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This post should be mostly discounted because Ray doesn't really seem to be aware of the true risk of the Tether scam, the biggest component of and risk to Bitc
by lalaland1125 6y ago
This post should be mostly discounted because Ray doesn't really seem to be aware of the true risk of the Tether scam, the biggest component of and risk to Bitcoin's value.
For those not aware, Tether is a "stable coin" that issues tokens that supposedly represent dollars and can be used as a medium of exchange. However, it's widely suspected that Tether is unbacked and printing fake dollars and even Tether itself has admitted that at least 26% of their tokens have no backing [1]. Tether has never been audited so we have no clue how much of it is actually backed and how much of it is fake.
This is extremely problematic because Tether is currently printing around $500 million per day and is a source of a significant amount of buy pressure in the market. Tether is used on almost every exchange and is the vast majority of Bitcoin buy orders so Tether can be used to artificially pump the price of Bitcoin quite effectively.
Ray points out Tether as a risk to Bitcoin's value, but I don't think he does an adequate job explaining the risk. Tether isn't a small component of the Bitcoin ecosystem. It's at the heart of Bitcoin with it being the primary currency used to buy Bitcoin with at most exchanges. Most of the buy volume is with Tether and that $500 million per day is huge.
Regardless of what one thinks about the value of Bitcoin, it's irrational to invest while $500 million of fake dollars are being pumped in every day. Once that artificial $500 million buy pressure is removed, the market will face an existential risk. Who knows what the real price of Bitcoin would be without all that fake money?
https://davidgerard.co.uk/blockchain/2021/02/03/tether-printer-go-brrrrr/ https://davidgerard.co.uk/blockchain/2021/02/03/tether-print... is a good article for additional context on Tether.
1. https://www.coindesk.com/tether-lawyer-confirms-stablecoin-74-percent-backed-by-cash-and-equivalents https://www.coindesk.com/tether-lawyer-confirms-stablecoin-7...
- thebean11 6y agoRay isn't the only one, the market is pricing in zero risk of tether collapsing. It trades at no discount to real dollars, anybody with a Coinbase account could convert pretty high volumes of tether to real dollars. I really have no idea why, it seems sketchy.
- choxi 6y agoIt looks like Coinbase doesn't support Tether: https://www.coinbase.com/price/tether https://www.coinbase.com/price/tether
- itsoktocry 6y agoTether drives the price of Bitcoin (and other cryptocurrencies), which they do support.
- thebean11 6y agoShould have specified, you'd need to convert tether to bitcoin on a different exchange, then sell the bitcoin on Coinbase (or any other real-dollar exchange). The point is that 1 dollar buys the exact same amount of bitcoin as 1 tether.
- gruez 6y agobut kraken does: https://trade.kraken.com/charts/KRAKEN:USDT-USD https://trade.kraken.com/charts/KRAKEN:USDT-USD
- pjkundert 6y agoYou are correct; its USDC token is backed by audited USD$.
- lalaland1125 6y agoTether is almost certainly holding on to a couple billion real dollars to maintain the peg. This is very similar to how the Bank of England maintained an artificial value for the pound that wasn't broken until George Soros came around.
- CyberDildonics 6y agoI think it is much more likely that tether is backed by bitcoin and is a ponzi scheme. Price rises seems to be driven heavily by more tether being created out of nothing, leading to another speculation and news frenzy, leading their btc being more valuable and safety from default despite creating more tether. If bitcoin goes down rapidly or people start exchanging lots of tether for bitcoin (because you can't actually get USD from it) I think it will end up exposed, since as btc goes down their backing value goes down.
- thesausageking 6y agoTether FUD always returns when there's an influx of a lot newcomers to Bitcoin. It's been debunked over and over. Here's one by Nic Carter that explains why these "takedowns" are completely wrong: https://medium.com/@nic__carter/assessing-bitcoins-liquidity-with-coinlib-data-is-indefensible-3e5fdad51646 https://medium.com/@nic__carter/assessing-bitcoins-liquidity...
- lalaland1125 6y agoThat doesn't deal with the fake $500 million per day that is being pushed in by Tether. That money has to be artificially inflating the price of Bitcoin. Unless you actually think $500 million per day of real dollars are being acquired by Tether, a company that has never been audited and is under investigation, when there are many legitimate stable coin alternatives such as USDC? You would have to assume that there is both a $500 million per day whale buying Bitcoin and that whale is unable to use more legal means.
- T0Bi 6y agoYou have no sources for any of your claims.
- lalaland1125 6y agoI provided links to my sources in the original post. I thought it was pointless to relink them every single time.
- bl557 6y agoStudy finding no correlation between stablecoin issuance and BTC price - https://voxeu.org/article/stable-coins-dont-inflate-crypto-markets https://voxeu.org/article/stable-coins-dont-inflate-crypto-m...
- itsoktocry 6y ago>Tether FUD What's the opposite of FUD, when people with a massive financial stake in something do nothing but tell everyone everything is great all the time, and never acknowledge any issues?
- itsoktocry 6y ago>Ray doesn't really seem to be aware of the true risk of the Tether scam Every day that goes by it's becoming more clear that Dalio's "genius" was nothing more than a product of being in the right-place-right-time of an extraordinary 20+ year bond run and Chinese money connections.
- MrMan 6y ago60/40 portfolio with leverage
- andrepd 6y agoExcuse me, how is this different from banks, which have money to cover ~1% of their deposit liabilities? Scratch that, US and UK banks, for example, now have 0% reserve requirements.
- reitzensteinm 6y agoBanks still have assets to cover the liabilities, they're just not liquid. Are you claiming Tether has other assets that are not being counted?
- andrepd 6y agoNo, they don't. In the event of a bank run, a bank cannot cover their liabilities. This is the same thing that you point in tether as a fatal flaw and a "scam".
- joubert 6y agoTiming difference, i.e. majority of assets are not held in cash (it is put to work), so if many people try to withdraw lots of money at the same time, it can trigger a downward spiral (“bank run”). I’d you’re curious to understand more: https://en.wikipedia.org/wiki/Bank_run https://en.wikipedia.org/wiki/Bank_run
- andrepd 6y agoI don't understand, what does that have to do with anything? The issue being discussed is Tether, and how it's totally a pyramid scam since it doesn't hold 100% in reserve.
- reitzensteinm 6y agoI said neither thing about Tether, and there is a vast difference between illiquid and insolvent.
- seanhunter 6y agoUK and US banks absolutely do have reserve requirements and they are neither 1% nor 0%. I have no idea where you're getting that from. The reserve requirements vary by type of bank and type and risk weighting of asset. Here is the documentation that explains the capital requirements for a regulated entity (not just banks, but including banks) in the UK https://www.handbook.fca.org.uk/handbook/glossary/G1567.html https://www.handbook.fca.org.uk/handbook/glossary/G1567.html
- CyberDildonics 6y agoEveryone who invests in bitcoin is breaking the cardinal rule of investing: don't invest in something you don't understand. If people realized that bitcoin's -average- transaction fee is around $25 USD because it is restricted (for no technical reason) to a few transactions per second (less throughput than 240p youtube videos) they would at least move on to other cryptocurrencies. If people realized that a sudden drop in price will mean a sudden drop in mining power, which will mean a sudden drop in blocks being generated, which will mean a sudden drop in throughput, they might be even more eager to get out of it. Since transactions are already so extremely limited purely by choice of the people that took it over, sudden drops in price mean less utility while in practice sudden rises in price lead to lots of transactions for speculation, which also prices out any utility. One transaction is now 4x the hard drive cost to store the entire chain (and users don't even need to store the chain at all).
- lalaland1125 6y agoThe actual cost per transaction in Bitcoin is ~$150 now once you include both the direct transaction fee and the miner reward (inflation cost). It's an incredibly inefficient technology.
- gruez 6y ago>and the inflation costs compared to the endless money printing done by the fed that still seems like a bargain. https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
- throwaway1777 6y agoStrawman argument since there are other ways to hedge inflation.
- gruez 6y agoHow is it a strawman argument? The point is that you're factoring in the inflation cost for BTC, but not the alternatives such as USD or even gold.
- orange_tee 6y agoAll of this shows how the supposed transparency of Bitcoin is useless. The blockchain does not really tell you anything. Price goes up 500%. Nobody knows why. People speculate it is because of Tether or some cabal of Chinese BTC mining tycoons or exchanges faking volume;, or WallSt playing their voodoo with billions worth of BTC. What other asset has this situation where the reason for the movement of its price is so obfuscated?
- gruez 6y ago>All of this shows how the supposed transparency of Bitcoin is useless. This seems like begging the question to me. Was bitcoin ever supposed to be some sort of asset where the pricing is transparent?
- orange_tee 6y agoI don't quite remember from the original white paper if it was pushed as a feature or just a property of the system. But later proponents certainty try to say it is some revolutionary feature. Now don't get me wrong. Transparency in the financial system is good. But a public blockchain as is, does not provide any transparency at all. Now that I am thinking about it, they probably mean something else entirely by transparency. They probably mean, they know the total amount of BTC out there.
- jstrong 6y ago> Price goes up 500%. Nobody knows why. welcome to currency trading
- kgkyltpgllg 6y ago> Tether isn't a small component of the Bitcoin ecosystem. It's at the heart of Bitcoin with it being the primary currency used to buy Bitcoin with at most exchanges So if you were a big company, let's say Tesla, which wanted to buy a lot of bitcoin, let's say 1.5 bil, would that mean that you first need to convert that 1.5 bil to Tether, since that's the most liquid denomination of BTC? Could it be that some of those "fake" $500 mil daily Tethers were actually really backed by Tesla dollars?
- lalaland1125 6y agoLegitimate actors like Tesla have no need for Tether. They could directly wire in their cash or use an actually legit stablecoin like USDC.
- kgkyltpgllg 6y agoBut according to you there is no real liquidity in BTC/USDC, it's all in BTC/USDT. When you do that kind of buying, you need to go to the most liquid exchange (Binance), and that uses Tether.
- lalaland1125 6y agoThe volume at coinbase is more than enough to support a $1.5 billion buy. Keep in mind that in relationship to tether, $1.5 billion is tiny. It's only 3 days of tether printing.
- kgkyltpgllg 6y agoThere is a big difference between two-way speculative volume and one way long term directional volume. If AAPL trades $15 bil per day, that doesn't mean that you can easily buy $1 bil without huge market impact.
- FireBeyond 6y agoAnd yet we're lead to believe that Tether is at or very close to 1:1. So Tether is depositing, USD, $6.5B A WEEK. Over the last year this would make them one of the richest entities in the world. Oh wait, they haven't actually been audited, they won't tell anyone which institution/s actually hold this trove of funds, they've already lost more than a billion to people to who effectively said "yeah, we're not giving you back the money you gave us", and they're fighting and delaying multiple investigations and prosecutions of financial crimes. Perhaps when Tether's USD holding exceed even Apple's (which, according to you, is less than a year away, at the absolute max), you'll realize that this is all a house of cards.
- arberx 6y agoWhy wasn't Tether printing during the 2018-2019 bear market?
- babyshake 6y agoIf there is one argument that convinces me that Tether is unlikely to present an existential risk to Bitcoin, it's that some of the largest companies are supporting Bitcoin, adding it to their balance sheet, etc. I've got to believe they are well aware of this risk and have looked into it, and have at least decided that it isn't a large enough issue to expose them significantly.
- budlightvirus 6y agoEnron and Lehman Brothers were both sizable enterprises
- fwiwm2c 6y agoYou know something special which others, who have much sophisticated investing mechanisms, don't know ehh? If you are so confident in asking someone like Ray Dalio to "discount" their post, then why don't you bet against Bitcoin and see where that lands you? Stop presenting FUD if you don't yourself want to back it.
- coinward 6y agoAh, so when a central bank fiats, its sound economics. When crypto folks fiat, its a scam. I see.
- ad31mar 6y agoThis reply should be mostly discounted because the author doesn't really seem to be able to do basic research. Tether imploding would actually be good for Bitcoin.
- biolurker1 6y agoFirst of all you didn't read the whole text, second you think you can discount the opinion of the mot successful hedge fund manager ever and the due diligence of his team! because you know better. Amazing dunning krugger effect at play. Go back and read the report and don't rush to make hate comments. He describes in the text those that are blinded.
- eyeball 6y ago30/870=3.4%
- gge 6y agoOnly people in the middle of the IQ spectrum fall for the Tether psyops. HFSP.