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> Even IF Tether is NOT running a fraud, the arbitrage positions that automatically exist between Bitcoin and any tether are real and do create incentive to cre
by runeks 9y ago
> Even IF Tether is NOT running a fraud, the arbitrage positions that automatically exist between Bitcoin and any tether are real and do create incentive to create an arbitraged feedback loop whereby a pegged tether between Bitcoin - any_generic_tether - USD does exist and self feeds, driving up Bitcoin exactly as the author contends may be happening with the current Tether.
This purported mechanism needs a more thorough explanation from the author before it can seriously considered. How, exactly, does this arbitrage opportunity work?
- hammock 9y agoTether price is 80cents. Person trades bitcoin for tether. Person redeems tether for $1, profiting 20cents. Tether issues more (fraudulent, not backed) currency. Repeat.
- heptathorp 9y agoIf someone sells bitcoin for tether (because they want to redeem the tether and collect 20 cent profit) the price of bitcoin goes down, not up.
- runeks 9y agoWhich markets confuse tethers with USD? They are clearly two different assets. The former is a private currency, issued by a company and redeemable in USD, while the latter is the USD that the former IOU is denominated in. I see how this would affect the price of bitcoins in tethers, but not how it would affect the price of bitcoins in USD (unless the market, as a whole, conflates the two). Also, where do these alleged arbitrageurs redeem their tethers? As I understand it, the corporation that issues tethers was cut off from doing international wire transfers, thus rendering tethers irredeemable.