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About 70% of transactions are in USDT, and bitcoin’s price rise has followed increases in Tether tokens. It would appear the price surge has been backed by USDT

by graeme 6y ago

About 70% of transactions are in USDT, and bitcoin’s price rise has followed increases in Tether tokens. It would appear the price surge has been backed by USDT because currently the bitcoin market accepts USDT as equal to USD, despite evidence USDT is not backed. Bitcoin itself is powered by the miners, but the fiat value of bitcoin is backed by USDT. If there was doubt about the peg you’d see a run.

matheusmoreira 6y ago
> bitcoin’s price rise has followed increases in Tether tokens I understand this as price manipulation by Tether, not as evidence that BTC is backed by it. > currently the bitcoin market accepts USDT as equal to USD, despite evidence USDT is not backed Yeah, it's unfortunate. I don't understand why people won't use BUSD instead. > If there was doubt about the peg you’d see a run. Probably. In my opinion, people should exchange USDT for BUSD while it still has value. That way everyone will continue trading normally when all the controversy catches up to Tether.
- graeme 6y ago
  > Probably. In my opinion, people should exchange USDT for BUSD while it still has value. That way everyone will continue trading normally when all the controversy catches up to Tether. This is sound advice for the individual but it doesn’t work for the market as a whole. I’m arguing Tether is a sham. When too many people try to get out of a sham, it collapses. Currently, 2/3rd of people who try to sell their BTC find USDT buyers. If Tether is revealed as a fraud suddenly the sell side will outweigh the buy side.
  - dbancajas 6y ago
    > ndependently verify at specific points in time that the entire supply of Paxos Standard tokens is consistent with USD in reserve accounts at U.S. banks held and managed by Paxos. Where are all the people holding all the USDT? It seems nobody is complaining. I'm bearish on BTC price right now but can't help thinking someone should have already cracked the USDT wide open. Eventually someone (few brokers) will be left holding USDT with no buyers. I can't believe brokers are allowing people to cash out w/o guarantee the stable coins they redeem can are not cashable somewhere.
    - graeme 6y ago
      Excellent question, why haven’t tether holders lost confidence? Part of the answer I think is that you can lock up Tether at 12+% interest. So the system encourages withdrawing tethers from the system, at unsustainable savings rates. https://bitcompare.net/coins/tether/savings-interest-rates https://bitcompare.net/coins/tether/savings-interest-rates The other part is that it is not easy to directly trade USDT for USD. Kraken is the only place you can do so directly, it is the only place the peg is directly tested. Apart from that to get USD you need to trade to something else, like BTC or ETH, and then sell that for dollars. The only people likely to have held USDT are also likely to be long crypto, so not surprising they wouldn’t cash out. The better question is who are selling their BTC/ETH for Tether, and what do they do with the money after? Surely the locked in savings are part of the answer: interest rates on stablecoins are much higher than on BTC/ETH. But I don’t think it is the whole answer. Presumably enough people don’t question the peg that it can stay afloat for now.
      - cfcosta 6y ago
        >The other part is that it is not easy to directly trade USDT for USD. Kraken is the only place you can do so directly, it is the only place the peg is directly tested. Apart from that to get USD you need to trade to something else, like BTC or ETH, and then sell that for dollars. What do you mean? I trade USDC and USDT from and to Fiat using Binance, and it's a breeze. I get the funds directly on my bank account in 5 minutes or so, and I imagine the same happens on Kraken, coinbase pro, gemini/blockfi.
        graeme 6y ago
        Interesting I was under the impression you couldn’t. Does Binance have a USDT/USD trading pair? If not, what are the mechanics of trading from USDT to fiat?
        cfcosta 6y ago
        Hey, I didn't see your reply, sorry! But yes, Binance does have a USDT/USD trading pair. Then you just withdraw to your bank account (the mechanics of this vary by country).
3np 6y ago
> About 70% of transactions are in USDT Source? Because this is very far from any data I have.
- graeme 6y ago
  What data sources have you got? You can see here Tether’s 24 hour volume actually surpasses bitcoin. It’s used in ETH trading and elsewhere which is why its volume is larger. https://www.coindesk.com/price/tether https://www.coindesk.com/price/tether https://www.coindesk.com/price/bitcoin https://www.coindesk.com/price/bitcoin For the 70% figure I’d have to dig a bit to fully check current volume. It’s been widely repeated in articles, they use data which check flows through exchanges. Binance may have a bit less USDT than before? https://coinlib.io/exchange/binance https://coinlib.io/exchange/binance https://coinlib.io/exchange/bit-z https://coinlib.io/exchange/bit-z https://coinlib.io/exchange/hitbtc https://coinlib.io/exchange/hitbtc
  - 3np 6y ago
    You're talking about spot trading volume on centralized exchanges, which is a completely different metric than "transactions" (regardless of if you want to interpret that as on-chain or not). Separately, Binance is a lot of bot-trading, and, outside of BN, USDT-heavy exchanges have questionable volume figures (wash trading and fake trades). USDT usage has indeed gone down in favor of other stable coins, and while Binance is huge among exchanges, it's just one fraction of the BTC economy.
    - graeme 6y ago
      Could you elaborate on your methods or sources for determining actual volume of transactions?
      - 3np 6y ago
        As I mentioned, I think it's too ambiguous to talk about "transactions" if we want to compare something measurable - if you want to restrict yourself to on-chain transaction numbers or volume, you'd have to just look at the on-chain activity - I am just assuming BTC is dwarfing USDT here, but that's just a small part of the story. On-chain activity is also meaningless for what I guess you're after, since there's no reliable way to separate self-transfers from other transactions. If we go by what your sources allude to - trades on centralized exchanges - it'd be a matter of summing up the trading volume for each par involving either asset on any side. Let's first look at Binance for the past 24h. I get: BTC: 1.9 BUSD USDT: 3.8 BUSD Not so far off from the 70/30 number. This is not so surprising though, as USDT is a popular base-pair on Binance - but this is way different than saying that Bitcoin rests on USDT. There are other stablecoins on Binance, and if trouble or further doubts of confidence comes to Tether, liquidity will migrate fast. Indeed, it already is, gradually. If we look at more exchanges (here 31 in total): BTC: 7.6 BUSD USDT: 9.6 BUSD In either way, claiming that Binance or even the sum of all exchanges represent the whole bitcoin economy is ludicruous. Consider that USDT is almost only used for off-chain trading on exchanges, where Bitcoin is transacted in a lot of other ways. OTC transactions (even those run by exchanges, like Coinbase) are not included here, for example. Neither are payments, on-chain transactions, or L2. Some will argue (I don't) that derivatives markets like BitMEX (margined/settled in BTC) and CME (margined/settled in USD) are reasonable to include as well, which are huge in BTC and again negligible in USDT. As for sources - any serious exchange provide APIs for trades, and there are vendors that aggregate them. Coindesk and Coinlib acquire APIs and data from such vendors, who base them on the self-reporting of exchanges. --- I don't think there's any published recent study that looks at this properly. It takes effort or money to get the proper data, knowledge to model it, and time to compile it. Most of the people I know with the means are having their hands full with other stuff right now ;)

by graeme 6y ago

matheusmoreira 6y ago

> bitcoin’s price rise has followed increases in Tether tokens I understand this as price manipulation by Tether, not as evidence that BTC is backed by it. > currently the bitcoin market accepts USDT as equal to USD, despite evidence USDT is not backed Yeah, it's unfortunate. I don't understand why people won't use BUSD instead. > If there was doubt about the peg you’d see a run. Probably. In my opinion, people should exchange USDT for BUSD while it still has value. That way everyone will continue trading normally when all the controversy catches up to Tether.

graeme 6y ago
> Probably. In my opinion, people should exchange USDT for BUSD while it still has value. That way everyone will continue trading normally when all the controversy catches up to Tether. This is sound advice for the individual but it doesn’t work for the market as a whole. I’m arguing Tether is a sham. When too many people try to get out of a sham, it collapses. Currently, 2/3rd of people who try to sell their BTC find USDT buyers. If Tether is revealed as a fraud suddenly the sell side will outweigh the buy side.
- dbancajas 6y ago
  > ndependently verify at specific points in time that the entire supply of Paxos Standard tokens is consistent with USD in reserve accounts at U.S. banks held and managed by Paxos. Where are all the people holding all the USDT? It seems nobody is complaining. I'm bearish on BTC price right now but can't help thinking someone should have already cracked the USDT wide open. Eventually someone (few brokers) will be left holding USDT with no buyers. I can't believe brokers are allowing people to cash out w/o guarantee the stable coins they redeem can are not cashable somewhere.
  - graeme 6y ago
    Excellent question, why haven’t tether holders lost confidence? Part of the answer I think is that you can lock up Tether at 12+% interest. So the system encourages withdrawing tethers from the system, at unsustainable savings rates. https://bitcompare.net/coins/tether/savings-interest-rates https://bitcompare.net/coins/tether/savings-interest-rates The other part is that it is not easy to directly trade USDT for USD. Kraken is the only place you can do so directly, it is the only place the peg is directly tested. Apart from that to get USD you need to trade to something else, like BTC or ETH, and then sell that for dollars. The only people likely to have held USDT are also likely to be long crypto, so not surprising they wouldn’t cash out. The better question is who are selling their BTC/ETH for Tether, and what do they do with the money after? Surely the locked in savings are part of the answer: interest rates on stablecoins are much higher than on BTC/ETH. But I don’t think it is the whole answer. Presumably enough people don’t question the peg that it can stay afloat for now.
    - cfcosta 6y ago
      >The other part is that it is not easy to directly trade USDT for USD. Kraken is the only place you can do so directly, it is the only place the peg is directly tested. Apart from that to get USD you need to trade to something else, like BTC or ETH, and then sell that for dollars. What do you mean? I trade USDC and USDT from and to Fiat using Binance, and it's a breeze. I get the funds directly on my bank account in 5 minutes or so, and I imagine the same happens on Kraken, coinbase pro, gemini/blockfi.
      - graeme 6y ago
        Interesting I was under the impression you couldn’t. Does Binance have a USDT/USD trading pair? If not, what are the mechanics of trading from USDT to fiat?
        cfcosta 6y ago
        Hey, I didn't see your reply, sorry! But yes, Binance does have a USDT/USD trading pair. Then you just withdraw to your bank account (the mechanics of this vary by country).

3np 6y ago

> About 70% of transactions are in USDT Source? Because this is very far from any data I have.

graeme 6y ago
What data sources have you got? You can see here Tether’s 24 hour volume actually surpasses bitcoin. It’s used in ETH trading and elsewhere which is why its volume is larger. https://www.coindesk.com/price/tether https://www.coindesk.com/price/tether https://www.coindesk.com/price/bitcoin https://www.coindesk.com/price/bitcoin For the 70% figure I’d have to dig a bit to fully check current volume. It’s been widely repeated in articles, they use data which check flows through exchanges. Binance may have a bit less USDT than before? https://coinlib.io/exchange/binance https://coinlib.io/exchange/binance https://coinlib.io/exchange/bit-z https://coinlib.io/exchange/bit-z https://coinlib.io/exchange/hitbtc https://coinlib.io/exchange/hitbtc
- 3np 6y ago
  You're talking about spot trading volume on centralized exchanges, which is a completely different metric than "transactions" (regardless of if you want to interpret that as on-chain or not). Separately, Binance is a lot of bot-trading, and, outside of BN, USDT-heavy exchanges have questionable volume figures (wash trading and fake trades). USDT usage has indeed gone down in favor of other stable coins, and while Binance is huge among exchanges, it's just one fraction of the BTC economy.
  - graeme 6y ago
    Could you elaborate on your methods or sources for determining actual volume of transactions?
    - 3np 6y ago
      As I mentioned, I think it's too ambiguous to talk about "transactions" if we want to compare something measurable - if you want to restrict yourself to on-chain transaction numbers or volume, you'd have to just look at the on-chain activity - I am just assuming BTC is dwarfing USDT here, but that's just a small part of the story. On-chain activity is also meaningless for what I guess you're after, since there's no reliable way to separate self-transfers from other transactions. If we go by what your sources allude to - trades on centralized exchanges - it'd be a matter of summing up the trading volume for each par involving either asset on any side. Let's first look at Binance for the past 24h. I get: BTC: 1.9 BUSD USDT: 3.8 BUSD Not so far off from the 70/30 number. This is not so surprising though, as USDT is a popular base-pair on Binance - but this is way different than saying that Bitcoin rests on USDT. There are other stablecoins on Binance, and if trouble or further doubts of confidence comes to Tether, liquidity will migrate fast. Indeed, it already is, gradually. If we look at more exchanges (here 31 in total): BTC: 7.6 BUSD USDT: 9.6 BUSD In either way, claiming that Binance or even the sum of all exchanges represent the whole bitcoin economy is ludicruous. Consider that USDT is almost only used for off-chain trading on exchanges, where Bitcoin is transacted in a lot of other ways. OTC transactions (even those run by exchanges, like Coinbase) are not included here, for example. Neither are payments, on-chain transactions, or L2. Some will argue (I don't) that derivatives markets like BitMEX (margined/settled in BTC) and CME (margined/settled in USD) are reasonable to include as well, which are huge in BTC and again negligible in USDT. As for sources - any serious exchange provide APIs for trades, and there are vendors that aggregate them. Coindesk and Coinlib acquire APIs and data from such vendors, who base them on the self-reporting of exchanges. --- I don't think there's any published recent study that looks at this properly. It takes effort or money to get the proper data, knowledge to model it, and time to compile it. Most of the people I know with the means are having their hands full with other stuff right now ;)