5 ms·

How are the big players in cryptocurrency not pushing back on this? It has potential to take down the entire ecosystem.

by mancerayder 9y ago

adamnemecek 9y ago
How?
- Shank 9y ago
  A lot of exchanges only change between USDT and other crypto currencies. If tether is insolvent, the 1:1 backing ratio of USDT to USD doesn't exist, which means that USDT is worthless. Promised USD just evaporates. The few exchanges that offer USD to crypto and back are probably pretty safe, but if the entire ecosystem crashes, it stands to reason that's not going to stand up for long.
  - deleted 9y ago
    [deleted]
- jameskilton 9y ago
  Fake 450 million USD being used to buy up Bitcoin, artificially inflating the value. Then when people want to sell, there isn't actually the underlying USD available, so you can't actually turn your BTC back into USD, leading to a mass sell panic rush and the price craters.
- hendzen 9y ago
  Imagine the New York Stock exchange decided to print counterfeit dollars (electronically) and use them to buy up shares of all the stocks on the exchange. There would be a huge rally, all the stock prices would go through the roof. But if enough shareholders started selling their shares and asking for real dollars back, the exchange would eventually collapse because they wouldn't have enough money to settle all the trades. With Tether its basically the same situation, just more convoluted. Rather than counterfeiting dollars, they are rapidly printing USDT that the community, apparently on faith alone, believes are redeemable for $1 per Tether. Curiously Tethers have only been created, never destroyed, which would indicate that none have been redeemed back to USD. Many other (complicit) exchanges are also accepting these "tethered dollars" - the "USD" volume at exchanges like Bitfinex, Poloniex, Binance, Huobi, Bittrex, OkEX, etc is actually USDT based. The endgame is the same as the simplified example with counterfeit dollars. The only thing keeping it going is the rising cryptocurrency price, which is keeping people hoarding coins instead of selling back to USD. This is also why the rate of tether issuance has been increasing - they need to keep the price high so people continue to hold. Eventually the selling pressure will increase (on the few exchanges that actually handle real USD), and as people attempt to convert their crypto holdings to real dollars the fraud will become readily apparent. There will be huge distortions as the price of Bitcoin and Ethereum rockets on Bitfinex and other Tether exchanges as people try to get their money out, and simultaneously craters on GDAX & Gemeni as they try to get back in to fiat. In the end the massively decreased GDAX/Gemeni prices will be the only ones that matter since all faith will have been lost in the former tether-based exchanges. If you're reading this, you have been warned.
  - ufo 9y ago
    To complement what you said, this has already happened with MtGOX in 2013. The price rise in Bitcoin up to $1000 was largely due to trading bots in MtGOX who purchased bitcoin with fake money. When MtGOX finally broke we say prices exploding inside it, as people desperately tried to cash out, and plummeting everywhere else.
  - deleted 9y ago
    [deleted]
  - candiodari 9y ago
    You could go even further. Let's say you are a very large bitcoin fish running an exchange and you want to cash out. Tether is the ideal instrument to let you absorb part of the market demand using bitcoin rather than dollars, protecting the price while you're continuing your cashout.
  - bb88 9y ago
    Great comment.
  - ActsJuvenile 9y ago
    Couldn't agree more with the endgame you described. It will be same as MtGox's last month when prices were $2,000 higher there while everyone was trying to sell off at more liquid exchanges.
enraged_camel 9y ago
How would it take down the entire ecosystem? Bitcoin alone has a $194B market cap. $450M is a drop in the bucket.
- mancerayder 9y ago
  Key words, last four days. What do you think has been happening the last few months with Tether creation?
- jboles 9y ago
  Do you think there really is $194B hard cash in the entire ecosystem? Or are you deriving that number from simply # of coins issued multiplied by last trade price?
- wcoenen 9y ago
  > How would it take down the entire ecosystem? Bitcoin alone has a $194B market cap. $450M is a drop in the bucket. I'm not sure you can compare those numbers like that. If somebody used $450M to buy bitcoin, the market cap would likely rise much much more than $450M. For example, if I look at the GDAX order book right now, I see that the bitcoin price could be pushed up $200 by buying less than $3M worth of bitcoin. That corresponds to increasing the market cap by $3.2 billion.
- ceejayoz 9y ago
  Bitcoin's market cap is $194B in the same way Basecamp is a $100B company. https://m.signalvnoise.com/press-release-basecamp-valuation-tops-100-billion-after-bold-vc-investment-c221d8f86ad7 https://m.signalvnoise.com/press-release-basecamp-valuation-...
- goldenkey 9y ago
  You may want to consider a better metric than market cap - https://news.ycombinator.com/item?id=16182896 https://news.ycombinator.com/item?id=16182896
mtgx 9y ago
Tether is 1/400 of the cryptocurrency market cap. Meaning "only" 1/400 of the money would be lost if Tether does an "exit scam" like Bitconnect did. Oh, and by the way, Bitconnect was larger than Tether. To put things in context, the MtGox heist was worth about 1/20 of the market. However, back then Bitcoin was pretty much the only cryptocurrency and it was still just a technological curiosity. If Bitcoin could be "hacked" at this level, then people didn't really have a choice than think that maybe this technology isn't all that great, and may actually disappear. I don't think the market would crash for 2 years straight again if $40 billion in cryptocurrency were stolen tomorrow. It would take a LOT to take down the whole market for good. Even if you had events such as world's governments uniting to ban all cryptocurrency exchanges, which is highly unlikely (see Belarus announcing to make crypto tax-free today), it would still make crash the market for 2-3 years, until people figure out how to get around those regulations with decentralized exchanges.
- hendzen 9y ago
  You are equating dollar inflows/outflows with market cap. They are not the same. Look at the order book on GDAX. How much bitcoin do you need to buy/sell to increase/decrease the market cap by 1 billion dollars? MUCH less than 1 billion dollars worth...
- mancerayder 9y ago
  Sure, but you're assuming they're going to stop printing Tethers. Also, Belarus? It ranks as one of the most corrupt countries in the world. Not exactly the first shining example that comes to mind of a leader in financial regulation.
- ActsJuvenile 9y ago
  You should look at daily volume: BTC daily trade volume = $14B Tethers sloshing around in market today = $1.6B Thus Tethers represent 14% of the market. If MtGox crash was due to a 5% heist, this 14% scam will wipe out Bitcoin and establish Ethereum as the new king. PS: What's the story behind your username?
  - dialtone 9y ago
lingben 9y ago
why would they push back on the most successful scheme since MtGox' willy bot?

How are the big players in cryptocurrency not pushing back on this? It has potential to take down the entire ecosystem.

adamnemecek 9y ago

How?

Shank 9y ago
A lot of exchanges only change between USDT and other crypto currencies. If tether is insolvent, the 1:1 backing ratio of USDT to USD doesn't exist, which means that USDT is worthless. Promised USD just evaporates. The few exchanges that offer USD to crypto and back are probably pretty safe, but if the entire ecosystem crashes, it stands to reason that's not going to stand up for long.
- deleted 9y ago
  [deleted]
jameskilton 9y ago
Fake 450 million USD being used to buy up Bitcoin, artificially inflating the value. Then when people want to sell, there isn't actually the underlying USD available, so you can't actually turn your BTC back into USD, leading to a mass sell panic rush and the price craters.
hendzen 9y ago
Imagine the New York Stock exchange decided to print counterfeit dollars (electronically) and use them to buy up shares of all the stocks on the exchange. There would be a huge rally, all the stock prices would go through the roof. But if enough shareholders started selling their shares and asking for real dollars back, the exchange would eventually collapse because they wouldn't have enough money to settle all the trades. With Tether its basically the same situation, just more convoluted. Rather than counterfeiting dollars, they are rapidly printing USDT that the community, apparently on faith alone, believes are redeemable for $1 per Tether. Curiously Tethers have only been created, never destroyed, which would indicate that none have been redeemed back to USD. Many other (complicit) exchanges are also accepting these "tethered dollars" - the "USD" volume at exchanges like Bitfinex, Poloniex, Binance, Huobi, Bittrex, OkEX, etc is actually USDT based. The endgame is the same as the simplified example with counterfeit dollars. The only thing keeping it going is the rising cryptocurrency price, which is keeping people hoarding coins instead of selling back to USD. This is also why the rate of tether issuance has been increasing - they need to keep the price high so people continue to hold. Eventually the selling pressure will increase (on the few exchanges that actually handle real USD), and as people attempt to convert their crypto holdings to real dollars the fraud will become readily apparent. There will be huge distortions as the price of Bitcoin and Ethereum rockets on Bitfinex and other Tether exchanges as people try to get their money out, and simultaneously craters on GDAX & Gemeni as they try to get back in to fiat. In the end the massively decreased GDAX/Gemeni prices will be the only ones that matter since all faith will have been lost in the former tether-based exchanges. If you're reading this, you have been warned.
- ufo 9y ago
  To complement what you said, this has already happened with MtGOX in 2013. The price rise in Bitcoin up to $1000 was largely due to trading bots in MtGOX who purchased bitcoin with fake money. When MtGOX finally broke we say prices exploding inside it, as people desperately tried to cash out, and plummeting everywhere else.
- deleted 9y ago
  [deleted]
- candiodari 9y ago
  You could go even further. Let's say you are a very large bitcoin fish running an exchange and you want to cash out. Tether is the ideal instrument to let you absorb part of the market demand using bitcoin rather than dollars, protecting the price while you're continuing your cashout.
- bb88 9y ago
  Great comment.
- ActsJuvenile 9y ago
  Couldn't agree more with the endgame you described. It will be same as MtGox's last month when prices were $2,000 higher there while everyone was trying to sell off at more liquid exchanges.

enraged_camel 9y ago

How would it take down the entire ecosystem? Bitcoin alone has a $194B market cap. $450M is a drop in the bucket.

mancerayder 9y ago
Key words, last four days. What do you think has been happening the last few months with Tether creation?
jboles 9y ago
Do you think there really is $194B hard cash in the entire ecosystem? Or are you deriving that number from simply # of coins issued multiplied by last trade price?
wcoenen 9y ago
> How would it take down the entire ecosystem? Bitcoin alone has a $194B market cap. $450M is a drop in the bucket. I'm not sure you can compare those numbers like that. If somebody used $450M to buy bitcoin, the market cap would likely rise much much more than $450M. For example, if I look at the GDAX order book right now, I see that the bitcoin price could be pushed up $200 by buying less than $3M worth of bitcoin. That corresponds to increasing the market cap by $3.2 billion.
ceejayoz 9y ago
Bitcoin's market cap is $194B in the same way Basecamp is a $100B company. https://m.signalvnoise.com/press-release-basecamp-valuation-tops-100-billion-after-bold-vc-investment-c221d8f86ad7 https://m.signalvnoise.com/press-release-basecamp-valuation-...
goldenkey 9y ago
You may want to consider a better metric than market cap - https://news.ycombinator.com/item?id=16182896 https://news.ycombinator.com/item?id=16182896

mtgx 9y ago

Tether is 1/400 of the cryptocurrency market cap. Meaning "only" 1/400 of the money would be lost if Tether does an "exit scam" like Bitconnect did. Oh, and by the way, Bitconnect was larger than Tether. To put things in context, the MtGox heist was worth about 1/20 of the market. However, back then Bitcoin was pretty much the only cryptocurrency and it was still just a technological curiosity. If Bitcoin could be "hacked" at this level, then people didn't really have a choice than think that maybe this technology isn't all that great, and may actually disappear. I don't think the market would crash for 2 years straight again if $40 billion in cryptocurrency were stolen tomorrow. It would take a LOT to take down the whole market for good. Even if you had events such as world's governments uniting to ban all cryptocurrency exchanges, which is highly unlikely (see Belarus announcing to make crypto tax-free today), it would still make crash the market for 2-3 years, until people figure out how to get around those regulations with decentralized exchanges.

hendzen 9y ago
You are equating dollar inflows/outflows with market cap. They are not the same. Look at the order book on GDAX. How much bitcoin do you need to buy/sell to increase/decrease the market cap by 1 billion dollars? MUCH less than 1 billion dollars worth...
mancerayder 9y ago
Sure, but you're assuming they're going to stop printing Tethers. Also, Belarus? It ranks as one of the most corrupt countries in the world. Not exactly the first shining example that comes to mind of a leader in financial regulation.
ActsJuvenile 9y ago
You should look at daily volume: BTC daily trade volume = $14B Tethers sloshing around in market today = $1.6B Thus Tethers represent 14% of the market. If MtGox crash was due to a 5% heist, this 14% scam will wipe out Bitcoin and establish Ethereum as the new king. PS: What's the story behind your username?
- dialtone 9y ago

lingben 9y ago

why would they push back on the most successful scheme since MtGox' willy bot?