Hacker News Reader

Comment by pcthrowaway | Hacker News Reader

Tether?... withdrawals?

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.

View on HN

Tether supports redemptions of USDT to USD: https://tether.to/es/redeem-tethers-to-your-bank-account/

They claim to but nobody has posted proof that they got their money. Their terms of service at tether.to/legal says they can basically deny or indefinitely delay redemptions arbitrarily, and the only people who backed up Tether's claims publicly are SBF and Trabucco and I'm not sure I believe them anymore.

If someone didn’t get their money when they tried to redeem, they would definitely scream bloody murder about that. So far, no such party has.

They're simply not incentivized to do that. If they did their USDT would actually become worthless. If they said nothing and simply exchanged it to the next fool, they get their money.

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.

Okay. So your argument requires no one to ever pull the trigger for mutually assured destruction in his case, over a broad universe of non-cooperating actors, and even if they had another way to benefit from the collapse of crypto that they would be causing. That still leaves it in a tenuous position.

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.

The thing is it's not really speculation. The CFTC and NYAG statements said in no uncertain terms that there were long periods of time where Tether did not have the money to cover their obligations.

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.

> The thing is it's not really speculation.

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,

Sorry maybe I was just a little confused, I'm trying to do a few things at a time. Let me try and clarify. I'm approaching this from a good faith position.

> 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.

If your argued in good faith, you wouldn't t need to constantly "clarify a position", and you wouldn't "get confused". You made a comment doubting that Tether was honoring redemptions at all -- directly contrary to the position you now hold.

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

> If your argued in good faith, you wouldn't t need to constantly "clarify a position", and you wouldn't "get confused". You made a comment doubting that Tether was honoring redemptions at all -- directly contrary to the position you now hold.

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.

You argued Tether wasn't honoring withdrawals, saying there was no evidence of it. I disputed that claim as being over-the-top. That wasn't "being argumentative", that was calling out an obviously wrong claim, and then you trying to pretend I was disputing a different claim that you're better prepared to defend.

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.

> They're simply not incentivized to do that. If they did their USDT would actually become worthless. If they said nothing and simply exchanged it to the next fool, they get their money.

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.

People have been screaming about Tether being a scam for almost a decade now and it hasn’t crashed.

The market can remain insane longer than you could remain solvent in that case.

> People have been screaming about Tether being a scam for almost a decade now and it hasn’t crashed.

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.

As pointed out elsewhere in this thread, the counterparty risk to these shorts makes it nearly impossible to do.

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.

We're talking about a hypothetical situation where people have attempted to withdraw Tether and failed to do so. And the assertion was that no one would "spill the beans" about Tether's inability to redeem USDT because they'd risk harming their own investment. That would not happen because of what I outlined above. There will be at least one person willing to make a bet on this. It's in the DNA of people who trade. The appeal of exploiting information asymmetry is too great, at least for one of the participants. And all it takes is one person to reveal Tether's inability to pay.

I looked through their site, and couldn’t find any way to even attempt to redeem unless I have $100k.

Do you have a way we should be trying?

When Tether crashes, the whole crypto market will crash with it. So, unless they convince some crazy bank to give them real money loans for more than the "hundreds of millions of dollars" worth of crypto tokens that would drop to near zero if Tether were exposed, they really can't.

No. If you had the power to crash the crypto market, you could still buy puts on LedgerX, which are fully cash secured.

That's still irrelevant if they can make more money from the crypto market as it is today.

How is that irrelevant? People who trade want to make money. If you could control crashing the market, you could make so much more by crashing the market than you could otherwise.

Then go redeem one. We’re all watching.

They claim to, if you meet their verification requirements, and if you're requesting enough. What's the betting that their account verification would happen to have some technical issues during any crisis?

Except stocks don't claim to be pegged to, or backed by, anything. If Tether isn't backed 1-to-1 then it looks more like a bank, and may be subject to a lot more regulation.

Of course, I wasn't claiming Tether works the same way. I was merely responding to the idea that bitcoin "gains" aren't real because people haven't "withdrawn"

Money market funds do, but of course, they're heavily regulated securities.

The Tether-Bitcoin complex is a Ponzi scheme, because the profits that people have seen from them have been paid out of (newer) deposits.

> If everyone holding Alphabet decided to try to sell it tomorrow, the price would crater, because that's how markets work.

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.

Reply on news.ycombinator.com