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Comment by georgeecollins | Hacker News Reader

Here's one hypothesis: USDT is used to trade a lot but (hopefully) not a lot of retail investors are holding large amounts of USDT.

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.

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This is actually a quite correct hypothesis. Tether has an insane velocity (at least comparing to a Central Bank coin). Tether trade volume sits at $40 billion in the last 24 hours. There are only $68bn. This figure does not include futures, and P2P trades. Tether probably trades itself in a single day.

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.

Bitcoin price is at $23,530 right now. Imagine Alice wants to buy 1 bitcoin and sell it a few minutes later for some profit. In that case Alice can apply a 10x leverage since it is short term, and needs only $2,400 as collateral. 10 minutes later she sold the coin at $24,000, netting a profit of $470. This makes $47,530 of trade volume with just $2,400 collateral and $47 in tx fees (assuming that tx fee is 1/2000 for both buyer and seller).

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.

>> Tether trade volume sits at $40 billion in the last 24 hours.

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.

> But like the CEL (Celsius) a lot of the "market cap" of the coin is held in companies that are essentially insolvent

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.

Binance, the largest crypto exchange of them all, has huge USDT holdings and is widely reckoned to be in deep trouble. However, they can't dump it without wrecking the market in the process.

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.

This isn't true by any means. The order book for usdt (or for busd) is bigger than that at binance.

If this is true, it seems like a strange thing to worry about since there's plenty of Uniswap v3 liquidity that could cover much more than that.

Or you are lost in a forest of plausible nonsense.

Could you elaborate?

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.

No interest in questioning your/their sources, but $250k is an order of microbusiness’s hourly amount. It can barely even move a spread on any exchange, unless dropped into an order book as is*. I worked few years ago as a trading bot developer for a company of 3-5 people who traded EUR and USD stablecoins for a local currency as part of their ops. $100k amount was a lazy morning.

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.

Well, yes, that's exactly why CZ's concerns have raised so many eyebrows.

But judge for yourself, here's what SBF has entered into the Congressional record:

https://imageio.forbes.com/specials-images/imageserve/63981b...

Looking through the chat, it doesn't seem to me that CZ is suspecting SBF with just this $250k trade. To me it looks like he is suspecting that SBF is doing something shady, and the $250k trade is just a tiny example of that activity. You have to intrepret this quite strongly to have the view that CZ seriously would think 250k would move the market. Additionally, CZ was right that SBF is a crook.

Thank you for the links!

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.

Wow I hadn't realized they all have a group chat together. That's wild!

> One of the famous SBF screenshots showed Binance's CEO deeply concerned about someone selling US$250k (not M! K!) USDT,

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.

Yeah I think Michael Burry was 3 years early for his 2007 crash prediction

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