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Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
- jamesrom 5y agoYou don't need to read any further than the headline to know the interests behind this story.
- tiku 5y agoEveryone is ragging on Tether but Exchanges do have to exchange them for money and they are not getting Tether for free from Tether I guess. So the 4% backed Tether could not really be true if you think about it. Or am I missing something?
- JohnJamesRambo 5y agoLoad the Tether fud. It’s like clockwork every time Bitcoin goes down haha. WSJ does their overlords’ bidding. Now we are comparing it to pre civil war money. They are running out of angles.
- MomoXenosaga 5y agoHonestly that's a good thing. Let the government stay out of this mess. If crypto speculators lose their money I don't want society to have to bail them out like what happened with Icelandic/Cypriot bank account holders.
- shughes 5y agoI always liked the concept behind BitShares, but I never hear much about it. Conceptually, it seems like it targets the third-party concern. Anyway, the idea of BitShares is (was?) to ensure stability of their crypto currency through futures contracts. You buy/sell futures contracts that peg their coin to another asset. This guarantees a certain payout at expiration. For example, you can buy a contract that guarantees you receive (or must pay) the bitshares-equivalent of X USD when the futures contract expires. (You can also have contracts that guarantee the bitshares-equivalent of X ounces of gold, etc.) So the future (smart) contract itself acts like the fungible stablecoin, even though it's not backed by the actual asset. And it doesn't rely on a trusted third-party. Rather, its stability relies on the futures speculator market that trades these futures contracts. Such a concept seems like it doesn't have to be limited to bitshares, but can be generalized into a smart contract traded on blockchains like Ethereum, etc.
- ionwake 5y agoAnyone else diversifying their crypto and a bit unsure about how high all the FAAANG stocks seem to be?
- gher-shyu3i 5y agoSeems there's a lot of resistance to bitcoin because they're afraid of it truly revamping the broken financial system.
- alexnewman 5y agoAll of the things that tether holds as cash are repo-able for cash on the repo market. On tether are people worried about this conversation … Tether: we go back so long jp, here’s some more junk bonds . You like this collateral JPMorgan: we are not interested in taking it anymore . Liquid on the run or mbs. We may be friends but we are friendly in the federal funds market, not repo . Post collateral or I’ll Kill your operation and shut you out of repo. Tether: but fed put! ‘’’ Cause I don’t think it ever happens
- ahthat 5y agoI wrote about a similar comparison way back in the middle of 2017: https://benshieldsblog-blog.tumblr.com/post/165101127465/letter-to-made-in-lynnwood-blockchain https://benshieldsblog-blog.tumblr.com/post/165101127465/let... https://drive.google.com/file/d/0B9li-Wu3-bPEWEswQVdIOHVKTmM/view https://drive.google.com/file/d/0B9li-Wu3-bPEWEswQVdIOHVKTmM...
- lurkerasdfh8 5y agohonestly, anyone with half a brain do not see that cryptocurrencies are re-hashing (heh) every single scam from the unregulated investment market times? every single one of them. Many times over. I think everyone knows, because, c'mon. But everyone thinks they are the smarter one and will be the ones fooling others and making money. Which makes this article, and yours, pointless, because, everyone already knows that.
- ve55 5y agoI think you're significantly overestimating how much experience and knowledge most that briefly dabble in currency have both over what is currently going on and over what types of finance scams have happened in the past.
- knowaveragejoe 5y agoI've heard "it's a scam" a lot recently, but nobody can articulate how in a way that is similar to any real, provable scam in the past. It's a giant, distributed scam?
- daenz 5y agoI think its based on a fundamental idea of buying something that you know is worthless in order to sell it for more than you bought it by convincing the buyer that it isn't worthless. Eventually it will burn through all potential buyers and there will be no one left to sell to. Then it collapses because everyone finally agrees that it actually has no value.
- Havoc 5y agoHonestly stablecoins - specifically tether - is about the only thing about crypto that genuinely frightens me. Crypto rollercoaster - up down sideways and in circles - sure I'm game. Tether that is stable until it implodes...hell no. Even without direct exposure the blast radius worries me.
- tluyben2 5y agoI find it weird that any person 'hodls' any crypto. I pick the rallies (like the one last night) and ride them, then sell. I cannot, besides stress, understand why anyone would hold crypto currencies at this point. It is too young and Wild West. That's why riding waves is easy and if you trade half decent you can make fortunes. But it can be gone tomorrow; for instance if Tether gets called on it's bluff.
- jamesrom 5y agoI find it weird that people can't see how that attitude is exactly why it's a rollercoaster...
- tluyben2 5y agoYep, but I am not holding the burning bag of poo. So yes I know that but I am not going to be that religious person that does that first and I do not get why anyone would.
- tiku 5y agoYou HODL until you can get a good enough number to stop HODLing.
- randomhodler84 5y agoYou have not been playing long enough if this is your attitude. “Zoom out” is generally the quote on this.
- bordercases 5y ago
- greyface- 5y agohttps://archive.is/Cd9xD https://archive.is/Cd9xD
- Animats 5y agoI keep thinking of Madoff's fund. It was once called "the Jewish T-bill". It worked just fine until there was a significant net outflow. Then, total crash, because the backing assets were not there. Tether is way too much like that. Remember, Tether has no upside. There is no reason to ever hold Tether for any length of time. [1] https://www.timesofisrael.com/before-dying-bernie-madoff-lifted-veil-on-the-biggest-ponzi-scheme-in-history/ https://www.timesofisrael.com/before-dying-bernie-madoff-lif...
- pinkybanana 5y ago> Remember, Tether has no upside. There is no reason to ever hold Tether for any length of time. "There is this product/service X, that is bought and traded fro billions. I don't see any use cases myself so clearly there isn't any reason to use it. Market is wrong and I am right."
- ac29 5y agoThe point is that the maximum value of 1 Tether is 1 USD. No matter how long you hold it, it will not be worth more than a dollar held in a safe, insured bank account.
- R0b0t1 5y agoI've been following cryptocurrencies since their inception. No one who knows anything is investing in or holding fiat based currencies. It may make some people some money, but it is assuredly not going to make you any money, and will probably make you lose money.
- canacrypto 5y agoThe title is misleading. Bitcoin isn't reliant on Stablecoins. DeFi, is but DeFi !== Bitcoin...
- latchkey 5y agostablecoins enable the ability to exit bitcoin at any time without having to take risk on another equally volatile coin.
- yokem55 5y agoWhile tether gets piped around ethereum between centralized exchanges, few on chain defi applications actually use tether outside of a few stable coin focused swapping apps. Most of the lending and borrowing apps prefer USDC or Dai.
- latchkey 5y agoDeFi now has a plethora of 'stablecoins' thanks to innovation of algo-stables.
- initplus 5y agoTether as an organization operates with no transparency, and has a toxic symbiotic relationship with exchanges. I'm certain that Tether has backroom relationships with major exchanges - Tether provides liquidity to exchanges in the form of short term USDT loans. So Tether can claim their issues are backed by real reserves https://tether.to/wp-content/uploads/2021/05/tether-march-31-2021-reserves-breakdown.pdf https://tether.to/wp-content/uploads/2021/05/tether-march-31..., omitting the convenient fact that much of the debt they own is itself denominated in USDT. Tether uses this scheme to issue loans and collect interest without the pesky step of actually having cash reserves to loan out.
- gruez 5y ago>I'm certain that Tether has backroom relationships with major exchanges - Tether provides liquidity to exchanges in the form of short term USDT loans. Is there a reason why exchanges even need such loans?
- deleted 5y ago[deleted]
- shkkmo 5y agoA lot of shadier exchanges are giving away USDT to encourage people to move their other cryptocurrency holdings onto the exchange.
- gruez 5y agoCan you link to some? Most of them are pretty modest, eg. create an account, make $500 worth of trades and we'll give you $50 in USDT. You certainly don't need to move all of your holdings over to take advantage. Moreover, I don't see how account opening bonuses are shady. It might be cheaper for them if they can get hold of USDT for cheaper than its face value, but if that were the case I don't see why they don't go with the more straightforward route of directly selling USDT for USD (eg. https://trade.kraken.com/charts/KRAKEN:USDT-USD https://trade.kraken.com/charts/KRAKEN:USDT-USD).
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- issa 5y agoI think the most important thing to keep in mind is that EVERYONE knows Tether is a complete farce and this is already priced into the market.
- wmf 5y agoDoes that imply that "the market" would rise if Tether was eliminated? Why not do it?
- fastball 5y agoWell it would rise proportionally to the value of Tether eliminated, for no net gain, but at the cost liquidity across various exchanges, for a net loss.
- redisman 5y agoPriced in how and to what? Definitely not to tether
- issa 5y agoOne of the more common "bitcoin implosion scenarios" keeping people up at night has been Tether collapsing. Certainly that must be priced into crypto by now. The accusations and suspicions that it is not backed by hard currency have been around for years.
- 55555 5y agoTether trades at $1. How is your statement true?
- issa 5y agoI mean priced into the crypto market writ large.
- Geee 5y agoIt isn't really different from normal banking. Banks are allowed to create money by issuing debt, and the loan agreement itself works as the reserve for the issued currency. In both cases the thing doesn't blow up if the debt is collateralized with something that keeps appreciating against inflation. It can go on forever, but people whose savings are decimated might get angry at some point.
- kevingadd 5y agoNormal banking is heavily regulated to a degree that does not apply here, that's why it's different. (Perhaps not heavily enough)
- firekvz 5y agoFor those trying to say that USDC is 'clear' and backed, remember that an attestation is not the same as an audit, circle has not provided any audit and same as tether, won't even mention an audit. I choose to believe that what circle and coinbase are doing is creatinng a lot of liquidity by taking coinbase cash and turning it into USDC but at some point a lot of those USDC are being made the same way as tether, is just not real money comming into the ecosystem from either retail or institutions, but just imaginary money that is traded back and forth by coinbase bots to keep the price moving on their exchange
- superkuh 5y agoBitcoin's reliance on Stablecoins? I think the wsj is confused and has this backwards. Additionally, like all mainstream media sources, they cannot seem to understand that Bitcoin is what happens on the blockchain and that 99% of the breathless hype about trading and finance bro stuff is completely off chain and only tangentially related to Bitcoin.
- davidgerard 5y ago> Bitcoin is what happens on the blockchain If this was true, nobody would be talking about bitcoin. Here in the real world, bitcoin is the whole system of people, institutions, and the actual money that every aspect of bitcoin is denominated in.
- mustafa_pasi 5y agoIn practice people care about what happens off chain as long as it affects the exchange value. And the article is talking about the alleged Tether manipulation of Bitcoin's exchange value.
- bdcravens 5y ago> they cannot seem to understand that Bitcoin is what happens on the blockchain and that 99% of the breathless hype about trading and finance bro stuff is completely off chain and only tangentially related to Bitcoin. The same could be said of crypto advocates who leave their "coins" on an exchange
- lvs 5y agoNot to mention that it's worth only a tiny fraction of bitcoin + all the other cryptos.
- Marazan 5y agoHow much trading volume does tether have compared to "bitcoin + all the other cryptos"? Answer: a lot, Tether is the unit of account. If something happens to it the crypto space explodes as the volume of real dollar trades in crypto is a fraction of Tether trades.
- whimsicalism 5y agoAre people just forgetting the existence of Dai?
- wmf 5y agoBTC/USDT liquidity is dramatically larger than BTC/DAI.
- whimsicalism 5y agoDespite the title, this article is about crypto writ large, not just BTC and eth Dai liquidity is fine.
- captn3m0 5y ago46% of DAI holdings are USDC. You might as well use USDC at that point.
- whimsicalism 5y ago1. They can sell MKR to make up for any shortfall, so the risk isn’t mostly to the Dai holders 2. If USDC goes to 0, then Dai has 50 cents backing, USDC has 0. Definitely not ideal to have such high exposure to one coin though
- blake1 5y agoIt’s “Wildcat Banks,” with additional regulatory risk. Crypto in the form of Bitcoin is not systemically risky. Crypto in the form of “stable coins,” which are actually shadow banks, is risky.
- deleted 5y ago[deleted]
- vmception 5y agotl;dr they think its bad because the federal reserve wont shore up these markets, while conceding that they work better than banks would in a run given that the reserves are higher by sometimes an order of magnitude even in the most controversial stablecoins, and all the stablecoins can pay out in-kind with assets instead of just in dollars “But the Fed wont bail it out in a run or market crash, even though it will work more perfectly, for that reason I’m out” Worse than a shark tank episode
- bouncycastle 5y agoTether is very good for borrowing, if you think it might collapse. You can borrow a large amount, buy a hard asset with the borrowings, and if it collapses you'll only need to pay back at a discount. (Not advice) I am beginning to think that it would be worse if USDT went over the peg rather than under! Therefore, it would not surprise me if the Tether FUD might be intentional - otherwise Tether might start "collapsing" the wrong way.
- fastball 5y agoThe problem with that plan is that Tether loaning (outside the interesting relationship exchanges have with Tether) is generally gonna be DeFi loans, which are massively over-collateralized (something like 2:1 collateral to debt). If Tether crashed, it is not clear that your collateral would not be liquidated to cover the nominal value of the original loan, rather than the new (near zero) value of Tether.
- bouncycastle 5y agoActually, what I've described is called "shorting". In defi it's never the nominal value, but the current value, so it would be very clear that your collateral would unlikely be liquidated. You can also use something like USDC for the collateral for even more safety. (I think you can already see some evidence of this strategy since the interest rates for USDT are always higher) The scenario where all the collateral would be liquidated would be if Tether broke its peg and went up. That would be a disaster. (Also called a "short squeeze")
- fastball 5y agoAFAIK all DeFi lending based around Tether is predicated on the idea that a Tether is worth $1 USD. I'm not sure the smart contracts / etc involved are particularly resilient if that changes. The attempts at making these DeFi systems robust is almost entirely focused on what the system needs to do when the value of the non-stable crypto fluctuates wildly, not the stablecoin.