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I believe it's an open secret that tether is not backed by $ 1 to 1. If I remember correctly, they admitted that somewhere around 80% was backed by cash and the

I believe it's an open secret that tether is not backed by $ 1 to 1. If I remember correctly, they admitted that somewhere around 80% was backed by cash and the rest in collateral. Not sure how much you can trust what they say anyways. In the meantime, avoid tether at all cost, alternatives like USDC and DAI are much better and trustworthy.

Tenoke 6y ago
Even 80% seems like enough to make a bank run very unlikely, especially if some of the rest is mostly in easy to liquidize crypto.
- Clewza313 6y ago
  If there is a "bank run" (price collapse) on BTC, the value of that crypto collateral will collapse and it will be very hard to "liquidize" it (because everybody else is selling too).
  - rawtxapp 6y ago
    Unless it's overcollateralized similar to what maker does with DAI. And if there was a bank run, that would a bank run by people trying to exit tether, so you'd expect to see a temporary increase in BTC price.
    - NomeChomsky 6y ago
      I've seen many people say this. But the reality is that the significant part of BTCs trading volume is in tether. When that dries up it's price will nose dive and the only route out will be into fiat. And if BTCs price is declining, no one is buying. So tether collapsing means BTC will collapse.
      - dekz 6y ago
        If Tether untethers there will be a rush to other assets, pushing them higher. Shorts denominated in USDT will get absolutely decimated, pushing other assets higher. Exchanges using Tether will enforce a maximum withdrawal, pushing other assets higher. Smart money will buy USDT at a discount once their reserve details are made publicly available. If it's FUD they'll make an absolute killing. There's 3 possibilities here: 1. Tether is completely backed 1:$1 (highly unlikely) 2. Tether is partially backed, the reserves are greater than the outstanding 3. Tether is partially backed, the reserves are less than outstanding Only 3) will have a downward price correction. If they've been buying BTC like everyone here has suggested then 2) is the most probable, since you know BTC is at yet another ATH. If it becomes public that tether has excess reserves, the FUD will disappear silently. Worst case Tether says they will slowly sell off to reach 1:$1 over the next 12 months.
        rtpg 6y ago
        you own a bunch of tether, you decide to "rush" to other assets. Except your existing assets are dropping to 0, so you don't actually have that much buying power anymore. So you'll only see a fraction of a rise. Meanwhile whoever sold you the tether probably cashed out a while back.
        tehlike 6y ago
        Someone will front run the news and sell tethers for btc, or things like that.
        lottin 6y ago
        Not to mention that people don't rush to other assets in general, they rush to safe assets. No one is gonna rush to buy bitcoin in the event of turmoil affecting bitcoin exchanges, this is just nonsense.
        ac29 6y ago
        > If Tether untethers there will be a rush to other assets, pushing them higher. On unbanked exchanges this is true. However the next step is that people will transfer those inflated assets to banked exchanges to exchange them for fiat, pushing the price down. See Gox, Mt.
      - nullc 6y ago
        > But the reality is that the significant part of BTCs trading volume is in tether. I believe that is not even remotely true. Most Bitcoin users I know have never touched tether in any form. Rather, what you're seeing is that there are a multitude of casinos operating under the guise of "exchanges" which have absolutely no access to fiat -- usually because they're fly by night shady operations if not outright scams. All these things use tether due to having no fiat access. All of these also pump out enormous amounts of fake "volume" that is ignored by most people with a clue. Checkout the bitwise presentation to the SEC: https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5164833-183434.pdf https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca2... And their paper on it: https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5574233-185408.pdf https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca2...
        xwolfi 6y ago
        Most I know had no choice because our chinese banks blocked withdrawals.
- ac29 6y ago
  The threat is that the US government comes in and says, no, you can not pretend 80 cents is a dollar and seizes as much of their reserves as they can.
- eurusdac 6y ago
  80% backed by high quality liquid assets is pretty good. But insolvent banks avoid bank runs partly because lots of the money is sticky. Many people and organisations won't participate in a run no matter what, either because they think it's antisocial, or they believe the system will look after them, or they just aren't informed enough. A bank whose depositors are all cynical speculators has a much harder job to stay afloat.

Tenoke 6y ago

Even 80% seems like enough to make a bank run very unlikely, especially if some of the rest is mostly in easy to liquidize crypto.

Clewza313 6y ago
If there is a "bank run" (price collapse) on BTC, the value of that crypto collateral will collapse and it will be very hard to "liquidize" it (because everybody else is selling too).
- rawtxapp 6y ago
  Unless it's overcollateralized similar to what maker does with DAI. And if there was a bank run, that would a bank run by people trying to exit tether, so you'd expect to see a temporary increase in BTC price.
  - NomeChomsky 6y ago
    I've seen many people say this. But the reality is that the significant part of BTCs trading volume is in tether. When that dries up it's price will nose dive and the only route out will be into fiat. And if BTCs price is declining, no one is buying. So tether collapsing means BTC will collapse.
    - dekz 6y ago
      If Tether untethers there will be a rush to other assets, pushing them higher. Shorts denominated in USDT will get absolutely decimated, pushing other assets higher. Exchanges using Tether will enforce a maximum withdrawal, pushing other assets higher. Smart money will buy USDT at a discount once their reserve details are made publicly available. If it's FUD they'll make an absolute killing. There's 3 possibilities here: 1. Tether is completely backed 1:$1 (highly unlikely) 2. Tether is partially backed, the reserves are greater than the outstanding 3. Tether is partially backed, the reserves are less than outstanding Only 3) will have a downward price correction. If they've been buying BTC like everyone here has suggested then 2) is the most probable, since you know BTC is at yet another ATH. If it becomes public that tether has excess reserves, the FUD will disappear silently. Worst case Tether says they will slowly sell off to reach 1:$1 over the next 12 months.
      - rtpg 6y ago
        you own a bunch of tether, you decide to "rush" to other assets. Except your existing assets are dropping to 0, so you don't actually have that much buying power anymore. So you'll only see a fraction of a rise. Meanwhile whoever sold you the tether probably cashed out a while back.
        tehlike 6y ago
        Someone will front run the news and sell tethers for btc, or things like that.
        lottin 6y ago
        Not to mention that people don't rush to other assets in general, they rush to safe assets. No one is gonna rush to buy bitcoin in the event of turmoil affecting bitcoin exchanges, this is just nonsense.
      - ac29 6y ago
        > If Tether untethers there will be a rush to other assets, pushing them higher. On unbanked exchanges this is true. However the next step is that people will transfer those inflated assets to banked exchanges to exchange them for fiat, pushing the price down. See Gox, Mt.
    - nullc 6y ago
      > But the reality is that the significant part of BTCs trading volume is in tether. I believe that is not even remotely true. Most Bitcoin users I know have never touched tether in any form. Rather, what you're seeing is that there are a multitude of casinos operating under the guise of "exchanges" which have absolutely no access to fiat -- usually because they're fly by night shady operations if not outright scams. All these things use tether due to having no fiat access. All of these also pump out enormous amounts of fake "volume" that is ignored by most people with a clue. Checkout the bitwise presentation to the SEC: https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5164833-183434.pdf https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca2... And their paper on it: https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5574233-185408.pdf https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca2...
      - xwolfi 6y ago
        Most I know had no choice because our chinese banks blocked withdrawals.
ac29 6y ago
The threat is that the US government comes in and says, no, you can not pretend 80 cents is a dollar and seizes as much of their reserves as they can.
eurusdac 6y ago
80% backed by high quality liquid assets is pretty good. But insolvent banks avoid bank runs partly because lots of the money is sticky. Many people and organisations won't participate in a run no matter what, either because they think it's antisocial, or they believe the system will look after them, or they just aren't informed enough. A bank whose depositors are all cynical speculators has a much harder job to stay afloat.