7 ms·

Yet the Tether price of BTC is only 6% below the USD price: http://www.untether.space/ http://www.untether.space/

by jpatokal 7y ago

toomuchtodo 7y ago
The market can remain irrational...
- a1369209993 7y ago
  ... longer than you can remain solvent.
  - duskwuff 7y ago
    Or, perhaps in this case, longer than Tether can remain solvent.
dheera 7y ago
Question -- why does this matter to me? As long as the market agrees to trade it for around 1.00 USD, +/- a few %, which seems to generally be happening, it shouldn't matter to me whether it's backed or not. It's just an abstract notion that the market has agreed to trade at a certain price. (It's not like I would hold onto USDT for a long time anyway -- it's only there to facilitate short-term needs. If I wanted to hold USD I'd just change it for USD and hold that instead.)
- bhouston 7y ago
  Is the gap between issues tethers and backing USD widening? At what rate? At some point people will not believing USDT is pegged to the dollar and it will be a race to the exit. It is a matter of time I would think.
  - dheera 7y ago
    Sure, but nobody would hold onto USDT for a long time anyway. It's not meant to be a long-term investment. As long as it facilitates short-term transactions and people are agreeable to trading it at 1 USD, that black box system fulfills its mission as a product, and doesn't need to fulfill anything else.
    - v64 7y ago
      > Question -- why does this matter to me? If you don't trade cryptocurrency and aren't invested in the market day to day, it very likely doesn't matter. > As long as it facilitates short-term transactions and people are agreeable to trading it at 1 USD Right now this is the case because the US AG announcements have not fundamentally changed the day to day use of the token, as you stated. However, as the lawsuit moves forward, the probabilities of Bitfinex having to shut down due to bankruptcy or criminal liability, and the probability that the Tether blockchain has to be shut down, are going to change and may possibly increase. The likelihood of these events occurring will cause the Tether premium to change accordingly, and as it increases, more and more market participants are going to cease to use it in favor of more reliable stablecoins. The problem is that it's impossible to predict what the catalyst for these events will be, and it's up to individual traders to determine whether or not they think the day they're holding Tether is going to be the day something happens to cause the market to lose confidence in it.
      - dragonwriter 7y ago
        > Right now this is the case because the US AG announcements NY AG, not the US AG.
        v64 7y ago
        Correct, thanks.
- joshe 7y ago
  Because if there is a "run on the bank", someone will end up short. Either the first people out will get 100% of their money and last 26% will get zero, or everyone will get 74% of their money. This very fact will actually cause a run on the bank in any sort of crisis. You don't need to actually believe that tether is a complete sham and has no money to decide to withdraw. You just need to worry that 74% of people might get worried. Because if they all withdraw, you will get none of your money. The point of FDIC insurance (aka lender of last resort) is that when you hear that Wells Fargo is in trouble you don't worry about your checking account going to zero. This used to happen quite a bit as late as during the great depression in the early 1930s. Being 100% backed by liquid assets was supposed to serve that function, it's not a nice to have, it's the whole point.
  - cperciva 7y ago
    Ironically, tether is pretty much immune from bank runs... because it's impossible to withdraw money at all.
    - gruez 7y ago
      >because it's impossible to withdraw money at all. I heard this meme being repeated since forever and it never made sense to me. As I understand it, you could exchange USDT for real USD at any participating exchange. Not being able to convert USDT would mean not being able to withdraw from any of those exchanges, but there's no widespread reports of this. Also, you could convert USDT to USD at Kraken, and they definitely don't have any withdraw problems. Finally, if you really couldn't withdraw USD from an exchange, it would become evident because BTC priced would skyrocket as people scramble to find other ways to withdraw their cash. We saw this with mtgox, but not here (there's a premium but nowhere close to mtgox levels) edit: clarified which part I'm replying to
      - bb88 7y ago
        The point of having the reserves in US Dollars is that Tether could theoretically buy back surplus USDT's from an exchange that trades in it. Otherwise an exchange could be left holding millions of worthless USDT with no means to move that back to US dollars.
- deleted 7y ago
  [deleted]
- roenxi 7y ago
  Can you tell me what the difference is between tether and roenxi-coin where I take dollars and give you an "IOU" that is, formally, not going to be redeemed? I can do better than tether. You give me $1, I'll keep 80c that I still won't give back to you later. I'm pretty trustworthy on promises like that. The only difference I can see is I wouldn't be willing to actually run that scheme because at some point I'd be jailed for running a fraud. Anyone who deals in tether now has to admit that supply is not limited in any way and the people behind the creation of new supply are crooked. Only an idiot would deal in tether now. If the price trends downwards there is literally no reason for it to ever trend up again. It has the worst value proposition of any scheme involving millions of dollars I've ever seen.
- deleted 7y ago
  [deleted]
_tb1_ 7y ago
I find this pretty interesting. On the one hand, it's similar to the situation a lot of lenders are in. But on the other hand Tether isn't owed that money back as far as I understand it. You also have the fact that a lot of crypto people are very against fractional reserve.

Yet the Tether price of BTC is only 6% below the USD price: http://www.untether.space/ http://www.untether.space/

toomuchtodo 7y ago

The market can remain irrational...

a1369209993 7y ago
... longer than you can remain solvent.
- duskwuff 7y ago
  Or, perhaps in this case, longer than Tether can remain solvent.

dheera 7y ago

Question -- why does this matter to me? As long as the market agrees to trade it for around 1.00 USD, +/- a few %, which seems to generally be happening, it shouldn't matter to me whether it's backed or not. It's just an abstract notion that the market has agreed to trade at a certain price. (It's not like I would hold onto USDT for a long time anyway -- it's only there to facilitate short-term needs. If I wanted to hold USD I'd just change it for USD and hold that instead.)

bhouston 7y ago
Is the gap between issues tethers and backing USD widening? At what rate? At some point people will not believing USDT is pegged to the dollar and it will be a race to the exit. It is a matter of time I would think.
- dheera 7y ago
  Sure, but nobody would hold onto USDT for a long time anyway. It's not meant to be a long-term investment. As long as it facilitates short-term transactions and people are agreeable to trading it at 1 USD, that black box system fulfills its mission as a product, and doesn't need to fulfill anything else.
  - v64 7y ago
    > Question -- why does this matter to me? If you don't trade cryptocurrency and aren't invested in the market day to day, it very likely doesn't matter. > As long as it facilitates short-term transactions and people are agreeable to trading it at 1 USD Right now this is the case because the US AG announcements have not fundamentally changed the day to day use of the token, as you stated. However, as the lawsuit moves forward, the probabilities of Bitfinex having to shut down due to bankruptcy or criminal liability, and the probability that the Tether blockchain has to be shut down, are going to change and may possibly increase. The likelihood of these events occurring will cause the Tether premium to change accordingly, and as it increases, more and more market participants are going to cease to use it in favor of more reliable stablecoins. The problem is that it's impossible to predict what the catalyst for these events will be, and it's up to individual traders to determine whether or not they think the day they're holding Tether is going to be the day something happens to cause the market to lose confidence in it.
    - dragonwriter 7y ago
      > Right now this is the case because the US AG announcements NY AG, not the US AG.
      - v64 7y ago
        Correct, thanks.
joshe 7y ago
Because if there is a "run on the bank", someone will end up short. Either the first people out will get 100% of their money and last 26% will get zero, or everyone will get 74% of their money. This very fact will actually cause a run on the bank in any sort of crisis. You don't need to actually believe that tether is a complete sham and has no money to decide to withdraw. You just need to worry that 74% of people might get worried. Because if they all withdraw, you will get none of your money. The point of FDIC insurance (aka lender of last resort) is that when you hear that Wells Fargo is in trouble you don't worry about your checking account going to zero. This used to happen quite a bit as late as during the great depression in the early 1930s. Being 100% backed by liquid assets was supposed to serve that function, it's not a nice to have, it's the whole point.
- cperciva 7y ago
  Ironically, tether is pretty much immune from bank runs... because it's impossible to withdraw money at all.
  - gruez 7y ago
    >because it's impossible to withdraw money at all. I heard this meme being repeated since forever and it never made sense to me. As I understand it, you could exchange USDT for real USD at any participating exchange. Not being able to convert USDT would mean not being able to withdraw from any of those exchanges, but there's no widespread reports of this. Also, you could convert USDT to USD at Kraken, and they definitely don't have any withdraw problems. Finally, if you really couldn't withdraw USD from an exchange, it would become evident because BTC priced would skyrocket as people scramble to find other ways to withdraw their cash. We saw this with mtgox, but not here (there's a premium but nowhere close to mtgox levels) edit: clarified which part I'm replying to
    - bb88 7y ago
      The point of having the reserves in US Dollars is that Tether could theoretically buy back surplus USDT's from an exchange that trades in it. Otherwise an exchange could be left holding millions of worthless USDT with no means to move that back to US dollars.
deleted 7y ago
[deleted]
roenxi 7y ago
Can you tell me what the difference is between tether and roenxi-coin where I take dollars and give you an "IOU" that is, formally, not going to be redeemed? I can do better than tether. You give me $1, I'll keep 80c that I still won't give back to you later. I'm pretty trustworthy on promises like that. The only difference I can see is I wouldn't be willing to actually run that scheme because at some point I'd be jailed for running a fraud. Anyone who deals in tether now has to admit that supply is not limited in any way and the people behind the creation of new supply are crooked. Only an idiot would deal in tether now. If the price trends downwards there is literally no reason for it to ever trend up again. It has the worst value proposition of any scheme involving millions of dollars I've ever seen.
deleted 7y ago
[deleted]

_tb1_ 7y ago

I find this pretty interesting. On the one hand, it's similar to the situation a lot of lenders are in. But on the other hand Tether isn't owed that money back as far as I understand it. You also have the fact that a lot of crypto people are very against fractional reserve.