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Isn't this an easy opportunity for arbitrage? Assuming it goes back up to $1. I thought that was the whole point of fiat-backed crypto?
by lewisflude 8y ago
Isn't this an easy opportunity for arbitrage? Assuming it goes back up to $1. I thought that was the whole point of fiat-backed crypto?
- unixhero 8y agoYeah. But like. How backed is it really.
- GenericsMotors 8y agoIf only a neutral third party, such as a respected auditing firm, could confirm they hold the cash in reserve.
- underyx 8y agoThe price being this low should mean that the market thinks there's a chance it won't go back up to $1.
- AznHisoka 8y agoI got a coin “HNcoin”. I deem it worth $1.00! why? because I said so. I will sell it to you for just 95c Easiest arbitrage opportunity.
- patrickg_zill 8y agoYou just explained the Federal Reserve...
- creshal 8y agoThe Fed is backed by the US Federal Government, which has quite some assets to cash in to pay off its obligations in the worst case. Tether has… nothing.
- village-idiot 8y agoAlso, you need USD. Even if every other economic transaction you make is in crypto, you have to pay your taxes in USD. This alone adds quite a bit of demand for fiat.
- patrickg_zill 8y agoYes, there are very few examples of fiat being issued without requiring taxes be paid in that same fiat, as a way to drive demand for the currency.
- AstralStorm 8y agoFed has a few more economic considerations (esp. bank pressure and Treasury entanglements) than J. Random Scammer.
- bduerst 8y agoOnly if the federal reserve wasn't backed by the U.S. Military and did not have billions of people willing to trade with it's currency.
- Ntrails 8y agoSort of, but rather than being the guy posting on the internet the fed gets to draw on the GDP of a pretty big country. Second point, 1 dollar is not a stable unit of value as viewed by other currencies. This is fine, you're valuing the fed vs currency x's backing resource.
- dagw 8y agoAssuming it goes back up to $1 That is a massive assumption, that very few people seem to currently hold. I thought that was the whole point of fiat-backed crypto? More and more people are starting to doubt that it actually is backed by anything.
- lewisflude 8y agoThat makes sense. Definitely sounds like there might be something fishy going on.
- Lazare 8y ago> I thought that was the whole point of fiat-backed crypto? That is a key point of fiat-backed crypto. Whether Tether is an example of fiat-backed crypto is another question entirely. :)
- nwellnhof 8y agoThe fact the Tether who issued USDT for presumably something around $1 aren't buying it back themselves for an easy profit should tell you something.
- mtgx 8y agoIt doesn't tell you anything. Maybe they think the bitcoin price is going to shoot up 3xin the coming months so using their money to buy tether would be pretty stupid in that case no? This is actually why it's so hard to tell from this whether or not this is something bad or just "normal" because tether price always reaches lower levels like this when people get out of it to buy cryptocurrencies, too.
- michaelt 8y agoMaybe they think the bitcoin price is going to shoot up 3xin the coming months so using their money to buy tether would be pretty stupid in that case no? For Tether to be backed by US$, for every 1 USDT they need to hold $1 in cash or cash equivalents. If they have invested the fiat in bitcoins, they aren't backed by US$ any more.
- caf 8y agoThis is right - Tether buying back their USDT means that they get to retire 1 USDT for 0.95c of their backing reserves, turning the remaining 0.05c into profit which they can then invest wherever they want.
- deleted 8y ago[deleted]
- londons_explore 8y agoI see these possibilities: * The tether organisation doesn't have an effective way to buy back tethers. They might not have the processes/infrastructure in place. * The tether organisation doesn't have the USD in liquid enough form to do said purchasing. For example, it might be in frozen bank accounts or offshore and take many days to transfer. * The backing USD doesn't exist entirely.
- nosuchthing 8y agoHow? It’s been a long standing allegation that tether is a fraud, counterfeited by Bitfinex to manipulate the spot price in a scheme to steal bitcoins (buying BTC with free tether printing).. [1][2] The telltale sign of a bankrun at Bitfinex seems to be playing out, as you can see the spot price rises on Bitfinex meanwhile on other exchanges BTC spot price drops. Coinciding with the drop in USD:USDT pair losing its peg is a huge red flag. Bitfinex might attempt a last ditch effort to avoid a MTGOX like collapse, it could be though a large enough drop of the spot price on other exchanges along with Bitfinex purchasing back their customer deposits in a fraudulent version of short selling. Yet that assumes Bitfinex/Tether has liquid cash reserves to leverage such a trade. https://i.imgur.com/pBO0nfY.png https://i.imgur.com/pBO0nfY.png https://i.imgur.com/2DkzWWm.png https://i.imgur.com/2DkzWWm.png [1] https://www.nytimes.com/2018/06/13/technology/bitcoin-price-manipulation.html https://www.nytimes.com/2018/06/13/technology/bitcoin-price-... https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066 [2] https://medium.com/@bitfinexed/latest https://medium.com/@bitfinexed/latest
- Alex3917 8y ago> The telltale sign of a bankrun at Bitfinex seems to be playing out, as you can see the spot price rises on Bitfinex meanwhile on other exchanges BTC spot price drops. As also evidenced by the fact that the price of all other crypto assets is going up, meaning that people are dumping Tether at a loss to buy other stuff at inflated prices.
- jpatokal 8y agoThe fundamental problem with arbitrage -- and one of the major reasons why this moment has been predicted by many -- is that Tether will not redeem USDT for USD. So you can buy all the "cheap" Tethers you like, but you can't turn them back into fiat. Pretty much the only major exchange that does USD/USDT trades is Kraken, and the rate is looking distinctly wobbly today: https://www.coingecko.com/en/price_charts/tether/usd https://www.coingecko.com/en/price_charts/tether/usd
- village-idiot 8y agoThere’s a lot of doubt that they’re actually backed by fiat, hence the fluctuations.
- andrewla 8y agoIt is an arbitrage, but not risk-free arbitrage. The current price differential between USDT and USD can be explained two ways. One is that there's an ~8% chance of tether being long-term without value. That seems to be the dominant interpretation among critics of Bitfinex and Tether. The other is that a short-term liquidity crunch is causing investors to take a haircut in order to obtain liquidity in their desired currency. Rumors abound, but except for one tangential announcement from Bitfinex [1], I haven't heard much that is definitive about the current state of fiat deposits/withdrawals on Bitfinex. Currently the price differentials themselves are the strongest signal. [1] https://medium.com/bitfinex/fiat-deposit-update-october-15th-2018-18ddd276c3fd https://medium.com/bitfinex/fiat-deposit-update-october-15th...
- specialp 8y agoIf one was able to convert it directly to 1 USD immediately then yes it would be a super easy arbitrage and the price of Tether would never fluctuate from 1 USD more than very small amounts (which would be arbitraged and restored) The problem is that you can't do that, and the pricing is indicating that the market no longer believes that Tether is worth 1 USD, so isn't willing to pay that much.
- paulcole 8y agoAll arbitrage opportunities are easy if your assumption that you're going to make money hold true.