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The majority of markets don't care if it is 100% backed, like they don't care when their bank does fractional reserve. They care about whether the USD peg will

The majority of markets don't care if it is 100% backed, like they don't care when their bank does fractional reserve. They care about whether the USD peg will last within their timespan they plan to use tether. One of the most common advertised applications for tether is arbitrage between exchanges. There it hardly matters whether tether has 100% reserves, what matters if the peg stays within the days that you are doing the arbitrage (buying tether from one exchange, transfering to other, selling it).

pfisch 7y ago
>The majority of markets don't care if it is 100% backed, like they don't care when their bank does fractional reserve. Banks are insured, and in general they haven't failed for the last like 100+ years. I do think what you are saying about usdt is mostly true though, however if(when) usdt does fail the entire market will take a dive off a cliff. So even if your assets are in other cryptos it still represents a systemic risk to the entire system.
- SkyMarshal 7y ago
  >Banks are insured, and in general they haven't failed for the last like 100+ years. Not sure what you're trying to say here, given Bear Stearns and Lehman just failed ~11yrs ago, and the entire banking system would have imploded if not for trillions in Fed lending support and govt stimulus.
  - pfisch 7y ago
    Those were not consumer banks. I don't think anyone actually lost their account balances.
    - arcticbull 7y ago
      That's the SIPC for ya (https://www.sipc.org https://www.sipc.org)
  - arcticbull 7y ago
    Not only were those investment banks, they were insured by the SIPC which actually protects the investments they've got on deposit. In 2008 WaMu and about a local bank a week went under and yet thanks to the FDIC no retail banking customer lost a single penny. That's why it's there. I swear if ECON101 was mandatory crypto wouldn't exist.
- deadbunny 7y ago
  > Banks are insured, and in general they haven't failed for the last like 100+ years. Thanks to massive bailouts you mean?
  - pfisch 7y ago
    The mechanism really doesn't matter as long as they are secured.
ravingraven 7y ago
>The majority of markets don't care if it is 100% backed, like they don't care when their bank does fractional reserve. Yes, but doesn't Tether promise that they back each coin with a dollar? I would care very much if I found out that the issuing party is lying.
- p49k 7y ago
  You’re arguing in circles. Maybe you would care, but the point OP is making is that the people who are engaging in the transactions that cause it to be pegged at $1 don’t care if Tether is lying because it doesn’t affect their use case in any significant way.
beefield 7y ago
> The majority of markets don't care if it is 100% backed, like they don't care when their bank does fractional reserve Fractional reserve banks' deposits are backed more than 100% with more or less liquid assets. That's why nobody cares if a bank does fractional reserve. With tether there is no reason to believe there is even close to 100% backing. Unless you count as a reason an unverified claim that they are backed.
- dwild 7y ago
  > with more or less liquid assets What's more liquid than cash itself? I also have an hard time it's backed with MORE value and whether that value is fictional or not. The 2008 crash has shown that it wasn't actually backed by much.
  - beefield 7y ago
    "Or less" Any bank with assets worth less than liabilities is bankrupt. You may not believe it, but regulators that allow bank to operate and any one holding bank equity with stock price above zero believes that bank's assets are worth more than liabilities. There you are right that it is possible that tje value of the bank's assets may decline fast, but normally the assets exceed deposits quite significantly as deposits are amongst the highest priorities, so other liabilities (senior debt and equity) act as buffers as well.
    - beefield 7y ago
      Of course, when I say liabilities, I mean non-equity.

pfisch 7y ago

>The majority of markets don't care if it is 100% backed, like they don't care when their bank does fractional reserve. Banks are insured, and in general they haven't failed for the last like 100+ years. I do think what you are saying about usdt is mostly true though, however if(when) usdt does fail the entire market will take a dive off a cliff. So even if your assets are in other cryptos it still represents a systemic risk to the entire system.

SkyMarshal 7y ago
>Banks are insured, and in general they haven't failed for the last like 100+ years. Not sure what you're trying to say here, given Bear Stearns and Lehman just failed ~11yrs ago, and the entire banking system would have imploded if not for trillions in Fed lending support and govt stimulus.
- pfisch 7y ago
  Those were not consumer banks. I don't think anyone actually lost their account balances.
  - arcticbull 7y ago
    That's the SIPC for ya (https://www.sipc.org https://www.sipc.org)
- arcticbull 7y ago
  Not only were those investment banks, they were insured by the SIPC which actually protects the investments they've got on deposit. In 2008 WaMu and about a local bank a week went under and yet thanks to the FDIC no retail banking customer lost a single penny. That's why it's there. I swear if ECON101 was mandatory crypto wouldn't exist.
deadbunny 7y ago
> Banks are insured, and in general they haven't failed for the last like 100+ years. Thanks to massive bailouts you mean?
- pfisch 7y ago
  The mechanism really doesn't matter as long as they are secured.

ravingraven 7y ago

>The majority of markets don't care if it is 100% backed, like they don't care when their bank does fractional reserve. Yes, but doesn't Tether promise that they back each coin with a dollar? I would care very much if I found out that the issuing party is lying.

p49k 7y ago
You’re arguing in circles. Maybe you would care, but the point OP is making is that the people who are engaging in the transactions that cause it to be pegged at $1 don’t care if Tether is lying because it doesn’t affect their use case in any significant way.

beefield 7y ago

> The majority of markets don't care if it is 100% backed, like they don't care when their bank does fractional reserve Fractional reserve banks' deposits are backed more than 100% with more or less liquid assets. That's why nobody cares if a bank does fractional reserve. With tether there is no reason to believe there is even close to 100% backing. Unless you count as a reason an unverified claim that they are backed.

dwild 7y ago
> with more or less liquid assets What's more liquid than cash itself? I also have an hard time it's backed with MORE value and whether that value is fictional or not. The 2008 crash has shown that it wasn't actually backed by much.
- beefield 7y ago
  "Or less" Any bank with assets worth less than liabilities is bankrupt. You may not believe it, but regulators that allow bank to operate and any one holding bank equity with stock price above zero believes that bank's assets are worth more than liabilities. There you are right that it is possible that tje value of the bank's assets may decline fast, but normally the assets exceed deposits quite significantly as deposits are amongst the highest priorities, so other liabilities (senior debt and equity) act as buffers as well.
  - beefield 7y ago
    Of course, when I say liabilities, I mean non-equity.