Hacker News Reader

Comment by drug-freedom | Hacker News Reader

I'm still waiting for the "obvious scam that Tether is which is printing fake dollars as everybody knows" to implode. Any moment now.

BTW, wasn't the narrative that crypto goes up because it's bought with printed Tethers? Why aren't they printing some now to start another bull market?

View on HN

"Eschew flamebait. Avoid generic tangents."

https://news.ycombinator.com/newsguidelines.html

Are you implying that Tether isn't shady? Because it's obviously a huge scam.

Now the question isn't if, it's when. And as Madoff showed us, it can take a very long time, decades even, before it fails.

And predicting the future is very hard, so nobody knows how much longer it'll take. But down it will go because it's inevitable.

And to your second paragraph, that's an oversimplification. Yes, printing Tether helped dampen the fall and prop up the price, but it did not do so alone and it's not as easy as just printing more to start the bull market.

Trying to do that would smore likely just hurry up their impending doom.

Matt Levine has an article on Tether and how tether is the perfect business except for them loaning crypto to customers.

https://www.bloomberg.com/opinion/articles/2023-09-21/tether...

> the perfect business except for them loaning crypto to customers

Well, and assuming they have any significant fraction of the assets they claim to have.

It is great as long as they are actually sticking to short dated US t-bills. They've just been super sketchy about if they are or are not in the past. Personally I think they're fine. The absolute worst case there's a run and depositors only get back like 75 cents on the dollar. Which is way better than most places that people park crypto.

My amateur theory is that Tether could have imploded for most of its existence, but now there’s a real chance that they have been (or will be) able to bluff their way to solvency.

But I’m probably wrong…

The worst case is zero cents on the dollar.

"LOL, FTX fail? Sam Bankman-Fried is a genius, you think you know better than him?"

This is the most infuriating attitude, and the reason you can't reason cryptobros out of their delusion.

You see far too much of this attitude on HN with regards to a number of idiotic business plans.

Yeah, HN is _big_ into the “rich people are magic” thing. Maybe a bit blunted at the moment, with FTX, and, er, Twitter, but it goes _deep_.

I've noticed this too, including the increasingly indefensible position that billionaires are somehow inate geniuses and will solve all our problems.

You might just as well wait for the 'obvious scam of the FED printing fake money' to implode. The thing with fiat money is, fake or not, as long as enough people believe in it, it functions well.

Replacing an imperfect implementation with one that has demonstrated time and time again it's far worse should never be the solution. Crypto has languished in obscurity (other than gambling, scams, and criminality) for 15 years because anyone who isn't in the cult (or hyping their "bags") can see how obviously ridiculous it is.

It's been clearly and obviously explained to death for crypto people where the value of fiat comes from and it's not a "debate" I'm interested in rehashing.

You are being downvoted but I think there's some truth. I'd like to see counter arguments. One that I can think of is the difference in intent. Tether is for profit and the FED is to stabilize the economy.

> I think there's some truth. I'd like to see counter arguments.

The history of money and banking. Starting with John Law [1], and why private, leveraged money requires a public backstop.

[1] https://en.m.wikipedia.org/wiki/John_Law_(economist)

Fiat money is backed by guys with guns. Tether is not.

Guys backed with guns funded by fiat (tax revenue).

It's unbelievable to me that crypto people don't see/understand/refuse to acknowledge the huge difference.

"It is difficult to get a man to understand something when his salary depends on his not understanding it."

Or (in this case) their gambling.

How many years have you been waiting? Tether was launched in 2014...

IIRC, the NYAG/JPM report from a few years back almost explicitly said "this is totally criminal and entirely fraudulent, but it's too late to stop, because if we do, the entire global financial system will explode"

I think you're remembering incorrectly. Crypto is large, but nowhere near large enough to cause contagion risk, especially because nobody is stupid enough to lever against it as though it was a AAA asset (like they did for American mortgages). If every single cryptocurrency was zeroed tomorrow, the global economy would shrug and move on.

Quite possible. The closest I can find is [1] (via [0]), which upon re-reading suggests the cryptoverse, not the global economy, would blow up. Perhaps I'm conflating it with the general warnings of the era [2,3,4].

Though I swear I recall reading some ominous wording, pointed out by another commenter, that subtly suggested the decision to quietly settle vs. aggressively prosecute was based on billions of dollars of potential economic fallout. Other articles [2,3,4] talk about contagion risk, but none are exactly what I recall. Funny how memory works!

  [0] https://cryptobriefing.com/jp-morgan-issues-tether-warning-second-guesses-146000-btc-price-target/

  [1] https://www.tbstat.com/wp/uploads/2021/02/JPM_Bitcoin_Report.pdf

  [2] https://www.bloomberg.com/opinion/articles/2022-05-12/crypto-crash-contagion-could-go-beyond-bitcoin-ethereum-tether

  [3] https://decrypt.co/83276/imf-warns-stablecoins-could-pose-contagion-risk-global-financial-system

  [4] https://www.cnbc.com/2022/05/19/tether-claims-usdt-stablecoin-is-backed-by-non-us-bonds.html

One almost hopes it happens solely to shut up the crypto bros that still refuse to accept the primary use case for crypto is scams.

Sure it can be a distributed concencus/ledger system/smart contract system almost no one important needs or will use, or will reuse the idea internally themselves if it's useful.

Anything important won't be built on something they can't control or manage. Crypto by definition is that. So you have to really consider what this built on it and who's profiting from it.

Arguably the crypto blowup last year did result in some contagion, being one of the triggers for the US’s recent Medium Sized Bank Crisis. Though, also, arguably that was coming anyway, one way or another.

I think the 2023 bank crisis proves the opposite of what you're claiming. Only 3 banks failed, and of those three one had nothing to do with crypto. It was not a contagion, and people predicting it would have widespread repercussions on the economy turned out to be wrong.

"No contagion risk" doesn't mean nobody would be harmed by a crypto collapse; obviously there are a handful of morons here and there who would get wiped out. It means there is no systematic, widespread dependency of the real economy on the crypto one. I think the bank failures bear that out.

Sorry to be a finance idiot, but why would the entire global financial system explode?

the term is contagion. and in this case it is probably hyperbolic, but basically when people rely on one asset as a medium of exchange, and that asset turns out to be of poor quality or worthless, then it affects many other assets and businesses.

if balance sheets and collateral for loans for big businesses were all in tether it stopped being redeemable or traded at $0, the businesses would have nothing on their balance sheet and all their lenders would realize the collateral was also missing, and the lenders also would realize they wouldn't get paid and had lent on bad assurances. The lenders would also lose money on all those loans, and their capital partners would lose money (private equity firms and their limited partners) and everyone that relied on payouts from the PE firms would have to change their forecasting, and the PE firm would not be investing in the economy anymore, making a hole in that market. Depending on how many PE firms were doing this it could grind a significant part of the economy to a halt.

good news is that typically the government fills in the gap. but people don't like that.

Reply on news.ycombinator.com