9 ms·
If it wasn't obvious from the get go that Tether was a scam, what more do you need.
by rubyist5eva 5y ago
If it wasn't obvious from the get go that Tether was a scam, what more do you need.
- crazydoggers 5y ago> Based on the information Protos has gathered, Cumberland is apparently the number one liquidity provider in crypto, period — thanks to Tether. Not saying there’s nothing nefarious occurring, but it also doesn’t scream scam. The whole point of Tether is to supply liquidity to the crypto market. So is it surprising firms specializing in it utilize an outsized share?? The thing is tether is pegged. It’s not like if you buy a million dollars worth you’ll get rich. In fact that money is now tied up in an asset that doesn’t grow and will slowly shrink due to inflation. What would be much more problematic is tether being used by large criminal organizations to help shelter or launder money, but I haven’t yet seen evidence of that.
- jqpabc123 5y agoThe thing is tether is pegged. I think the point you're missing here is that there is no logical basis for the "pegging". It's pegged because crypto exchanges play along with the pegging fantasy.
- crazydoggers 5y agoWell it’s supposed to be pegged to the dollar by maintaining USD deposits. Nothing here or that I’ve yet seen indicated that hasn’t been happening. Banks are worse anyway, all banks function on fractional reserve, but we don’t immediately call them scams.
- themagician 5y agoLiterally most of what Tether holds is commercial paper—basically IOUs for payroll. From who? Who knows. Probably other startups.
- crazydoggers 5y agoDo you have references? Edit: Haha.. asking legit question for data because I’m curious gets downvoted. Lol. I should know to avoid the crypto discussions here. Lots of emotion and not much useful information getting shared
- themagician 5y agoYes, Tether is my source: 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...
- crazydoggers 5y agoAnd that’s why I asked the question! Thank you, I hadn’t seen that before. I would say that’s definitely problematic. Still wouldn’t call it a scam. That’d be like calling Lehman Brothers a scam.
- jqpabc123 5y agoStill wouldn’t call it a scam. A scam is pretending something is true when it clearly is not --- for financial gain. The scam here is the fact that the exchanges cooperate to keep the price of USDT pegged at $1 USD --- even after Tether itself has admitted they do NOT have $1 USD for each USDT minted and they are NOT obligated to redeem 1 USDT for $1 USD.
- crazydoggers 5y agoWhat is being pretended as true? The link was published by Tether themselves! It’s not a scam if I can see that they’re backed by commercial paper. I can then make a decision if I want to use the service. The big miss with tether everyone makes is that it’s not an investment. It’s a tool to support liquidity. The average investor uses it then converts it, buys or sells. The companies holding it are the ones providing liquidity to investors. So if anyone is getting scammed it’s these large companies offering liquidity services.
- majormajor 5y agoFractional reserve refers to liquid cash, vs stuff the banks lend back out, but that doesn't mean bank balance sheets don't have to balance out in terms of assets and liabilities. You can't just declare yourself a bank and turn a million dollars into ten million dollars, say.
- IncRnd 5y ago> all banks function on fractional reserve, but we don’t immediately call them scams. US (and many other) Banks have capital requirements, regulations, regulators, and insurance that covers the deposits!
- crazydoggers 5y agoCapital requirements mean the bank won’t go bankrupt, ie it can pay its employees etc. But does not deal with deposit reserve. FDIC insurance also covers only $200,000 and that’s insured by the US government. Reserve requirements were lowered to zero percent in 2020 to ease lending during the pandemic: https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm Also a good read on the implications… basically banks can keep loaning out to infinity.. a situation that doesn’t seem a whole lot better than tether in my opinion: https://www.forbes.com/sites/bobhaber/2020/03/16/the-fed-fires-the-big-one/?sh=790f73dd6aa8 https://www.forbes.com/sites/bobhaber/2020/03/16/the-fed-fir... And perhaps you have noticed inflation starting to creep up.. this and QE5 very likely a source https://www.usinflationcalculator.com/inflation/current-inflation-rates/ https://www.usinflationcalculator.com/inflation/current-infl...
- IncRnd 5y agoOne can infer from your comment that you expect people to purchase more than $200,000 in Tether. Someone who does so might want to perform more research than reading shills on the Internet. It be far more rational to start one's own crypto-currency in order to remove distrust from the equation.
- crazydoggers 5y agoThis makes no sense
- tcbawo 5y agoI can also imagine it being used to circumvent currency controls, especially in and around Asia.
- crazydoggers 5y agoYes, I’d say it probably is. That may not be a bad thing for many people depending on your outlook.
- themagician 5y agoThe point of Tether is to make money—for Tether, not you. They are getting rich when you buy a million dollars worth.
- crazydoggers 5y agoHow? They have to maintain that million dollars so I can withdraw it when I need it. Nothing has yet shown that is a problem or that’s not being done. Go deposit 1 million in a bank, and then ask for it in cash the next day. You won’t get it.
- themagician 5y agoThey do not maintain that million dollars as dollars. They instead buy all sorts of stuff. Only a small portion is maintained as dollars. If there is a run on Tether tomorrow it will collapse. You won’t get your money. Assets will need to be liquidated, and some of them might be junk.
- jazzyjackson 5y agoThe fact that tether does not hold 1:1 cash reserves was widely reported Here’s a discussion from may, “Tether says its reserves are backed by cash to the tune of 2.9%” https://news.ycombinator.com/item?id=27151370 https://news.ycombinator.com/item?id=27151370
- IncRnd 5y ago> Go deposit 1 million in a bank, and then ask for it in cash the next day. You won’t get it. But, you will get it. Try that with Tether, and you might just get laughed at. They would have already put your million dollars to other uses outside of being a deposit for you.
- crazydoggers 5y agoYou can read about what happens when you try to withdraw that much cash from a bank. Not only do they not hold that much cash, there’s lots of hoops to jump through: https://www.linkedin.com/pulse/when-i-tried-withdraw-20000-my-own-money-from-bank-samuel-barton https://www.linkedin.com/pulse/when-i-tried-withdraw-20000-m... https://www.cleveland.com/business/2012/04/man_who_wants_to_withdraw_6000.html https://www.cleveland.com/business/2012/04/man_who_wants_to_... https://grantcardonetv.com/ever-withdraw-1000000-in-cash-from-your-bank-i-did-heres-what-happened/ https://grantcardonetv.com/ever-withdraw-1000000-in-cash-fro... https://finance.zacks.com/federal-banking-rules-withdrawing-large-sums-cash-1696.html https://finance.zacks.com/federal-banking-rules-withdrawing-...
- jqpabc123 5y agoIt doesn't end there. Slightly less obvious is the fact that Tether and other "Stable coins" are the only "stability" that exists in the crypto marketplace. More than half of all crypto trades involve stable coins. And exchanges play along (wittingly or not) with the ruse for their own benefit. So if Tether is a scam, so is bitcoin and the entire crypto marketplace.
- sprafa 5y agoUSDC has been audited and it's solid. I know of people in large banks who are working with USDC and they've vouched for it being 100% ok.
- X6S1x6Okd1st 5y agoYeah USDC appears to be solid, there are also algorithmic stablecoins that appear to be holding well even under 50% drops over 1 or 2 days (DAI appears to be the one working best)
- albntomat0 5y agoWasn’t there confusion recently on whether it was fully cashed backed (per their website), when USDC actually had a bunch of other stuff in it?
- ceejayoz 5y ago> I know of people in large banks who are working with USDC and they've vouched for it being 100% ok. Sure, just like they did with AAA-rated mortgage CDOs before the https://en.wikipedia.org/wiki/Subprime_mortgage_crisis https://en.wikipedia.org/wiki/Subprime_mortgage_crisis. "The bankers say it's fine" is not the comforting statement you're making it out to be.
- themagician 5y agoUSDC is better than Tether but far from “solid”. They still hold commercial paper, just 10% instead of 50%. The audit is a joke. Who knows what is really considered “cash equivalent”. Hell, it’s possible USDC holds Tether.
- kgin 5y agoAnd a very large chunk of BTC’s value has come from Tether buys.
- amackera 5y agoSource?
- JumpCrisscross 5y ago“This paper investigates whether Tether, a digital currency pegged to the U.S. dollar, influenced Bitcoin and other cryptocurrency prices during the 2017 boom. Using algorithms to analyze blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. The flow is attributable to one entity, clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests insufficient Tether reserves before month-ends. Rather than demand from cash investors, these patterns are most consistent with the supply-based hypothesis of unbacked digital money inflating cryptocurrency prices.” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066
- amackera 5y agoThanks!
- TuringNYC 5y agoCould you clarify why this should concern me as a BTC holder? As I understand, Tether buys come in two cohorts: 1. Retail/Institutional USD/other --> Tether --> BTC 2. {over-minted/under-reserved Tether} --> BTC I dont see 1 as a problem, as Tether is just a conduit for the actual transaction. I can see the issue in 2, but is that an issue any longer given the current scrutiny?
- yawaworht1978 5y agoHow does that work? You mean wash trading? Or eli5 how tether could be abused to raise btc prices, and does it work the same way for eth?
- gruez 5y agoHow is minting to a few companies proof of fraud?
- Jasper_ 5y agoBecause we know that Alameda and Cumberland do not, on the whole, possess $63 trillion in USD. That's the official number of "outstanding Tether" posted on the Tether website [0]. If these allegations are true, the other holders of Tether total a couple million, meaning Alameda and Cumberland together must have trillions of holdings. Which, based on filings, we know isn't what they're reporting. [0] https://wallet.tether.to/transparency https://wallet.tether.to/transparency
- ceejayoz 5y ago$63 billion, not trillion.
- Jasper_ 5y agoI apparently cannot parse decimal places, thank you for the correction.
- FireBeyond 5y agoBut still. Whilst acknowledging that revenue is not holdings, I did some looking and saw that, if looking at Tether's claimed deposits, they would be within the top 20 largest companies in the world, eclipsing Alphabet, AT&T, even Samsung and Saudi Aramco. Which is laughable. Apple, Microsoft, Google, Verizon Communications and Pfizer COMBINED hold $400B in reserves. Tether can barely say who they bank with.
- deleted 5y ago[deleted]
- jqpabc123 5y agoThese minting were done as loans --- on an IOU basis. An IOU is a promise to pay --- not the same as being paid in hard currency.
- Bombthecat 5y agoI call it again and again and again :tether is the fed of crypto
- uncletammy 5y agoIt's worse. At least the Fed is checked to some degree by Congress. Tether is outside of the control of any goverment. It's just another faceless shell company.
- ur-whale 5y ago>If it wasn't obvious from the get go that Tether was a scam, what more do you need. Not a fan of Tether, but I can't understand what your argument is here. In what way does the fact that a huge chunk of Tether was sold to a liquidity provider and an exchange point to a scam?