4 ms·

Tether is how you short bitcoin -- it's hard to move USD out of exchanges, people are worried about a bitcoin (or "all cryptocurrencies") drop, so they move int

Tether is how you short bitcoin -- it's hard to move USD out of exchanges, people are worried about a bitcoin (or "all cryptocurrencies") drop, so they move into tether hoping to buy back in after bitcoin goes down without having to do the expensive/difficult bitcoin-usd move. This assumes that the price of bitcoin will go down but the rest of the system (exchanges, tether, mining, etc.) will stay intact. As long as people want to short bitcoin there will be lots of demand for tether at a little over a dollar that the tether company will be happy to supply. These people will balance out anyone who wants out of tether in the short term, and it's impossible to lever your "tether goes down" position. In the future, when people decide to turn around and sell in bulk for a little under a dollar, tether might not be able to make good, particularly if they were holding their balances in bitcoin instead of USD like they claim. Bitcoin shorters might be willing to gamble that they can move faster than the tether market will collapse in that situation and not be the bagholder. There's no way to short "the whole mess" aside from just not getting involved in the first place or trying to get your money out while you can.

nissimk 9y ago
Futures are opening for trading in the next two weeks on regulated US exchanges with daily / weekly USD cash settlement and central clearing. For every long futures position, someone else is short. I think that's a lot safer way to short bitcoin than holding tether.
panarky 9y ago
> As long as people want to short bitcoin there will be lots of demand for tether Interesting observation. Most people here are say fractional-reserve Tethers are inflating the exchange rate of other cryptocurrencies. But that doesn't really make sense, because buying cryptocurrencies means selling Tethers, pushing down the exchange rate for Tethers. But Tethers are trading 1:1 for USD, so something doesn't add up. You say that Tether demand is strong because traders are selling Bitcoin, and that's propping up the exchange rate of Tether. So what happens if a Tether fraud is revealed and traders want out of Tether -- does the Bitcoin exchange rate go even higher? See https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law where Tethers are the "bad money" causing traders to hoard Bitcoin, the "good money".
jpmattia 9y ago
> Tether is how you short bitcoin ... so they move into tether hoping to buy back in after bitcoin goes down without having to do the expensive/difficult bitcoin-usd move. "Shorting" means borrowing bitcoin and then selling the borrowed bitcoin. What you've described is simply selling bitcoin for USDT, unless I'm missing something.
- bcoates 9y ago
  It's short in the sense that you're selling before you buy and profiting off the thing bought/sold (bitcoin) going down between the two trades. Sell -> wait -> buy as opposed to the 'long' position of buy -> wait -> sell. Since nobody-ish lets you borrow for bitcoin margin trades you have to "borrow from yourself" (already own bitcoin) and be long-bitcoin in the long run for that to make any sense. But if you're a to-the-moon true believer that also thinks that bitcoin is in a bubble and going to make a temporary correction you could make a ton of bitcoin by being right... if you can actually make the trades and not get screwed by a counterparty.
brendanw 9y ago
I am not sure I follow you on people being worried about a BTC drop from their own selling of BTC. We are in a bull market; one person selling BTC for USD on an exchange is not going to have a significant impact. "so they move into tether hoping to buy back in after bitcoin goes down without having to do the expensive/difficult bitcoin-usd move." How does this help them avoid an expensive bitcion-usd move? They will still have to buy btc with tether and then do a transaction for USD incurring blockchain fees.

nissimk 9y ago

Futures are opening for trading in the next two weeks on regulated US exchanges with daily / weekly USD cash settlement and central clearing. For every long futures position, someone else is short. I think that's a lot safer way to short bitcoin than holding tether.

panarky 9y ago

> As long as people want to short bitcoin there will be lots of demand for tether Interesting observation. Most people here are say fractional-reserve Tethers are inflating the exchange rate of other cryptocurrencies. But that doesn't really make sense, because buying cryptocurrencies means selling Tethers, pushing down the exchange rate for Tethers. But Tethers are trading 1:1 for USD, so something doesn't add up. You say that Tether demand is strong because traders are selling Bitcoin, and that's propping up the exchange rate of Tether. So what happens if a Tether fraud is revealed and traders want out of Tether -- does the Bitcoin exchange rate go even higher? See https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law where Tethers are the "bad money" causing traders to hoard Bitcoin, the "good money".

jpmattia 9y ago

> Tether is how you short bitcoin ... so they move into tether hoping to buy back in after bitcoin goes down without having to do the expensive/difficult bitcoin-usd move. "Shorting" means borrowing bitcoin and then selling the borrowed bitcoin. What you've described is simply selling bitcoin for USDT, unless I'm missing something.

bcoates 9y ago
It's short in the sense that you're selling before you buy and profiting off the thing bought/sold (bitcoin) going down between the two trades. Sell -> wait -> buy as opposed to the 'long' position of buy -> wait -> sell. Since nobody-ish lets you borrow for bitcoin margin trades you have to "borrow from yourself" (already own bitcoin) and be long-bitcoin in the long run for that to make any sense. But if you're a to-the-moon true believer that also thinks that bitcoin is in a bubble and going to make a temporary correction you could make a ton of bitcoin by being right... if you can actually make the trades and not get screwed by a counterparty.

brendanw 9y ago

I am not sure I follow you on people being worried about a BTC drop from their own selling of BTC. We are in a bull market; one person selling BTC for USD on an exchange is not going to have a significant impact. "so they move into tether hoping to buy back in after bitcoin goes down without having to do the expensive/difficult bitcoin-usd move." How does this help them avoid an expensive bitcion-usd move? They will still have to buy btc with tether and then do a transaction for USD incurring blockchain fees.