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What surprises me most is that despite all these red flags USDT still holds its peg mostly well. Right now it trades less than a cent below the dollar on kraken

by simias 9y ago

What surprises me most is that despite all these red flags USDT still holds its peg mostly well. Right now it trades less than a cent below the dollar on kraken for instance. It seems like cryptocurrency traders are paradoxically pretty trusting.

conanbatt 9y ago
I think bitfinex is holding the peg on where you can see it (kraken). Nobody else can buy /sell tether. Even a guy saying tether probably has the money on twitter was only willing to buy at 45% premium. Now, bitfinex looks super solvent though, so its not like the exchange can dissolve like mtgox.
- DennisP 9y ago
  How is Bitfinex involved with Kraken?
  - simias 9y ago
    I think the idea is that Bitfinex might have enough money to prop USDT up as long as the trading volume is low enough. Just buy on kraken when the peg starts to break. Similarly they can probably afford to actually exchange the USDT for USD up to a certain limit, the question is how deep their pockets are. Do they actually have the full amount in their accounts? $1 billion? 100 millions? 10 millions? We'll know that for sure when there's an actual audit or when there's a bank run and they collapse because they don't have the money to pay for the USDTs.
  - tim333 9y ago
    I don't think Bitfinex is directly involved with Kraken. Bitfinex is a shady offshore operation [1] and Kraken is a fully US regulated company with their main office in SF. Kraken is however about the only place you can actually trade USDT for real USD. Or indeed short the things. [1] >[people] have attempted to visit the company’s registered address in Hong Kong only to find an accounting company which served as a registration agent for the company >most of the executive team is distributed across the globe.https://medium.com/@cadammitchell/bitfinex-has-a-true-working-office-in-taiwan-a7ab8c55f7c5 https://medium.com/@cadammitchell/bitfinex-has-a-true-workin...
arisAlexis 9y ago
it's actually because they are probably solvent. be critical when everyone is sure about something without insider knowledge
- Sangermaine 9y ago
  You're bizarrely reversing the burden of proof here. If they're solvent, it should be a simple matter to prove it. If "insider knowledge" has the answer, they should easily be able to assuage all doubts.
  - arisAlexis 9y ago
    they have huge incentive not to disclose exactly where their accounts are offshore due to potential government crackdowns on crypto. that is why their previous audit was difficult, attested the amounts but ultimately was cancelled. you can see the amount of panic and fanatism by the downvotes on my previous comment. be sure to bookmark this chat for the future :)
    - Sangermaine 9y ago
      Sure, but I’m not sure why you’d want written proof of your gullibility and credulousness.
    - dictum 9y ago
      The simpler answer is that counting on the other party to do right when you have absolute information asymmetry has always been a sucker's game. Yes, this time it may be different. But even the classic Nigerian scam is based on the premise that you cannot verify the claims – you cannot involve the government, the police or any other third-party, you just have to trust the relative of the disgraced kleptocrat to receive your millions.
      - arisAlexis 9y ago
        comparing the biggest crypto exchange by volume to a nigerian scam is kind of extreme imo. The tech is there and they have always delivered. Yes they don't have an audit and I hope they produce it but govs do crack down lately.
panarky 9y ago
I agree that the audit failure makes Tether look super shady. But when traders continue to buy and sell within 1% of parity, that's a signal that maybe there's more going on here. I don't buy the concept that Bitfinex can somehow rig the price on other exchanges. If traders are all selling Tether, while simultaneously new Tethers are getting printed, then the price should tank. When the price doesn't tank, that should tell us there's more to the story.
- Sangermaine 9y ago
  Yes, gullibility and greed.
- tim333 9y ago
  Tether presumably maintain the price by buying and selling USDT within 1% of parity, probably automatically using software, and probably mostly by trading BTC/USDT rather than USD/USDT given the difficulty of moving actual USD. It's not really rigging the price in a bad way - it's kind of how the thing is supposed to work.
AlexCoventry 9y ago
My favorite theory is that they're currently solvent if you take their cryptocurrency assets at current fiat prices into account. In this theory, the regulatory suppression of their banking relationships forced them to hold the crypto assets they were taking in return for USDT, and they have made out like bandits -- on paper, for now -- from the crazy demand for cryptocurrency over the last 6 months. If that's the case, it might be possible to estimate how far the current crash would have to go for them to hit insolvency, from the history of USDT releases. On the other hand, hopefully they've been diversifying the holdings they're prevented from liquidating into other price-stable commodities like gold and oil, via in- kind trades. If any of this is true, I can see how it would make them shy about an audit. It's very precarious, even if there's no theft intended by it.
- Nursie 9y ago
  It would also still be fraudulent, given their claims to be backed by USD...

by simias 9y ago

conanbatt 9y ago

I think bitfinex is holding the peg on where you can see it (kraken). Nobody else can buy /sell tether. Even a guy saying tether probably has the money on twitter was only willing to buy at 45% premium. Now, bitfinex looks super solvent though, so its not like the exchange can dissolve like mtgox.

DennisP 9y ago
How is Bitfinex involved with Kraken?
- simias 9y ago
  I think the idea is that Bitfinex might have enough money to prop USDT up as long as the trading volume is low enough. Just buy on kraken when the peg starts to break. Similarly they can probably afford to actually exchange the USDT for USD up to a certain limit, the question is how deep their pockets are. Do they actually have the full amount in their accounts? $1 billion? 100 millions? 10 millions? We'll know that for sure when there's an actual audit or when there's a bank run and they collapse because they don't have the money to pay for the USDTs.
- tim333 9y ago
  I don't think Bitfinex is directly involved with Kraken. Bitfinex is a shady offshore operation [1] and Kraken is a fully US regulated company with their main office in SF. Kraken is however about the only place you can actually trade USDT for real USD. Or indeed short the things. [1] >[people] have attempted to visit the company’s registered address in Hong Kong only to find an accounting company which served as a registration agent for the company >most of the executive team is distributed across the globe.https://medium.com/@cadammitchell/bitfinex-has-a-true-working-office-in-taiwan-a7ab8c55f7c5 https://medium.com/@cadammitchell/bitfinex-has-a-true-workin...

arisAlexis 9y ago

it's actually because they are probably solvent. be critical when everyone is sure about something without insider knowledge

Sangermaine 9y ago
You're bizarrely reversing the burden of proof here. If they're solvent, it should be a simple matter to prove it. If "insider knowledge" has the answer, they should easily be able to assuage all doubts.
- arisAlexis 9y ago
  they have huge incentive not to disclose exactly where their accounts are offshore due to potential government crackdowns on crypto. that is why their previous audit was difficult, attested the amounts but ultimately was cancelled. you can see the amount of panic and fanatism by the downvotes on my previous comment. be sure to bookmark this chat for the future :)
  - Sangermaine 9y ago
    Sure, but I’m not sure why you’d want written proof of your gullibility and credulousness.
  - dictum 9y ago
    The simpler answer is that counting on the other party to do right when you have absolute information asymmetry has always been a sucker's game. Yes, this time it may be different. But even the classic Nigerian scam is based on the premise that you cannot verify the claims – you cannot involve the government, the police or any other third-party, you just have to trust the relative of the disgraced kleptocrat to receive your millions.
    - arisAlexis 9y ago
      comparing the biggest crypto exchange by volume to a nigerian scam is kind of extreme imo. The tech is there and they have always delivered. Yes they don't have an audit and I hope they produce it but govs do crack down lately.

panarky 9y ago

I agree that the audit failure makes Tether look super shady. But when traders continue to buy and sell within 1% of parity, that's a signal that maybe there's more going on here. I don't buy the concept that Bitfinex can somehow rig the price on other exchanges. If traders are all selling Tether, while simultaneously new Tethers are getting printed, then the price should tank. When the price doesn't tank, that should tell us there's more to the story.

Sangermaine 9y ago
Yes, gullibility and greed.
tim333 9y ago
Tether presumably maintain the price by buying and selling USDT within 1% of parity, probably automatically using software, and probably mostly by trading BTC/USDT rather than USD/USDT given the difficulty of moving actual USD. It's not really rigging the price in a bad way - it's kind of how the thing is supposed to work.

AlexCoventry 9y ago

My favorite theory is that they're currently solvent if you take their cryptocurrency assets at current fiat prices into account. In this theory, the regulatory suppression of their banking relationships forced them to hold the crypto assets they were taking in return for USDT, and they have made out like bandits -- on paper, for now -- from the crazy demand for cryptocurrency over the last 6 months. If that's the case, it might be possible to estimate how far the current crash would have to go for them to hit insolvency, from the history of USDT releases. On the other hand, hopefully they've been diversifying the holdings they're prevented from liquidating into other price-stable commodities like gold and oil, via in- kind trades. If any of this is true, I can see how it would make them shy about an audit. It's very precarious, even if there's no theft intended by it.

Nursie 9y ago
It would also still be fraudulent, given their claims to be backed by USD...