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Let's assume tether is a scam (not backed by enough USD) and at some point would start to loses it peg to the USD. Wouldnt that increase the demand of BTC? Ever

by seppel 6y ago

Let's assume tether is a scam (not backed by enough USD) and at some point would start to loses it peg to the USD. Wouldnt that increase the demand of BTC? Everyone holding tether would start buying BTC (or other coins) because this is the only thing you can do with tether.

tim333 6y ago
Well if tether went to say 90c and dropping, tether holders would certainly try to swap them for bitcoins but I'm not sure the bitcoin holders would be keen resulting in bitcoin going up in tether terms but probably down in US$ terms as tether fell.
- seppel 6y ago
  But why would it go down in USD in the demand increases?
  - gillesjacobs 6y ago
    Because demand for Tether would not actually increase. BTC holders would not look to exchange for Tether in the case Tether turned up unbacked. If BTC sellers were to sell they would exchange for other cryptocurrencies or more likely other stablecoins that are actually auditted.
  - tim333 6y ago
    If tether was collapsing people would probably panic a bit and try to exit crypto for normal money. It's not certain though.
  - user-the-name 6y ago
    If Tether goes does, and people try to exit to USD via Bitcoin, then the few exchanges that still trade Bitcoin for USD would be overwhelmed and would run out of liquidity, causing Bitcoin to drop as well.
gillesjacobs 6y ago
Many DeFi projects have Tether as their largest stable liquidity pool. While Tether is currently the largest stablecoin, the competition competes on the fact that they are overcollaterized, fully backed and auditted. The sooner Tether is replaced by the competition the better. On the upside, stablecoin swaps like Curve and Balancer have made exchanging USDT for any other competing stablecoin cheaper and easier. I wager these services are being used mainly to decrease reliance on Tether for whales. Would be interesting to analyse the data of stablecoin swaps to gauge trust in USDT.

by seppel 6y ago

tim333 6y ago

Well if tether went to say 90c and dropping, tether holders would certainly try to swap them for bitcoins but I'm not sure the bitcoin holders would be keen resulting in bitcoin going up in tether terms but probably down in US$ terms as tether fell.

seppel 6y ago
But why would it go down in USD in the demand increases?
- gillesjacobs 6y ago
  Because demand for Tether would not actually increase. BTC holders would not look to exchange for Tether in the case Tether turned up unbacked. If BTC sellers were to sell they would exchange for other cryptocurrencies or more likely other stablecoins that are actually auditted.
- tim333 6y ago
  If tether was collapsing people would probably panic a bit and try to exit crypto for normal money. It's not certain though.
- user-the-name 6y ago
  If Tether goes does, and people try to exit to USD via Bitcoin, then the few exchanges that still trade Bitcoin for USD would be overwhelmed and would run out of liquidity, causing Bitcoin to drop as well.

gillesjacobs 6y ago

Many DeFi projects have Tether as their largest stable liquidity pool. While Tether is currently the largest stablecoin, the competition competes on the fact that they are overcollaterized, fully backed and auditted. The sooner Tether is replaced by the competition the better. On the upside, stablecoin swaps like Curve and Balancer have made exchanging USDT for any other competing stablecoin cheaper and easier. I wager these services are being used mainly to decrease reliance on Tether for whales. Would be interesting to analyse the data of stablecoin swaps to gauge trust in USDT.