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I'm no Tether apologist, but this doesn't seem like an issue to me? Alameda and Cumberland are the 2 biggest liquidity providers in crypto trading. Tether is t

I'm no Tether apologist, but this doesn't seem like an issue to me? Alameda and Cumberland are the 2 biggest liquidity providers in crypto trading. Tether is the source of liquidity for many of the exchanges that they trade on. So of course they'd use Tether to on-ramp into the crypto ecosystem and trade. I suppose the real news here is that Alameda and Cumberland haven't redeemed much Tether (proportionally), so if Tether collapses, it could blow them up?

Wizrad 5y ago
Most likely they trade out of the USDT position shortly after creating it which would minimise their exposure.
- gringoDan 5y ago
  I don't think this would be the case, since these firms are actively market-making using USDT. I.e., they're not just turning fiat into crypto using USDT, but they are also market-making in USDT/BTC, USDT/ETH, etc. My understanding is that Alameda is trading with fairly high frequency, so they would keep funds in USDT in order to facilitate those trades. Further, the on-chain data suggests that they don't trade out of USDT to USD – otherwise we'd see high corresponding USDT burns.
vmception 5y ago
hmm no OTC traders here? When you call the OTC desk and wire them dollars they mint stablecoins using their account with - presumably - Bitfinex. Bitfinex issues Tethers no different than Coinbase/Circle issues USDC in a just in time transaction. You either receive the Tether you asked for to make your own trades, or they keep the Tether and purchase the crypto you really wanted. In either scenario, someone besides the OTC has the Tether now. There is no reason to use custodial exchanges for your fiat onramps. They put you at a major disadvantage in speed. It is strange that this is to be the smoking gun for people against Tether. These kind of juvenile inexperienced arguments (seen in other comments) are why more serious scrutiny of Tether takes so long, because its mixed up with all this benign stuff put in front of regulators who have a huge learning curve already.
- PragmaticPulp 5y ago
  > You either receive the Tether you asked for to make your own trades, or they keep the Tether and purchase the crypto you really wanted. In either scenario, someone besides the OTC has the Tether now. So instead of buying coins directly, people are buying Tether then immediately selling that Tether to… someone? Who apparently is okay holding on to huge quantities of Tether? It’s weird that crypto proponents always act perplexed at why anyone would hold large amounts of fiat losing out to inflation, but when that fiat comes in the form of a cryptocurrency representation it’s actually okay and perfectly logical for huge amounts of it to exist in the crypto system, sitting in a few very large accounts somewhere. Comparing Tether to USDC is also conveniently ignoring the fact that Bitfinex and Tether tried to mislead everyone into thinking they were unrelated companies, when in fact they were tightly coupled this whole time.
  - vmception 5y ago
    Any major stablecoin is good for buying cryptos within the crypto ecosystem which have no fiat markets. Tether happens to be the one with the most liquidity and broad acceptance. As others mentioned, they are a stable value interface into the crypto native ecosystem. Nobody in our conversation is advocating for fiat in cryptocurrency representation, I’m telling you the answer, our feelings about Tether doesnt change the accuracy of the answer. Liquidity providers are the ones okay holding large amounts of tether. Just look at the liquidity pools, they all earn commissions from other people routing trades through those pools onchain, and many of them yield farm too. The risk is tolerable for them, Tether has had much greater crisis of confidence in the past and didn't implode, trading at worse 15% away from $1 for prolongued periods of time so if those werent going to make holders lose all their money than (compared to the 99% drops in most crypto assets) then people have more confidence amongst the universe of pricing confidence. That's where we are. Like I said, and what you walked directly into anyway: Bitfinex and Tether’s poor management and governance and opaqueness are issues, randomly picking any Tether headline as validation of those issues are a distraction, as it clouds everyone’s ability to focus on real issues with Tether.
  - FireBeyond 5y ago
    They're not even 'tightly coupled'. They're literally the same people. The Bitfinex loan to Tether literally had the same two signatories on both sides of the loan.
X6S1x6Okd1st 5y ago
If Alameda & Cumberland paid for the minting of USDT by offering Commercial Paper (e.g. IOU from Alameda) and Alameda isn't actually good for it then they've just printed USDT backed by essentially nothing. They may be able to extract enough $ to cover it by the time they actually have to show reserves, that's what they did previously.

Wizrad 5y ago

Most likely they trade out of the USDT position shortly after creating it which would minimise their exposure.

gringoDan 5y ago
I don't think this would be the case, since these firms are actively market-making using USDT. I.e., they're not just turning fiat into crypto using USDT, but they are also market-making in USDT/BTC, USDT/ETH, etc. My understanding is that Alameda is trading with fairly high frequency, so they would keep funds in USDT in order to facilitate those trades. Further, the on-chain data suggests that they don't trade out of USDT to USD – otherwise we'd see high corresponding USDT burns.

vmception 5y ago

hmm no OTC traders here? When you call the OTC desk and wire them dollars they mint stablecoins using their account with - presumably - Bitfinex. Bitfinex issues Tethers no different than Coinbase/Circle issues USDC in a just in time transaction. You either receive the Tether you asked for to make your own trades, or they keep the Tether and purchase the crypto you really wanted. In either scenario, someone besides the OTC has the Tether now. There is no reason to use custodial exchanges for your fiat onramps. They put you at a major disadvantage in speed. It is strange that this is to be the smoking gun for people against Tether. These kind of juvenile inexperienced arguments (seen in other comments) are why more serious scrutiny of Tether takes so long, because its mixed up with all this benign stuff put in front of regulators who have a huge learning curve already.

PragmaticPulp 5y ago
> You either receive the Tether you asked for to make your own trades, or they keep the Tether and purchase the crypto you really wanted. In either scenario, someone besides the OTC has the Tether now. So instead of buying coins directly, people are buying Tether then immediately selling that Tether to… someone? Who apparently is okay holding on to huge quantities of Tether? It’s weird that crypto proponents always act perplexed at why anyone would hold large amounts of fiat losing out to inflation, but when that fiat comes in the form of a cryptocurrency representation it’s actually okay and perfectly logical for huge amounts of it to exist in the crypto system, sitting in a few very large accounts somewhere. Comparing Tether to USDC is also conveniently ignoring the fact that Bitfinex and Tether tried to mislead everyone into thinking they were unrelated companies, when in fact they were tightly coupled this whole time.
- vmception 5y ago
  Any major stablecoin is good for buying cryptos within the crypto ecosystem which have no fiat markets. Tether happens to be the one with the most liquidity and broad acceptance. As others mentioned, they are a stable value interface into the crypto native ecosystem. Nobody in our conversation is advocating for fiat in cryptocurrency representation, I’m telling you the answer, our feelings about Tether doesnt change the accuracy of the answer. Liquidity providers are the ones okay holding large amounts of tether. Just look at the liquidity pools, they all earn commissions from other people routing trades through those pools onchain, and many of them yield farm too. The risk is tolerable for them, Tether has had much greater crisis of confidence in the past and didn't implode, trading at worse 15% away from $1 for prolongued periods of time so if those werent going to make holders lose all their money than (compared to the 99% drops in most crypto assets) then people have more confidence amongst the universe of pricing confidence. That's where we are. Like I said, and what you walked directly into anyway: Bitfinex and Tether’s poor management and governance and opaqueness are issues, randomly picking any Tether headline as validation of those issues are a distraction, as it clouds everyone’s ability to focus on real issues with Tether.
- FireBeyond 5y ago
  They're not even 'tightly coupled'. They're literally the same people. The Bitfinex loan to Tether literally had the same two signatories on both sides of the loan.

X6S1x6Okd1st 5y ago

If Alameda & Cumberland paid for the minting of USDT by offering Commercial Paper (e.g. IOU from Alameda) and Alameda isn't actually good for it then they've just printed USDT backed by essentially nothing. They may be able to extract enough $ to cover it by the time they actually have to show reserves, that's what they did previously.