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Because the mechanism to transmit USDT to USD doesn't exist. Tether has never demonstrated a single USDT redemption. All of the trading on an exchange doesn't m

Because the mechanism to transmit USDT to USD doesn't exist. Tether has never demonstrated a single USDT redemption. All of the trading on an exchange doesn't matter because on USDT exchanges, you never actually have USD. If you trade USDT/USD on Binance, your profits are still actually USDT denominated! There is no proven way to convert USDT to USD except via another crypto (i.e. Binance USDT -> BTC and then Coinbase BTC -> USD) hence this entire topic... The peg would break down if there was any real convergence mechanism. But there isn't. This isn't a problem until people actually try to exchange these supposedly fungible assets.

gruez 6y ago
>Tether has never demonstrated a single USDT redemption Does that matter when you can withdraw from a USDT exchange and get USD in a bank account, or trade USDT for USD at kraken?
- qeternity 6y ago
  Yes - none of this proves that Tether has any reserves. It just proves that someone else believes they do...which we already know.
  - gruez 6y ago
    This is moving the goalposts. I don't think anyone thinks tether has full reserves. They literally admitted that they don't[1]. However your original claim of "you can't redeem USDT" is misleading at best. [1] wikipedia: "On 30 April 2019 Tether Limited's lawyer claimed that each tether was backed by only $0.74 in cash and cash equivalents"
    - FireBeyond 6y ago
      That was after how many years of Tether insisting that they had 1:1 reserves, talking about audits thereof, threatening lawsuits against people who said they didn't? ... and many many crypto-fans naysaying anyone who didn't believe them.
    - nebulous1 6y ago
      I feel like most people think of what you're referring to as trading Tether, and "redeeming USDT" as actually exchanging the USDT for the fiat that is supposedly backing it. Everybody realizes that for the individual turning tether into fiat both of these amount to the same thing, but they are not the same thing for the system as a whole at all. Ultimately the only way that tether as a company can maintain the peg is by buying their own token with the reserve funds if market won't (there are obviously different mechanisms they could use to do this, either via the exchanges or with the seller directly trading with them). If they don't have access to enough reserve funds then the peg will eventually fail.
    - sobolevskia 6y ago
      He said 74% are cash reserves. Meaning, Tether is 1:1 backed by its reserves, of which 74% is cash. The rest could be bonds/loans etc, as long as they're deemed liquid and fair value. I don't know about the latter, just stating facts. In any case, if indeed (still) true, having their lawyer say that USDTs are backed 74% by cash, makes it arguably safer and more liquid than any US bank, where cash backing your account balance represents a single digit percentage (I would estimate, happy to learn the factual number). Not saying that it shouldn't strive for 100% cash backeding (I think it should be), but noting that if you're concerned about Tether's cash liquidity, you probably should be even more concerned about your bank's chequing account.
- csomar 6y ago
  I think it's a waste of time trying to argue with the USDT conspiracy theory crowd. I'm not really sure what's their problem; they clearly never traded the market or used it. Maybe it's a butt-hurt feeling from missing out on this decade best performing assets? I'll give you a more sensible counter-argument: If you held USDT in the last 4 years (only) and actively generated yield (requires 1 hours work max per week), and periodically withdrew it (1-3 months) my reports show a 120% gain. This means if you bought $100k of USDT 4 years ago, you'd have withdrawn $120k into real dollars and still have $100k of USDT. In this situation, it's impossible to lose even if Tether is worth 0 tomorrow. Yield have gone considerably down. This means traders now trust USDT more than they did a few years ago. This would also mean that traders who are into risk would not hold USDT, they would rather hold something else to get better yield. If USDT was risky, its total market cap will decrease, as it doesn't make sense to hold into it with low yield. That or the market will quickly collapse. This can give you an idea (better than a stamped report from any AAA auditing firm) about how strong the USDT position in the market is.

gruez 6y ago

>Tether has never demonstrated a single USDT redemption Does that matter when you can withdraw from a USDT exchange and get USD in a bank account, or trade USDT for USD at kraken?

qeternity 6y ago
Yes - none of this proves that Tether has any reserves. It just proves that someone else believes they do...which we already know.
- gruez 6y ago
  This is moving the goalposts. I don't think anyone thinks tether has full reserves. They literally admitted that they don't[1]. However your original claim of "you can't redeem USDT" is misleading at best. [1] wikipedia: "On 30 April 2019 Tether Limited's lawyer claimed that each tether was backed by only $0.74 in cash and cash equivalents"
  - FireBeyond 6y ago
    That was after how many years of Tether insisting that they had 1:1 reserves, talking about audits thereof, threatening lawsuits against people who said they didn't? ... and many many crypto-fans naysaying anyone who didn't believe them.
  - nebulous1 6y ago
    I feel like most people think of what you're referring to as trading Tether, and "redeeming USDT" as actually exchanging the USDT for the fiat that is supposedly backing it. Everybody realizes that for the individual turning tether into fiat both of these amount to the same thing, but they are not the same thing for the system as a whole at all. Ultimately the only way that tether as a company can maintain the peg is by buying their own token with the reserve funds if market won't (there are obviously different mechanisms they could use to do this, either via the exchanges or with the seller directly trading with them). If they don't have access to enough reserve funds then the peg will eventually fail.
  - sobolevskia 6y ago
    He said 74% are cash reserves. Meaning, Tether is 1:1 backed by its reserves, of which 74% is cash. The rest could be bonds/loans etc, as long as they're deemed liquid and fair value. I don't know about the latter, just stating facts. In any case, if indeed (still) true, having their lawyer say that USDTs are backed 74% by cash, makes it arguably safer and more liquid than any US bank, where cash backing your account balance represents a single digit percentage (I would estimate, happy to learn the factual number). Not saying that it shouldn't strive for 100% cash backeding (I think it should be), but noting that if you're concerned about Tether's cash liquidity, you probably should be even more concerned about your bank's chequing account.
csomar 6y ago
I think it's a waste of time trying to argue with the USDT conspiracy theory crowd. I'm not really sure what's their problem; they clearly never traded the market or used it. Maybe it's a butt-hurt feeling from missing out on this decade best performing assets? I'll give you a more sensible counter-argument: If you held USDT in the last 4 years (only) and actively generated yield (requires 1 hours work max per week), and periodically withdrew it (1-3 months) my reports show a 120% gain. This means if you bought $100k of USDT 4 years ago, you'd have withdrawn $120k into real dollars and still have $100k of USDT. In this situation, it's impossible to lose even if Tether is worth 0 tomorrow. Yield have gone considerably down. This means traders now trust USDT more than they did a few years ago. This would also mean that traders who are into risk would not hold USDT, they would rather hold something else to get better yield. If USDT was risky, its total market cap will decrease, as it doesn't make sense to hold into it with low yield. That or the market will quickly collapse. This can give you an idea (better than a stamped report from any AAA auditing firm) about how strong the USDT position in the market is.