13 ms·

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 appear

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.

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.