11 ms·

The Tether Ponzi Scheme

261 points by enraged_camel 5y ago

dheera 5y ago
> tether likely never had a dollar in a bank account for each USDT, at any point, ever Why does this really matter? As a user of USDT the only thing that matters is that the people in the market amicably agree to trade it at around 1 USD, which they seem to be doing. Being "backed" by something is a concept of a bygone century that doesn't really apply to the Gen Z economy. What is USD backed by anyway?
- fedreserved 5y ago
  My dad's favorite saying is what you think and what you thought are 2 different things
- samfisher83 5y ago
  By an army
- karatinversion 5y ago
  It doesn’t matter at all, until it’s the only thing that matters.
  - dheera 5y ago
    You could say that about any fiat.
    - insert_coin 5y ago
      It is said about all fiats, of which tether is one. And the confidence seems to be at the endpoint.
      - munk-a 5y ago
        I don't know if the confidence actually is at an endpoint, it depends if this article and similar sentiments get widespread acceptance. If people disregard this article as irrelevant because we're all just amicably agreeing that one USDT is still worth one USD then there isn't a problem (today - the potential for a problem doesn't go away). Economics is like 90% whatever people say it is, and if we say this isn't a problem then it isn't - if we say it is that's when people start accepting USDT at fractional values of what USD is and then USDT will quickly hit hyper inflation and become worthless... down to a limit! And that limit is the reserve they have, which is why a 100% guaranteed currency backing for a coin like this is so critical since, if users start refusing to accept coins at 80% of USD value then middle men will step in to happily execute the transaction at full value in a different medium and the only result will be that the consumers that refuse to accept the coin at stated value will lose their ability to compete with consumers that do accept that value due to losses from arbitrage. If confidence is done and the backing isn't there then we can expect to see a quick inflation - if the confidence isn't done or the backing is there then we're safe. But if we're relying on confidence alone then at some point that rug will be pulled from under our feet - and this effect will be accelerated if the company loses confidence dramatically fast (i.e. by being exposed as fraudulent). Also, whenever this happens it's not unlikely that the fuse will be partially lit by some people that are hedging bets against USDT by having, for instance, outstanding options to buy as part of an ongoing non-instantaneous transaction.
- thisisnico 5y ago
  Gen Z economy. What are you talking about? USD has been fiat since the 70’s
  - dheera 5y ago
    Gen Z economy: - Hype IS value. Investors mostly invest in hype. Bring something of scientific or humanitarian value to the table without some fancy story and they 100% won't invest in that. Doesn't matter if it's stock market public investors or crypto investors or private investors, they all go after the hype, time after time, demonstrating with their wallet that hype IS in fact what they value. - Currencies don't operate around scarcity, and their value is not fully correlated with scarcity, their value is more correlated with the intrinsic value they provide as a product, e.g. dApps and NFTs; USD provides none of that - Manipulation is legal, part of the game rules, embrace it. Manipulation and trick shots are legal in table tennis, too, the only rules are physical. - Money itself is a joke, for the most part - We are in the midst of a revolution in which we are exploring new models for financial governance
    - yqe78 5y ago
      Do people really believe this bloviation outside of the cryptocurrency thought bubble? I thought you were trolling until the last bullet. Then I realized you’re serious. Hype is value? (To who?) Money is a joke? Comparing economic security to table tennis? Come on, dude, get real. Those are the exact sentiments that disqualify you from having an opinion on economics worth hearing, not qualify. I’d bet currency you consider worthless that you can’t even discuss the tradeoffs of money and why they were consciously accepted by economists who actually studied their subject and went on to advise and design modern civilizations. Don’t tie these thoughts to a generation as if everyone in the generation expects the outcome you do. I have a hard time believing everyone in Gen Z understands what you’re saying, much less wants what you do. There is no watershed moment for uprooting the world economy that only people of a certain age understand. Revolutions do not happen on Medium. You’re discussing the economy. There are militaries involved. You are interacting with forces far beyond yourself and acting like you have all the answers. Our entire existence is defined by the economy, and rejecting it wholesale is interesting for a blog post but a complete nonstarter for actual reform. Since humans mostly subsist as a product of economies, you realize poor economic reform kills people, right? I’m going to reiterate that last point in clearer terms because it needs to get into that bubble with purpose. Say the world stops being stupid and sees your light. Now you need a phone to eat. Do you think those people you just starved to death are going to go “well, Gen Z economy!” or do you think they’re going to arm themselves and start killing everyone involved? History is a guide here and human subsistence is not something a bit of Go can just fuck with because you say so. Good luck!
- lifty 5y ago
  I don’t have a strong opinion about tether, but it matters who gets to create money in an economy. Ideally, the judges of the money spigot should point it towards productive and beneficial long term endeavors. I also happen to think that the existing financial system is failing to do that. Addition: also the democratic principle should be kept in mind. Sovereign currencies are a resource of their respective people.
  - whimsicalism 5y ago
    > I also happen to think that the existing financial system is failing to do that What are they currently doing wrong, in your view, and what should they be doing better? Lots of fed hate on HN nowadays. I personally think that they are doing a so-much better job than '08 and am happy that academic economists seem to at least be learning a few lessons.
    - lifty 5y ago
      Well it’s clear that small companies have a much harder time obtaining credit, while huge conglomerates don’t have a problem. I also have a feeling that new money has been disproportionally funneled toward the financialized economy, instead of funding research, education or other long term focused work. Perhaps my qualms should not be attributed simply to the monetary side of things (cheap money), but also to the lack of fiscal action.
      - whimsicalism 5y ago
        Huge companies can build up trust and fail less easily, so it makes sense to me that creditors would be more willing to lend to them. If you are small, it is probably easier to get liquid capital by selling ownership stakes. As you've mentioned, I don't think deciding what industries we should focus on/invest in is within the purview of the Fed.
        lifty 5y ago
        Since we’re talking about the collective resource of money shouldn’t we move past the reductive risk based assessment? And I’m not talking about the Fed here, they don’t create money. Banks do, and they do a strictly a risk based calculation. Hence the situation that we are now where most money is chasing other financial products. Btw, I don’t think there’s a simple solution here, and banks aren’t necessarily to blame here. They’re merely reacting to the incentive structure. To solve the problem we need deep structural changes in how we view economics. I’m one of those people that like aspects of both MMT and crypto assets. Addition: since my comment is a bit too light on practical solutions, I think we should have a decentralized way in which local communities can direct money creation towards productive long term projects that help that community. And the same can be done at the federal level for very big projects (rockets, dams, infrastructure etc)
- munk-a 5y ago
  I think it mostly matters because an article like this can be released if they lack actual cash backing that causes people to lose faith in the real value of USDT and then people don't amicably agree to trade it at around 1 USD because it can't actually be converted to that value. This may seem pedantic but that's because economics is pedantic - things can appear to be running fine for a long time but if some basic assumptions are violated the whole thing can topple like a house of cards.
- lvh 5y ago
  You can't think of a reason why it matters that a financial firm was lying about whether or not it had literal billions of dollars when they issue a coupon that allegedly can be redeemed for actual dollars?
- dudus 5y ago
  Maybe because their promise from the start was to be 100% fully backed by cash reserves and to do regular audits. The audits never happened and then they just changed the language in the website without announcement. If it didn't matter then why make the promise in the first place?
- devoutsalsa 5y ago
  A stable coin worth $1 isn’t very stable of it’s not worth $1, is it?
  - dheera 5y ago
    It's worth what people say it's worth, not what it's backed by. And people seem to be saying it's worth $1 from the charts so ... it's worth $1. Elon Musk's "net worth" is 146 billion, is that backed by something? No, TSLA shares are manufactured just like USDT.
    - lvh 5y ago
      Do you believe that shares give you certain rights besides just existing? Like, say, a right to future shares of profits, or voting rights?
      - dheera 5y ago
        Okay, so we implement smart contracts on USDT and we have the same.
    - arp242 5y ago
      Tesla is a company that creates products; that has intrinsic value. Could it all go belly-up? Of course. But the value isn't just invented whole-cloth "just because someone said so".
    - devoutsalsa 5y ago
      How much would you pay for 1 USDT?
- Mizza 5y ago
  That you don't realize that the dollar is backed up by the force of the US military shows how far detached those who live in the imperial core are from those who live near its outskirts.
  - jollybean 5y ago
    It's not backed by the US Army, it's backed by the US Governments ability to pay it's debts, and the integrity of the US economy and financial system. Now that is obviously supported by the US Military. But to state without context 'it's the US Army' is just false. There's a lot of question marks about how Central Banks do money supply, but it's part of governance, their books are public, at least now they are. That Tether can still exist even though it's a proven fraud is at the core of the problem: the new RobinHood Armies (not just them of course) are keeping everything buoyed up. Nikola is a similar thing - they have vapour, and yet are worth billions. A lot of this froth exist in regular stocks as well, across the board, but even in Google, Tesla etc.. It's a problem. A lot of this might go away with slightly higher interest rates. When things get close to 0 then a lot of weird leverage things happen. 2% -> 1% interest is one thing, but 1% -> 0% (or negative) and systems start to go weird.
    - dheera 5y ago
      > it's backed by the US Governments ability to pay it's debts, https://www.worldometers.info/us-debt-clock/ https://www.worldometers.info/us-debt-clock/ I don't see a whole lot of difference between this and USDT honestly.
      - Mizza 5y ago
        The dollar is the reserve currency of most of the world because of the explicit threat of violence. This isn't hyperbole, this is reality. It's simple. You take the loan in dollars, then pay us back in goods, sold at a discount in dollars. If you don't, we sanction and embargo you. You try to break the embargo, we sink your ships. You try to make your own regional currency, we assassinate you. This is why you can afford to purchase expensive goods yet the people who produce them can't. This is the fundamental basis of the modern world. That more people aren't actively aware of this is the powerful result of ideology.
- maxbond 5y ago
  USD is backed by the faith & credit of the United States Government. USG has a 200 year history of paying it's debts. It has the power to tax a massive economy. There are hundreds of millions, if not billions of people, who believe in the creditworthiness of the USG. This is why markets are "amiable" wrt the dollar. Tether is backed by a shady company who's been caught lying numerous times. The claim that 1 USDT is backed by 1 USD is what was meant to establish it as creditworthy. This has been walked back so many times - it's not USD, it's a basket of goods. Those goods might include cryptocurrencies. Those cryptocurrencies might include coins we've minted. Et cetera. It is not reasonable to have faith in their statements. It is not reasonable to consider them creditworthy. You can't keep USDT pegged to $1 if the organization backing it can't be trusted.
  - dheera 5y ago
    > faith & credit of the United States Government Why should I have faith in the government? > USG has a 200 year history of paying it's debts Wait what? https://www.worldometers.info/us-debt-clock/ https://www.worldometers.info/us-debt-clock/
    - maxbond 5y ago
      Should you have faith that your treasury bonds will be paid? I'd say so. I certainly have qualms with my government. But their ability to send out checks is not one of them. Yes, the national debt is rising. Debt is being issued faster than it is being paid. So what? Are coupon payments being missed? Is there any reason to believe that the government will default?
    - lvh 5y ago
      The US debt clock does not say that the US does not pay its debts.
    - yqe78 5y ago
      > Why should I have faith in the government? Because you’re allowed to be this naive on a computer forum on an international network of high-tech computing devices, some of which you own, openly call for economic reforms you don’t understand, and not find yourself up against a wall with seconds to live. That’s why. Your ability to study crypto instead of working a field to feed your family under the watch of rifles, crypto’s entire existence (arguably), the fact that you’re ostensibly literate, the food in your stomach, and countless other secondary concerns that add up to you making this comment right now only happened because you are subject to a government that permitted it and created an existence for you where you can have all of those things. The other side of that wall has guns pointed at it. Note that specifying status quo does not communicate an opinion on it. There are real concerns with every world government. On the other hand, it’s naive young people who assume their comfortable existence is “just the way it is” for everyone universally and their ethnicity and sovereign power has nothing to do with it. You don’t have to trust the government to tell you the truth. You do have to implicitly trust that governments worth paying attention to can, and will, exercise actual power when they consider it necessary and consequently create a free existence where you are allowed to flourish. Those are different things. That’s what “backed by the full faith” means. Not that we trust the government to be honest about who it’s talking to late at night on Snapchat. The world implicitly trusts the Third Fleet. “What has the government done for me?”, you’re essentially asking, on the downstream consequences of a decentralized government command and control network experiment which also happened to feed you your entire economic worldview in a society where limits on education are mostly forgotten, particularly by you.
- sva_ 5y ago
  As someone who understands little about Tether, it seems to me that why it matters is pretty obvious: since Tether can be issued by the authority that controls it arbitrarily, it enables that authority to 'print' the currency at will. This is similar to how governments that control currencies may just generate more of it. Wasn't the thought of Bitcoin to be against this very thing? Didn't the very first block of Bitcoin contain a message condemning the practice of bailing out banks by 'printing' money? It seems that some people with business-smart skills picked up on this and integrated the same principle into cryptocurrencies, and that principle is called Tether. And it appears to completely defeat the point of crypto-currencies. But I might be wrong. I'm just a lay-person in this or whatever. Maybe I'm misunderstanding things.
- rglullis 5y ago
  If I start printing really nice-looking $20 bills, will you accept them? Will your bank? What about the Tax Man?
  - dheera 5y ago
    If the bank and tax man accepts them with full knowledge of what they are, I'll accept them. :) In the case of USDT, everyone accepts them, so why shouldn't I?
    - rglullis 5y ago
      > everyone accepts them You and I have very different ideas of what "everyone" means. USDT is not even accepted by everyone that deals with crypto, even less if you actually start thinking about the financial institutions that are looking into crypto, and the amount of people who would take USDT is infinitesimally small compared to those that would accept greenbacks in a regular transaction. USDT is only accepted at shady exchanges that couldn't find a banking partner and their ignorant/SOL users who were forced or "incentivized" into taking USDT for a premium.
- drcode 5y ago
  It'll matter if there's a bull market, and lots of people try to exchange their tether for Bitcoin/Ethereum en masse, and Bitfinex runs out of money to maintain the $1 peg, because they lack reserves.
- arp242 5y ago
  > Being "backed" by something is a concept of a bygone century that doesn't really apply to the Gen Z economy. If it's so unimportant then why did Tether lie about it? This, on its own, seems like a pretty big red flag to me. The kind of red flag that smashes you in the face.
o_p 5y ago
Pro tip: the deposits in your bank account are not backed by actual money 1-to-1
- taneq 5y ago
  Pro tip: Modern finance is also a Ponzi scheme.
  - ttul 5y ago
    No, it's not a Ponzi scheme. A Ponzi scheme, "is a fraudulent investing scam promising high rates of return with little risk to investors. A Ponzi scheme is a fraudulent investing scam which generates returns for earlier investors with money taken from later investors. This is similar to a pyramid scheme in that both are based on using new investors' funds to pay the earlier backers." (https://www.investopedia.com/terms/p/ponzischeme.asp https://www.investopedia.com/terms/p/ponzischeme.asp) Modern finance is regulated. Schemes that aim to generate a return have to file a prospectus and must be audited and exposed to legal liability should they fail to follow the rules.
- whimsicalism 5y ago
  They are, however, backed by the FDIC.
  - sschueller 5y ago
    Only up to 250k. Any more and you need your own insurance.
    - ARandumGuy 5y ago
      $250k per account, up to 6 accounts. So the FDIC insures up to $1.5 million. If you have more then that, I think you can find other ways to secure your money.
    - toomuchtodo 5y ago
      Anything above FDIC insurance limits and you’re in US Treasuries, backed by the full faith and credit of the US Treasury. They’re one of the safest financial assets in the world. The risk of default is almost, but not quite, zero.
cgb223 5y ago
If I own $100 worth of tether can I exchange them through the official tether organization/company for $100 cash?
- darawk 5y ago
  Yes, you can.
  - deleted 5y ago
    [deleted]
  - forgithubs 5y ago
    Not sure you can really
- mvanaltvorst 5y ago
  Yes. However, if you and the rest of the world want to at the same time, you cannot. This is a known risk, normal banks suffer from the same problem. However, normal banks are strictly regulated, and will receive a bailout to make sure your life savings do not vanish in thin air. Tether does not have such guarantees, so you will have to solely trust Tether foundation to prioritise your money over their profit.
  - qeternity 5y ago
    No, you can’t. And their TOS state they have zero obligation to do so.
  - reedjosh 5y ago
    Although the fractional reserve requirement has been dropped to 0% recently. https://www.eidebailly.com/insights/articles/2020/4/federal-reserve-eliminates-reserve-requirements https://www.eidebailly.com/insights/articles/2020/4/federal-... So there goes that regulation. At least there's FDIC?
  - rglullis 5y ago
    You are not wrong, but you are making a false equivalence between Tether and banks. Banks have fractional reserve because they take their customer funds and reinvest, make loans, etc. So they will never have one dollar in their vaults for every dollar they get deposited from their customers. Tether is not doing any of that, they are just minting ~1.3 USDT for every USD they get deposited. What they are doing is criminal and should never be accepted as "just a known risk".
darawk 5y ago
People keep posting these articles, and Tether keeps not collapsing. You can exchange your Tethers 1:1 for dollars right now, and have been able to this entire time.
- defen 5y ago
  People have been predicting the imminent implosion of Tether Real Soon Now™ for at least 4 years. At what point can we say we are in Q territory?
  - threevox 5y ago
    That's a terrible argument in the financial world. Obviously this would be a Black Swan type of event like the 2009 financial crisis - there wouldn't necessarily be foreboding events or even the ability to predict when this would happen. What we can do is analyze the fundamentals, and that's what this guy is doing
- Afforess 5y ago
  Well, this article is an improvement in that it has a testable prediction. When BTC falls below ~19k, for an extended period, Tether should collapse, according to the article.
  - ugopapa 5y ago
    The article also said that BTC has already dropped into the dead zone just one year ago during the pandemic crash. Tether is still alive and BTC is worth 10 times more. I don't know how reliable of a prediction this could be.
  - darawk 5y ago
    These people were making predictions like this in 2017 when btc was at 20k. It crashed brutally for a long time, and nothing happened to Tether. I see no reason whatsoever to think that this time is different. This article relies on the same specious arguments as all the others. The simple fact of the matter is that you cannot maintain a peg in liquid markets for a ponzi asset for any appreciable period of time. Tether trades in liquid markets on many exchanges, and there is no way to fake that. It is possible that Tether is a ponzi, but if it is, it's at least mostly backed. It's certainly true that the company is shady, and probably doing riskier things with the capital than it should be, but the idea that Tether is a complete ponzi that's been used to inflate the entire market is just demonstrably false.
dane-pgp 5y ago
"The danger zone happens when BTC drops below $18,500". Does that mean the scheme can continue as long as BTC doesn't drop that far?
- quickthrower2 5y ago
  I think the danger zone thing is saying if it drops to $18,500 then at this point the bottom will fall out and it will drop a lot further. If it doesn't drop below $18,500 there could still be danger. Of course danger means it will then drop, well, you know ... below $18,500!
edm0nd 5y ago
USDC and DAI ftw Those gas prices tho :C
treelovinhippie 5y ago
Got to wonder what crypto prices would be at today without Tether's pump scam.
TheAlchemist 5y ago
I too believe it's a massive ponzi scheme. However, I wasn't even aware (not trading crypto at all) that Binance offer 'affiliate' programs where influencers can earn Tethers. It's kind of funny - it works literally like a ponzi scheme - influencers bring in new 'investors' and earn 'tethers' (which are just printed out of thin air) - they can buy crypto with those tethers - and then guess what ? They sell them to the new 'investors' they just brought in. It works until it doesn't.
- deleted 5y ago
  [deleted]
- gruez 5y ago
  Is there a meaningful difference between them paying the influencers in USDT compared to paying them in USD? It doesn't seem hard to convert the USDT to USD at par so I can't see the difference.
  - throayobviousl 5y ago
    >Is there a meaningful difference between them paying the influencers in USDT compared to paying them in USD? Yes. You print USDT and pay someone then lie about not printing it. For the love of god, don't hold any USDT. Its really convenient to exchange cryptos but don't be holding it when the cards fall.
    - gruez 5y ago
      So the following is okay: 1. bitfinex asks some influencer to do some influencer things for them 2. bitfinex hands them a $100 bill but the following isn't fine: 2. bitfinex hands them 100 USDT tokens But hold on, corporations don't often pay people using paper bills, they pay them using ACH, so is the following fine? 2. bitfinex transfers $100 to their bank using ACH Probably fine right, given that there isn't really a difference between getting paid in ACH vs paper bills. But some companies are old fashioned and don't do ACH transfers, they issue checks instead. So is the following fine? 2. bitfinex writes them a check for $100 Well, a check is just an IOU right? It's only a promise to pay them something. If you try to deposit the check and the check bounces it's not like the FDIC will save you. You'll have to chase after them for it. Given that fact, and recognizing that USDT is just an IOU, is there any difference between the above and 2. bitfinex gives them 100 USDT tokens ?
diamondhandle 5y ago
Ultimately Tether is backed by obligations from the participating exchanges to fund the tethers that were generated on their behalf. It is basically a scheme being run on behalf of the large crypto exchanges to enable wash trades (which are illegal in every market EXCEPT crypto because nobody figured out how to regulate crypto properly, as per Gensler’s recent comments). If you want to kill Tether and Bitcoin, you don’t need to go after Tether directly or wait for some price drop. Subpoena all of the exchanges and ask for their commercial relationship with Tether to be documented, and for them to disclose all of their loan obligations, collateral and so on. But, your friendly politicians aren’t going to do that, because Coinbase and Binance and the others have locked up some very high powered lobbyists at this point. That’s where Madoff went wrong... One of the craziest things is actually USDC — an attempt to replace Tether with a cleaned up, legitimate-looking version of the same nonsense.
- lifty 5y ago
  USDC doesn’t have backing either?
  - makomk 5y ago
    USDC isn't backed by actual USD in a bank account somewhere either. (Largely because you can't just stick that much money in a bank account, and it wouldn't actually be close to 100% safe even if you could.)
    - lifty 5y ago
      Don’t they hold things like treasury bills which are practically equivalent to USD?
      - 1001101 5y ago
        Coindesk has a breakdown [1]. Treasury bills make up 2.94% of their cash/cash equivalent balances, which in turn make up 75.85% of their balance sheet. It's mostly in commercial paper. As the Coindesk article points out, it's hard to say what the credit rating or liquidity of the commercial paper is. Compare to the capital ratios of your average bank, though. [1] https://www.coindesk.com/tether-first-reserve-composition-report-usdt https://www.coindesk.com/tether-first-reserve-composition-re...
dragontamer 5y ago
> Disclaimer: I have short positions on the cryptocurrency ecosystem, through MSTR and COIN puts Not a good way to start the article. I think Tether can crash without affecting MSTR or COIN, for example. A short on GBTC might be more obvious connection. But... that's another article for sure. ------------- Otherwise, the news on Tether's sketchy drum has been beaten for almost 5 years now, at least by my own memory. Tether could very easily survive this most recent crash by... whatever mysterious means its survived before. This blogpost adds a $18,000 BTC price as the time they think everything falls apart. An interesting theory. Maybe we'll get there in a few weeks and see if the theory bears any fruit. Its an objective price point for sure, so its an easy one to test if the price shifts lower in the future.
- kemonocode 5y ago
  At least they're disclosing their stake, it's more honest that most people putting out hokum about crypto.
  - dragontamer 5y ago
    Oh yeah. I appreciate them disclosing their stake. I just... don't think their logic is very good in that sentence. But its kind of a tangent and unrelated to the rest of the post. I remember reading some advice from some seasoned traders years (maybe ~decade ago). Knowing the future is overrated. Timing is everything. Even if you knew that Tether was worth $0 as of the year 2025 with a magical crystal ball, if you don't know all the price points between now and then (and therefore are unable to make an appropriate "timing" for placing your bet), you'll lose money. ------- I think a lot of us around here are willing to bet Tether is worthless. But when does everyone else realize it? That's the big question for any bubble. Timing is everything, even when you are correct. In the meantime, Tether will be worth $1 or so, and "be operational". So even a perfectly accurate crystal ball seeing into the future doesn't help you in the now.
    - TheAlchemist 5y ago
      As the saying goes "the market can remain irrational longer than you can remain solvent" !
CalChris 5y ago
All coins are Ponzi schemes. Tether is a coin. Tether is a Ponzi scheme.
drcode 5y ago
I find it rather annoying how the word "ponzi" is being redefined to just mean "shady business". Tether is definitely shady af, but I don't understand the obsession people have for calling anything they don't like (bitcoin/gamestop/nfts/etc) a ponzi.
- robbiep 5y ago
  Well the thesis per the article is that unless more cash keeps piling into tether in order to handle withdrawals then tether could collapse, which is pretty much the practical definition of a ponzi - don’t be the last one without a chair when the music stops
  - tofukid 5y ago
    A Ponzi scheme is an investment fund whereby older investors are paid returns from newer investor principle. Tether does not promise any returns. It’s not an investment. It’s a stable coin. It’s traded near $1 to 1 tether. Most traders don’t redeem tethers. They sell them on an exchange when they need to go back to dollars.
    - robbiep 5y ago
      I’m not saying it is or it isn’t. The thesis of the article is that it is, and the reasoning they provide is consistent with the definition of a ponzi scheme. So it’s consistent and your reasoning is no better than theirs until we have more evidence (ie it fails or it becomes the cornerstone of a long lived vibrant ecosystem)
- bhouston 5y ago
  Bitcoin is a ponzi in the classic sense though. There is no underlying value and the price only goes up if more people buy in. A lot of people see the parallels: https://www.cnbc.com/2021/04/23/bitcoin-a-gimmick-and-resembles-a-ponzi-scheme-black-swan-author-.html https://www.cnbc.com/2021/04/23/bitcoin-a-gimmick-and-resemb...
  - 5y ago
LudwigNagasena 5y ago
This is not what Ponzi scheme means. They lied that every coin is backed by the US dollar, but it is not. That’s all. Does every country that has a pegged currency have 1-to-1 reserves? No, the only difference is that they don’t claim they do, and people don’t base their trust on this false fact.
- threevox 5y ago
  It is a more general form of a Ponzi scheme, where you substitute the nominal positive returns from Madoff's scheme with a theoretical stable price, when in reality both schemes should (if the author of this article is right) offer a significantly negative return
- deleted 5y ago
  [deleted]
anm89 5y ago
It get's really old to see people to continually misunderstand the nature of what a ponzi scheme is. Things can be fraudulent or unethical without being a ponzi scheme. Tether could be called maybe an indirect type of pump and dump on the crypto space. It could easily be called a confidence scheme. It called also involve accounting fraud and securities fraud as well as outright fraud if any of the audits were deemed to have not really happened. None of these make it a ponzi scheme because it fits essentially none of the characteristics of a ponzi scheme
- threevox 5y ago
  Well, the unsustainability of a negative sum game being masked by new investment is basically the most general form of a Ponzi scheme, and that's what this article is arguing Tether is
  - LudwigNagasena 5y ago
    The essence of a Ponzi scheme is claims about above-average profit rate. Holding Tether by its essence can’t provide you more profit than holding cash.
    - jhayward 5y ago
      No. The essence of a Ponzi scheme is that outsized returns are fraudulently produced by using new investment funds to pay for withdrawals rather than being invested or retained. That's pretty much what Tether is alleged or suspected to be doing.
      - LudwigNagasena 5y ago
        Ugh, outsized returns, that’s what I said. What outsized returns do owners of Tether expect? How much money can I expect to earn if I buy Tether instead of stocks or bonds? I expect to earn less.
        graeme 5y ago
kemonocode 5y ago
If you want to know if/when Tether will crash, look at the NYAG settlement and the moment iFinex can no longer fulfill those transparency reports. [0] That'll be your canary in the mine. [0] 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-...
- wmf 5y ago
  If Tether fails to satisfy their agreement the NYAG will hem and haw for two years before taking action. During that time Tether may print, say, $500B more fake money.
optimalsolver 5y ago
Tether will be to Mt. Gox what Little Boy was to a firecracker.
- randomhodler84 5y ago
  Cute but no, the ratios are totally off. Gox was bigger than Coinbase is now relative to the share of trades. Gox traded more BTC in its brief history than any other organization possibly can again for the rest of human history. The whole market cap of Tether is a blip, and there are several liquidity pools on public chains that would sustain their value in a confidence collapse situation.
  - deleted 5y ago
    [deleted]
  - kmonsen 5y ago
    Is this true? According to https://en.wikipedia.org/wiki/Mt._Gox https://en.wikipedia.org/wiki/Mt._Gox at most .5 billion was missing from Gox but from is described here a lot more can be lost from Tether if it goes black hole?
    - kelp 5y ago
      In dollars, almost certainly not. Maybe in number of BTC that traded hands?
      - randomhodler84 5y ago
        Yes. The only yardstick to use. In 50 years the routine theft of billions may not even merit media attention.
elliekelly 5y ago
Tether’s General Counsel is an attorney who specializes in gambling law rather than securities or investment law which should tell you everything you need to know about Tether.
znebby 5y ago
In the recent thread about this topic [1] people mentioned that USDC is also not fully backed by pure cash. Assuming USDC has no funny business like tether seems to, how is this any different than companies like PayPal, which presumably also don't just have a bank account sitting with billions of dollars cash, backing all of their virtual cash? 1. https://news.ycombinator.com/item?id=27151370 https://news.ycombinator.com/item?id=27151370
- danlugo92 5y ago
  Paypal doesn't print I pressume? Only receives fiat deposits.
  - gruez 5y ago
    But there doesn't seem to be much evidence that tether is printing USDT, only a history of them losing people's deposits due to random banking related issues.
    - onlyrealcuzzo 5y ago
      The evidence is that - by their own numbers - they would've needed to buy 1% of all commercial paper in existence in a one month period. It just didn't happen. I will add that the problem is roughly 2x worse. Tether is only ~60% of the stablecoin market: https://coinmarketcap.com/view/stablecoin/ https://coinmarketcap.com/view/stablecoin/
    - davidgerard 5y ago
      Tether are printing USDT, then accounting for the printed USDT on the books as "loans". This is what banks do, but Tether is not a bank.
- thirtyseven 5y ago
  I mean, PayPal is not a bank, and if for some reason they become insolvent, your deposits will be gone too. That being said, I don't keep large deposits in PayPal, and I've never had trouble getting PayPal money directly deposited into my bank account via ACH. Can the same be said for USDT?
aazaa 5y ago
> Note how this is different than buying a company’s stock. People buy and sell stocks on a stock exchange, but the companies independently have money coming in (from their clients). The stock of a profitable company is a positive-sum ecosystem. If somehow no one wants to buy the stock, a profitable company will be happy to buy it back itself. It's almost as if the author has no sense of irony: 1. A crash in most company's stock would lead to utter disaster as interest rates, future fundraising, and executive compensation are all closely tied to the share price. 2. Stock buyback have been enabled by lax policies and a Fed only too happy to bend over backward with QE. 3. Many companies have little to no "money coming in" on a net basis. Tether is a time bomb, there's no other way to put it. But if you're going to raise the alarm there, you might as well be fair about it.
- driverdan 5y ago
  Your point about the traditional financial markets is reasonable but it's not what the author is discussing and they have no obligation to do so.
- lottin 5y ago
  If a company is profitable it means it generates net revenues. The owners of the company have a claim on these revenues. This means if you own the stock of a profitable company you have a claim on all this income. The stock price is the price at which you can sell this claim in the market. The thing is you don't have to sell the stock at a higher price in order to profit from it. That's what makes it different.
flyGuyOnTheSly 5y ago
This trend line would suggest otherwise: https://trends.google.com/trends/explore?q=buy%20usdt,buy%20tether https://trends.google.com/trends/explore?q=buy%20usdt,buy%20... (Virtually every corrupt country in the world is eagerly pouring fiat money into USDT at an accelerating pace)
- Orou 5y ago
  Legitimate question: how useful is Google trends for understanding interest in a subject for other languages, or in regions where Google's presence is limited (e.g. China)? This seems like a really poor data point when also considering that it shows relative rather than absolute interest in a term so we can't compare countries.
unreal37 5y ago
I feel like this Tether "scam" story has been posted to death. The NY AG investigated, and nothing came from it. I guess there's a "where there is smoke there is fire" element, and something could happen. But... where's the beef?
deleted 5y ago
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beforeolives 5y ago
What is one's best course of action if - they believe that tether is shady and aren't interested in owning, using, participating or encouraging its existance and use - they still want to own and use cryptocurrencies - they like the ease of use, low fees and coin offerings on binance compared to the competition ?
- fastball 5y ago
  Just don't use USDT?
- wmf 5y ago
  You're asking for something that is too good to be true.
- webinvest 5y ago
  The main way is to just not use USDT. But here’s a creative way. Step 1) Borrow USDT (tether) somewhere. Step 2) Sell it for either a stablecoin you trust more and/or is trading below $1: Whether that’s USDC, GUSD, BUSD, DAI, PAX, or TUSD. Step 3) Wait a long time for Tether to implode. Step 4) Buy back Tether for 15 cents on the dollar to close your position. Do I recommend you do this? No, not really. It involves taking on debt. I don’t think one tether FUD article is enough material for you to base an investment decision.
- danlugo92 5y ago
  When usdt collapses. Btc will also collapse to a real price. you buy btc then but dont expect crazy gains. It will go up as fast as its adopted, but the newly found price stability will bring in wider adoption
andrewla 5y ago
To summarise, Tether is bad. Tether, like all the other attempts to create shadow banks, risks becoming systemically important while not being capable of maintaining their dollar peg if there is a large demand for liquidity. What Tether is not: - A Ponzi Scheme. Tether makes no guarantees on returns for investors. If you have $1 worth of tether it will never be worth more or less. This is as opposed to a Ponzi scheme where your $1 increases in value (on paper) but those returns do not represent an actual increase in value, but just a gamble that enough people won't try to withdraw their money. - A scheme to pump up the price of cryptocurrencies by creating unbacked tether from thin air and using that to buy cryptocurrencies. The balance sheet summary published shows that they have reserves equal to the amount issued, with varying amounts of liquidity. In addition, this was the conclusion reached by the NYAG. Note that "absence of evidence is not evidence of absence", this could still be the case but there is no credible evidence of this. - Backed entirely by bank deposits or by bags full of dollar bills. They are instead using a number of debt instruments of varying degrees of liquidity. Although this is contrary to their initial claims, it is not dissimilar from any organization purporting to hold "cash", like corporations, etc. And realistically at the scale they are at there is no realistic way to hold that amount of money in the traditional banking system. Tether is still bad! Read up on Rohan Grey's critiques of stablecoins from a systemic risk perspective; he's a very clear thinker in this space with a vast knowledge of historical antecedents for exactly this kind of thing. It's just not bad for the reasons that people think it's bad.
- idiotsecant 5y ago
  >they have reserves equal to the amount issued This is very misleading. They are backed by the very assets they buy using the tether they create! It's a perpetual motion machine, not reserves.
- qeternity 5y ago
  > It's just not bad for the reasons that people think it's bad. Yes, it is. You’ve glossed over some very important issues and dismissed them. If I told you I grew wings and could fly, you don’t need evidence that it’s not true. There is enough information about other rules of the universe to suggest that probability of this is zero. The same is true for Tether. An insignificant offshore bank has not suddenly become the beneficial owner of 3% of one of the most important markets in the largest financial sector in the world. And they certainly haven’t accumulated 1% in a matter of weeks as they would purport. This would cause monumental moves in systemically important markets (the GFC catalyst was commercial paper markets locking up…)
FireBeyond 5y ago
Who could forget this gem of an interview with the Deltec Bank Deputy CEO? https://www.reddit.com/r/Buttcoin/comments/l5m2my/gregory_pepin_previously_deputy_ceo_of_deltec/ https://www.reddit.com/r/Buttcoin/comments/l5m2my/gregory_pe... > "Every tether is backed by a reserve and their reserve is more than what is in circulation," said Gregory Pepin, Deltec Bank's deputy CEO. What business does the bank have in auditing Tethers? Why would they care? They're just holding funds. > “We can see it firsthand, so I can confirm that.” That to me more reads like Deltec is heavily involved in the actual day-to-day operations at Bitfinex/Tether. Which wouldn't be surprising - after all, remember when Bitfinex and Tether were claimed to be entirely separate and independent entities. It's a little bit of a stretch to say that Bitfinex has been able to get Deltec on board with keeping this all going by providing a "partnership" above and beyond the usual "banking relationship", but that's very much the vibe I get from all this, and as I said, to me, it just increases the sketchiness of everything. Oh, and WTF, I watched the video of the interview with the "Deputy CEO" of Deltec Bank, self-described as a "50-year-old bank [whose] customers range from asset managers to high-net-worth individuals" It's a damn "kid" who looks to be 30 (edit: 33) at most, sitting in his gamer seat with red slashes in the black, wearing a Razer gaming headset. He has almost no photos on the internet, his LinkedIn profile is full of multiple spelling errors ("Independance Weath Management"), who claims to be a Professor of Finance at a University in Lebanon (a year after graduating from a Lausanne University) while working for numerous Swiss funds, oh and in Jacksonville, Florida, simultaneously. How the hell are people taking this seriously?!? And according to his profile he apparently graduated with a Masters in Science from HEC Lausanne (prestigious Swiss university) when he was FIFTEEN. I'm sorry, I'm crying now with laughter. Funnily enough, Deltec bank removed him from their website when this interview was published, then re-added them when people asked questions, and then arranged a very quick website complete "redesign" (I use that word lightly - this looks like a WordPress template that they've struggled to fill with any content whatsoever - most of the pages are effectively empty, many of the buttons to "learn more" are not linked to anywhere). Oh, and in among the re-design, the bank went from 55 years old to 70 years old in the space of six months... Sources: - https://wallmine.com/nasdaq/tenx/officer/2087842/gregory-pepin https://wallmine.com/nasdaq/tenx/officer/2087842/gregory-pep... - https://www.linkedin.com/public-profile/in/gregory-pepin-0a8 https://www.linkedin.com/public-profile/in/gregory-pepin-0a8...
Androider 5y ago
TLDR: ~ 7% of Tether is in risk-free, short-term, liquid assets. The other 93% may very well be dog shit wrapped in cat shit. Some additional good reading https://www.mymoneyblog.com/tether-stablecoin-risk.html https://www.mymoneyblog.com/tether-stablecoin-risk.html
young_unixer 5y ago
Can someone recommend an alternative? Binance USD (BUSD)? Other stablecoin? Anyway, Bitcoin is not going to drop to 18k anytime within the next 8 months, so funds are safe for now.
- fastball 5y ago
  USDC is a stablecoin by Circle which is backed 1:1 by USD, with Circle being based in the US, properly licensed, audited, etc.
  - davidgerard 5y ago
    It's not audited. Circle tries to imply it's audited, but the company supplies only attestations, which are Grant Thornton looking at a snapshot of one day's numbers handed them by Circle.
    - fastball 5y ago
      That's good to know, thank you. I'd be surprised they would be able to hold on to their US and UK licenses with that kind of behavior though.
- gruez 5y ago
  https://www.gemini.com/dollar https://www.gemini.com/dollar Suppposedly it's FDIC insured to $250k per user.
- gruez 5y ago
  https://www.gemini.com/dollar https://www.gemini.com/dollar Supposedly it's FDIC insured to $250k per user.
- webinvest 5y ago
  USDC, GUSD, BUSD, or DAI are the main 4 (in that order). TUSD, PAX, and UST also exist. It depends on what’s offered on your exchange but I think most people trust those first 4. Tether has a big target on it’s back with a lot of other stable-coins vying for it’s position.
Leader2light 5y ago
US government has given up. Everyone will be fucked when the collapse finally comes.
Leader2light 5y ago
US government is asleep at the wheel.
deleted 5y ago
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lvl100 5y ago
Tether is a ponzi just as other shitcoins are ponzi feeding bitcoin and now eth. This is what we learned in 2018. And now you have even more elaborate schemes. Bitcoin by itself cannot survive because you need constant flow of transactions to make it appear “active”. Similar to how people create shell companies across multiple borders to launder or hide money, you can do the same with crypto. Added bonus for crypto is that you can simultaneously pump prices while you’re laundering money.
bronzeage 5y ago
I got a scheme that can actually actively break the peg. All you have to do is continuously buy Tether at exchanges other than bitfinex and then turn around and redeem Tether back for your money. Then turn around and do this again and again with the same money. Every time you caught Tether from an entity that isn't Tether, you reduced the number of Tethers in circulation, and a similar amount of reserves was removed from Tether. Keep going and eventually you managed to remove enough Tethers from circulation that Tether can no longer pay you or anyone else. The only catch is that if Tether are on to you and manage to do the reverse of this scheme (print tethers, resell them to you for you faster than you drain them) then you just lost money on transaction fees. You have to catch them off guard, and hope that you do it quick enough that they find themselves out of money before they realize what you're doing.
xpressvideoz 5y ago
"It would be a zero-sum ecosystem, except for the fact that miners have to pay their bills in dollars" I've also been curious since the inception of Bitcoin. As the power plants don't accept cryptocurrencies, someone should pay the bill in cash, which inevitably means there will always be less money in the market than there needs to be. How does the cryptocurrency supporters explain this structure?
- ghawr 5y ago
  The only explanation I've heard is that once adoption occurs, you'd be able to pay directly. That's a big IF.
danlugo92 5y ago
Why was this moved to the 3rd page?
Black101 5y ago
They print a billion every few days: https://twitter.com/search?q=%22minted%20at%20Tether%20Treasury%22%20%20(from%3Awhale_alert)&src=typed_query&f=live https://twitter.com/search?q=%22minted%20at%20Tether%20Treas...
deleted 5y ago
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tofukid 5y ago
It’s pretty funny that people are so upset at Tether for practicing fractional reserve. What Tether is doing is literally what the entire banking industry did for centuries. The global financial system is just money created out of thin air, redeemable for nothing, yet every week HN has to upvote some screed about Tether being a scam.

261 points by enraged_camel 5y ago

> tether likely never had a dollar in a bank account for each USDT, at any point, ever Why does this really matter? As a user of USDT the only thing that matters is that the people in the market amicably agree to trade it at around 1 USD, which they seem to be doing. Being "backed" by something is a concept of a bygone century that doesn't really apply to the Gen Z economy. What is USD backed by anyway?

fedreserved 5y ago
My dad's favorite saying is what you think and what you thought are 2 different things
samfisher83 5y ago
By an army
karatinversion 5y ago
It doesn’t matter at all, until it’s the only thing that matters.
- dheera 5y ago
  You could say that about any fiat.
  - insert_coin 5y ago
    It is said about all fiats, of which tether is one. And the confidence seems to be at the endpoint.
    - munk-a 5y ago
      I don't know if the confidence actually is at an endpoint, it depends if this article and similar sentiments get widespread acceptance. If people disregard this article as irrelevant because we're all just amicably agreeing that one USDT is still worth one USD then there isn't a problem (today - the potential for a problem doesn't go away). Economics is like 90% whatever people say it is, and if we say this isn't a problem then it isn't - if we say it is that's when people start accepting USDT at fractional values of what USD is and then USDT will quickly hit hyper inflation and become worthless... down to a limit! And that limit is the reserve they have, which is why a 100% guaranteed currency backing for a coin like this is so critical since, if users start refusing to accept coins at 80% of USD value then middle men will step in to happily execute the transaction at full value in a different medium and the only result will be that the consumers that refuse to accept the coin at stated value will lose their ability to compete with consumers that do accept that value due to losses from arbitrage. If confidence is done and the backing isn't there then we can expect to see a quick inflation - if the confidence isn't done or the backing is there then we're safe. But if we're relying on confidence alone then at some point that rug will be pulled from under our feet - and this effect will be accelerated if the company loses confidence dramatically fast (i.e. by being exposed as fraudulent). Also, whenever this happens it's not unlikely that the fuse will be partially lit by some people that are hedging bets against USDT by having, for instance, outstanding options to buy as part of an ongoing non-instantaneous transaction.
thisisnico 5y ago
Gen Z economy. What are you talking about? USD has been fiat since the 70’s
- dheera 5y ago
  Gen Z economy: - Hype IS value. Investors mostly invest in hype. Bring something of scientific or humanitarian value to the table without some fancy story and they 100% won't invest in that. Doesn't matter if it's stock market public investors or crypto investors or private investors, they all go after the hype, time after time, demonstrating with their wallet that hype IS in fact what they value. - Currencies don't operate around scarcity, and their value is not fully correlated with scarcity, their value is more correlated with the intrinsic value they provide as a product, e.g. dApps and NFTs; USD provides none of that - Manipulation is legal, part of the game rules, embrace it. Manipulation and trick shots are legal in table tennis, too, the only rules are physical. - Money itself is a joke, for the most part - We are in the midst of a revolution in which we are exploring new models for financial governance
  - yqe78 5y ago
    Do people really believe this bloviation outside of the cryptocurrency thought bubble? I thought you were trolling until the last bullet. Then I realized you’re serious. Hype is value? (To who?) Money is a joke? Comparing economic security to table tennis? Come on, dude, get real. Those are the exact sentiments that disqualify you from having an opinion on economics worth hearing, not qualify. I’d bet currency you consider worthless that you can’t even discuss the tradeoffs of money and why they were consciously accepted by economists who actually studied their subject and went on to advise and design modern civilizations. Don’t tie these thoughts to a generation as if everyone in the generation expects the outcome you do. I have a hard time believing everyone in Gen Z understands what you’re saying, much less wants what you do. There is no watershed moment for uprooting the world economy that only people of a certain age understand. Revolutions do not happen on Medium. You’re discussing the economy. There are militaries involved. You are interacting with forces far beyond yourself and acting like you have all the answers. Our entire existence is defined by the economy, and rejecting it wholesale is interesting for a blog post but a complete nonstarter for actual reform. Since humans mostly subsist as a product of economies, you realize poor economic reform kills people, right? I’m going to reiterate that last point in clearer terms because it needs to get into that bubble with purpose. Say the world stops being stupid and sees your light. Now you need a phone to eat. Do you think those people you just starved to death are going to go “well, Gen Z economy!” or do you think they’re going to arm themselves and start killing everyone involved? History is a guide here and human subsistence is not something a bit of Go can just fuck with because you say so. Good luck!
lifty 5y ago
I don’t have a strong opinion about tether, but it matters who gets to create money in an economy. Ideally, the judges of the money spigot should point it towards productive and beneficial long term endeavors. I also happen to think that the existing financial system is failing to do that. Addition: also the democratic principle should be kept in mind. Sovereign currencies are a resource of their respective people.
- whimsicalism 5y ago
  > I also happen to think that the existing financial system is failing to do that What are they currently doing wrong, in your view, and what should they be doing better? Lots of fed hate on HN nowadays. I personally think that they are doing a so-much better job than '08 and am happy that academic economists seem to at least be learning a few lessons.
  - lifty 5y ago
    Well it’s clear that small companies have a much harder time obtaining credit, while huge conglomerates don’t have a problem. I also have a feeling that new money has been disproportionally funneled toward the financialized economy, instead of funding research, education or other long term focused work. Perhaps my qualms should not be attributed simply to the monetary side of things (cheap money), but also to the lack of fiscal action.
    - whimsicalism 5y ago
      Huge companies can build up trust and fail less easily, so it makes sense to me that creditors would be more willing to lend to them. If you are small, it is probably easier to get liquid capital by selling ownership stakes. As you've mentioned, I don't think deciding what industries we should focus on/invest in is within the purview of the Fed.
      - lifty 5y ago
        Since we’re talking about the collective resource of money shouldn’t we move past the reductive risk based assessment? And I’m not talking about the Fed here, they don’t create money. Banks do, and they do a strictly a risk based calculation. Hence the situation that we are now where most money is chasing other financial products. Btw, I don’t think there’s a simple solution here, and banks aren’t necessarily to blame here. They’re merely reacting to the incentive structure. To solve the problem we need deep structural changes in how we view economics. I’m one of those people that like aspects of both MMT and crypto assets. Addition: since my comment is a bit too light on practical solutions, I think we should have a decentralized way in which local communities can direct money creation towards productive long term projects that help that community. And the same can be done at the federal level for very big projects (rockets, dams, infrastructure etc)
munk-a 5y ago
I think it mostly matters because an article like this can be released if they lack actual cash backing that causes people to lose faith in the real value of USDT and then people don't amicably agree to trade it at around 1 USD because it can't actually be converted to that value. This may seem pedantic but that's because economics is pedantic - things can appear to be running fine for a long time but if some basic assumptions are violated the whole thing can topple like a house of cards.
lvh 5y ago
You can't think of a reason why it matters that a financial firm was lying about whether or not it had literal billions of dollars when they issue a coupon that allegedly can be redeemed for actual dollars?
dudus 5y ago
Maybe because their promise from the start was to be 100% fully backed by cash reserves and to do regular audits. The audits never happened and then they just changed the language in the website without announcement. If it didn't matter then why make the promise in the first place?
devoutsalsa 5y ago
A stable coin worth $1 isn’t very stable of it’s not worth $1, is it?
- dheera 5y ago
  It's worth what people say it's worth, not what it's backed by. And people seem to be saying it's worth $1 from the charts so ... it's worth $1. Elon Musk's "net worth" is 146 billion, is that backed by something? No, TSLA shares are manufactured just like USDT.
  - lvh 5y ago
    Do you believe that shares give you certain rights besides just existing? Like, say, a right to future shares of profits, or voting rights?
    - dheera 5y ago
      Okay, so we implement smart contracts on USDT and we have the same.
  - arp242 5y ago
    Tesla is a company that creates products; that has intrinsic value. Could it all go belly-up? Of course. But the value isn't just invented whole-cloth "just because someone said so".
  - devoutsalsa 5y ago
    How much would you pay for 1 USDT?
Mizza 5y ago
That you don't realize that the dollar is backed up by the force of the US military shows how far detached those who live in the imperial core are from those who live near its outskirts.
- jollybean 5y ago
  It's not backed by the US Army, it's backed by the US Governments ability to pay it's debts, and the integrity of the US economy and financial system. Now that is obviously supported by the US Military. But to state without context 'it's the US Army' is just false. There's a lot of question marks about how Central Banks do money supply, but it's part of governance, their books are public, at least now they are. That Tether can still exist even though it's a proven fraud is at the core of the problem: the new RobinHood Armies (not just them of course) are keeping everything buoyed up. Nikola is a similar thing - they have vapour, and yet are worth billions. A lot of this froth exist in regular stocks as well, across the board, but even in Google, Tesla etc.. It's a problem. A lot of this might go away with slightly higher interest rates. When things get close to 0 then a lot of weird leverage things happen. 2% -> 1% interest is one thing, but 1% -> 0% (or negative) and systems start to go weird.
  - dheera 5y ago
    > it's backed by the US Governments ability to pay it's debts, https://www.worldometers.info/us-debt-clock/ https://www.worldometers.info/us-debt-clock/ I don't see a whole lot of difference between this and USDT honestly.
    - Mizza 5y ago
      The dollar is the reserve currency of most of the world because of the explicit threat of violence. This isn't hyperbole, this is reality. It's simple. You take the loan in dollars, then pay us back in goods, sold at a discount in dollars. If you don't, we sanction and embargo you. You try to break the embargo, we sink your ships. You try to make your own regional currency, we assassinate you. This is why you can afford to purchase expensive goods yet the people who produce them can't. This is the fundamental basis of the modern world. That more people aren't actively aware of this is the powerful result of ideology.
maxbond 5y ago
USD is backed by the faith & credit of the United States Government. USG has a 200 year history of paying it's debts. It has the power to tax a massive economy. There are hundreds of millions, if not billions of people, who believe in the creditworthiness of the USG. This is why markets are "amiable" wrt the dollar. Tether is backed by a shady company who's been caught lying numerous times. The claim that 1 USDT is backed by 1 USD is what was meant to establish it as creditworthy. This has been walked back so many times - it's not USD, it's a basket of goods. Those goods might include cryptocurrencies. Those cryptocurrencies might include coins we've minted. Et cetera. It is not reasonable to have faith in their statements. It is not reasonable to consider them creditworthy. You can't keep USDT pegged to $1 if the organization backing it can't be trusted.
- dheera 5y ago
  > faith & credit of the United States Government Why should I have faith in the government? > USG has a 200 year history of paying it's debts Wait what? https://www.worldometers.info/us-debt-clock/ https://www.worldometers.info/us-debt-clock/
  - maxbond 5y ago
    Should you have faith that your treasury bonds will be paid? I'd say so. I certainly have qualms with my government. But their ability to send out checks is not one of them. Yes, the national debt is rising. Debt is being issued faster than it is being paid. So what? Are coupon payments being missed? Is there any reason to believe that the government will default?
  - lvh 5y ago
    The US debt clock does not say that the US does not pay its debts.
  - yqe78 5y ago
    > Why should I have faith in the government? Because you’re allowed to be this naive on a computer forum on an international network of high-tech computing devices, some of which you own, openly call for economic reforms you don’t understand, and not find yourself up against a wall with seconds to live. That’s why. Your ability to study crypto instead of working a field to feed your family under the watch of rifles, crypto’s entire existence (arguably), the fact that you’re ostensibly literate, the food in your stomach, and countless other secondary concerns that add up to you making this comment right now only happened because you are subject to a government that permitted it and created an existence for you where you can have all of those things. The other side of that wall has guns pointed at it. Note that specifying status quo does not communicate an opinion on it. There are real concerns with every world government. On the other hand, it’s naive young people who assume their comfortable existence is “just the way it is” for everyone universally and their ethnicity and sovereign power has nothing to do with it. You don’t have to trust the government to tell you the truth. You do have to implicitly trust that governments worth paying attention to can, and will, exercise actual power when they consider it necessary and consequently create a free existence where you are allowed to flourish. Those are different things. That’s what “backed by the full faith” means. Not that we trust the government to be honest about who it’s talking to late at night on Snapchat. The world implicitly trusts the Third Fleet. “What has the government done for me?”, you’re essentially asking, on the downstream consequences of a decentralized government command and control network experiment which also happened to feed you your entire economic worldview in a society where limits on education are mostly forgotten, particularly by you.
sva_ 5y ago
As someone who understands little about Tether, it seems to me that why it matters is pretty obvious: since Tether can be issued by the authority that controls it arbitrarily, it enables that authority to 'print' the currency at will. This is similar to how governments that control currencies may just generate more of it. Wasn't the thought of Bitcoin to be against this very thing? Didn't the very first block of Bitcoin contain a message condemning the practice of bailing out banks by 'printing' money? It seems that some people with business-smart skills picked up on this and integrated the same principle into cryptocurrencies, and that principle is called Tether. And it appears to completely defeat the point of crypto-currencies. But I might be wrong. I'm just a lay-person in this or whatever. Maybe I'm misunderstanding things.
rglullis 5y ago
If I start printing really nice-looking $20 bills, will you accept them? Will your bank? What about the Tax Man?
- dheera 5y ago
  If the bank and tax man accepts them with full knowledge of what they are, I'll accept them. :) In the case of USDT, everyone accepts them, so why shouldn't I?
  - rglullis 5y ago
    > everyone accepts them You and I have very different ideas of what "everyone" means. USDT is not even accepted by everyone that deals with crypto, even less if you actually start thinking about the financial institutions that are looking into crypto, and the amount of people who would take USDT is infinitesimally small compared to those that would accept greenbacks in a regular transaction. USDT is only accepted at shady exchanges that couldn't find a banking partner and their ignorant/SOL users who were forced or "incentivized" into taking USDT for a premium.
drcode 5y ago
It'll matter if there's a bull market, and lots of people try to exchange their tether for Bitcoin/Ethereum en masse, and Bitfinex runs out of money to maintain the $1 peg, because they lack reserves.
arp242 5y ago
> Being "backed" by something is a concept of a bygone century that doesn't really apply to the Gen Z economy. If it's so unimportant then why did Tether lie about it? This, on its own, seems like a pretty big red flag to me. The kind of red flag that smashes you in the face.

o_p 5y ago

Pro tip: the deposits in your bank account are not backed by actual money 1-to-1

taneq 5y ago
Pro tip: Modern finance is also a Ponzi scheme.
- ttul 5y ago
  No, it's not a Ponzi scheme. A Ponzi scheme, "is a fraudulent investing scam promising high rates of return with little risk to investors. A Ponzi scheme is a fraudulent investing scam which generates returns for earlier investors with money taken from later investors. This is similar to a pyramid scheme in that both are based on using new investors' funds to pay the earlier backers." (https://www.investopedia.com/terms/p/ponzischeme.asp https://www.investopedia.com/terms/p/ponzischeme.asp) Modern finance is regulated. Schemes that aim to generate a return have to file a prospectus and must be audited and exposed to legal liability should they fail to follow the rules.
whimsicalism 5y ago
They are, however, backed by the FDIC.
- sschueller 5y ago
  Only up to 250k. Any more and you need your own insurance.
  - ARandumGuy 5y ago
    $250k per account, up to 6 accounts. So the FDIC insures up to $1.5 million. If you have more then that, I think you can find other ways to secure your money.
  - toomuchtodo 5y ago
    Anything above FDIC insurance limits and you’re in US Treasuries, backed by the full faith and credit of the US Treasury. They’re one of the safest financial assets in the world. The risk of default is almost, but not quite, zero.

cgb223 5y ago

If I own $100 worth of tether can I exchange them through the official tether organization/company for $100 cash?

darawk 5y ago
Yes, you can.
- deleted 5y ago
  [deleted]
- forgithubs 5y ago
  Not sure you can really
mvanaltvorst 5y ago
Yes. However, if you and the rest of the world want to at the same time, you cannot. This is a known risk, normal banks suffer from the same problem. However, normal banks are strictly regulated, and will receive a bailout to make sure your life savings do not vanish in thin air. Tether does not have such guarantees, so you will have to solely trust Tether foundation to prioritise your money over their profit.
- qeternity 5y ago
  No, you can’t. And their TOS state they have zero obligation to do so.
- reedjosh 5y ago
  Although the fractional reserve requirement has been dropped to 0% recently. https://www.eidebailly.com/insights/articles/2020/4/federal-reserve-eliminates-reserve-requirements https://www.eidebailly.com/insights/articles/2020/4/federal-... So there goes that regulation. At least there's FDIC?
- rglullis 5y ago
  You are not wrong, but you are making a false equivalence between Tether and banks. Banks have fractional reserve because they take their customer funds and reinvest, make loans, etc. So they will never have one dollar in their vaults for every dollar they get deposited from their customers. Tether is not doing any of that, they are just minting ~1.3 USDT for every USD they get deposited. What they are doing is criminal and should never be accepted as "just a known risk".

darawk 5y ago

People keep posting these articles, and Tether keeps not collapsing. You can exchange your Tethers 1:1 for dollars right now, and have been able to this entire time.

defen 5y ago
People have been predicting the imminent implosion of Tether Real Soon Now™ for at least 4 years. At what point can we say we are in Q territory?
- threevox 5y ago
  That's a terrible argument in the financial world. Obviously this would be a Black Swan type of event like the 2009 financial crisis - there wouldn't necessarily be foreboding events or even the ability to predict when this would happen. What we can do is analyze the fundamentals, and that's what this guy is doing
Afforess 5y ago
Well, this article is an improvement in that it has a testable prediction. When BTC falls below ~19k, for an extended period, Tether should collapse, according to the article.
- ugopapa 5y ago
  The article also said that BTC has already dropped into the dead zone just one year ago during the pandemic crash. Tether is still alive and BTC is worth 10 times more. I don't know how reliable of a prediction this could be.
- darawk 5y ago
  These people were making predictions like this in 2017 when btc was at 20k. It crashed brutally for a long time, and nothing happened to Tether. I see no reason whatsoever to think that this time is different. This article relies on the same specious arguments as all the others. The simple fact of the matter is that you cannot maintain a peg in liquid markets for a ponzi asset for any appreciable period of time. Tether trades in liquid markets on many exchanges, and there is no way to fake that. It is possible that Tether is a ponzi, but if it is, it's at least mostly backed. It's certainly true that the company is shady, and probably doing riskier things with the capital than it should be, but the idea that Tether is a complete ponzi that's been used to inflate the entire market is just demonstrably false.

dane-pgp 5y ago

"The danger zone happens when BTC drops below $18,500". Does that mean the scheme can continue as long as BTC doesn't drop that far?

quickthrower2 5y ago
I think the danger zone thing is saying if it drops to $18,500 then at this point the bottom will fall out and it will drop a lot further. If it doesn't drop below $18,500 there could still be danger. Of course danger means it will then drop, well, you know ... below $18,500!

edm0nd 5y ago

USDC and DAI ftw Those gas prices tho :C

treelovinhippie 5y ago

Got to wonder what crypto prices would be at today without Tether's pump scam.

TheAlchemist 5y ago

I too believe it's a massive ponzi scheme. However, I wasn't even aware (not trading crypto at all) that Binance offer 'affiliate' programs where influencers can earn Tethers. It's kind of funny - it works literally like a ponzi scheme - influencers bring in new 'investors' and earn 'tethers' (which are just printed out of thin air) - they can buy crypto with those tethers - and then guess what ? They sell them to the new 'investors' they just brought in. It works until it doesn't.

deleted 5y ago
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gruez 5y ago
Is there a meaningful difference between them paying the influencers in USDT compared to paying them in USD? It doesn't seem hard to convert the USDT to USD at par so I can't see the difference.
- throayobviousl 5y ago
  >Is there a meaningful difference between them paying the influencers in USDT compared to paying them in USD? Yes. You print USDT and pay someone then lie about not printing it. For the love of god, don't hold any USDT. Its really convenient to exchange cryptos but don't be holding it when the cards fall.
  - gruez 5y ago
    So the following is okay: 1. bitfinex asks some influencer to do some influencer things for them 2. bitfinex hands them a $100 bill but the following isn't fine: 2. bitfinex hands them 100 USDT tokens But hold on, corporations don't often pay people using paper bills, they pay them using ACH, so is the following fine? 2. bitfinex transfers $100 to their bank using ACH Probably fine right, given that there isn't really a difference between getting paid in ACH vs paper bills. But some companies are old fashioned and don't do ACH transfers, they issue checks instead. So is the following fine? 2. bitfinex writes them a check for $100 Well, a check is just an IOU right? It's only a promise to pay them something. If you try to deposit the check and the check bounces it's not like the FDIC will save you. You'll have to chase after them for it. Given that fact, and recognizing that USDT is just an IOU, is there any difference between the above and 2. bitfinex gives them 100 USDT tokens ?

diamondhandle 5y ago

Ultimately Tether is backed by obligations from the participating exchanges to fund the tethers that were generated on their behalf. It is basically a scheme being run on behalf of the large crypto exchanges to enable wash trades (which are illegal in every market EXCEPT crypto because nobody figured out how to regulate crypto properly, as per Gensler’s recent comments). If you want to kill Tether and Bitcoin, you don’t need to go after Tether directly or wait for some price drop. Subpoena all of the exchanges and ask for their commercial relationship with Tether to be documented, and for them to disclose all of their loan obligations, collateral and so on. But, your friendly politicians aren’t going to do that, because Coinbase and Binance and the others have locked up some very high powered lobbyists at this point. That’s where Madoff went wrong... One of the craziest things is actually USDC — an attempt to replace Tether with a cleaned up, legitimate-looking version of the same nonsense.

lifty 5y ago
USDC doesn’t have backing either?
- makomk 5y ago
  USDC isn't backed by actual USD in a bank account somewhere either. (Largely because you can't just stick that much money in a bank account, and it wouldn't actually be close to 100% safe even if you could.)
  - lifty 5y ago
    Don’t they hold things like treasury bills which are practically equivalent to USD?
    - 1001101 5y ago
      Coindesk has a breakdown [1]. Treasury bills make up 2.94% of their cash/cash equivalent balances, which in turn make up 75.85% of their balance sheet. It's mostly in commercial paper. As the Coindesk article points out, it's hard to say what the credit rating or liquidity of the commercial paper is. Compare to the capital ratios of your average bank, though. [1] https://www.coindesk.com/tether-first-reserve-composition-report-usdt https://www.coindesk.com/tether-first-reserve-composition-re...

dragontamer 5y ago

> Disclaimer: I have short positions on the cryptocurrency ecosystem, through MSTR and COIN puts Not a good way to start the article. I think Tether can crash without affecting MSTR or COIN, for example. A short on GBTC might be more obvious connection. But... that's another article for sure. ------------- Otherwise, the news on Tether's sketchy drum has been beaten for almost 5 years now, at least by my own memory. Tether could very easily survive this most recent crash by... whatever mysterious means its survived before. This blogpost adds a $18,000 BTC price as the time they think everything falls apart. An interesting theory. Maybe we'll get there in a few weeks and see if the theory bears any fruit. Its an objective price point for sure, so its an easy one to test if the price shifts lower in the future.

kemonocode 5y ago
At least they're disclosing their stake, it's more honest that most people putting out hokum about crypto.
- dragontamer 5y ago
  Oh yeah. I appreciate them disclosing their stake. I just... don't think their logic is very good in that sentence. But its kind of a tangent and unrelated to the rest of the post. I remember reading some advice from some seasoned traders years (maybe ~decade ago). Knowing the future is overrated. Timing is everything. Even if you knew that Tether was worth $0 as of the year 2025 with a magical crystal ball, if you don't know all the price points between now and then (and therefore are unable to make an appropriate "timing" for placing your bet), you'll lose money. ------- I think a lot of us around here are willing to bet Tether is worthless. But when does everyone else realize it? That's the big question for any bubble. Timing is everything, even when you are correct. In the meantime, Tether will be worth $1 or so, and "be operational". So even a perfectly accurate crystal ball seeing into the future doesn't help you in the now.
  - TheAlchemist 5y ago
    As the saying goes "the market can remain irrational longer than you can remain solvent" !

CalChris 5y ago

All coins are Ponzi schemes. Tether is a coin. Tether is a Ponzi scheme.

drcode 5y ago

I find it rather annoying how the word "ponzi" is being redefined to just mean "shady business". Tether is definitely shady af, but I don't understand the obsession people have for calling anything they don't like (bitcoin/gamestop/nfts/etc) a ponzi.

robbiep 5y ago
Well the thesis per the article is that unless more cash keeps piling into tether in order to handle withdrawals then tether could collapse, which is pretty much the practical definition of a ponzi - don’t be the last one without a chair when the music stops
- tofukid 5y ago
  A Ponzi scheme is an investment fund whereby older investors are paid returns from newer investor principle. Tether does not promise any returns. It’s not an investment. It’s a stable coin. It’s traded near $1 to 1 tether. Most traders don’t redeem tethers. They sell them on an exchange when they need to go back to dollars.
  - robbiep 5y ago
    I’m not saying it is or it isn’t. The thesis of the article is that it is, and the reasoning they provide is consistent with the definition of a ponzi scheme. So it’s consistent and your reasoning is no better than theirs until we have more evidence (ie it fails or it becomes the cornerstone of a long lived vibrant ecosystem)
bhouston 5y ago
Bitcoin is a ponzi in the classic sense though. There is no underlying value and the price only goes up if more people buy in. A lot of people see the parallels: https://www.cnbc.com/2021/04/23/bitcoin-a-gimmick-and-resembles-a-ponzi-scheme-black-swan-author-.html https://www.cnbc.com/2021/04/23/bitcoin-a-gimmick-and-resemb...
- 5y ago

LudwigNagasena 5y ago

This is not what Ponzi scheme means. They lied that every coin is backed by the US dollar, but it is not. That’s all. Does every country that has a pegged currency have 1-to-1 reserves? No, the only difference is that they don’t claim they do, and people don’t base their trust on this false fact.

threevox 5y ago
It is a more general form of a Ponzi scheme, where you substitute the nominal positive returns from Madoff's scheme with a theoretical stable price, when in reality both schemes should (if the author of this article is right) offer a significantly negative return
deleted 5y ago
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anm89 5y ago

It get's really old to see people to continually misunderstand the nature of what a ponzi scheme is. Things can be fraudulent or unethical without being a ponzi scheme. Tether could be called maybe an indirect type of pump and dump on the crypto space. It could easily be called a confidence scheme. It called also involve accounting fraud and securities fraud as well as outright fraud if any of the audits were deemed to have not really happened. None of these make it a ponzi scheme because it fits essentially none of the characteristics of a ponzi scheme

threevox 5y ago
Well, the unsustainability of a negative sum game being masked by new investment is basically the most general form of a Ponzi scheme, and that's what this article is arguing Tether is
- LudwigNagasena 5y ago
  The essence of a Ponzi scheme is claims about above-average profit rate. Holding Tether by its essence can’t provide you more profit than holding cash.
  - jhayward 5y ago
    No. The essence of a Ponzi scheme is that outsized returns are fraudulently produced by using new investment funds to pay for withdrawals rather than being invested or retained. That's pretty much what Tether is alleged or suspected to be doing.
    - LudwigNagasena 5y ago
      Ugh, outsized returns, that’s what I said. What outsized returns do owners of Tether expect? How much money can I expect to earn if I buy Tether instead of stocks or bonds? I expect to earn less.
      - graeme 5y ago

kemonocode 5y ago

If you want to know if/when Tether will crash, look at the NYAG settlement and the moment iFinex can no longer fulfill those transparency reports. [0] That'll be your canary in the mine. [0] 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-...

wmf 5y ago
If Tether fails to satisfy their agreement the NYAG will hem and haw for two years before taking action. During that time Tether may print, say, $500B more fake money.

optimalsolver 5y ago

Tether will be to Mt. Gox what Little Boy was to a firecracker.

randomhodler84 5y ago
Cute but no, the ratios are totally off. Gox was bigger than Coinbase is now relative to the share of trades. Gox traded more BTC in its brief history than any other organization possibly can again for the rest of human history. The whole market cap of Tether is a blip, and there are several liquidity pools on public chains that would sustain their value in a confidence collapse situation.
- deleted 5y ago
  [deleted]
- kmonsen 5y ago
  Is this true? According to https://en.wikipedia.org/wiki/Mt._Gox https://en.wikipedia.org/wiki/Mt._Gox at most .5 billion was missing from Gox but from is described here a lot more can be lost from Tether if it goes black hole?
  - kelp 5y ago
    In dollars, almost certainly not. Maybe in number of BTC that traded hands?
    - randomhodler84 5y ago
      Yes. The only yardstick to use. In 50 years the routine theft of billions may not even merit media attention.

elliekelly 5y ago

Tether’s General Counsel is an attorney who specializes in gambling law rather than securities or investment law which should tell you everything you need to know about Tether.

znebby 5y ago

In the recent thread about this topic [1] people mentioned that USDC is also not fully backed by pure cash. Assuming USDC has no funny business like tether seems to, how is this any different than companies like PayPal, which presumably also don't just have a bank account sitting with billions of dollars cash, backing all of their virtual cash? 1. https://news.ycombinator.com/item?id=27151370 https://news.ycombinator.com/item?id=27151370

danlugo92 5y ago
Paypal doesn't print I pressume? Only receives fiat deposits.
- gruez 5y ago
  But there doesn't seem to be much evidence that tether is printing USDT, only a history of them losing people's deposits due to random banking related issues.
  - onlyrealcuzzo 5y ago
    The evidence is that - by their own numbers - they would've needed to buy 1% of all commercial paper in existence in a one month period. It just didn't happen. I will add that the problem is roughly 2x worse. Tether is only ~60% of the stablecoin market: https://coinmarketcap.com/view/stablecoin/ https://coinmarketcap.com/view/stablecoin/
  - davidgerard 5y ago
    Tether are printing USDT, then accounting for the printed USDT on the books as "loans". This is what banks do, but Tether is not a bank.
thirtyseven 5y ago
I mean, PayPal is not a bank, and if for some reason they become insolvent, your deposits will be gone too. That being said, I don't keep large deposits in PayPal, and I've never had trouble getting PayPal money directly deposited into my bank account via ACH. Can the same be said for USDT?

aazaa 5y ago

> Note how this is different than buying a company’s stock. People buy and sell stocks on a stock exchange, but the companies independently have money coming in (from their clients). The stock of a profitable company is a positive-sum ecosystem. If somehow no one wants to buy the stock, a profitable company will be happy to buy it back itself. It's almost as if the author has no sense of irony: 1. A crash in most company's stock would lead to utter disaster as interest rates, future fundraising, and executive compensation are all closely tied to the share price. 2. Stock buyback have been enabled by lax policies and a Fed only too happy to bend over backward with QE. 3. Many companies have little to no "money coming in" on a net basis. Tether is a time bomb, there's no other way to put it. But if you're going to raise the alarm there, you might as well be fair about it.

driverdan 5y ago
Your point about the traditional financial markets is reasonable but it's not what the author is discussing and they have no obligation to do so.
lottin 5y ago
If a company is profitable it means it generates net revenues. The owners of the company have a claim on these revenues. This means if you own the stock of a profitable company you have a claim on all this income. The stock price is the price at which you can sell this claim in the market. The thing is you don't have to sell the stock at a higher price in order to profit from it. That's what makes it different.

flyGuyOnTheSly 5y ago

This trend line would suggest otherwise: https://trends.google.com/trends/explore?q=buy%20usdt,buy%20tether https://trends.google.com/trends/explore?q=buy%20usdt,buy%20... (Virtually every corrupt country in the world is eagerly pouring fiat money into USDT at an accelerating pace)

Orou 5y ago
Legitimate question: how useful is Google trends for understanding interest in a subject for other languages, or in regions where Google's presence is limited (e.g. China)? This seems like a really poor data point when also considering that it shows relative rather than absolute interest in a term so we can't compare countries.

unreal37 5y ago

I feel like this Tether "scam" story has been posted to death. The NY AG investigated, and nothing came from it. I guess there's a "where there is smoke there is fire" element, and something could happen. But... where's the beef?

deleted 5y ago

[deleted]

beforeolives 5y ago

What is one's best course of action if - they believe that tether is shady and aren't interested in owning, using, participating or encouraging its existance and use - they still want to own and use cryptocurrencies - they like the ease of use, low fees and coin offerings on binance compared to the competition ?

fastball 5y ago
Just don't use USDT?
wmf 5y ago
You're asking for something that is too good to be true.
webinvest 5y ago
The main way is to just not use USDT. But here’s a creative way. Step 1) Borrow USDT (tether) somewhere. Step 2) Sell it for either a stablecoin you trust more and/or is trading below $1: Whether that’s USDC, GUSD, BUSD, DAI, PAX, or TUSD. Step 3) Wait a long time for Tether to implode. Step 4) Buy back Tether for 15 cents on the dollar to close your position. Do I recommend you do this? No, not really. It involves taking on debt. I don’t think one tether FUD article is enough material for you to base an investment decision.
danlugo92 5y ago
When usdt collapses. Btc will also collapse to a real price. you buy btc then but dont expect crazy gains. It will go up as fast as its adopted, but the newly found price stability will bring in wider adoption

andrewla 5y ago

To summarise, Tether is bad. Tether, like all the other attempts to create shadow banks, risks becoming systemically important while not being capable of maintaining their dollar peg if there is a large demand for liquidity. What Tether is not: - A Ponzi Scheme. Tether makes no guarantees on returns for investors. If you have $1 worth of tether it will never be worth more or less. This is as opposed to a Ponzi scheme where your $1 increases in value (on paper) but those returns do not represent an actual increase in value, but just a gamble that enough people won't try to withdraw their money. - A scheme to pump up the price of cryptocurrencies by creating unbacked tether from thin air and using that to buy cryptocurrencies. The balance sheet summary published shows that they have reserves equal to the amount issued, with varying amounts of liquidity. In addition, this was the conclusion reached by the NYAG. Note that "absence of evidence is not evidence of absence", this could still be the case but there is no credible evidence of this. - Backed entirely by bank deposits or by bags full of dollar bills. They are instead using a number of debt instruments of varying degrees of liquidity. Although this is contrary to their initial claims, it is not dissimilar from any organization purporting to hold "cash", like corporations, etc. And realistically at the scale they are at there is no realistic way to hold that amount of money in the traditional banking system. Tether is still bad! Read up on Rohan Grey's critiques of stablecoins from a systemic risk perspective; he's a very clear thinker in this space with a vast knowledge of historical antecedents for exactly this kind of thing. It's just not bad for the reasons that people think it's bad.

idiotsecant 5y ago
>they have reserves equal to the amount issued This is very misleading. They are backed by the very assets they buy using the tether they create! It's a perpetual motion machine, not reserves.
qeternity 5y ago
> It's just not bad for the reasons that people think it's bad. Yes, it is. You’ve glossed over some very important issues and dismissed them. If I told you I grew wings and could fly, you don’t need evidence that it’s not true. There is enough information about other rules of the universe to suggest that probability of this is zero. The same is true for Tether. An insignificant offshore bank has not suddenly become the beneficial owner of 3% of one of the most important markets in the largest financial sector in the world. And they certainly haven’t accumulated 1% in a matter of weeks as they would purport. This would cause monumental moves in systemically important markets (the GFC catalyst was commercial paper markets locking up…)

FireBeyond 5y ago

Who could forget this gem of an interview with the Deltec Bank Deputy CEO? https://www.reddit.com/r/Buttcoin/comments/l5m2my/gregory_pepin_previously_deputy_ceo_of_deltec/ https://www.reddit.com/r/Buttcoin/comments/l5m2my/gregory_pe... > "Every tether is backed by a reserve and their reserve is more than what is in circulation," said Gregory Pepin, Deltec Bank's deputy CEO. What business does the bank have in auditing Tethers? Why would they care? They're just holding funds. > “We can see it firsthand, so I can confirm that.” That to me more reads like Deltec is heavily involved in the actual day-to-day operations at Bitfinex/Tether. Which wouldn't be surprising - after all, remember when Bitfinex and Tether were claimed to be entirely separate and independent entities. It's a little bit of a stretch to say that Bitfinex has been able to get Deltec on board with keeping this all going by providing a "partnership" above and beyond the usual "banking relationship", but that's very much the vibe I get from all this, and as I said, to me, it just increases the sketchiness of everything. Oh, and WTF, I watched the video of the interview with the "Deputy CEO" of Deltec Bank, self-described as a "50-year-old bank [whose] customers range from asset managers to high-net-worth individuals" It's a damn "kid" who looks to be 30 (edit: 33) at most, sitting in his gamer seat with red slashes in the black, wearing a Razer gaming headset. He has almost no photos on the internet, his LinkedIn profile is full of multiple spelling errors ("Independance Weath Management"), who claims to be a Professor of Finance at a University in Lebanon (a year after graduating from a Lausanne University) while working for numerous Swiss funds, oh and in Jacksonville, Florida, simultaneously. How the hell are people taking this seriously?!? And according to his profile he apparently graduated with a Masters in Science from HEC Lausanne (prestigious Swiss university) when he was FIFTEEN. I'm sorry, I'm crying now with laughter. Funnily enough, Deltec bank removed him from their website when this interview was published, then re-added them when people asked questions, and then arranged a very quick website complete "redesign" (I use that word lightly - this looks like a WordPress template that they've struggled to fill with any content whatsoever - most of the pages are effectively empty, many of the buttons to "learn more" are not linked to anywhere). Oh, and in among the re-design, the bank went from 55 years old to 70 years old in the space of six months... Sources: - https://wallmine.com/nasdaq/tenx/officer/2087842/gregory-pepin https://wallmine.com/nasdaq/tenx/officer/2087842/gregory-pep... - https://www.linkedin.com/public-profile/in/gregory-pepin-0a8 https://www.linkedin.com/public-profile/in/gregory-pepin-0a8...

Androider 5y ago

TLDR: ~ 7% of Tether is in risk-free, short-term, liquid assets. The other 93% may very well be dog shit wrapped in cat shit. Some additional good reading https://www.mymoneyblog.com/tether-stablecoin-risk.html https://www.mymoneyblog.com/tether-stablecoin-risk.html

young_unixer 5y ago

Can someone recommend an alternative? Binance USD (BUSD)? Other stablecoin? Anyway, Bitcoin is not going to drop to 18k anytime within the next 8 months, so funds are safe for now.

fastball 5y ago
USDC is a stablecoin by Circle which is backed 1:1 by USD, with Circle being based in the US, properly licensed, audited, etc.
- davidgerard 5y ago
  It's not audited. Circle tries to imply it's audited, but the company supplies only attestations, which are Grant Thornton looking at a snapshot of one day's numbers handed them by Circle.
  - fastball 5y ago
    That's good to know, thank you. I'd be surprised they would be able to hold on to their US and UK licenses with that kind of behavior though.
gruez 5y ago
https://www.gemini.com/dollar https://www.gemini.com/dollar Suppposedly it's FDIC insured to $250k per user.
gruez 5y ago
https://www.gemini.com/dollar https://www.gemini.com/dollar Supposedly it's FDIC insured to $250k per user.
webinvest 5y ago
USDC, GUSD, BUSD, or DAI are the main 4 (in that order). TUSD, PAX, and UST also exist. It depends on what’s offered on your exchange but I think most people trust those first 4. Tether has a big target on it’s back with a lot of other stable-coins vying for it’s position.

Leader2light 5y ago

US government has given up. Everyone will be fucked when the collapse finally comes.

Leader2light 5y ago

US government is asleep at the wheel.

deleted 5y ago

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lvl100 5y ago

Tether is a ponzi just as other shitcoins are ponzi feeding bitcoin and now eth. This is what we learned in 2018. And now you have even more elaborate schemes. Bitcoin by itself cannot survive because you need constant flow of transactions to make it appear “active”. Similar to how people create shell companies across multiple borders to launder or hide money, you can do the same with crypto. Added bonus for crypto is that you can simultaneously pump prices while you’re laundering money.

bronzeage 5y ago

I got a scheme that can actually actively break the peg. All you have to do is continuously buy Tether at exchanges other than bitfinex and then turn around and redeem Tether back for your money. Then turn around and do this again and again with the same money. Every time you caught Tether from an entity that isn't Tether, you reduced the number of Tethers in circulation, and a similar amount of reserves was removed from Tether. Keep going and eventually you managed to remove enough Tethers from circulation that Tether can no longer pay you or anyone else. The only catch is that if Tether are on to you and manage to do the reverse of this scheme (print tethers, resell them to you for you faster than you drain them) then you just lost money on transaction fees. You have to catch them off guard, and hope that you do it quick enough that they find themselves out of money before they realize what you're doing.

xpressvideoz 5y ago

"It would be a zero-sum ecosystem, except for the fact that miners have to pay their bills in dollars" I've also been curious since the inception of Bitcoin. As the power plants don't accept cryptocurrencies, someone should pay the bill in cash, which inevitably means there will always be less money in the market than there needs to be. How does the cryptocurrency supporters explain this structure?

ghawr 5y ago
The only explanation I've heard is that once adoption occurs, you'd be able to pay directly. That's a big IF.

danlugo92 5y ago

Why was this moved to the 3rd page?

Black101 5y ago

They print a billion every few days: https://twitter.com/search?q=%22minted%20at%20Tether%20Treasury%22%20%20(from%3Awhale_alert)&src=typed_query&f=live https://twitter.com/search?q=%22minted%20at%20Tether%20Treas...

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tofukid 5y ago

It’s pretty funny that people are so upset at Tether for practicing fractional reserve. What Tether is doing is literally what the entire banking industry did for centuries. The global financial system is just money created out of thin air, redeemable for nothing, yet every week HN has to upvote some screed about Tether being a scam.