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If the Commercial Paper that Tether holds to show they have enough cash on hand is issued from Alameda & Cumberland then we've closed the loop on this scam. e.

If the Commercial Paper that Tether holds to show they have enough cash on hand is issued from Alameda & Cumberland then we've closed the loop on this scam. e.g. Alameda offers to buy 20B USDT in exchange for commerical paper offered by them. It's rated as A or B in part because before the sale they have net positive assets. Tether's sheets look good at a very high level pass (https://tether.to/wp-content/uploads/2021/08/tether_assuranceconsolidated_reserves_report_2021-06-30.pdf https://tether.to/wp-content/uploads/2021/08/tether_assuranc...) Notably they have 14B in Commerical Paper rated at A-1 and 13.9B in Commerical Paper rated at A-2.

lamontcg 5y ago
I doubt those companies could have been issuing that much actual, proper commercial paper. Where are they getting the USD for those loans? My guess is that they're sitting on collectively about $45B in BTC and other crypto and they take loans out in USDT with that crypto as the collateral. Then they use that USDT to fund crypto ventures, speculate, and fuel arbitrage and wash trading bots. Maybe there's an intermediate step in there where those two companies are the originators of the crypto-backed loans, but it'll amount to basically the same thing.
- jqpabc123 5y ago
  Where are they getting the USD for those loans? LOL! They're not loaning USD, they're loaning USDT which they create out of electrons --- and accept an IOU is return --- but only from select individuals/companies. The rest of the crypto marketplace are the ones who produce USD and exchange it for USDT.
  - lamontcg 5y ago
    That comment was in the context of the assumption that the backing was real honest-to-god commercial paper being used in the real world. That would take actual tens of billions of dollars to produce that commercial paper. It would also get noticed in the marketplace. That isn't what the commercial paper is. And there isn't $65B in USD in the crypto space anywhere to have produced all that commercial paper in loans. That is my point there. And to the extent that you're arguing that tether is backed by quite literally nothing and its printed out of entirely thin air, I'll disagree vehemently with that. Then it wouldn't be stable and would have already collapsed, and there's no mechanism to maintain the pin. USDT is pretty clearly backed by crypto one way or another, which is why USDT issuance increases as bitcoin goes up (and USDT is used to pump bitcoin up, around and around). To the extent that crypto is "just electrons" I'd agree, but I think you were making a dramatic oversimplification which isn't how it all works.
    - jqpabc123 5y ago
      Then it wouldn't be stable and would have already collapsed, and there's no mechanism to maintain the pin. But there is a method to maintain the pin --- cooperative collusion from the exchanges. You are assuming that the exchanges are honest, "free market" promoters like those found in regulated stock and currency markets. You have no way to know or verify this. They are accountable to noone but themselves.
      - lamontcg 5y ago
        No I'm not assuming their honest. I think the foundation of Tether is a pile of lies. But I do think that the people involved have a visceral enough understanding of their own financial best interest that they wouldn't accept IOUs printed out of literally nothing. You're assuming counterparties which are deeply financially stupid. Tether being collateralized loans against crypto actually offers a service that people would buy, and offers a mechanism to defend the pin by having the loans be dollar denominated. I don't assume they're honest, but I do assume they're out for(what they believe to be) their own self-interest. It also explains why Tether is issued as bitcoin increases and not when it collapses. If Tether was just IOUs the demand for them would boom as bitcoin price fell and people sold bitcoin for Tether at the top. All the printing during the run up to $50k makes sense if it is collateralized crypto, it makes no sense if its IOUs that sops up excess bitcoin selling demand.
        jqpabc123 5y ago
        But I do think that the people involved have a visceral enough understanding of their own financial best interest that they wouldn't accept IOUs printed out of literally nothing. Your thinking here is overly simplistic. Minting new tethers cost them literally nothing, zero, nada. What if they are just minting and giving away tethers to select individuals (aka "business associates") with the understanding that they (with their artificially "pegged" value of $1 USD) will be used to buy Bitcoin and inflate the price? Knowing in advance that the price of Bitcoin will be going up gives them plenty of opportunity to make money.

lamontcg 5y ago

I doubt those companies could have been issuing that much actual, proper commercial paper. Where are they getting the USD for those loans? My guess is that they're sitting on collectively about $45B in BTC and other crypto and they take loans out in USDT with that crypto as the collateral. Then they use that USDT to fund crypto ventures, speculate, and fuel arbitrage and wash trading bots. Maybe there's an intermediate step in there where those two companies are the originators of the crypto-backed loans, but it'll amount to basically the same thing.

jqpabc123 5y ago
Where are they getting the USD for those loans? LOL! They're not loaning USD, they're loaning USDT which they create out of electrons --- and accept an IOU is return --- but only from select individuals/companies. The rest of the crypto marketplace are the ones who produce USD and exchange it for USDT.
- lamontcg 5y ago
  That comment was in the context of the assumption that the backing was real honest-to-god commercial paper being used in the real world. That would take actual tens of billions of dollars to produce that commercial paper. It would also get noticed in the marketplace. That isn't what the commercial paper is. And there isn't $65B in USD in the crypto space anywhere to have produced all that commercial paper in loans. That is my point there. And to the extent that you're arguing that tether is backed by quite literally nothing and its printed out of entirely thin air, I'll disagree vehemently with that. Then it wouldn't be stable and would have already collapsed, and there's no mechanism to maintain the pin. USDT is pretty clearly backed by crypto one way or another, which is why USDT issuance increases as bitcoin goes up (and USDT is used to pump bitcoin up, around and around). To the extent that crypto is "just electrons" I'd agree, but I think you were making a dramatic oversimplification which isn't how it all works.
  - jqpabc123 5y ago
    Then it wouldn't be stable and would have already collapsed, and there's no mechanism to maintain the pin. But there is a method to maintain the pin --- cooperative collusion from the exchanges. You are assuming that the exchanges are honest, "free market" promoters like those found in regulated stock and currency markets. You have no way to know or verify this. They are accountable to noone but themselves.
    - lamontcg 5y ago
      No I'm not assuming their honest. I think the foundation of Tether is a pile of lies. But I do think that the people involved have a visceral enough understanding of their own financial best interest that they wouldn't accept IOUs printed out of literally nothing. You're assuming counterparties which are deeply financially stupid. Tether being collateralized loans against crypto actually offers a service that people would buy, and offers a mechanism to defend the pin by having the loans be dollar denominated. I don't assume they're honest, but I do assume they're out for(what they believe to be) their own self-interest. It also explains why Tether is issued as bitcoin increases and not when it collapses. If Tether was just IOUs the demand for them would boom as bitcoin price fell and people sold bitcoin for Tether at the top. All the printing during the run up to $50k makes sense if it is collateralized crypto, it makes no sense if its IOUs that sops up excess bitcoin selling demand.
      - jqpabc123 5y ago
        But I do think that the people involved have a visceral enough understanding of their own financial best interest that they wouldn't accept IOUs printed out of literally nothing. Your thinking here is overly simplistic. Minting new tethers cost them literally nothing, zero, nada. What if they are just minting and giving away tethers to select individuals (aka "business associates") with the understanding that they (with their artificially "pegged" value of $1 USD) will be used to buy Bitcoin and inflate the price? Knowing in advance that the price of Bitcoin will be going up gives them plenty of opportunity to make money.