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They are probably holding Tether reserves in BTC, in a way gambling with the storage moeny. Figure that 2 billion dollars in sitting money generates very little
by conanbatt 9y ago
They are probably holding Tether reserves in BTC, in a way gambling with the storage moeny. Figure that 2 billion dollars in sitting money generates very little interest, in comparison to 2 billion dollars in btc that might jump 10% in one week.
This bet however, inflates the price of btc alone, since its like someone selling a btc doesnt take any btc from the market (as a btc is traded for another btc concealed). This double spend increases demand for btc, and on paper makes tether rich.
However, if BTC drops below the cost of acquiring it, the fund becomes insolvent, and as it can't sell anything to recoup it can only spiral down.
Thats one theory anyway.
- bb88 9y agoSo, it's better to sell BTC when the market is higher, and convert BTC back to paper currency. Then USDT could in fact be solvent and possibly earn a profit with the a jump in BTC price. If they have billions of dollars in BTC, it might not be infeasible then to print USDT because their profit would guarantee people would get their money.
- conanbatt 9y agoThats like saying you can make a loan for the bank, and buy the bank's stock saying that the bank is making more profits on loans now. It may work in an incredible bull market (which we have) but it has immense risk exposure. Also bear that the monet that Tether sells their btc, they depreciate their own reserves.