7 ms·

This is pretty big news; the entire cryptocurrency economy relies on tethers being valued at par, given that they're how billions of dollars of liquidity are de

This is pretty big news; the entire cryptocurrency economy relies on tethers being valued at par, given that they're how billions of dollars of liquidity are denominated. While rumors and suppositions about Tether have swirled for quite some time, that was also true of Mt. Gox before the fall, and those of us who have been saying loudly that they're insolvent have not been widely believed.

driverdan 7y ago
Anyone in the cryptocurrency space with half a brain knew something was up the minute they refused an independent audit. It was only a matter of time before someone brought charges and/or Tether collapsed.
- raverbashing 7y ago
  Correct, sometimes wishful thinking clobbers rational thought Hence there might be tears
- Felz 7y ago
  Which does make it rather curious that the music's kept playing, so far. Is "common knowledge" that it's probably a complete fraud (like this filing should give) required to pop the tether bubble? Or will even this not be enough?
  - panarky 7y ago
    People have been yelling that Tether is a ponzi fraud since it launched in 2015. And yet it still trades 1:1 to USD today, after the court filing was released. So is there some magic force that keeps the fraud running, and prevents market participants from cashing out their Tether in the mother of all bank runs? If you hold Tether why wouldn't you sell? Or is there more to the story than just "Tether is an obvious fraud"?
    - geofft 7y ago
      I don't understand cryptocurrency markets at all, but, could there be something where the only people participating in the USDT market are those who are at least somewhat confident that USDT is what it claims to be and therefore are pricing it at $1? What do you get out of participating in the market if you expect Tether to be fraudulent? You'd personally price it at zero, then, right? Can you profitably short it, or does everything just break down if you're right? That is, if you hold USDT and want to sell it for cheap, who is going to buy it for cheap-but-nonzero?
      - panarky 7y ago
        > if you hold USDT and want to sell it for cheap, who is going to buy it for cheap-but-nonzero? The market price for one Tether is currently $0.9984 because traders are buying at that price. So if anyone holds Tethers and believes there's greater than 1% probability that it goes to zero, the rational trade is to sell. The fact that the price holds at parity tells me that Tether is not an obvious fraud.
        gzu 7y ago
        There is complacency among the exchanges though. You really believe all that volume and price action is legitimate? Exchanges want tether to be worth what they say it’s worth, 1 USD. The alternative is a massive crash in tether and therefore bitcoin price therefore altcoins price therefore profit (trading fees) for exchanges. The scam can go on much longer than you/anyone can imagine.
    - JumpCrisscross 7y ago
      > it still trades 1:1 to USD today On exchanges of questionably integrity. And where it is impossible to reliably short the instrument.
      - askmike 7y ago
        You mean Kraken? There are many OTC lending markets that allow for tether shorting.
  - bb88 7y ago
    Let's not think of it as a bubble. Let's think of it as Wyle E Coyote running off a cliff and forgetting to look down, because that seems to be the modus operandi of the average HODL.
    - Semaphor 7y ago
      But HODLers don't really care about tether, do they? Isn't tether mainly used for traders who want to temporarily move out of crypto and use tether for that?
      - orthecreedence 7y ago
        It's been suggested that a large percentage of the crypto market cap is based on tethers which have been used to prop up prices but also used to hedge against falling BTC prices. Essentially, bitfinex prints tether whenever the price of BTC drops, and in the meantime, people use these printed tethers to hedge against BTC (and buy back in when the price trends upward again). So there are many iterations of compounded phantom value folded into the market cap of BTC. If tether is found insolvent, essentially 80% of the value of BTC disappears overnight. The entire value of the crypto market depends on people's belief that one tether is worth 1USD. Or so the theory goes.
        Semaphor 7y ago
        I've heard that theory, but I can't say I understand it. Let's say USDT goes to 0 instantly. All traders lose their parked money. I can see a crash from panic and from people recouping their lost safe money, but what else does it have to do with with cryptocurrencies?
        askmike 7y ago
        If USDT would go to 0 instantly many things would happen (a few of the biggest BTC fiat markets would not be able to operate, such as binance's main BTC market). As a practical example big traders would obviously sell their tether straight into crypto on those markets. But since they don't want to be exposed to that much crypto they would sell the same amount on other exchanges (such as Coinbase). In these chaotic events the biggest traders will fly to safety for most on their books (actual fiat, or hedged via derivatives). But that's not the potential issue being described: Tether is supposed to be worth 1 dollar. A lot of big crypto markets run on tether. If it turns out that a lot of crypto was bought with synthetic dollars (tether) that turned out to be a lot less than a dollar, that would mean the price of many crypto projects got to where it is by imaginary money. In another word: overpriced.
  - empath75 7y ago
    You can keep dumb money flowing by screaming fud a lot and appealing to emotion.
  - rocqua 7y ago
    Participating in a Ponzi scheme can be profitable if you get out early enough, perhaps people are expecting Tether to stand a bit longer. Alternatively, perhaps people expect the revelation that Tether isn't fully backed to proceed like the dollar going of the gold standard. It comes with a lot of noise, but the thing keeps working because people keep using it. In this scenario, Tether essentially becomes Bitfinex fiat. That would be a really cool dystopia.
- MusaTheRedGuard 7y ago
  Yep. Most smart people, even the most diehard fans, knew tether was at the very least, extremely shady.
appleflaxen 7y ago
> the entire cryptocurrency economy relies on tethers being valued at par, given that they're how billions of dollars of liquidity are denominated. this doesn't make any sense unless tether is a required intermediate step to liquidating cryptocurrency, which it's not.
- b1daly 7y ago
  That’s one of the problems. Liquidating “crypto to fiat” is not that easy.
  - Roark66 7y ago
    Depends on the amount. If you suddenly have 1 billion $ worth of BTC to liquidate, then yes. It might not be so easy, but this is the same with any asset, stocks, bonds or commodities. If you want to liquidate less, why not use established exchanges? Last time I checked their limits were quite high.
wtdata 7y ago
Sincerely, but if they were completely backed up and valued at par, they wouldn't call it theter, they would just be using USD.

driverdan 7y ago

Anyone in the cryptocurrency space with half a brain knew something was up the minute they refused an independent audit. It was only a matter of time before someone brought charges and/or Tether collapsed.

raverbashing 7y ago
Correct, sometimes wishful thinking clobbers rational thought Hence there might be tears
Felz 7y ago
Which does make it rather curious that the music's kept playing, so far. Is "common knowledge" that it's probably a complete fraud (like this filing should give) required to pop the tether bubble? Or will even this not be enough?
- panarky 7y ago
  People have been yelling that Tether is a ponzi fraud since it launched in 2015. And yet it still trades 1:1 to USD today, after the court filing was released. So is there some magic force that keeps the fraud running, and prevents market participants from cashing out their Tether in the mother of all bank runs? If you hold Tether why wouldn't you sell? Or is there more to the story than just "Tether is an obvious fraud"?
  - geofft 7y ago
    I don't understand cryptocurrency markets at all, but, could there be something where the only people participating in the USDT market are those who are at least somewhat confident that USDT is what it claims to be and therefore are pricing it at $1? What do you get out of participating in the market if you expect Tether to be fraudulent? You'd personally price it at zero, then, right? Can you profitably short it, or does everything just break down if you're right? That is, if you hold USDT and want to sell it for cheap, who is going to buy it for cheap-but-nonzero?
    - panarky 7y ago
      > if you hold USDT and want to sell it for cheap, who is going to buy it for cheap-but-nonzero? The market price for one Tether is currently $0.9984 because traders are buying at that price. So if anyone holds Tethers and believes there's greater than 1% probability that it goes to zero, the rational trade is to sell. The fact that the price holds at parity tells me that Tether is not an obvious fraud.
      - gzu 7y ago
        There is complacency among the exchanges though. You really believe all that volume and price action is legitimate? Exchanges want tether to be worth what they say it’s worth, 1 USD. The alternative is a massive crash in tether and therefore bitcoin price therefore altcoins price therefore profit (trading fees) for exchanges. The scam can go on much longer than you/anyone can imagine.
  - JumpCrisscross 7y ago
    > it still trades 1:1 to USD today On exchanges of questionably integrity. And where it is impossible to reliably short the instrument.
    - askmike 7y ago
      You mean Kraken? There are many OTC lending markets that allow for tether shorting.
- bb88 7y ago
  Let's not think of it as a bubble. Let's think of it as Wyle E Coyote running off a cliff and forgetting to look down, because that seems to be the modus operandi of the average HODL.
  - Semaphor 7y ago
    But HODLers don't really care about tether, do they? Isn't tether mainly used for traders who want to temporarily move out of crypto and use tether for that?
    - orthecreedence 7y ago
      It's been suggested that a large percentage of the crypto market cap is based on tethers which have been used to prop up prices but also used to hedge against falling BTC prices. Essentially, bitfinex prints tether whenever the price of BTC drops, and in the meantime, people use these printed tethers to hedge against BTC (and buy back in when the price trends upward again). So there are many iterations of compounded phantom value folded into the market cap of BTC. If tether is found insolvent, essentially 80% of the value of BTC disappears overnight. The entire value of the crypto market depends on people's belief that one tether is worth 1USD. Or so the theory goes.
      - Semaphor 7y ago
        I've heard that theory, but I can't say I understand it. Let's say USDT goes to 0 instantly. All traders lose their parked money. I can see a crash from panic and from people recouping their lost safe money, but what else does it have to do with with cryptocurrencies?
        askmike 7y ago
        If USDT would go to 0 instantly many things would happen (a few of the biggest BTC fiat markets would not be able to operate, such as binance's main BTC market). As a practical example big traders would obviously sell their tether straight into crypto on those markets. But since they don't want to be exposed to that much crypto they would sell the same amount on other exchanges (such as Coinbase). In these chaotic events the biggest traders will fly to safety for most on their books (actual fiat, or hedged via derivatives). But that's not the potential issue being described: Tether is supposed to be worth 1 dollar. A lot of big crypto markets run on tether. If it turns out that a lot of crypto was bought with synthetic dollars (tether) that turned out to be a lot less than a dollar, that would mean the price of many crypto projects got to where it is by imaginary money. In another word: overpriced.
- empath75 7y ago
  You can keep dumb money flowing by screaming fud a lot and appealing to emotion.
- rocqua 7y ago
  Participating in a Ponzi scheme can be profitable if you get out early enough, perhaps people are expecting Tether to stand a bit longer. Alternatively, perhaps people expect the revelation that Tether isn't fully backed to proceed like the dollar going of the gold standard. It comes with a lot of noise, but the thing keeps working because people keep using it. In this scenario, Tether essentially becomes Bitfinex fiat. That would be a really cool dystopia.
MusaTheRedGuard 7y ago
Yep. Most smart people, even the most diehard fans, knew tether was at the very least, extremely shady.

appleflaxen 7y ago

> the entire cryptocurrency economy relies on tethers being valued at par, given that they're how billions of dollars of liquidity are denominated. this doesn't make any sense unless tether is a required intermediate step to liquidating cryptocurrency, which it's not.

b1daly 7y ago
That’s one of the problems. Liquidating “crypto to fiat” is not that easy.
- Roark66 7y ago
  Depends on the amount. If you suddenly have 1 billion $ worth of BTC to liquidate, then yes. It might not be so easy, but this is the same with any asset, stocks, bonds or commodities. If you want to liquidate less, why not use established exchanges? Last time I checked their limits were quite high.

wtdata 7y ago

Sincerely, but if they were completely backed up and valued at par, they wouldn't call it theter, they would just be using USD.