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Who the hell even holds Tether? Don't people get it and then convert into a different crypto pretty quickly? If all remaining Tether got "burned" after they got

Who the hell even holds Tether? Don't people get it and then convert into a different crypto pretty quickly? If all remaining Tether got "burned" after they got shut down, wouldn't it's impact on crypto markets be rather trivial? I don't see why there is so much focus on it. Either they have funds to back up the printing or they don't (yes, they didn't for a period of time in 2018, but settled that lawsuit). If they still don't, and Tether goes away, I would think it would only lower Bitcoin/crypto volume and volatility as there is one less funding source. But, anyone that bought Tether to buy Bitcoin has already done so, and that Tether is sitting with someone else like an exchange, lender, or liquidity pool. If they truly are a fraudulent weak-link in the ecosystem, than I am all for figuring this out so we can move on.

throwaway6734 5y ago
One thing I think is interesting is what if tether fraudulently printed notes to push up the price of BTC, and now they either have made enough money to back what they printed or the price of BTC is now anchored to these inflated prices so their actions no longer matter as much
jMyles 5y ago
People do hold it sadly. It provides fiat-pegged stability with crypto-level defi liquidity. So people choose to hold it for use in defi products. It's a blight on the blockchain world.
- washedup 5y ago
  Got it - that makes sense... they would certainly be hurt by this and likely have to liquidate crypto holdings to recover.
SpicyLemonZest 5y ago
Converting to a different crypto just means that whoever you traded with is now holding the Tether you paid them. In the absence of a practical redemption mechanism, someone will always end up holding the bag.
- washedup 5y ago
  Yes, correct, thanks for the comment. I guess I see the people who are buying Tether (exchanging bitcoin for Tether for example) are market makers or lenders and appreciate the liquidity that Tether offers, who would certainly be crushed by Tether collapsing. Overall though it shouldn't affect the demand for other blockchains... but negative news / narratives can do a lot of damage
  - shkkmo 5y ago
    How does a loss of demand/liquidity not have a direct effect on blockchain token prices?
graeme 5y ago
There are 62.5 billion Tether in circulation. I can’t tel; you who holds it, but they certainly aren’t all “converted into a different type of crypto”. Various market participants hold every single one of those Tethers. Tesla made waves for injecting 1.5 billion into Bitcoin. The Tether injection is 42x that. So the strong probability is that the crypto market has been raised by a flood of fake money and the actual dollar demand for Bitcoin et al is rather low. As for backing, it is surely not present. It would be trivial to audit Tether’s assets but they have dodged it for years and been caught in lies. As Dan Davies said about the Iraq War lies, “ There is, as I have mentioned in the past, no fancy Latin term for the fallacy of "giving known liars the benefit of the doubt", but it is in my view a much greater source of avoidable error in the world. Audit is meant to protect us from this, which is why audit is so important.” https://blog.danieldavies.com/2004_05_23_d-squareddigest_archive.html https://blog.danieldavies.com/2004_05_23_d-squareddigest_arc...
- washedup 5y ago
  Right, I agree that lots of people are holding Tether, mostly exchanges, market makers, and liquidity pools if I had to guess, but unclear. If that Tether was proved worthless, anyone who used Tether to buy crypto still gets to keep their crypto. It is ONLY people holding Tether that are hurt, but the negative news could have waterfall impact on ecosystem. As for the triviality of auditing, I don't think it's that simple, but point taken.
  - michaelt 5y ago
    Well, you could make a stablecoin that was trivial to audit - you merely need to demonstrate that, at the moment of the audit, the number of tokens in circulation equals the amount in your backing funds account with a reputable bank. And that the auditor can see the history of cash in your account and coins in circulation match up. Of course, if you don't want to be easy to audit, you can introduce a bunch of complexity - play a shell game shifting money around, intermingle the clients' money with the company's money, operate independent lines of business and intermingle those too, and so on...
    - 5y ago
ipnon 5y ago
It is the most held stablecoin for accounts outside of the United States.
- washedup 5y ago
  This is an interesting point from SEC's perspective... how can they manage that? Would the solution be to simply ban it's use in the United States (both Tether and Bitfinex)?
  - ipnon 5y ago
    Yes because the United States only has jurisdiction for United States residents. However the United States is the most influential country for financial regulations so we will see some knock on effects.
- thehappypm 5y ago
  "most held stablecoin" doesn't really answer the question, though. Why hold stablecoins at all? If you hold actual USD in a bank account, you're trusting your bank. If you hold USDT you're trusting that Tether Ltd stays solvent. I understand there's not always so much trust in banks, but trusting this shady Tether Ltd company feels absolutely bonkers. Even buying Bitcoin feels safer!
  - ipnon 5y ago
    People hold stablecoins so they can use the practical equivalent of a United States dollar "on chain." Ask your local bank to let you deposit your savings account into Aave or Yearn and you're going to be shown the door. In order to use the smart contracts on the blockchain you first need to bridge your "real world" funds to the chain by using a service like Coinbase. Coinbase will take your USD and give you Ether or a stablecoin like USDC in exchange. You can use either of those assets on chain in smart contracts. To answer your question as directly as possible, people hold stablecoins because they want to use USD in smart contracts.
logicchains 5y ago
>Who the hell even holds Tether? Don't people get it and then convert into a different crypto pretty quickly? Most crypto trading actually takes place outside of the US. Imagine I want to predict the whole crypto market goes down, I want to short it. Ideally I'd like to short it relative to the USD, the world's reserve currency. But, as a random unregulated firm trading on an unregulated exchange, getting USD or something close to it is super painful from a compliance perspective, so ideally I'd prefer something that follows the price of the USD but is outside the scope of US regulators. Tether fulfils this shared need of non-US market participants, so they have incentive to keep acting as if it were real even though they know it's a scam. Tether then gets to extract a fee for this service by printing USDT.
- washedup 5y ago
  Thanks for the context, it makes sense. The way I see it, a Tether collapse would simply remove some volatility and volume from other crypto markets, but it's possible that if this is putting huge sell pressure with shorting today, that crypto has a nice rebound after the dust settles. Thoughts?

throwaway6734 5y ago

One thing I think is interesting is what if tether fraudulently printed notes to push up the price of BTC, and now they either have made enough money to back what they printed or the price of BTC is now anchored to these inflated prices so their actions no longer matter as much

jMyles 5y ago

People do hold it sadly. It provides fiat-pegged stability with crypto-level defi liquidity. So people choose to hold it for use in defi products. It's a blight on the blockchain world.

washedup 5y ago
Got it - that makes sense... they would certainly be hurt by this and likely have to liquidate crypto holdings to recover.

SpicyLemonZest 5y ago

Converting to a different crypto just means that whoever you traded with is now holding the Tether you paid them. In the absence of a practical redemption mechanism, someone will always end up holding the bag.

washedup 5y ago
Yes, correct, thanks for the comment. I guess I see the people who are buying Tether (exchanging bitcoin for Tether for example) are market makers or lenders and appreciate the liquidity that Tether offers, who would certainly be crushed by Tether collapsing. Overall though it shouldn't affect the demand for other blockchains... but negative news / narratives can do a lot of damage
- shkkmo 5y ago
  How does a loss of demand/liquidity not have a direct effect on blockchain token prices?

graeme 5y ago

There are 62.5 billion Tether in circulation. I can’t tel; you who holds it, but they certainly aren’t all “converted into a different type of crypto”. Various market participants hold every single one of those Tethers. Tesla made waves for injecting 1.5 billion into Bitcoin. The Tether injection is 42x that. So the strong probability is that the crypto market has been raised by a flood of fake money and the actual dollar demand for Bitcoin et al is rather low. As for backing, it is surely not present. It would be trivial to audit Tether’s assets but they have dodged it for years and been caught in lies. As Dan Davies said about the Iraq War lies, “ There is, as I have mentioned in the past, no fancy Latin term for the fallacy of "giving known liars the benefit of the doubt", but it is in my view a much greater source of avoidable error in the world. Audit is meant to protect us from this, which is why audit is so important.” https://blog.danieldavies.com/2004_05_23_d-squareddigest_archive.html https://blog.danieldavies.com/2004_05_23_d-squareddigest_arc...

washedup 5y ago
Right, I agree that lots of people are holding Tether, mostly exchanges, market makers, and liquidity pools if I had to guess, but unclear. If that Tether was proved worthless, anyone who used Tether to buy crypto still gets to keep their crypto. It is ONLY people holding Tether that are hurt, but the negative news could have waterfall impact on ecosystem. As for the triviality of auditing, I don't think it's that simple, but point taken.
- michaelt 5y ago
  Well, you could make a stablecoin that was trivial to audit - you merely need to demonstrate that, at the moment of the audit, the number of tokens in circulation equals the amount in your backing funds account with a reputable bank. And that the auditor can see the history of cash in your account and coins in circulation match up. Of course, if you don't want to be easy to audit, you can introduce a bunch of complexity - play a shell game shifting money around, intermingle the clients' money with the company's money, operate independent lines of business and intermingle those too, and so on...
  - 5y ago

ipnon 5y ago

It is the most held stablecoin for accounts outside of the United States.

washedup 5y ago
This is an interesting point from SEC's perspective... how can they manage that? Would the solution be to simply ban it's use in the United States (both Tether and Bitfinex)?
- ipnon 5y ago
  Yes because the United States only has jurisdiction for United States residents. However the United States is the most influential country for financial regulations so we will see some knock on effects.
thehappypm 5y ago
"most held stablecoin" doesn't really answer the question, though. Why hold stablecoins at all? If you hold actual USD in a bank account, you're trusting your bank. If you hold USDT you're trusting that Tether Ltd stays solvent. I understand there's not always so much trust in banks, but trusting this shady Tether Ltd company feels absolutely bonkers. Even buying Bitcoin feels safer!
- ipnon 5y ago
  People hold stablecoins so they can use the practical equivalent of a United States dollar "on chain." Ask your local bank to let you deposit your savings account into Aave or Yearn and you're going to be shown the door. In order to use the smart contracts on the blockchain you first need to bridge your "real world" funds to the chain by using a service like Coinbase. Coinbase will take your USD and give you Ether or a stablecoin like USDC in exchange. You can use either of those assets on chain in smart contracts. To answer your question as directly as possible, people hold stablecoins because they want to use USD in smart contracts.

logicchains 5y ago

>Who the hell even holds Tether? Don't people get it and then convert into a different crypto pretty quickly? Most crypto trading actually takes place outside of the US. Imagine I want to predict the whole crypto market goes down, I want to short it. Ideally I'd like to short it relative to the USD, the world's reserve currency. But, as a random unregulated firm trading on an unregulated exchange, getting USD or something close to it is super painful from a compliance perspective, so ideally I'd prefer something that follows the price of the USD but is outside the scope of US regulators. Tether fulfils this shared need of non-US market participants, so they have incentive to keep acting as if it were real even though they know it's a scam. Tether then gets to extract a fee for this service by printing USDT.

washedup 5y ago
Thanks for the context, it makes sense. The way I see it, a Tether collapse would simply remove some volatility and volume from other crypto markets, but it's possible that if this is putting huge sell pressure with shorting today, that crypto has a nice rebound after the dust settles. Thoughts?