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Everyone should take some time now to learn about Tether, the high likelihood that it is in fact a Ponzi scheme, and that it poses a big systemic risk to the cr

Everyone should take some time now to learn about Tether, the high likelihood that it is in fact a Ponzi scheme, and that it poses a big systemic risk to the crypto exchanges and therefore the markets themselves [1]. People have been sounding the alarm on Tether for a long time now, but we’re finally getting some hard evidence now to back the allegations [2]. Don’t say you weren’t warned. [1] https://mobile.twitter.com/smdiehl https://mobile.twitter.com/smdiehl [2] https://ag.ny.gov/press-release/2021/attorney-general-james-ends-virtual-currency-trading-platform-bitfinexs-illegal https://ag.ny.gov/press-release/2021/attorney-general-james-...

Clewza313 5y ago
Here's a good, up to date primer: https://www.singlelunch.com/2021/05/19/the-tether-ponzi-scheme/ https://www.singlelunch.com/2021/05/19/the-tether-ponzi-sche...
- briankelly 5y ago
  Yoga instructor selling her house to throw it into bitcoin feels like the '21 spiritual successor of the Las Vegas stripper who owned several condos/houses that became the '08 housing market crash meme. Wild prediction: this BTC crash pops the USDT bubble, cratering crypto in general. TSLA holders (frequently BTC/doge buyers themselves) begin to panic sell, triggering an ARKK bank run. ARKK implosion sparks wide selloff of big tech stocks (essentially their holdings) which depresses the S&P (where tech is the main driver of growth). Everyone is now forced to be conservative; cost to borrow skyrockets; demand chills, and coupled with supply chain disruptions and high commodity and materials costs, some businesses begin to fail. New homeowners who went for broke to buy at the top of their market are immediately underwater, and some of them are now losing their jobs. Fed is now between a rock and a hard place - needs to raise to interest rates but also needs to encourage spending - what to do? Anyway, there is my daily dose of doom-and-gloom, and I have a vague understanding of any of it, so enjoy.
  - rebelos 5y ago
    So what's your portfolio breakdown?
    - briankelly 5y ago
      Pretty much all (90+%) equities. Not a whole lot of alternatives.
Avalaxy 5y ago
As a noob who owns some bitcoin and ethereum (both stored on an exchange), how does tether being a scam (which I do believe in) affect me? I don't hold any tether myself.
- Crye 5y ago
  Tether is used for the purchase of other cryptocurrency (i.e. creates demand). If more Tether has been created then dollars burned, then there has been artificial demand generated for cryptocurrency. Artificial demand, artificial prices. I think sometimes Tether's affect on the market is blown out of proportion, but it could have cooling effect on the trustworthiness of cryptocurrency and then exchanges used to facilitate trades.
- zaptrem 5y ago
  The theory is that the market cap of BTC/Eth/Shitcoins have been pumped by Tether buying power that isn’t actually backed by USD. People think Tether is printing fake money and buying crypto with it. If/when the world realizes this, the market cap of these different assets will return to their (possibly much lower) “real” values. This slide could cause another crash.
- woeirua 5y ago
  It affects you directly because: 1 - many exchanges hold Tether as a reserve and use it extensively for various transactions between the exchanges, which means that if Tether collapses they could have huge holes in their balance sheets. Some exchanges (Binance especially) could become insolvent overnight. No money in, no money out. Read up on Mt. Gox if you want to see what happened the last time an exchange went belly up. 2 - If you believe the worst allegations, then Tether is artificially propping up the value of Bitcoin. In the event of a run on Tether, Tether may be forced to sell thousands of Bitcoins abruptly onto the market to get cash. 3 - The fallout of a true worst case scenario for Tether could lead to crypto being reclassified in order to fall under all the relevant financial regulations that banks and the traditional finance sector are subject to.
  - shakezula 5y ago
Toine 5y ago
All crypto tokens are Ponzi schemes
richyliu 5y ago
Here's the specific thread from smdiehl talking about how tethers are not actually worth $1 as they claim [1]. [1] https://mobile.twitter.com/smdiehl/status/1393669812220465162 https://mobile.twitter.com/smdiehl/status/139366981222046516...
Ekaros 5y ago
Is tether even a Ponzi scheme? My understanding is that returns are 0. And it's "pegged" to dollar, so you can't even make any money by buying it... Ponzi scheme would mean that some investors were getting returns...
- Qub3d 5y ago
  Its a fraud in that the money/gold/intrinsic fiat that is supposed to be backing it has not been credibly proven to exist, at least at a value matching the current amount of USDT in supply. --- Let's say I decide to make NerdBucks. I offer to sell you n NerdBucks for n dollars, 1-to-1, and tell you I will always buy those NerdBucks back at the same price. This is how NerdBucks get "pegged" to a dollar -- if someone will always buy the currency for a given rate, it will then always be worth at least that much. Now, you might say, "Okay, what's from stopping you from selling a billion NerdBucks, and when people try to sell them back to you, you just refuse?" Well, normally nothing (outside of litigation, but that is a rabbit hole I'm not going to talk about here). In theory, though, I could have a bank account that I publish the amount of inside it, to show you I am prepared to buy every single NerdBuck back in a worst-case scenario. --- Going back to Tether: The issuing body of Tether has suggested they are holding reserves of USD equivalent to USDT in circulation. If you look at some of the other articles linked in this thread [0] you can find deep-dives that suggest they are lying, and in fact have been using USDT as a way to print money. They are relying on the hope that more people will buy USDT than come calling to cash in. That is fundamentally the same hope that a Ponzi scheme relies on. [0]:https://medium.com/@bitfinexed/bitfinex-and-tether-is-unauditable-why-they-will-never-do-a-real-audit-3324e002b185 https://medium.com/@bitfinexed/bitfinex-and-tether-is-unaudi...
  - Ekaros 5y ago
    I'm not oppose to calling it fraud or scam. I'm in general just against using Ponzi scheme to describe things that are not systems where previous investors are promised and paid profits with later investors money. BTC is bubble or mania. But not really Ponzi. Tether is even less so, it's carnival token...
    - 5y ago
brundolf 5y ago
I haven't messed with crypto at all myself, but the IT guy at my office was telling me about the whole Tether scam four years ago. I'm amazed it's kept going for this long.

Clewza313 5y ago

Here's a good, up to date primer: https://www.singlelunch.com/2021/05/19/the-tether-ponzi-scheme/ https://www.singlelunch.com/2021/05/19/the-tether-ponzi-sche...

briankelly 5y ago
Yoga instructor selling her house to throw it into bitcoin feels like the '21 spiritual successor of the Las Vegas stripper who owned several condos/houses that became the '08 housing market crash meme. Wild prediction: this BTC crash pops the USDT bubble, cratering crypto in general. TSLA holders (frequently BTC/doge buyers themselves) begin to panic sell, triggering an ARKK bank run. ARKK implosion sparks wide selloff of big tech stocks (essentially their holdings) which depresses the S&P (where tech is the main driver of growth). Everyone is now forced to be conservative; cost to borrow skyrockets; demand chills, and coupled with supply chain disruptions and high commodity and materials costs, some businesses begin to fail. New homeowners who went for broke to buy at the top of their market are immediately underwater, and some of them are now losing their jobs. Fed is now between a rock and a hard place - needs to raise to interest rates but also needs to encourage spending - what to do? Anyway, there is my daily dose of doom-and-gloom, and I have a vague understanding of any of it, so enjoy.
- rebelos 5y ago
  So what's your portfolio breakdown?
  - briankelly 5y ago
    Pretty much all (90+%) equities. Not a whole lot of alternatives.

Avalaxy 5y ago

As a noob who owns some bitcoin and ethereum (both stored on an exchange), how does tether being a scam (which I do believe in) affect me? I don't hold any tether myself.

Crye 5y ago
Tether is used for the purchase of other cryptocurrency (i.e. creates demand). If more Tether has been created then dollars burned, then there has been artificial demand generated for cryptocurrency. Artificial demand, artificial prices. I think sometimes Tether's affect on the market is blown out of proportion, but it could have cooling effect on the trustworthiness of cryptocurrency and then exchanges used to facilitate trades.
zaptrem 5y ago
The theory is that the market cap of BTC/Eth/Shitcoins have been pumped by Tether buying power that isn’t actually backed by USD. People think Tether is printing fake money and buying crypto with it. If/when the world realizes this, the market cap of these different assets will return to their (possibly much lower) “real” values. This slide could cause another crash.
woeirua 5y ago
It affects you directly because: 1 - many exchanges hold Tether as a reserve and use it extensively for various transactions between the exchanges, which means that if Tether collapses they could have huge holes in their balance sheets. Some exchanges (Binance especially) could become insolvent overnight. No money in, no money out. Read up on Mt. Gox if you want to see what happened the last time an exchange went belly up. 2 - If you believe the worst allegations, then Tether is artificially propping up the value of Bitcoin. In the event of a run on Tether, Tether may be forced to sell thousands of Bitcoins abruptly onto the market to get cash. 3 - The fallout of a true worst case scenario for Tether could lead to crypto being reclassified in order to fall under all the relevant financial regulations that banks and the traditional finance sector are subject to.
- shakezula 5y ago

Toine 5y ago

All crypto tokens are Ponzi schemes

richyliu 5y ago

Here's the specific thread from smdiehl talking about how tethers are not actually worth $1 as they claim [1]. [1] https://mobile.twitter.com/smdiehl/status/1393669812220465162 https://mobile.twitter.com/smdiehl/status/139366981222046516...

Ekaros 5y ago

Is tether even a Ponzi scheme? My understanding is that returns are 0. And it's "pegged" to dollar, so you can't even make any money by buying it... Ponzi scheme would mean that some investors were getting returns...

Qub3d 5y ago
Its a fraud in that the money/gold/intrinsic fiat that is supposed to be backing it has not been credibly proven to exist, at least at a value matching the current amount of USDT in supply. --- Let's say I decide to make NerdBucks. I offer to sell you n NerdBucks for n dollars, 1-to-1, and tell you I will always buy those NerdBucks back at the same price. This is how NerdBucks get "pegged" to a dollar -- if someone will always buy the currency for a given rate, it will then always be worth at least that much. Now, you might say, "Okay, what's from stopping you from selling a billion NerdBucks, and when people try to sell them back to you, you just refuse?" Well, normally nothing (outside of litigation, but that is a rabbit hole I'm not going to talk about here). In theory, though, I could have a bank account that I publish the amount of inside it, to show you I am prepared to buy every single NerdBuck back in a worst-case scenario. --- Going back to Tether: The issuing body of Tether has suggested they are holding reserves of USD equivalent to USDT in circulation. If you look at some of the other articles linked in this thread [0] you can find deep-dives that suggest they are lying, and in fact have been using USDT as a way to print money. They are relying on the hope that more people will buy USDT than come calling to cash in. That is fundamentally the same hope that a Ponzi scheme relies on. [0]:https://medium.com/@bitfinexed/bitfinex-and-tether-is-unauditable-why-they-will-never-do-a-real-audit-3324e002b185 https://medium.com/@bitfinexed/bitfinex-and-tether-is-unaudi...
- Ekaros 5y ago
  I'm not oppose to calling it fraud or scam. I'm in general just against using Ponzi scheme to describe things that are not systems where previous investors are promised and paid profits with later investors money. BTC is bubble or mania. But not really Ponzi. Tether is even less so, it's carnival token...
  - 5y ago

brundolf 5y ago

I haven't messed with crypto at all myself, but the IT guy at my office was telling me about the whole Tether scam four years ago. I'm amazed it's kept going for this long.