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pstrateman

That kind of thing has usually had the opposite effect.

If USDT is worthless then you want to sell it, causing the price of Bitcoin to rise on those exchanges.

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If you sell it for BTC, yes, though it's more likely people will get spooked of crypto and sell it for USD.

If USDT can no longer be redeemed for USD, then people may buy BTC instead?

Why would someone accept your USDT and give you bitcoin if USDT is de-pegged and worthless?

De-pegged is just any value less than $1. If USDT is 50% collateralized, maybe it is worth $0.50, which is de-pegged but not worthless.

We said we were 100% collateralized, actually it's only 50% but you can trust us that it really is 50% collateralized this time and we aren't lying again. Transact with trust!

De-pegged (I means really de-pegged, not a transient .97c a dollar on exchanges like it happened) means it's not fulfilling its promise, hence the trust is lost.

Also, Tether would try to save face, by honoring USDT redemption at 1$ as long as they can, which drains their reserves. So if they aren't able to do it anymore, it means that they don't have anything left, and USDT is now worthless.

These things are highly non-linear and bank runs can kill a bank in no time (and tether is functionally a bank).

Sure. People disinclined to trust Tether's word are already out of USDT. Clearly, a lot remain. Some of those people might attempt to profit from arbitraging a de-pegged Tether (maybe at $0.97 rather than $0.50 but it's the same principle).

The only stable values of a USD stablecoin are $1 and $0.

Perhaps as the mass USD redemptions start to fail, there is a window of opportunity to buy BTC before exchanges put a stop to it.

Isn't the point of USDT that the vast majority of its holders are locked out of USD? They can liquidate to BTC but it is unclear that they can actually get USD out.

It would be nice if the market worked that way and every coin helped each other out as a "crypto team" to beat out fiat together, but the reality is BTC holders are probably going to be spooked and not give you much BTC for your USDT.

And then everyone gets spooked of crypto as a whole and sells for fiat.

Basically whenever "shit" happens all of crypto goes down.

I don't think this is responsive to my comment. You wrote:

> it's more likely people will get spooked of crypto and sell [USDT] for USD.

I don't think (the vast majority of) USDT holders can sell for USD fiat -- because they are locked out of the US financial system for one reason or another. That is, actually, the reason they are holding USDT instead. They can (try) to exit via BTC, and maybe they can cash out for some other fiat currency. Just not USD.

The price of USDT will fall off a cliff, yes. That won't make the price of Bitcoin rise except when denominated in USDT.

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