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Well 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 w

Well 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 ago
Literally most of what Tether holds is commercial paper—basically IOUs for payroll. From who? Who knows. Probably other startups.
- crazydoggers 5y ago
  Do 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 ago
    Yes, 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 ago
      And 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 ago
        Still 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 ago
        What 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.
        jqpabc123 5y ago
        What is being pretended as true? That 1 USDT is worth $1 USD. The entire crypto market is a house of cards built around this fantasy.
        themagician 5y ago
        It's people that are holding it, on platforms like Nexo, so they can get their 12% interest. Whenever a crypto company uses the word "liquidity" that's a red flag that it's likely some kind of a scam. It's the same way that pyramid schemes call themselves "multi-level marketing" companies or say that they are "sales driven". Be careful friend.
        crazydoggers 5y ago
        > Whenever a crypto company uses the word "liquidity" that's a red flag that it's likely some kind of a scam. That’s really not the case. If you deal with investments on any real scale the utility of liquidity becomes very clear. If for any reason I decide I need to move a large sum of money (let’s say 100k), and god forbid I need to do that internationally, you’re going to have to wait. (too bad if it’s the weekend) Meaning your cash isn’t as liquid as it could be. Tether and other stable coins primarily make moving sums of money within minutes internationally possible. If I see an investment opportunity and want to act, waiting on a wire might be a no go. The vast majority of Tether and stable coin use is for that. People holding tether as some kind of investment is practically nil (it’s a horrible horrible investment even if it’s backing was physical dollar bills in a vault) The reason services like Nexo provide 12% interest is not to hold, it’s to facilitate trade and moving in and out. If I want to have cash available for trading, moving it as USD is very hard. Moving it as stable coin is simply and allows trading quickly. The 12% is a bonus/hedge so you don’t feel like you have to immediately convert your liquid positions (dealing with taxes etc). With the interest, one can keep some stable coin on hand for trading and minimize losses. With Nexo, people are also taking out collateral loans. If you take that as USD, then tour waiting on banks to use it. Take it as stable coin you can use it immediately. The 12% also offsets the loan interest so you don’t need to pay it back immediately. So maybe tether’s strength as a stable coin can be scrutinized, it could be more arable with better backing… but again the concept isn’t a scam, and certainly nothing to do with pyramid schemes etc. Most people who talk about tether as a scam (or other stable coins) have no experience in using it.
  - deleted 5y ago
    [deleted]
majormajor 5y ago
Fractional 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 ago
  Capital 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 ago
    One 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 ago
      This makes no sense

themagician 5y ago

Literally most of what Tether holds is commercial paper—basically IOUs for payroll. From who? Who knows. Probably other startups.

crazydoggers 5y ago
Do 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 ago
  Yes, 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 ago
    And 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 ago
      Still 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 ago
        What 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.
        jqpabc123 5y ago
        What is being pretended as true? That 1 USDT is worth $1 USD. The entire crypto market is a house of cards built around this fantasy.
        themagician 5y ago
        It's people that are holding it, on platforms like Nexo, so they can get their 12% interest. Whenever a crypto company uses the word "liquidity" that's a red flag that it's likely some kind of a scam. It's the same way that pyramid schemes call themselves "multi-level marketing" companies or say that they are "sales driven". Be careful friend.
        crazydoggers 5y ago
        > Whenever a crypto company uses the word "liquidity" that's a red flag that it's likely some kind of a scam. That’s really not the case. If you deal with investments on any real scale the utility of liquidity becomes very clear. If for any reason I decide I need to move a large sum of money (let’s say 100k), and god forbid I need to do that internationally, you’re going to have to wait. (too bad if it’s the weekend) Meaning your cash isn’t as liquid as it could be. Tether and other stable coins primarily make moving sums of money within minutes internationally possible. If I see an investment opportunity and want to act, waiting on a wire might be a no go. The vast majority of Tether and stable coin use is for that. People holding tether as some kind of investment is practically nil (it’s a horrible horrible investment even if it’s backing was physical dollar bills in a vault) The reason services like Nexo provide 12% interest is not to hold, it’s to facilitate trade and moving in and out. If I want to have cash available for trading, moving it as USD is very hard. Moving it as stable coin is simply and allows trading quickly. The 12% is a bonus/hedge so you don’t feel like you have to immediately convert your liquid positions (dealing with taxes etc). With the interest, one can keep some stable coin on hand for trading and minimize losses. With Nexo, people are also taking out collateral loans. If you take that as USD, then tour waiting on banks to use it. Take it as stable coin you can use it immediately. The 12% also offsets the loan interest so you don’t need to pay it back immediately. So maybe tether’s strength as a stable coin can be scrutinized, it could be more arable with better backing… but again the concept isn’t a scam, and certainly nothing to do with pyramid schemes etc. Most people who talk about tether as a scam (or other stable coins) have no experience in using it.
- deleted 5y ago
  [deleted]

majormajor 5y ago

Fractional 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 ago
Capital 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 ago
  One 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 ago
    This makes no sense