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They can buy BTC with the newly minted coins.

shuntress 6y ago
This makes zero sense. Why not just use USD? The entire point of Tether seems to be that it is always valued to be exactly 1:1 with USD. And that seems to somehow convince people that entities who cannot obtain a loan of USD can obtain a loan of Tether?
- deleted 6y ago
  [deleted]
- nebulous1 6y ago
  Some exchanges have no traditional banking ties at all, so you have to send them some for of crypto in order to use them. It's also easier and quicker to move tether from one exchange to another than it is to receive a USD transfer and resend it to another, and that's ignoring regulatory issues.
  - shuntress 6y ago
    This does nothing to explain the purpose of Tether. If Exchange A has no "traditional banking ties" but is where I want to trade so I need to buy crypto through Exchange B first in order to trade that crypto on Exchange A why would I buy Tether instead of BTC through Exchange B?
    - briatx 6y ago
      Maybe you do buy BTC on Exchange B. Then you transfer to Exchange A and sell, and what do you get when you sell? Tether. The point of Tether initially is regulatory arbitrage for Tether based exchanges. It gives them a fiat substitute without having regulatory baggage that trading in actual money would require. Tether then turned into a lifeline for a Bitfinex bailout and now acts as a (almost assuredly illicit) liquidity provider to Tether based markets. The only reason Tether is worth a dollar at this point is because the Tether denominated Exchanges say it is worth a dollar. They are really what backstop Tether now and are fully complicit.
      - ChainOfFools 6y ago
        seems like a constant long term rise in BTC valuation is what keeps them backstopped in turn, then. well that and conveniently reliable outages in the middle of every major BTC sell-off.
- jayd16 6y ago
  It really comes down to what kind of loans Tether has accepted. They haven't disclosed this information. If Tether gave out a significant amount of USDT for Bitcoin without backing it in some other way, it means Tether isn't actually backed by the USD. Even if they lent out Tether for USD, they might have used BTC as collateral/risk assessment. The fear is that Thether is held up by a loan of BTC and BTC is held up by in some part by the stability of Tether.

This makes zero sense. Why not just use USD? The entire point of Tether seems to be that it is always valued to be exactly 1:1 with USD. And that seems to somehow convince people that entities who cannot obtain a loan of USD can obtain a loan of Tether?

deleted 6y ago
[deleted]
nebulous1 6y ago
Some exchanges have no traditional banking ties at all, so you have to send them some for of crypto in order to use them. It's also easier and quicker to move tether from one exchange to another than it is to receive a USD transfer and resend it to another, and that's ignoring regulatory issues.
- shuntress 6y ago
  This does nothing to explain the purpose of Tether. If Exchange A has no "traditional banking ties" but is where I want to trade so I need to buy crypto through Exchange B first in order to trade that crypto on Exchange A why would I buy Tether instead of BTC through Exchange B?
  - briatx 6y ago
    Maybe you do buy BTC on Exchange B. Then you transfer to Exchange A and sell, and what do you get when you sell? Tether. The point of Tether initially is regulatory arbitrage for Tether based exchanges. It gives them a fiat substitute without having regulatory baggage that trading in actual money would require. Tether then turned into a lifeline for a Bitfinex bailout and now acts as a (almost assuredly illicit) liquidity provider to Tether based markets. The only reason Tether is worth a dollar at this point is because the Tether denominated Exchanges say it is worth a dollar. They are really what backstop Tether now and are fully complicit.
    - ChainOfFools 6y ago
      seems like a constant long term rise in BTC valuation is what keeps them backstopped in turn, then. well that and conveniently reliable outages in the middle of every major BTC sell-off.
jayd16 6y ago
It really comes down to what kind of loans Tether has accepted. They haven't disclosed this information. If Tether gave out a significant amount of USDT for Bitcoin without backing it in some other way, it means Tether isn't actually backed by the USD. Even if they lent out Tether for USD, they might have used BTC as collateral/risk assessment. The fear is that Thether is held up by a loan of BTC and BTC is held up by in some part by the stability of Tether.