8 ms·

Tether Mints Record 2B USDT in One Week

63 points by 40four 6y ago

geerlingguy 6y ago
Every time I read about Tether, it seems patently obvious there's something fishy about it. Yet every time the price of BTC just goes up and Tether keeps appearing out of thin air. Will there ever be a consequence or endgame, or do we all just like watching things get pumped forever?
- deleted 6y ago
  [deleted]
- f430 6y ago
  The game of musical chairs will end at some point and somebody will be caught holding all the bags. This is just how ponzi scheme works. I've seen people who I respected become Gordon Gekko pushing shitcoins and trying to get co-workers to buy their crypto
- PragmaticPulp 6y ago
  > or do we all just like watching things get pumped forever? The real problem is that so many people are invested in Bitcoin that they're not just watching, they're benefiting. At least on paper. People are too excited about the prospect of doubling or quadrupling or 10x-ing their money that they don't want to believe anything could be wrong with the system.
  - aeternum 6y ago
    And what fraction of USD do banks need to keep in reserve? What's the rate at which we 'minted' USD in the last year? Even if we assume that Tether is 100% fraudulent and has zero reserves, that still only represents 24 billion of bitcoin's 600 billion market cap. Nothing compared to the USD that was 'minted' recently.
    - spiralx 6y ago
      The "market cap" of a cryptocurrency is a meaningless value. If I create a million coins and sell one for $1 that doesn't mean there's a million dollar market suddenly. If the BTC market was really $600bn you wouldn't see the price regularly rising or falling 10% or more in a single day based around small numbers of trades.
      - aeternum 6y ago
        But that's what market cap means. The same is true of a stock. If NKLA creates 1mil shares and sells a few for $1, their market cap is $1mil. Even if the float (shares available) are only 10% of total shares outstanding, if those shares now trade at $20 the market cap becomes $20 mil.
  - xiphias2 6y ago
    For me it was quite the opposite. In 2014 I was so angry with the banking system just taking away money from Cypriot pensioners, I wanted to get out of it as soon as possible, and get into a system where I can verify that I'm the owner of the asset. I went to Bitcoin and gold, but later got rid of my gold reserve, as it is manipulated even more heavily than Bitcoin price.
- washedup 6y ago
  What seems fishy about it? Each tether is created when someone gives up a dollar. That’s why the conversion rate of dollars to tether is (almost always) 1. There is no mystery here. The only concern is that maybe they don’t have enough reserves to cover all the tether they created. They say they do, but there was some audit drama in recent years. Anyway, this and other comments here all point to how much the Hacker News community grossly misunderstands markets and economics.
  - CamelCaseName 6y ago
    > Each tether is created when someone gives up a dollar. This is an opinion, not a fact.
  - trhway 6y ago
    >Each tether is created when someone gives up a dollar. > The only concern is that maybe they don’t have enough reserves to cover all the tether they created. So, it sounds like selling 1 USDT for $1 the Tether people put, lets be optimists here, $0.1 into the bank as reserve and pocket $0.9. Or do i miss something here?
    - spiralx 6y ago
      More that nobody buys any USDT with $ at all, and then Tether announces that there are two billion new USDT, which are then used to buy BTC. The trick is that lots of exchanges don't have any way to convert from crypto to real currency at all so use USDT as a stand-in, USDT's supposed backing 1:1 with $ means it's a stable place during crypto volatility, and it's next to impossible to actually get $ from directly exchanging USDT.
  - PragmaticPulp 6y ago
    How do you reconcile this: > Each tether is created when someone gives up a dollar. With this: > The only concern is that maybe they don’t have enough reserves to cover all the tether they created If they're accepting dollars and creating Tethers in exchange, then they should have 1:1 reserves as they claim, right? The concern is that they're creating Tethers without having the cash to back it up, indirectly using those Tethers to prop up the price of BTC, and hoping that no one tries to withdraw Tethers beyond their ability to pay out. For comparison, consider that Bernie Madoff ran his ponzi scheme out of his bank account for almost two decades. He created imaginary "profits" on paper and paid out "returns" to investors who wanted to cash out. The scheme worked as long as no one tried to withdraw enough returns to take his bank account balance below $0. The fear is that Tether is a similar scheme to inject fake money into the Bitcoin ecosystem, which can't realistically be proved unless people try to withdraw more USDT than Tether has in their bank account, at which point the system implodes.
- dheera 6y ago
  At the same time, why do people insist that money needs to be "backed" by something? Ultimately if people cooperatively agree to trade USDT at around USD1 it is working as intended and that's really all that matters, considering USDT isn't something you'd hold for an extended period of time. I wonder if it would be possible to design a token such that if any trader caused its value to crash from the prescribed function (where in this case it is a flat USD1), that trader's wallet is banned from trading, as a digital punishment, leaving only the players who respect the rules of the game and maintain its prescribed trading value. Is that possible to encode such logic in a token? (I haven't coded for crypto before, so honest question)
- cwhiz 6y ago
  Bitfinex and Tether have to submit documents to the New York state attorney general about their financial relationship. These documents are due no later than tomorrow, January 15.
anonymouse008 6y ago
I struggle to avoid the knee jerk reaction to classify Tether as the Federal Reserve of BTC. Can someone please explain how this either right or wrong?
- conception 6y ago
  Tether has no actual money to back its valuation.
  - ed25519FUUU 6y ago
    Or aircraft carrier.
  - biot 6y ago
    So it's a bit like the realization of this insightful comment? https://news.ycombinator.com/item?id=16242224 https://news.ycombinator.com/item?id=16242224
  - ineedasername 6y ago
    Well, they do seem to have reinvented fractional reserve banking. The "fraction" is unknown though, with unwillingness to provide details and a vague assertions from someone that it's "fully backed". But, you know, you have to take his word for it.
    - spiralx 6y ago
      They claimed 74% a while back IIRC, with the rest being in some unspecified combination of loans and other assets.
      - ineedasername 6y ago
        That's the problem, they make claims but fail to provide evidence. If I want to execute a currency arbitrage strategy, I want to know what is backing the currencies. In most fiat currencies, you can do this by 1) Assessing the current economic conditions & the country's history of monetary policy. 1) evaluating the currency supply against the GDP: This is really what a fiat currency is actually backed by. (Or at least one of the fundamental components) You can't do this with Tether. A country's own economic reports and extensive external analysis by others can validate the financial state of a country & its fiat currency. With Tether, you have to take their word for it. And loans? Doesn't that contradict their entire premise-- Mint 1 Tether and sell it for $1 so it's always fully backed. Loans shouldn't be necessary. Loans could be called in the second Tether shows weakness, which would further destabilize it. And lets face it: If it's not actually fully backed $1 for $USDT then there's zero guarantee that it can't start floating against other coins or currencies. It's only worth $1 if you can find someone willing to give you $1 for $1 USDT. People claim if it loses value then Tether will simply buy up enough to drive the price back to the $1 peg. Buy it with what though? Their assets, the money backing it! which means it's then backed by even less! The only way a strategy of Tether buying the price back up to the $ peg can work at all is if Tether has more assets backing it that strictly necessary. As for other assets backing it, they'll go up & down in value too. Even if it's currently fully backed, without transparency those other assets backing it can go down in value and then all of a sudden it's not fully backed. All of these concerns might be moot. Tether might be completely sound, rock solid & stable. But anyone who believes that is taking it on faith based on the word of people who are highly biased & highly interested in having $USDT owners believe it, true or not, and it is unfathomable to me at this point in crypto, where shitcoins & pump & dumps and ponzi schemes and all kinds of scams persist, that anyone would take something like this on faith.
msoad 6y ago
Amazing how unregulated this stuff is. What happens if USDT falls bellow 1 by a lot? Who's going to win and who's going to lose?
- ed25519FUUU 6y ago
  Questions like that are meaningless to greedy people.
- dcolkitt 6y ago
  If/when that happens a major casualty will be all the people yield farming stablecoins on DeFi platforms like Curve and Compound. Right now staking dollar stablecoins looks like a pretty risk free way to make 5-10% per annum on your USD positions. The way you do that is by providing liquidity for trading back and forth between USDT/USDC/DAI and other stablecoins. If USDT ever breaks a buck, then there will be a run on the pools and all your USDC/DAI will suddenly convert to now worthless USDT.
electriclove 6y ago
I don't know if this is FUD or legit, but something might take place with Tether on Jan 15? Anyone have more insight into these things? https://www.reddit.com/r/CryptoCurrency/comments/ksdfne/why_tether_might_tank_the_crypto_market_on_jan/ https://www.reddit.com/r/CryptoCurrency/comments/ksdfne/why_...
- washedup 6y ago
  There are many stablecoins. Right now tether continues to get most volume due to access to some major exchanges, but others could take its place. I don’t think it would be anything to write home about, though.
- Scoundreller 6y ago
  > What happens on Jan 15th? > Bitfinex and Tether have till the 15th of January to submit documents to the New York state attorney general about their financial relationship.
copperwater69 6y ago
Seems weird to me there are institutional investors in BTC when there are things like this going on.
- dumbfoundded 6y ago
  The FOMO is real. Everyone will continue to keep a blind eye to the actual dynamics until the bubble pops. No one wants to crash the party. There is a lot of value being created in the BTC ecosystem. Very little of the price changes reflect this. Probably the best course of action is to sell 30 to 50% and then buy the dip in 9 to 12 months. That's my personal plan.
  - freebuju 6y ago
    Except the dip is coming sooner rather than later. History has always taught us BTC to come down after Dec/Jan. Gotta have the engines of the market ecosystem churning somehow. Also like you I plan on adding more when it dips low so I can cash out later this year when it historically moons again.
- Acrobatic_Road 6y ago
  the people putting down deposits for tether are institutional investors.
  - riku_iki 6y ago
    Are such investors allowed buying unregulated securities?
    - DSingularity 6y ago
      Why do you think such regulations would apply to such institutions or apply in a way they cannot legally circumvent? These regulations were made for a reason and it is not to limit investment to those sanctioned by the federal government.
  - PragmaticPulp 6y ago
Acrobatic_Road 6y ago
There's no mystery here; demand for bitcoin drives demand for tether.
seibelj 6y ago
I post this over and over in these threads, but I only get downvotes from people who don’t know anything and are completely devoid of any knowledge of the crypto industry beyond hot takes they read. Tether is backed. It isn’t a fraud. I worked at a company that minted and burned billions of Tethers. Keep praying for it to die - it won’t.
- prakhar897 6y ago
  Tether says it's backed but there's no proof of it. Infact, a few days back, they admitted in court that there currency is only 62% backed. That's why this court ruling is important.
- Imnimo 6y ago
  >Tether is backed. Is it backed by dollars?
- CryptoGhost 6y ago
  > Tether is backed. It isn’t a fraud. Both of these can be true. But it is also true that Tether cannot be redeemed for USD (owning USDT does not entitle you to exchange for USD) and it has never undergone a hard audit. So while the entire project can be a good faith effort its also entirely possible its worth a lot less than $1USD for 1 USDT
  - seibelj 6y ago
    Yes you can! My company did! I know many companies that do! It’s just limited to offshore orgs that pass compliance and redeem large blocks at a time. Redemption isn’t for retail.
    - CryptoGhost 6y ago
      The point being this is completely discretionary. It's not comparable to say Gold Certificates in the USA where it gave you title to actual gold coins you could redeem. Holding USDT gives you title to nothing other than USDT itself.
- 6y ago
sethgecko 6y ago
Of course HN in it’s infinite wisdom can’t get the causal connection between BTC rising and tether printing right. Tether is being printed because btc is pumping. They have to print tether to maintain the peg at 1$. If the price keeps rising due to demand for tether they need to print and sell tether. It does not matter if you can redeem your tethers for dollars because they buy tether when the price goes below 1$ to maintain the peg.
- PragmaticPulp 6y ago
  > Tether is being printed Tether doesn't claim to "print" anything. Supposedly, Tether is 1:1 backed by actual dollars being paid in to the Tether corporation. If Tether corporation is "printing" Tethers without having received corresponding deposits, that's the fraud.
  - sethgecko 6y ago
    Yes it is backed because when they print a new tether they sell it for 1$ which they put it in their treasury.
    - mekster 6y ago
      No, people sell BTC to get Tether, in which case, what did the previous BTC owner buy if it's not backed up with USD?
- dang 6y ago
  Please don't use allcaps for emphasis on HN - it's basically yelling and the site guidelines ask you not to: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html. You can put *asterisks* around text and it will get italicized. And (this just in!) it's much easier to get literal asterisks now: https://news.ycombinator.com/formatdoc https://news.ycombinator.com/formatdoc Also, please don't post supercilious dismissals of the community. It's tedious and dyspeptic. If you're commenting here, you're as much "HN" as anyone else is. If you know more than other users, that's wonderful—please share some of what you know, so the rest of us can learn. https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sort=byDate&type=comment&query=share%20know%20learn%20by:dang https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...
shp0ngle 6y ago
Hey there surely is 24 billion USD sitting in an undisclosed bank in Bahamas or St Kitts and Nevis or Panama or somewhere
- ckastner 6y ago
  This is exactly what I was thinking. This is an immense amount of cash to manage, and management is not as trivial as it might seem, especially since it has to be kept liquid. And accepting $2bn of new inflow in just one week, given how frequently and strongly crypto has been connected to illegitimate business (Silk Road, etc.) is borderline unbelievable.
PragmaticPulp 6y ago
The Tether situation is even more suspect when you consider that Tether and Bitfinex are operated by the same group of people. The two companies have tried to publicly distance themselves from each other at times, but the Paradise Papers leak revealed that the two companies are, in fact, closely related ( https://news.bitcoin.com/paradise-papers-reveal-bitfinexs-devasini-and-potter-established-tether-already-back-in-2014/ https://news.bitcoin.com/paradise-papers-reveal-bitfinexs-de... ) Keep in mind that Bitfinex profits from trading activity. They benefit substantially from both increased prices and increased volume, both of which occur after each Tether-driven surge in Bitcoin. The concern is that the Bitfinex operators are using Tether as a convenient pump to drive the market into a frenzy, from which they profit greatly by skimming trading fees off of the top. If only a fraction of people ever try to withdraw Tether, it's entirely possible that they could cash out those few requests from trading profits, indirectly. If they can continue to pump the value of Bitcoin higher and higher, any potential fraud may never be exposed.
- deleted 6y ago
  [deleted]
- washedup 6y ago
  I think you don’t really understand how Tether works.
  - deleted 6y ago
    [deleted]
  - PragmaticPulp 6y ago
    Could you please elaborate rather than giving a drive-by dismissal? I'm explaining the fraud angle that everyone is concerned about. Of course, if Tether works exactly as the Tether corporation claims (but has yet to prove) then there's nothing to see here. Seems that they would be quick to try to prove this to regulators, though.
- atian 6y ago
  This may be a similar strategy to Binance's BNB token, where Binance operates BNB in a way similar to Bitfinex's "bailout" LEO token by committing their exchange revenue to token buybacks, forcing the token value to go up.
blhack 6y ago
Everything old is new again? The same things were said about tether in 2017. Maybe they’re right this time? Who knows, but it seems like a lot of work has been done to fine the smoking gun of the big tether fraud, and so far nothing. The questions seem valid, but so far it doesn’t seem like anything has panned out.
- mekster 6y ago
  Because they want to hide where the smoke is coming from at all costs if it's a fraud. They had the investigation on hold for a few years.
chaostheory 6y ago
What happens to tether if USD suffers massive inflation?
- romland 6y ago
  A tether decrease in value (it does not get inflated per se, but the outcome is the same). So, not much. Perhaps you are asking how people (and Tether themselves) will behave in such a scenario? Could be an interesting thought experiment, perhaps. That said, I've never owned a single USDT, but rest assured that if I did own one, I'd not hold it when I went to bed.
Geee 6y ago
Tether does not appear from thin air. It appears when new money is deposited on exchanges and OTC desks. It's simply a database for USD deposits. Some exchanges use MySQL to track their deposits. Tether allows transfering deposits between exchanges, in contrary to MySQL-dollars. There's way more MySQL-dollars being "printed" than Tethers. People pay attention to Tether because it's a transparent system. If Tether is not fully backed, it's a problem for those who own Tether. Tether is not a problem to Bitcoin.
- accountofme 6y ago
  I think you need to qualify these statements with proof. Otherwise everything you say is speculation.
- mekster 6y ago
  Its time to learn about the economy than just MySQL.
40four 6y ago
Here't another post I made that does a really good job at explaining the whole Tether history and current situation. There is a rapidly approaching deadline for them to provide documents to the New York Attorney General, folks are very anxious to see how this court situation plays out and hopefully illuminate their relationship with Bitfinex. Coincidence that there is a huge bitcoin ralley, and massive Tehter 'printing' going on right now? We shall see :) Get your popcorn ready! https://news.ycombinator.com/item?id=25771225 https://news.ycombinator.com/item?id=25771225
rajacombinator 6y ago
This clown show is still going? Yikes...
1experience 6y ago
They are the equivalent of an unregulated bank in the 1900s before deposit insurance, they will stay afloat as long as they keep up appearances and don't make stupid mistakes. However the moment they create a catalytic event, the entire house of cards falls down. The equivalent of a bank run. https://www.youtube.com/watch?v=xE5klz0yUT0 https://www.youtube.com/watch?v=xE5klz0yUT0
- BelenusMordred 6y ago
  The New York Attorney General proved in court they had at least 95% in cash deposit backing. How much does your bank have again? Last I looked in most places on Earth it's a few percent although the US removed any cash requirement so no one even has to report it anymore. I guess you folks will argue "well we have guns" but step and think about how that looks. Sounds like the mob to me. Hating crypto is fun and cool yeah, but being wrong over and over again for so many years must really hurt. Please put your money where your mouth is, no one seems willing to do so these days and I truly wonder why. Playing that "market can remain solvent longer than you" nonsense is ridiculous, the overhead on buying bitcoin futures going short is a fraction of a percent, supposedly "low-cost" ETF's charge nearly a magnitude more. Shorting bitcoin tether is literally a few clicks away for everyone on the planet, why not go bet everything you have on it. Watching all these people so proudly sure of themselves yet somehow you aren't all the richest people in the room? Please consider the very real possibility you are completely wrong and have been for years while mindless repeating this crap. Tether itself is a short on bitcoin, billions are stashed away in it, if it collapses all the coins will rise as people race for the exits. You could rolling in it right now or you could just be another one in this list: https://hn.algolia.com/?q=tether https://hn.algolia.com/?q=tether Choose your own adventure friend.
  - 1experience 6y ago
    The New York Attorney General proved in court they had at least 95% in cash deposit backing. Can you provide a source for this claim?
  - throwaway9d0291 6y ago

63 points by 40four 6y ago

Every time I read about Tether, it seems patently obvious there's something fishy about it. Yet every time the price of BTC just goes up and Tether keeps appearing out of thin air. Will there ever be a consequence or endgame, or do we all just like watching things get pumped forever?

deleted 6y ago
[deleted]
f430 6y ago
The game of musical chairs will end at some point and somebody will be caught holding all the bags. This is just how ponzi scheme works. I've seen people who I respected become Gordon Gekko pushing shitcoins and trying to get co-workers to buy their crypto
PragmaticPulp 6y ago
> or do we all just like watching things get pumped forever? The real problem is that so many people are invested in Bitcoin that they're not just watching, they're benefiting. At least on paper. People are too excited about the prospect of doubling or quadrupling or 10x-ing their money that they don't want to believe anything could be wrong with the system.
- aeternum 6y ago
  And what fraction of USD do banks need to keep in reserve? What's the rate at which we 'minted' USD in the last year? Even if we assume that Tether is 100% fraudulent and has zero reserves, that still only represents 24 billion of bitcoin's 600 billion market cap. Nothing compared to the USD that was 'minted' recently.
  - spiralx 6y ago
    The "market cap" of a cryptocurrency is a meaningless value. If I create a million coins and sell one for $1 that doesn't mean there's a million dollar market suddenly. If the BTC market was really $600bn you wouldn't see the price regularly rising or falling 10% or more in a single day based around small numbers of trades.
    - aeternum 6y ago
      But that's what market cap means. The same is true of a stock. If NKLA creates 1mil shares and sells a few for $1, their market cap is $1mil. Even if the float (shares available) are only 10% of total shares outstanding, if those shares now trade at $20 the market cap becomes $20 mil.
- xiphias2 6y ago
  For me it was quite the opposite. In 2014 I was so angry with the banking system just taking away money from Cypriot pensioners, I wanted to get out of it as soon as possible, and get into a system where I can verify that I'm the owner of the asset. I went to Bitcoin and gold, but later got rid of my gold reserve, as it is manipulated even more heavily than Bitcoin price.
washedup 6y ago
What seems fishy about it? Each tether is created when someone gives up a dollar. That’s why the conversion rate of dollars to tether is (almost always) 1. There is no mystery here. The only concern is that maybe they don’t have enough reserves to cover all the tether they created. They say they do, but there was some audit drama in recent years. Anyway, this and other comments here all point to how much the Hacker News community grossly misunderstands markets and economics.
- CamelCaseName 6y ago
  > Each tether is created when someone gives up a dollar. This is an opinion, not a fact.
- trhway 6y ago
  >Each tether is created when someone gives up a dollar. > The only concern is that maybe they don’t have enough reserves to cover all the tether they created. So, it sounds like selling 1 USDT for $1 the Tether people put, lets be optimists here, $0.1 into the bank as reserve and pocket $0.9. Or do i miss something here?
  - spiralx 6y ago
    More that nobody buys any USDT with $ at all, and then Tether announces that there are two billion new USDT, which are then used to buy BTC. The trick is that lots of exchanges don't have any way to convert from crypto to real currency at all so use USDT as a stand-in, USDT's supposed backing 1:1 with $ means it's a stable place during crypto volatility, and it's next to impossible to actually get $ from directly exchanging USDT.
- PragmaticPulp 6y ago
  How do you reconcile this: > Each tether is created when someone gives up a dollar. With this: > The only concern is that maybe they don’t have enough reserves to cover all the tether they created If they're accepting dollars and creating Tethers in exchange, then they should have 1:1 reserves as they claim, right? The concern is that they're creating Tethers without having the cash to back it up, indirectly using those Tethers to prop up the price of BTC, and hoping that no one tries to withdraw Tethers beyond their ability to pay out. For comparison, consider that Bernie Madoff ran his ponzi scheme out of his bank account for almost two decades. He created imaginary "profits" on paper and paid out "returns" to investors who wanted to cash out. The scheme worked as long as no one tried to withdraw enough returns to take his bank account balance below $0. The fear is that Tether is a similar scheme to inject fake money into the Bitcoin ecosystem, which can't realistically be proved unless people try to withdraw more USDT than Tether has in their bank account, at which point the system implodes.
dheera 6y ago
At the same time, why do people insist that money needs to be "backed" by something? Ultimately if people cooperatively agree to trade USDT at around USD1 it is working as intended and that's really all that matters, considering USDT isn't something you'd hold for an extended period of time. I wonder if it would be possible to design a token such that if any trader caused its value to crash from the prescribed function (where in this case it is a flat USD1), that trader's wallet is banned from trading, as a digital punishment, leaving only the players who respect the rules of the game and maintain its prescribed trading value. Is that possible to encode such logic in a token? (I haven't coded for crypto before, so honest question)
cwhiz 6y ago
Bitfinex and Tether have to submit documents to the New York state attorney general about their financial relationship. These documents are due no later than tomorrow, January 15.

anonymouse008 6y ago

I struggle to avoid the knee jerk reaction to classify Tether as the Federal Reserve of BTC. Can someone please explain how this either right or wrong?

conception 6y ago
Tether has no actual money to back its valuation.
- ed25519FUUU 6y ago
  Or aircraft carrier.
- biot 6y ago
  So it's a bit like the realization of this insightful comment? https://news.ycombinator.com/item?id=16242224 https://news.ycombinator.com/item?id=16242224
- ineedasername 6y ago
  Well, they do seem to have reinvented fractional reserve banking. The "fraction" is unknown though, with unwillingness to provide details and a vague assertions from someone that it's "fully backed". But, you know, you have to take his word for it.
  - spiralx 6y ago
    They claimed 74% a while back IIRC, with the rest being in some unspecified combination of loans and other assets.
    - ineedasername 6y ago
      That's the problem, they make claims but fail to provide evidence. If I want to execute a currency arbitrage strategy, I want to know what is backing the currencies. In most fiat currencies, you can do this by 1) Assessing the current economic conditions & the country's history of monetary policy. 1) evaluating the currency supply against the GDP: This is really what a fiat currency is actually backed by. (Or at least one of the fundamental components) You can't do this with Tether. A country's own economic reports and extensive external analysis by others can validate the financial state of a country & its fiat currency. With Tether, you have to take their word for it. And loans? Doesn't that contradict their entire premise-- Mint 1 Tether and sell it for $1 so it's always fully backed. Loans shouldn't be necessary. Loans could be called in the second Tether shows weakness, which would further destabilize it. And lets face it: If it's not actually fully backed $1 for $USDT then there's zero guarantee that it can't start floating against other coins or currencies. It's only worth $1 if you can find someone willing to give you $1 for $1 USDT. People claim if it loses value then Tether will simply buy up enough to drive the price back to the $1 peg. Buy it with what though? Their assets, the money backing it! which means it's then backed by even less! The only way a strategy of Tether buying the price back up to the $ peg can work at all is if Tether has more assets backing it that strictly necessary. As for other assets backing it, they'll go up & down in value too. Even if it's currently fully backed, without transparency those other assets backing it can go down in value and then all of a sudden it's not fully backed. All of these concerns might be moot. Tether might be completely sound, rock solid & stable. But anyone who believes that is taking it on faith based on the word of people who are highly biased & highly interested in having $USDT owners believe it, true or not, and it is unfathomable to me at this point in crypto, where shitcoins & pump & dumps and ponzi schemes and all kinds of scams persist, that anyone would take something like this on faith.

msoad 6y ago

Amazing how unregulated this stuff is. What happens if USDT falls bellow 1 by a lot? Who's going to win and who's going to lose?

ed25519FUUU 6y ago
Questions like that are meaningless to greedy people.
dcolkitt 6y ago
If/when that happens a major casualty will be all the people yield farming stablecoins on DeFi platforms like Curve and Compound. Right now staking dollar stablecoins looks like a pretty risk free way to make 5-10% per annum on your USD positions. The way you do that is by providing liquidity for trading back and forth between USDT/USDC/DAI and other stablecoins. If USDT ever breaks a buck, then there will be a run on the pools and all your USDC/DAI will suddenly convert to now worthless USDT.

electriclove 6y ago

I don't know if this is FUD or legit, but something might take place with Tether on Jan 15? Anyone have more insight into these things? https://www.reddit.com/r/CryptoCurrency/comments/ksdfne/why_tether_might_tank_the_crypto_market_on_jan/ https://www.reddit.com/r/CryptoCurrency/comments/ksdfne/why_...

washedup 6y ago
There are many stablecoins. Right now tether continues to get most volume due to access to some major exchanges, but others could take its place. I don’t think it would be anything to write home about, though.
Scoundreller 6y ago
> What happens on Jan 15th? > Bitfinex and Tether have till the 15th of January to submit documents to the New York state attorney general about their financial relationship.

copperwater69 6y ago

Seems weird to me there are institutional investors in BTC when there are things like this going on.

dumbfoundded 6y ago
The FOMO is real. Everyone will continue to keep a blind eye to the actual dynamics until the bubble pops. No one wants to crash the party. There is a lot of value being created in the BTC ecosystem. Very little of the price changes reflect this. Probably the best course of action is to sell 30 to 50% and then buy the dip in 9 to 12 months. That's my personal plan.
- freebuju 6y ago
  Except the dip is coming sooner rather than later. History has always taught us BTC to come down after Dec/Jan. Gotta have the engines of the market ecosystem churning somehow. Also like you I plan on adding more when it dips low so I can cash out later this year when it historically moons again.
Acrobatic_Road 6y ago
the people putting down deposits for tether are institutional investors.
- riku_iki 6y ago
  Are such investors allowed buying unregulated securities?
  - DSingularity 6y ago
    Why do you think such regulations would apply to such institutions or apply in a way they cannot legally circumvent? These regulations were made for a reason and it is not to limit investment to those sanctioned by the federal government.
- PragmaticPulp 6y ago

Acrobatic_Road 6y ago

There's no mystery here; demand for bitcoin drives demand for tether.

seibelj 6y ago

I post this over and over in these threads, but I only get downvotes from people who don’t know anything and are completely devoid of any knowledge of the crypto industry beyond hot takes they read. Tether is backed. It isn’t a fraud. I worked at a company that minted and burned billions of Tethers. Keep praying for it to die - it won’t.

prakhar897 6y ago
Tether says it's backed but there's no proof of it. Infact, a few days back, they admitted in court that there currency is only 62% backed. That's why this court ruling is important.
Imnimo 6y ago
>Tether is backed. Is it backed by dollars?
CryptoGhost 6y ago
> Tether is backed. It isn’t a fraud. Both of these can be true. But it is also true that Tether cannot be redeemed for USD (owning USDT does not entitle you to exchange for USD) and it has never undergone a hard audit. So while the entire project can be a good faith effort its also entirely possible its worth a lot less than $1USD for 1 USDT
- seibelj 6y ago
  Yes you can! My company did! I know many companies that do! It’s just limited to offshore orgs that pass compliance and redeem large blocks at a time. Redemption isn’t for retail.
  - CryptoGhost 6y ago
    The point being this is completely discretionary. It's not comparable to say Gold Certificates in the USA where it gave you title to actual gold coins you could redeem. Holding USDT gives you title to nothing other than USDT itself.
6y ago

sethgecko 6y ago

Of course HN in it’s infinite wisdom can’t get the causal connection between BTC rising and tether printing right. Tether is being printed because btc is pumping. They have to print tether to maintain the peg at 1$. If the price keeps rising due to demand for tether they need to print and sell tether. It does not matter if you can redeem your tethers for dollars because they buy tether when the price goes below 1$ to maintain the peg.

PragmaticPulp 6y ago
> Tether is being printed Tether doesn't claim to "print" anything. Supposedly, Tether is 1:1 backed by actual dollars being paid in to the Tether corporation. If Tether corporation is "printing" Tethers without having received corresponding deposits, that's the fraud.
- sethgecko 6y ago
  Yes it is backed because when they print a new tether they sell it for 1$ which they put it in their treasury.
  - mekster 6y ago
    No, people sell BTC to get Tether, in which case, what did the previous BTC owner buy if it's not backed up with USD?
dang 6y ago
Please don't use allcaps for emphasis on HN - it's basically yelling and the site guidelines ask you not to: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html. You can put *asterisks* around text and it will get italicized. And (this just in!) it's much easier to get literal asterisks now: https://news.ycombinator.com/formatdoc https://news.ycombinator.com/formatdoc Also, please don't post supercilious dismissals of the community. It's tedious and dyspeptic. If you're commenting here, you're as much "HN" as anyone else is. If you know more than other users, that's wonderful—please share some of what you know, so the rest of us can learn. https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sort=byDate&type=comment&query=share%20know%20learn%20by:dang https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...

shp0ngle 6y ago

Hey there surely is 24 billion USD sitting in an undisclosed bank in Bahamas or St Kitts and Nevis or Panama or somewhere

ckastner 6y ago
This is exactly what I was thinking. This is an immense amount of cash to manage, and management is not as trivial as it might seem, especially since it has to be kept liquid. And accepting $2bn of new inflow in just one week, given how frequently and strongly crypto has been connected to illegitimate business (Silk Road, etc.) is borderline unbelievable.

PragmaticPulp 6y ago

The Tether situation is even more suspect when you consider that Tether and Bitfinex are operated by the same group of people. The two companies have tried to publicly distance themselves from each other at times, but the Paradise Papers leak revealed that the two companies are, in fact, closely related ( https://news.bitcoin.com/paradise-papers-reveal-bitfinexs-devasini-and-potter-established-tether-already-back-in-2014/ https://news.bitcoin.com/paradise-papers-reveal-bitfinexs-de... ) Keep in mind that Bitfinex profits from trading activity. They benefit substantially from both increased prices and increased volume, both of which occur after each Tether-driven surge in Bitcoin. The concern is that the Bitfinex operators are using Tether as a convenient pump to drive the market into a frenzy, from which they profit greatly by skimming trading fees off of the top. If only a fraction of people ever try to withdraw Tether, it's entirely possible that they could cash out those few requests from trading profits, indirectly. If they can continue to pump the value of Bitcoin higher and higher, any potential fraud may never be exposed.

deleted 6y ago
[deleted]
washedup 6y ago
I think you don’t really understand how Tether works.
- deleted 6y ago
  [deleted]
- PragmaticPulp 6y ago
  Could you please elaborate rather than giving a drive-by dismissal? I'm explaining the fraud angle that everyone is concerned about. Of course, if Tether works exactly as the Tether corporation claims (but has yet to prove) then there's nothing to see here. Seems that they would be quick to try to prove this to regulators, though.
atian 6y ago
This may be a similar strategy to Binance's BNB token, where Binance operates BNB in a way similar to Bitfinex's "bailout" LEO token by committing their exchange revenue to token buybacks, forcing the token value to go up.

blhack 6y ago

Everything old is new again? The same things were said about tether in 2017. Maybe they’re right this time? Who knows, but it seems like a lot of work has been done to fine the smoking gun of the big tether fraud, and so far nothing. The questions seem valid, but so far it doesn’t seem like anything has panned out.

mekster 6y ago
Because they want to hide where the smoke is coming from at all costs if it's a fraud. They had the investigation on hold for a few years.

chaostheory 6y ago

What happens to tether if USD suffers massive inflation?

romland 6y ago
A tether decrease in value (it does not get inflated per se, but the outcome is the same). So, not much. Perhaps you are asking how people (and Tether themselves) will behave in such a scenario? Could be an interesting thought experiment, perhaps. That said, I've never owned a single USDT, but rest assured that if I did own one, I'd not hold it when I went to bed.

Geee 6y ago

Tether does not appear from thin air. It appears when new money is deposited on exchanges and OTC desks. It's simply a database for USD deposits. Some exchanges use MySQL to track their deposits. Tether allows transfering deposits between exchanges, in contrary to MySQL-dollars. There's way more MySQL-dollars being "printed" than Tethers. People pay attention to Tether because it's a transparent system. If Tether is not fully backed, it's a problem for those who own Tether. Tether is not a problem to Bitcoin.

accountofme 6y ago
I think you need to qualify these statements with proof. Otherwise everything you say is speculation.
mekster 6y ago
Its time to learn about the economy than just MySQL.

40four 6y ago

Here't another post I made that does a really good job at explaining the whole Tether history and current situation. There is a rapidly approaching deadline for them to provide documents to the New York Attorney General, folks are very anxious to see how this court situation plays out and hopefully illuminate their relationship with Bitfinex. Coincidence that there is a huge bitcoin ralley, and massive Tehter 'printing' going on right now? We shall see :) Get your popcorn ready! https://news.ycombinator.com/item?id=25771225 https://news.ycombinator.com/item?id=25771225

rajacombinator 6y ago

This clown show is still going? Yikes...

1experience 6y ago

They are the equivalent of an unregulated bank in the 1900s before deposit insurance, they will stay afloat as long as they keep up appearances and don't make stupid mistakes. However the moment they create a catalytic event, the entire house of cards falls down. The equivalent of a bank run. https://www.youtube.com/watch?v=xE5klz0yUT0 https://www.youtube.com/watch?v=xE5klz0yUT0

BelenusMordred 6y ago
The New York Attorney General proved in court they had at least 95% in cash deposit backing. How much does your bank have again? Last I looked in most places on Earth it's a few percent although the US removed any cash requirement so no one even has to report it anymore. I guess you folks will argue "well we have guns" but step and think about how that looks. Sounds like the mob to me. Hating crypto is fun and cool yeah, but being wrong over and over again for so many years must really hurt. Please put your money where your mouth is, no one seems willing to do so these days and I truly wonder why. Playing that "market can remain solvent longer than you" nonsense is ridiculous, the overhead on buying bitcoin futures going short is a fraction of a percent, supposedly "low-cost" ETF's charge nearly a magnitude more. Shorting bitcoin tether is literally a few clicks away for everyone on the planet, why not go bet everything you have on it. Watching all these people so proudly sure of themselves yet somehow you aren't all the richest people in the room? Please consider the very real possibility you are completely wrong and have been for years while mindless repeating this crap. Tether itself is a short on bitcoin, billions are stashed away in it, if it collapses all the coins will rise as people race for the exits. You could rolling in it right now or you could just be another one in this list: https://hn.algolia.com/?q=tether https://hn.algolia.com/?q=tether Choose your own adventure friend.
- 1experience 6y ago
  The New York Attorney General proved in court they had at least 95% in cash deposit backing. Can you provide a source for this claim?
- throwaway9d0291 6y ago