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People, mainly in Asia, use tether where trading crypto with fiat currencies is either prohibited or very difficult, whereas it remains marginal in markets such

People, mainly in Asia, use tether where trading crypto with fiat currencies is either prohibited or very difficult, whereas it remains marginal in markets such as the United States. I.e places with exchanges that don’t have good fiat rails for various reasons. https://www.cryptovantage.com/news/why-is-tether-so-popular-outside-of-north-america-and-western-europe/ https://www.cryptovantage.com/news/why-is-tether-so-popular-... I assume these people don’t stay in tether long, they just use it like a checking account when they cash in and out of positions. I also assume that if tether went away tomorrow, people would either use another stablecoin like USDC and if all stablecoins went away, they would just trade in and out of btc.

Slartie 5y ago
If tether went away tomorrow, 60 billion of "assumed dollars" backing up crypto asset values would also vanish. Such an event would immediately tank the dollar value of all cryptocurrencies (real dollars, not USDT, that one would explode to the moon instead). And not just by 60 billion dollars of total market cap, but more like 600 billion to a trillion. There's a lot of fantasy value for each actual dollar (or USDT, as long as people believe these are basically equal) in the crypto market caps.
- reidjs 5y ago
  Is it possible that such an event would benefit people who keep their btc off exchanges significantly?
  - ac29 5y ago
    If price collapses cause the exchanges to fail and disappear with their customer's assets then I suppose you'd be better off having held your own keys. But you still have an asset who's price has collapsed.
- htormey 5y ago
  Yeah sure but would that be worse than the other crashes that have happened over the life of BTC and other crypto assets? What kind of draw down would you expect and why? I think it’s unlikely that this would happen to all stable coins. So what would this scenario look like if USDC or DAI still existed?
  - Slartie 5y ago
    It would be worse because I think it would finally end the sequence of ever-bigger bubbles followed by collapses to higher lows. Why? Because the narrative that fueled this sequence has been "people with ever deeper pockets coming into crypto", and we are close to the end of this narratives' natural life anyway. The current "ever-deeper pockets" are institutional investors, which is as far as it gets in terms of deep pockets anyway, but which are also very sensitive to risk and need calculable risk envelopes. Stablecoins, with their publicly-known market caps, provide an approach to guesstimate the total amount of actual value underlying cryptocurrencies and thus help significantly in evaluating the risk of a crypto investment - theoretically, as long as we know that there is X amount of fiat money invested, the total crypto market cap cannot fall below that value. If we now learn that a huge chunk of this money does not exist anymore or never existed at all, the risk calculation becomes much worse. It is akin to a fiat currency of a country that is found to have blatantly invented big chunks of its official GDP for years - nobody would want to store value in that currency anymore. And without institutional investors, there are no "deeper pockets" anymore, hence the primary reason why most people hold cryptocurrencies - to participate in the growing crypto pie - falls apart, which should trigger a series of waves of sell-offs, similar to the "buying waves" during the last decade, but inverted (quick drops to lower lows, followed by slow recoveries to lower highs, followed by lower lows and so on). At least this is what I expect.

Slartie 5y ago

If tether went away tomorrow, 60 billion of "assumed dollars" backing up crypto asset values would also vanish. Such an event would immediately tank the dollar value of all cryptocurrencies (real dollars, not USDT, that one would explode to the moon instead). And not just by 60 billion dollars of total market cap, but more like 600 billion to a trillion. There's a lot of fantasy value for each actual dollar (or USDT, as long as people believe these are basically equal) in the crypto market caps.

reidjs 5y ago
Is it possible that such an event would benefit people who keep their btc off exchanges significantly?
- ac29 5y ago
  If price collapses cause the exchanges to fail and disappear with their customer's assets then I suppose you'd be better off having held your own keys. But you still have an asset who's price has collapsed.
htormey 5y ago
Yeah sure but would that be worse than the other crashes that have happened over the life of BTC and other crypto assets? What kind of draw down would you expect and why? I think it’s unlikely that this would happen to all stable coins. So what would this scenario look like if USDC or DAI still existed?
- Slartie 5y ago
  It would be worse because I think it would finally end the sequence of ever-bigger bubbles followed by collapses to higher lows. Why? Because the narrative that fueled this sequence has been "people with ever deeper pockets coming into crypto", and we are close to the end of this narratives' natural life anyway. The current "ever-deeper pockets" are institutional investors, which is as far as it gets in terms of deep pockets anyway, but which are also very sensitive to risk and need calculable risk envelopes. Stablecoins, with their publicly-known market caps, provide an approach to guesstimate the total amount of actual value underlying cryptocurrencies and thus help significantly in evaluating the risk of a crypto investment - theoretically, as long as we know that there is X amount of fiat money invested, the total crypto market cap cannot fall below that value. If we now learn that a huge chunk of this money does not exist anymore or never existed at all, the risk calculation becomes much worse. It is akin to a fiat currency of a country that is found to have blatantly invented big chunks of its official GDP for years - nobody would want to store value in that currency anymore. And without institutional investors, there are no "deeper pockets" anymore, hence the primary reason why most people hold cryptocurrencies - to participate in the growing crypto pie - falls apart, which should trigger a series of waves of sell-offs, similar to the "buying waves" during the last decade, but inverted (quick drops to lower lows, followed by slow recoveries to lower highs, followed by lower lows and so on). At least this is what I expect.