4 ms·

Tether 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 artifi

Tether 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 ago
I 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.
- thebean11 6y ago
  > 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 To be fair, this already happened. Bitcoin crashed from $22k to $4k, and this was at the height of tether worry.
  - CyberDildonics 6y ago
    That happened over the course of a year and I don't think there was a massive (enough) run on tether while it was low, since it didn't stay at that price for very long. There just isn't as much activity when bitcoin is low which I think also works in tether's favor. I think they do have significant btc backing them, just no USD. I actually wrote a comment about their dynamic two years ago when this happened. https://news.ycombinator.com/item?id=18222578 https://news.ycombinator.com/item?id=18222578
    - thebean11 6y ago
      It crashed from its peak to $6k in 2 months. The bear market lasted a long time, the initial crash was pretty fast when it first happened..
    - kgkyltpgllg 6y ago
      It stayed at $3k for 4 months in 2018.
- kgkyltpgllg 6y ago
  > more tether being created out of nothing How do you know that? Can you see Tether USD bank account, and can confirm that no USD is deposited there when Tether is created?
  - andy81 6y ago
    From the article that caused the panic- https://crypto-anonymous-2021.medium.com/the-bit-short-inside-cryptos-doomsday-machine-f8dcf78a64d3 https://crypto-anonymous-2021.medium.com/the-bit-short-insid... The last nail in the coffin was when I found out about the lack of visible reserves. If Tether Ltd. really was taking in 1 USD for each Tether it issued, then it should have as many dollars in its bank account as there are issued Tethers. And it turns out we can check if that’s true! Tether Ltd.’s bank is Deltec bank in the Bahamas, and the Bahamas discloses how much foreign currency its domestic banks hold each month. The answer was — at least up to the end of September 2020 — not nearly enough: From January 2020 to September 2020, the amount of all foreign currencies held by all the domestic banks in the Bahamas increases by only $600 million — going from $4.7B to $5.3B. (The table is in Bahamian dollars, but the Bahamian dollar is pegged to the US dollar, so 1 BSD = 1 USD.) But during the same period, total issued Tethers increased by almost $5.4 billion — going from $4.6B to $10B!
    - MrMan 6y ago
      This is a great clue. I don’t have an opinion but there is enough noise around all this stuff to keep me on the sidelines. I will go back to my ETH staking ruminations.

CyberDildonics 6y ago

I 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.

thebean11 6y ago
> 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 To be fair, this already happened. Bitcoin crashed from $22k to $4k, and this was at the height of tether worry.
- CyberDildonics 6y ago
  That happened over the course of a year and I don't think there was a massive (enough) run on tether while it was low, since it didn't stay at that price for very long. There just isn't as much activity when bitcoin is low which I think also works in tether's favor. I think they do have significant btc backing them, just no USD. I actually wrote a comment about their dynamic two years ago when this happened. https://news.ycombinator.com/item?id=18222578 https://news.ycombinator.com/item?id=18222578
  - thebean11 6y ago
    It crashed from its peak to $6k in 2 months. The bear market lasted a long time, the initial crash was pretty fast when it first happened..
  - kgkyltpgllg 6y ago
    It stayed at $3k for 4 months in 2018.
kgkyltpgllg 6y ago
> more tether being created out of nothing How do you know that? Can you see Tether USD bank account, and can confirm that no USD is deposited there when Tether is created?
- andy81 6y ago
  From the article that caused the panic- https://crypto-anonymous-2021.medium.com/the-bit-short-inside-cryptos-doomsday-machine-f8dcf78a64d3 https://crypto-anonymous-2021.medium.com/the-bit-short-insid... The last nail in the coffin was when I found out about the lack of visible reserves. If Tether Ltd. really was taking in 1 USD for each Tether it issued, then it should have as many dollars in its bank account as there are issued Tethers. And it turns out we can check if that’s true! Tether Ltd.’s bank is Deltec bank in the Bahamas, and the Bahamas discloses how much foreign currency its domestic banks hold each month. The answer was — at least up to the end of September 2020 — not nearly enough: From January 2020 to September 2020, the amount of all foreign currencies held by all the domestic banks in the Bahamas increases by only $600 million — going from $4.7B to $5.3B. (The table is in Bahamian dollars, but the Bahamian dollar is pegged to the US dollar, so 1 BSD = 1 USD.) But during the same period, total issued Tethers increased by almost $5.4 billion — going from $4.6B to $10B!
  - MrMan 6y ago
    This is a great clue. I don’t have an opinion but there is enough noise around all this stuff to keep me on the sidelines. I will go back to my ETH staking ruminations.