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I just document my guess here what's going on. Tether probably started exactly as they describe. At some point someone got a smart idea that just storing that

I just document my guess here what's going on. Tether probably started exactly as they describe. At some point someone got a smart idea that just storing that USD in bank accounts is stupid, let's invest that to something more profitable. BTC is quite obvious choiuce of investment here. All is good until someone figured out that if BTC goes down, we are technically insolvent. Luckily there is a way out, as long as there are people taking USDT at its face value. Keep on printing USDT and using that to purchase BTC so that the price stays high/goes up. There is a limited amount of BTC, so there is a backstop here, you have all the bitcoin of the world as your assets and amount x of USDT on your liabilities. At that point you can say that hey, if someone wants to convert their USDT to USD, it is easy, just buy some BTC with maybe 1 million USDT/BTC, and by the way, our just opened USD/BTC currency pair seems to trade at 999 000 USD/BTC, so you can convert your money that way. And USDT holders did not even understand that they were fleeced badly, but just should have kept their BTC investments in the first place. Now, admittably, there is a small catch in this plan. What if people lose trust on USDT? Well, god news is that at that point, USDT issuer has on their accounts a significant sum of BTC (and unless they are complete idiots), a significant sum of USD. So it is likely that they figure out a solution for themselves that may include linving rest of their lives on some remote paradise island. USDT and BTC investors, then again, may not be so lucky...

bufferoverflow 9y ago
The question is who are all those USDT buyers in this scheme. And, assuming the trades are voluntary, why should we worry much about these rich investors?
- hedonistbot 9y ago
  Bitfinex and some other exchanges list their crypto prices in USDT and most people trading on their platform probably don't realise this is not dollars. So there's your guaranteed demand. As long as those buyers HODL there is no pressure on USDT.
- TheCoelacanth 9y ago
  If they are people who are being defrauded into believing that they are selling bitcoin for USD when they are actually selling it for USDT, then yes we should be worried because fraud is a crime.
bhouston 9y ago
You are in my opinion exactly right. But the implications are huge and it likely means that the whole cryptocurrency market is sort of fucked, and we are just waiting for the music to stop at this point. 8 months before the 2007-2009 CDO crash, there was rumors among my smart fiends that things were heading south and there were huge hidden liabilities that the banks couldn't handle. At first, you think they are conspiracy guys, but eventually I came around and saved myself a lot of money. It was against a situation where if things went up, one was okay, but if things went down you found out some people couldn't meet their obligations in a really big way: https://en.wikipedia.org/wiki/Subprime_mortgage_crisis https://en.wikipedia.org/wiki/Subprime_mortgage_crisis I feel like we are in the same situation. Informed people are putting together the pieces but the music hasn't yet stopped.
- bby 9y ago
  When do you think the music stops? Who is going to profit from it? I noticed that futures volumes on the CBOE/CME have increased a bit more now (implying there may be more shorts). LedgerX/Deribit options volumes are still not good. Do you think that people are getting short exposure to coins over-the-counter? The market on its surface seems so one-sided even in the face of this Tether cloud. I am wondering what more sophisticated investors are thinking right now.
deleted 9y ago
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bufferoverflow 9y ago

The question is who are all those USDT buyers in this scheme. And, assuming the trades are voluntary, why should we worry much about these rich investors?

hedonistbot 9y ago
Bitfinex and some other exchanges list their crypto prices in USDT and most people trading on their platform probably don't realise this is not dollars. So there's your guaranteed demand. As long as those buyers HODL there is no pressure on USDT.
TheCoelacanth 9y ago
If they are people who are being defrauded into believing that they are selling bitcoin for USD when they are actually selling it for USDT, then yes we should be worried because fraud is a crime.

bhouston 9y ago

You are in my opinion exactly right. But the implications are huge and it likely means that the whole cryptocurrency market is sort of fucked, and we are just waiting for the music to stop at this point. 8 months before the 2007-2009 CDO crash, there was rumors among my smart fiends that things were heading south and there were huge hidden liabilities that the banks couldn't handle. At first, you think they are conspiracy guys, but eventually I came around and saved myself a lot of money. It was against a situation where if things went up, one was okay, but if things went down you found out some people couldn't meet their obligations in a really big way: https://en.wikipedia.org/wiki/Subprime_mortgage_crisis https://en.wikipedia.org/wiki/Subprime_mortgage_crisis I feel like we are in the same situation. Informed people are putting together the pieces but the music hasn't yet stopped.

bby 9y ago
When do you think the music stops? Who is going to profit from it? I noticed that futures volumes on the CBOE/CME have increased a bit more now (implying there may be more shorts). LedgerX/Deribit options volumes are still not good. Do you think that people are getting short exposure to coins over-the-counter? The market on its surface seems so one-sided even in the face of this Tether cloud. I am wondering what more sophisticated investors are thinking right now.

deleted 9y ago

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