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How do you invest in Tether? I thought it was just like a dollar peg for btc for inter-exchange operations.

birdyrooster 6y ago
I am guessing people park their money in tether during periods of instability without needing to pay a broker to transfer into fiat. It looks like a place for temporarily hedging against crypto generally.
rawtxapp 6y ago
They don't invest in tether, it's just a means of moving money between exchanges like you say or temporary hold between trades.
ac29 6y ago
In theory, if you give Tether some dollars, they will store those dollars in reserve and issue you new Tethers. In practice, there is no evidence that any part of that happens aside from the minting new tethers part. Most likely there is some amount of money and/or crypto held in reserve, but despite allegedly having several tens of billions of dollars in reserve, they refuse to do an audit. I think the currently most plausible answer for how Tether works is: 1 )Tether issues tokens to OTC exchanges in exchange for an IOU 2) The exchange buys BTC with it 3) The exchange sells that bitcoin for dollars, and pays off that IOU. This almost certainly wont fly with regulators, and has many ways it could explode, hence the investigations.
- dillondoyle 6y ago
  What's the best guess on where the actual cash sits in the meantime, or long term?
  - ac29 6y ago
    Impossible to know. 30 billion Tethers ago, it was at 74% according to a filing from Tether with the New York Attorney General. In my opinion, best case scenario: Tether is buying Bitcoin and other assets with Tether, and has been able to sell them at a profit as prices rise, leaving their reserves at or above 100%. This sort of initially unbacked issuance may be a crime in and of itself, but its possible Tether holders would have a legitimate claim on any assets if Tether fails or is shutdown and wouldnt take a loss (though it could take years to get back their money). Worst case scenario: its entirely, or almost entirely fraudulent, and Tether insiders have embezzled and spent as much of Tethers available hard currency as they can.
    - askmike 6y ago
      Your best case scenario is worse than what most people in the industry consider the truth..
      - arcticbull 6y ago
        Or rather, what most people in the industry pretend doesn't exist, because they know it's a systemic risk and everyone's in way too deep at this point. Look, it's easy, just phone up Paolo and get us an audit, you seem to imply you're connected. Then we'll move on! I'll eat my hat and apologize to everyone I've ever told Tether is anything other than the most legitimate entity in the entire world. I'll borrow from the r/wsb folks and tattoo a Tether logo on my backside, even.
        askmike 6y ago
        Not sure this aged like you think it would: > Or rather, what most people in the industry pretend doesn't exist, because they know it's a systemic risk and everyone's in way too deep at this point. Are you referring to the NYAG here?
    - arcticbull 6y ago
      Consider their T&Cs are very clear - owning USDT gives you no rights or claims on their reserves. They can also arbitrarily, and indefinitely, delay/postpone your withdrawal request. They can also substitute whatever they want from their assets to satisfy your claim. They can also just tell you to go pound sand. Owning a USDT gives you as much right to cash from the Tether treasury as owning a Chuck-E-Cheese token gives you right to the coins in the cash drawer at your local fun-a-torium.
    - Geee 6y ago
      Why would they sell their bitcoin? I think that the most plausible explanation is that they're almost completely backed with bitcoin. In a bull trend, they're able to keep issuing more Tether because their collateral value increases. They can buy unlimited amount of bitcoin as long as the bull trend continues. In a down trend, they'll liquidate/sell the bitcoin.
  - csomar 6y ago
    Bank accounts in Shell companies around the world. They are pretty good at this game, but it's pretty risky one.
    - arcticbull 6y ago
      That's how CryptoCapital operated after all. It's a pretty standard approach to money laundering.
- askmike 6y ago
  > but despite allegedly having several tens of billions of dollars in reserve, they refuse to do an audit. They don't refuse this, instead they fail to find an auditor that people actually trust that wants to work on a big crypto project. They are very open about this. The big problem about Tether is the amount of FUD and misinformation going around as common knowledge. > I think the currently most plausible answer for how Tether works is As someone who deals with Tether as well as all the big exchanges that run Tether markets, this is about as real as Alice in wonderland.
  - Closi 6y ago
    > They don't refuse this, instead they fail to find an auditor that people actually trust that wants to work on a big crypto project. They are very open about this. Claiming you don’t trust any auditors so you can’t do an audit is certainly one way of refusing an audit.
  - arcticbull 6y ago
    > They don't refuse this, instead they fail to find an auditor that people actually trust that wants to work on a big crypto project. They are very open about this. No no, let's not rewrite history. Tether hired Friedman LLP to audit them in ~2017/2018. Friedman literally walked out of the audit [1] because, and I assume this is true, it was just too squeaky clean to bother finishing. Friedman claims to be a specialist in this area [2], and I believe they're actually involved with GBTC [3]. In retrospect it makes sense Friedman ran about as fast as they could. The New York AG lawsuit indicates at the time, Tether knew they were only 74% backed by assets. Boy, that'll make it tough to pass an audit when your website says you're actually backed 1:1 with actual humanly usable physical dollars. Remember, Bitfinex banked with a money launderer, CryptoCapital, and had $850 million dollars seized by authorities, so they just reached into the Tether kitty to plug the hole. [4] At the time Bitfinex and Tether were of course denying they even had any relationship at all - let alone a "friends with mutually accessible bank accounts" relationship - but we found out thanks to the Paradise papers. [5] Tether is "very open" about absolutely nothing. Claiming otherwise is the biggest misleading statement in this entire thread, intentional or not. Let's stick to the facts, Mike. [1] https://www.coindesk.com/tether-confirms-relationship-auditor-dissolved https://www.coindesk.com/tether-confirms-relationship-audito... [2] https://www.friedmanllp.com/industries/digital-currency https://www.friedmanllp.com/industries/digital-currency [3] https://www.friedmanllp.com/insights/congratulations-to-grayscale-bitcoin-trust https://www.friedmanllp.com/insights/congratulations-to-gray... [4] https://www.bloomberg.com/news/articles/2019-04-30/tether-says-stablecoin-is-only-backed-74-by-cash-securities https://www.bloomberg.com/news/articles/2019-04-30/tether-sa... [5] https://www.icij.org/investigations/paradise-papers/paradise-papers-connection-sparks-massive-bitcoin-lawsuit/ https://www.icij.org/investigations/paradise-papers/paradise...
tim333 6y ago
Kraken will sell you some if you like.

I am guessing people park their money in tether during periods of instability without needing to pay a broker to transfer into fiat. It looks like a place for temporarily hedging against crypto generally.

rawtxapp 6y ago

They don't invest in tether, it's just a means of moving money between exchanges like you say or temporary hold between trades.

ac29 6y ago

In theory, if you give Tether some dollars, they will store those dollars in reserve and issue you new Tethers. In practice, there is no evidence that any part of that happens aside from the minting new tethers part. Most likely there is some amount of money and/or crypto held in reserve, but despite allegedly having several tens of billions of dollars in reserve, they refuse to do an audit. I think the currently most plausible answer for how Tether works is: 1 )Tether issues tokens to OTC exchanges in exchange for an IOU 2) The exchange buys BTC with it 3) The exchange sells that bitcoin for dollars, and pays off that IOU. This almost certainly wont fly with regulators, and has many ways it could explode, hence the investigations.

dillondoyle 6y ago
What's the best guess on where the actual cash sits in the meantime, or long term?
- ac29 6y ago
  Impossible to know. 30 billion Tethers ago, it was at 74% according to a filing from Tether with the New York Attorney General. In my opinion, best case scenario: Tether is buying Bitcoin and other assets with Tether, and has been able to sell them at a profit as prices rise, leaving their reserves at or above 100%. This sort of initially unbacked issuance may be a crime in and of itself, but its possible Tether holders would have a legitimate claim on any assets if Tether fails or is shutdown and wouldnt take a loss (though it could take years to get back their money). Worst case scenario: its entirely, or almost entirely fraudulent, and Tether insiders have embezzled and spent as much of Tethers available hard currency as they can.
  - askmike 6y ago
    Your best case scenario is worse than what most people in the industry consider the truth..
    - arcticbull 6y ago
      Or rather, what most people in the industry pretend doesn't exist, because they know it's a systemic risk and everyone's in way too deep at this point. Look, it's easy, just phone up Paolo and get us an audit, you seem to imply you're connected. Then we'll move on! I'll eat my hat and apologize to everyone I've ever told Tether is anything other than the most legitimate entity in the entire world. I'll borrow from the r/wsb folks and tattoo a Tether logo on my backside, even.
      - askmike 6y ago
        Not sure this aged like you think it would: > Or rather, what most people in the industry pretend doesn't exist, because they know it's a systemic risk and everyone's in way too deep at this point. Are you referring to the NYAG here?
  - arcticbull 6y ago
    Consider their T&Cs are very clear - owning USDT gives you no rights or claims on their reserves. They can also arbitrarily, and indefinitely, delay/postpone your withdrawal request. They can also substitute whatever they want from their assets to satisfy your claim. They can also just tell you to go pound sand. Owning a USDT gives you as much right to cash from the Tether treasury as owning a Chuck-E-Cheese token gives you right to the coins in the cash drawer at your local fun-a-torium.
  - Geee 6y ago
    Why would they sell their bitcoin? I think that the most plausible explanation is that they're almost completely backed with bitcoin. In a bull trend, they're able to keep issuing more Tether because their collateral value increases. They can buy unlimited amount of bitcoin as long as the bull trend continues. In a down trend, they'll liquidate/sell the bitcoin.
- csomar 6y ago
  Bank accounts in Shell companies around the world. They are pretty good at this game, but it's pretty risky one.
  - arcticbull 6y ago
    That's how CryptoCapital operated after all. It's a pretty standard approach to money laundering.
askmike 6y ago
> but despite allegedly having several tens of billions of dollars in reserve, they refuse to do an audit. They don't refuse this, instead they fail to find an auditor that people actually trust that wants to work on a big crypto project. They are very open about this. The big problem about Tether is the amount of FUD and misinformation going around as common knowledge. > I think the currently most plausible answer for how Tether works is As someone who deals with Tether as well as all the big exchanges that run Tether markets, this is about as real as Alice in wonderland.
- Closi 6y ago
  > They don't refuse this, instead they fail to find an auditor that people actually trust that wants to work on a big crypto project. They are very open about this. Claiming you don’t trust any auditors so you can’t do an audit is certainly one way of refusing an audit.
- arcticbull 6y ago
  > They don't refuse this, instead they fail to find an auditor that people actually trust that wants to work on a big crypto project. They are very open about this. No no, let's not rewrite history. Tether hired Friedman LLP to audit them in ~2017/2018. Friedman literally walked out of the audit [1] because, and I assume this is true, it was just too squeaky clean to bother finishing. Friedman claims to be a specialist in this area [2], and I believe they're actually involved with GBTC [3]. In retrospect it makes sense Friedman ran about as fast as they could. The New York AG lawsuit indicates at the time, Tether knew they were only 74% backed by assets. Boy, that'll make it tough to pass an audit when your website says you're actually backed 1:1 with actual humanly usable physical dollars. Remember, Bitfinex banked with a money launderer, CryptoCapital, and had $850 million dollars seized by authorities, so they just reached into the Tether kitty to plug the hole. [4] At the time Bitfinex and Tether were of course denying they even had any relationship at all - let alone a "friends with mutually accessible bank accounts" relationship - but we found out thanks to the Paradise papers. [5] Tether is "very open" about absolutely nothing. Claiming otherwise is the biggest misleading statement in this entire thread, intentional or not. Let's stick to the facts, Mike. [1] https://www.coindesk.com/tether-confirms-relationship-auditor-dissolved https://www.coindesk.com/tether-confirms-relationship-audito... [2] https://www.friedmanllp.com/industries/digital-currency https://www.friedmanllp.com/industries/digital-currency [3] https://www.friedmanllp.com/insights/congratulations-to-grayscale-bitcoin-trust https://www.friedmanllp.com/insights/congratulations-to-gray... [4] https://www.bloomberg.com/news/articles/2019-04-30/tether-says-stablecoin-is-only-backed-74-by-cash-securities https://www.bloomberg.com/news/articles/2019-04-30/tether-sa... [5] https://www.icij.org/investigations/paradise-papers/paradise-papers-connection-sparks-massive-bitcoin-lawsuit/ https://www.icij.org/investigations/paradise-papers/paradise...

tim333 6y ago

Kraken will sell you some if you like.