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The thing that should be a huge red flag about tether is that there is ~$2.5 billion in notional value of tethers floating around. (I think the bulk these are h

by b1daly 8y ago

The thing that should be a huge red flag about tether is that there is ~$2.5 billion in notional value of tethers floating around. (I think the bulk these are held by exchanges, on behalf of their customers or themselves.) There is no possible mechanism by which these tethers can actually be redeemed for US $. The Tether company does not offer this service, which is incredible. For someone to exchange their tethers for dollars requires them to have an account at an exchange that uses tether, with US dollar services, who reliably will let customers withdraw said dollars. As far as I know, there are no such entities who are willing or able to provide such a service. This alone should cause the tether peg to break. It seems like this lack of liquidity (is that the right term?) would enable a dollar peg to be maintained at a much lower cost, through wash trading or other trading on an exchange like Kraken. It's incredible to me that people are willing to entrust significant amounts of hard cash to this house of cards. I guess some people have money to burn.

A2017U1 8y ago
>As far as I know, there are no such entities who are willing or able to provide such a service. Kraken offer such a service, this article is about kraken and it specifically mentions USD/usdt trading on the exchange.
- duskwuff 8y ago
  > Kraken offer such a service... Kraken offers an exchange between USD and USDT. When you perform an exchange, you are trading USD for another user's USDT, or potentially for USDT issued directly by Tether. The exchange is performed at market rates, which can fluctuate. Tether claims on their web site that USDT can be redeemed, which would presumably be a process by which one USDT is destroyed and the holder receives exactly one USD in return. However, this process does not appear to actually be available to anyone.
  - A2017U1 8y ago
    I suggest you read the comment I was responding to again. My reply was accurate. >However, this process does not appear to actually be available to anyone. Tethers have been redeemed by exchanges and burnt, this is visible on the omni chain explorer. Theres only a handful of actual customers allowed to buy and redeem directly with tether.
windows_tips 8y ago
>The Tether company does not offer this service, which is incredible. How does sending to a Bank Account work, then? Do banks take Tether now?
- b1daly 8y ago
  I’m just a casual observer of the market, so I only know what can glean on the internet. My observations are purely anecdotal. A fundamental problem, in the entire “crypto” market is that it’s hard to get dollars to crypto exchanges. As far as I can tell, this difficulty is asymmetric: it’s harder to get dollars out of exchanges than it is to deposit. In either case, it is hard to get an account with an exchange that can handle dollars, if you are not willing able to jump through the hoops of AML and KYC regulations. Even if you are, exchanges like Coinbase (regulated, in US) or Bitfinex (unregulated, located god knows where) present significant friction in actually transacting with dollars. (See the relevant reddit forums). In addition, transferring dollars internationally is costly. So, somewhere, people exchange their dollars for bitcoin, or whatever. They can then easily transfer these digital tokens to any exchange, even those that don’t use dollars (which are many). When such a user wants to avoid exposure, they can sell their bitcoin for tethers, which they can hold or transfer between exchanges. The question is where this Tether comes from. It enters the system via Bitfinex, who generates the tether token (their sister company manages the network and creation/destruction of tethers). What people are suspicious of, is that Tether is generating tokens at will. They can then use these tokens to exchange for real bitcoins. They then avail themselves of whatever actual points of exchange they can to obtain real currency. Or they can just trade the bitcoin. The point is, in a panic sell situation, the exits are very blocked. If you hold your own tokens (off exchange) you will be that much more screwed, as these blockchain based networks breakdown under load. In some ways, maybe this lack of liquidity helps stabilize prices. But the total crypto “market cap” is at least an order of magnitude greater than the total dollars invested. (This is a hard concept to grasp, essentially it is the sum of the last price paid for all tokens in the market place.) If tether is being is being generated without dollars to back it, that means there is even less real liquidity in the market, and “Tether Inc” is scamming everyone buy siphoning of some of the real demand for crypto coins. These digital “currencies” have so far only shown utility as a pure commodity for speculation. This is all mathematically trivial to see. The thing that many skeptical market observers wonder is why the “bubble” hasn’t totally deflated. Bitcoin has shown surprising price stability between $6-8k for a few months. There is speculation that market manipulation is the thing providing the support, including the shenanigans of Bitfinex and Tether. Bottom line is that this is a (sub) zero sum game. Any dollars won have a balancing loss from another player. It seems highly likely that this already highly risky game is being “games” by entities that play dirty.

by b1daly 8y ago

A2017U1 8y ago

>As far as I know, there are no such entities who are willing or able to provide such a service. Kraken offer such a service, this article is about kraken and it specifically mentions USD/usdt trading on the exchange.

duskwuff 8y ago
> Kraken offer such a service... Kraken offers an exchange between USD and USDT. When you perform an exchange, you are trading USD for another user's USDT, or potentially for USDT issued directly by Tether. The exchange is performed at market rates, which can fluctuate. Tether claims on their web site that USDT can be redeemed, which would presumably be a process by which one USDT is destroyed and the holder receives exactly one USD in return. However, this process does not appear to actually be available to anyone.
- A2017U1 8y ago
  I suggest you read the comment I was responding to again. My reply was accurate. >However, this process does not appear to actually be available to anyone. Tethers have been redeemed by exchanges and burnt, this is visible on the omni chain explorer. Theres only a handful of actual customers allowed to buy and redeem directly with tether.

windows_tips 8y ago

>The Tether company does not offer this service, which is incredible. How does sending to a Bank Account work, then? Do banks take Tether now?

b1daly 8y ago
I’m just a casual observer of the market, so I only know what can glean on the internet. My observations are purely anecdotal. A fundamental problem, in the entire “crypto” market is that it’s hard to get dollars to crypto exchanges. As far as I can tell, this difficulty is asymmetric: it’s harder to get dollars out of exchanges than it is to deposit. In either case, it is hard to get an account with an exchange that can handle dollars, if you are not willing able to jump through the hoops of AML and KYC regulations. Even if you are, exchanges like Coinbase (regulated, in US) or Bitfinex (unregulated, located god knows where) present significant friction in actually transacting with dollars. (See the relevant reddit forums). In addition, transferring dollars internationally is costly. So, somewhere, people exchange their dollars for bitcoin, or whatever. They can then easily transfer these digital tokens to any exchange, even those that don’t use dollars (which are many). When such a user wants to avoid exposure, they can sell their bitcoin for tethers, which they can hold or transfer between exchanges. The question is where this Tether comes from. It enters the system via Bitfinex, who generates the tether token (their sister company manages the network and creation/destruction of tethers). What people are suspicious of, is that Tether is generating tokens at will. They can then use these tokens to exchange for real bitcoins. They then avail themselves of whatever actual points of exchange they can to obtain real currency. Or they can just trade the bitcoin. The point is, in a panic sell situation, the exits are very blocked. If you hold your own tokens (off exchange) you will be that much more screwed, as these blockchain based networks breakdown under load. In some ways, maybe this lack of liquidity helps stabilize prices. But the total crypto “market cap” is at least an order of magnitude greater than the total dollars invested. (This is a hard concept to grasp, essentially it is the sum of the last price paid for all tokens in the market place.) If tether is being is being generated without dollars to back it, that means there is even less real liquidity in the market, and “Tether Inc” is scamming everyone buy siphoning of some of the real demand for crypto coins. These digital “currencies” have so far only shown utility as a pure commodity for speculation. This is all mathematically trivial to see. The thing that many skeptical market observers wonder is why the “bubble” hasn’t totally deflated. Bitcoin has shown surprising price stability between $6-8k for a few months. There is speculation that market manipulation is the thing providing the support, including the shenanigans of Bitfinex and Tether. Bottom line is that this is a (sub) zero sum game. Any dollars won have a balancing loss from another player. It seems highly likely that this already highly risky game is being “games” by entities that play dirty.