Tether received loans from the company that were twice its credit limit while owning 7.73% of its equity, the report said.
Uh oh. Where have we heard that story before?
And their org chart.
1. Tether and Bitfinex CEO J. L. van der Velve used to sell a product he claimed could transform the nicotine in cigarettes into vitamins - and suggested it allowed you to smoke 300 per day.
2. Their chief council, Stuart Hoegner, once held all of the Tether backing reserves in his personal Bank of Montreal account co-mingled with his lunch money, one assumes. He was also director of compliance at Excapsa, parent company of Ultimate Bet, where they had a backdoor interface allowing their friends to see their opponents cards. [3]
3. Giancarlo Devasini, their CFO, is a former plastic surgeon (for about a week) who had to pay a $65,000 fine for pirating Microsoft software in 1996 and was then sued by Toshiba for infringing some of their DVD patents. [4]
[edit] Tether was co-founded by former Mighty Ducks cast member Brock Pierce, the guy who fled to Spain with Mark Collins-Rector while he was an indicted fugitive on child sex trafficking charges. They were then both arrested in a villa full of child pornography. [3]
[edit2] Also note that none of the leadership team wanted to admit they were involved in Tether until it came out in the paradise papers because they used Appleby. Because of course they used Appleby. [5]
[edit3] Almost forgot, the guy who runs their banking partner, Deltec (and Moonstone!), was the creator of Inspector Gadget - Jean Chalopin. [6]
[1] https://www.cftc.gov/PressRoom/PressReleases/8450-21
[2] https://ag.ny.gov/press-release/2021/attorney-general-james-...
[3] https://bennettftomlin.com/2021/03/27/before-bitfinex-and-te...
[4] https://www.ft.com/content/4da3060c-8e1a-439f-a1d7-a6a4688ad...
[5] https://news.bitcoin.com/paradise-papers-reveal-bitfinexs-de...
Did he plan to kill his customers or something?
Left out some pretty major details there. Looks like he’s a free man now and never convicted of any of this?
Ahh, Deltec. At the start of 2021, according to their website, it was a 55 year old bank. By the end, it was a 70 year old bank!
Their "Deputy CEO" gave a hilariously inept interview from his gaming rig. Their 33 year old Deputy CEO, who by his LinkedIn claimed to have graduated HEC Lausanne in Switzerland with a Master of Science at the age 15... celebrating his graduation by immediately being named Professor of Finance at a university in Lebanon. While dividing his spare time between running hedge funds in Switzerland and uhh... Jacksonville, FL.
The name of his fund? Indepedance [sic] Weath [sic] Management. Yeah...
In this hilariously inept interview, he claimed that people's claims about Deltec's money movements being several times larger than all the banking in their country was due to them misunderstanding the country's two banking licenses, the names of which he "couldn't remember right now" (the Deputy CEO of a bank who can't remember the name of the banking licenses), and he "wasn't sure which one they had, but they might have both".
Once the ridicule and all this started piling on, within 24 hours, he was removed from the bank's website leadership page. When people pointed out how suspicious that looked, he was -re-added-.
The bank then deleted the company's entire website and replaced it with a minimally edited WordPress site, where most of the links and buttons were non-functional and remained so for months thereafter.
I mean fuck it, if the cryptobros want to look at all that and say "seems legit to me", alright, let em.