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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

by 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...
  - washedup 5y ago
    Excellent point - does one exist (an easily audited stablecoin)?
- graeme 5y ago
  It would be a removal of $62.5 billion from the ecosystem. That’s a massive loss of demand. Everyone else still has their bitcoin but if it turns out the majority of the orders were with fraudulent funds, what does that do to BTC value? Why wouldn’t auditing be trivial? It’s just checking the level of funds in account and whether they’re present over time. All major companies do audits, it’s a simple, common procedure.
  - shkkmo 5y ago
    > Why wouldn’t auditing be trivial? It’s just checking the level of funds in account and whether they’re present over time. Except that we know for a fact that Tether is not mostly backed by bank deposits. They hold a bunch of different types of assets, some (most?) of which is probably debt with varying levels of collateral. Assessing debt risk is doable but mote complicated than just checking a balance number.
    - graeme 5y ago
      See the note above about not trusting the claims of proven liars. For years Tether said they were backed 1:1 by dollars, but blocked audits. The audits would have been simple. It turns out Tethers were not backed 1:1. It would also be simple to audit their dollar deposits now, but they haven’t done that either. And no one in the commercial paper market has heard of them. So, if they were bonafide, there are claims it would be simple to audit. They have not audited them.
      - shkkmo 5y ago
        Well, clearly the incentives for Tether are against auditing as any details they could announce (given what we already know) would just generate mote negative coverage amd uncertainty.
        graeme 5y ago
        How does that follow? If they had proof of their reserves it would dispel the rumours and increase confidence.
- shkkmo 5y ago
  If tether breaks, it will not just create negative sentiment, but cause a liquidity crunch since the major providers of liquidity are presumably the one that also hold a lot of tether. This combo could easily crater prices as more and more sellers compete for buyers by dropping prices.

by graeme 5y ago

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...
- washedup 5y ago
  Excellent point - does one exist (an easily audited stablecoin)?
graeme 5y ago
It would be a removal of $62.5 billion from the ecosystem. That’s a massive loss of demand. Everyone else still has their bitcoin but if it turns out the majority of the orders were with fraudulent funds, what does that do to BTC value? Why wouldn’t auditing be trivial? It’s just checking the level of funds in account and whether they’re present over time. All major companies do audits, it’s a simple, common procedure.
- shkkmo 5y ago
  > Why wouldn’t auditing be trivial? It’s just checking the level of funds in account and whether they’re present over time. Except that we know for a fact that Tether is not mostly backed by bank deposits. They hold a bunch of different types of assets, some (most?) of which is probably debt with varying levels of collateral. Assessing debt risk is doable but mote complicated than just checking a balance number.
  - graeme 5y ago
    See the note above about not trusting the claims of proven liars. For years Tether said they were backed 1:1 by dollars, but blocked audits. The audits would have been simple. It turns out Tethers were not backed 1:1. It would also be simple to audit their dollar deposits now, but they haven’t done that either. And no one in the commercial paper market has heard of them. So, if they were bonafide, there are claims it would be simple to audit. They have not audited them.
    - shkkmo 5y ago
      Well, clearly the incentives for Tether are against auditing as any details they could announce (given what we already know) would just generate mote negative coverage amd uncertainty.
      - graeme 5y ago
        How does that follow? If they had proof of their reserves it would dispel the rumours and increase confidence.
shkkmo 5y ago
If tether breaks, it will not just create negative sentiment, but cause a liquidity crunch since the major providers of liquidity are presumably the one that also hold a lot of tether. This combo could easily crater prices as more and more sellers compete for buyers by dropping prices.