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I don't ask this rhetorically: why would a Tether collapse negatively affect Bitcoin? If anything, it's proof that fiat-backed financial tools are flawed at inc

I don't ask this rhetorically: why would a Tether collapse negatively affect Bitcoin? If anything, it's proof that fiat-backed financial tools are flawed at inception. If there's a run and people need to dump USDT, it seems they will flood into BTC/ETH, not try to convert to USD/fiat.

orthecreedence 9y ago
The reason being (from my understanding) that the price of BTC has been pumped higher and higher by Buttfinex printing Tethers and using them to buy BTC. Essentially, they create value out of nothing, transfer that value into BTC, rinse and repeat. Therefor the high valuation you see in BTC is actually a lot of paper dollars that have no backing. This has been compounded many, many times. When it's found that Tether is insolvent, all that perceived value that's been pumped into BTC will dissolve, and the market (including all the alts that ride BTC's coat tails) will come crashing down.
- bb88 9y ago
  I've been trying to figure out how Bitfinex and Tethers manipulate BTC. One way it can go south is if Bitfinex is using the money it gets from Tethers to buy BTC. Effectively not converting the money to paper, but holding onto BTC. In other words, Tether may be backed by BTC. So a run on Tether might affect the price of BTC negatively as Bitfinex would have to sell BTC to dollars to pay for the Tethers people are trying to sell back. But that's only a theory.
  - orthecreedence 9y ago
    Problem is, Tether doesn't actually buy back USDT from anybody. Nobody has successfully converted their USDT to USD through Tether...only via USDT -> USD market on Kraken, or more commonly USDT -> BTC -> USD. In other words, it's like a bank you can only put money into, but not take money out of, and you can only redeem your money by finding some poor sucker who'll trade your USD vouchers for some other currency that's actually worth something. Unless you're just talking about maintaining the peg by buying large amounts when the price falls below $1. In that case, yes they'd have to sell BTC to maintain the peg because it's conjectured that they back USDT with BTC (not USD), and even with the BTC they have, at its market value it wouldn't actually back the amount of Tethers they've printed.
ericd 9y ago
>If anything, it's proof that fiat-backed financial tools are flawed at inception. That might be the case if Tether were actually backed by fiat.

orthecreedence 9y ago

The reason being (from my understanding) that the price of BTC has been pumped higher and higher by Buttfinex printing Tethers and using them to buy BTC. Essentially, they create value out of nothing, transfer that value into BTC, rinse and repeat. Therefor the high valuation you see in BTC is actually a lot of paper dollars that have no backing. This has been compounded many, many times. When it's found that Tether is insolvent, all that perceived value that's been pumped into BTC will dissolve, and the market (including all the alts that ride BTC's coat tails) will come crashing down.

bb88 9y ago
I've been trying to figure out how Bitfinex and Tethers manipulate BTC. One way it can go south is if Bitfinex is using the money it gets from Tethers to buy BTC. Effectively not converting the money to paper, but holding onto BTC. In other words, Tether may be backed by BTC. So a run on Tether might affect the price of BTC negatively as Bitfinex would have to sell BTC to dollars to pay for the Tethers people are trying to sell back. But that's only a theory.
- orthecreedence 9y ago
  Problem is, Tether doesn't actually buy back USDT from anybody. Nobody has successfully converted their USDT to USD through Tether...only via USDT -> USD market on Kraken, or more commonly USDT -> BTC -> USD. In other words, it's like a bank you can only put money into, but not take money out of, and you can only redeem your money by finding some poor sucker who'll trade your USD vouchers for some other currency that's actually worth something. Unless you're just talking about maintaining the peg by buying large amounts when the price falls below $1. In that case, yes they'd have to sell BTC to maintain the peg because it's conjectured that they back USDT with BTC (not USD), and even with the BTC they have, at its market value it wouldn't actually back the amount of Tethers they've printed.

ericd 9y ago

>If anything, it's proof that fiat-backed financial tools are flawed at inception. That might be the case if Tether were actually backed by fiat.