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If tether went belly up what would happen is everyone would sell their tether for BTC and other cryptos (whatever they can get into) and you would have the larg

If tether went belly up what would happen is everyone would sell their tether for BTC and other cryptos (whatever they can get into) and you would have the largest squeeze of all time. We actually witnessed this during the tether freak out saga a couple years ago where BTC on the bitfinex exchange was priced like 10 or 15% higher than the rest of the market. I wouldnt mind just getting it over with. Then we could get that over with an just have USD trading. But what most likely will happen is they will just be forced to comply with certain rules.

rcohngru 5y ago
The thought process here is that if you're stuck holding tether if/when it collapses, you can just sell for a crypto that hasn't collapsed. But who in their right minds would want to trade something of value for something that has just been shown to be worth $0?
- trident5000 5y ago
  For exchanges that use USDT, exchanging for crypto is your only immediate option.
  - rcohngru 5y ago
    Right, but who would want to be on the other side of that trade? You're telling me that if I have something worth $0 and you have something of value, you'd want to make that trade with me?
    - trident5000 5y ago
      Exactly, thats what causes a squeeze/absurd drive up in price. Its why I dont hold tether.
      - dekerta 5y ago
        Are you thinking of something like a short squeeze? That only happens because shorts would be forced to buy shares to cover their positions. I don't see how that would apply here. Who's forced to buy people's tether if the price goes to zero? In reality, everyone who holds tether would just be screwed. Their imaginary token would be worth nothing and they wouldn't be able to exchange them for anything. The value would just disappear in to the air
randomopining 5y ago
Wouldn't it cause holders to instantly have part of their portfolio be worthless, which would cause them to have to sell liquid BTC etc to cover their positions. Which would depress the price of btc/eth a lot?
chollida1 5y ago
> If tether went belly up what would happen is everyone would sell their tether for BTC and other cryptos (whatever they can get into) and you would have the largest squeeze of all time What squeeze could there possibly be? No one is forced to deliver anything here so there is absolutely nothing to be squeezed. now you may get some people willing to buy tether at 10 cents on the dollar but that would only continue to force down the price of tether as you exhaust the very small amount of tether buyers. Who do you see being squeezed here?
quickthrowman 5y ago
> If tether went belly up what would happen is everyone would sell their tether for BTC and other cryptos (whatever they can get into) and you would have the largest squeeze of all time. I’d like to know who you think would be buying Tether if it was collapsing, you can’t sell if there’s no bid!
postalrat 5y ago
"If tether went belly up what would happen is everyone would sell their tether for BTC" What do you mean by "tether went belly up"? Even when it's "belly up" it still has value to trade for BTC?
- quickthrowman 5y ago
  Who would be buying the tether? Every trade on an exchange has two sides, who is going to buy USDT that isn’t worth anything? For example, the $449 strike SPY call expiring in 27 minutes has a bid of 0.00 and an ask of 0.02, meaning nobody will buy if you try to sell the call, but a market maker will sell you one for 0.02. If tether was worthless, the same situation would happen, people would be willing to buy for 0.00 and sell for a bit more than 0.00
kangnkodos 5y ago
If Tether's USDT went belly up, there would be a loss of confidence in the Coinbase exchange, a run on the market, and a collapse in the price of Bitcoin. Right now, everyone who has an account at Coinbase believes that if they liquidated their Bitcoin tomorrow, they would eventually get genuine US Dollars equal to the amount of money in their account. Under normal operating conditions, this is true. But if Tether's USDT goes down in price significantly, all bets are off. Under normal operating conditions, when a client sells Bitcoin in their Coinbase account, Coinbase trades Bitcoin for Tether's USDT, the USDT sits in the user's account for a while, and eventually the user get US Dollars. Where do the US Dollars come from? Tether has a reserve of some US Dollars, and other non-crypto assets that can be quickly traded for US Dollars. Let's just consider this whole bucket as US Dollar reserves in order to simplify this discussion. The important thing to remember is that Tether's US Dollar reserves are only a small fraction of all outstanding Tethers. Also, Tether is constantly gathering more US Dollars. On an average day, Tether receives more US Dollars than go out. If for some reason, everyone decided at the same time that a USDT was worth less that one US Dollar and the price continued to drop over time, everything would change. In this dropping USDT price scenario, anyone who held USDT would go to Tether at the same time and ask for their US Dollars back. Tether would have a few options at this point, but one option they would not have is giving everyone their US Dollars back. Remember that Tether has limited US Dollar reserves. Assuming they kept trying to refund every request with a full US Dollar, they would blow through their reserve and hang up a closed sign on their window. Tether doesn't have any bankruptcy insurance, and there isn't a government that is likely to bail Tether out. They're not too big to fail. Oh, Tether would try some tricks to slow down the process. But they may not be able to stop the run on the bank/exchange. So now, let's assume Tether is worth zero. What happens to Coinbase and it's clients? Buying Bitcoin would not be a huge problem. Coinbase might have to change their procedures, but they could still find people willing to accept US Dollars in return for Bitcoin. The trouble would be selling Bitcoin. On a normal day, they just trade Bitcoin for USDT, and if necessary, go to Tether and trade the USDT for US Dollars. But if the normal system doesn't work because a USDT is worth zero, Coinbase would have trouble selling Bitcoin in a timely manner. People would flood Twitter complaining that they can't get their money out of Bitcoin through Coinbase, and this might trigger a second run. All Coinbase customers might lose confidence at the same time, and try to sell their Bitcoin in their Coinbase accounts at the same time. The price of Bitcoin would crash. Perhaps people would not trust exchanges such as Coinbase for a long time after, and prices might stay low for a long time. This is all just a wild guess. What do I know?

rcohngru 5y ago

The thought process here is that if you're stuck holding tether if/when it collapses, you can just sell for a crypto that hasn't collapsed. But who in their right minds would want to trade something of value for something that has just been shown to be worth $0?

trident5000 5y ago
For exchanges that use USDT, exchanging for crypto is your only immediate option.
- rcohngru 5y ago
  Right, but who would want to be on the other side of that trade? You're telling me that if I have something worth $0 and you have something of value, you'd want to make that trade with me?
  - trident5000 5y ago
    Exactly, thats what causes a squeeze/absurd drive up in price. Its why I dont hold tether.
    - dekerta 5y ago
      Are you thinking of something like a short squeeze? That only happens because shorts would be forced to buy shares to cover their positions. I don't see how that would apply here. Who's forced to buy people's tether if the price goes to zero? In reality, everyone who holds tether would just be screwed. Their imaginary token would be worth nothing and they wouldn't be able to exchange them for anything. The value would just disappear in to the air

randomopining 5y ago

Wouldn't it cause holders to instantly have part of their portfolio be worthless, which would cause them to have to sell liquid BTC etc to cover their positions. Which would depress the price of btc/eth a lot?

chollida1 5y ago

> If tether went belly up what would happen is everyone would sell their tether for BTC and other cryptos (whatever they can get into) and you would have the largest squeeze of all time What squeeze could there possibly be? No one is forced to deliver anything here so there is absolutely nothing to be squeezed. now you may get some people willing to buy tether at 10 cents on the dollar but that would only continue to force down the price of tether as you exhaust the very small amount of tether buyers. Who do you see being squeezed here?

quickthrowman 5y ago

postalrat 5y ago

"If tether went belly up what would happen is everyone would sell their tether for BTC" What do you mean by "tether went belly up"? Even when it's "belly up" it still has value to trade for BTC?

quickthrowman 5y ago
Who would be buying the tether? Every trade on an exchange has two sides, who is going to buy USDT that isn’t worth anything? For example, the $449 strike SPY call expiring in 27 minutes has a bid of 0.00 and an ask of 0.02, meaning nobody will buy if you try to sell the call, but a market maker will sell you one for 0.02. If tether was worthless, the same situation would happen, people would be willing to buy for 0.00 and sell for a bit more than 0.00

kangnkodos 5y ago

If Tether's USDT went belly up, there would be a loss of confidence in the Coinbase exchange, a run on the market, and a collapse in the price of Bitcoin. Right now, everyone who has an account at Coinbase believes that if they liquidated their Bitcoin tomorrow, they would eventually get genuine US Dollars equal to the amount of money in their account. Under normal operating conditions, this is true. But if Tether's USDT goes down in price significantly, all bets are off. Under normal operating conditions, when a client sells Bitcoin in their Coinbase account, Coinbase trades Bitcoin for Tether's USDT, the USDT sits in the user's account for a while, and eventually the user get US Dollars. Where do the US Dollars come from? Tether has a reserve of some US Dollars, and other non-crypto assets that can be quickly traded for US Dollars. Let's just consider this whole bucket as US Dollar reserves in order to simplify this discussion. The important thing to remember is that Tether's US Dollar reserves are only a small fraction of all outstanding Tethers. Also, Tether is constantly gathering more US Dollars. On an average day, Tether receives more US Dollars than go out. If for some reason, everyone decided at the same time that a USDT was worth less that one US Dollar and the price continued to drop over time, everything would change. In this dropping USDT price scenario, anyone who held USDT would go to Tether at the same time and ask for their US Dollars back. Tether would have a few options at this point, but one option they would not have is giving everyone their US Dollars back. Remember that Tether has limited US Dollar reserves. Assuming they kept trying to refund every request with a full US Dollar, they would blow through their reserve and hang up a closed sign on their window. Tether doesn't have any bankruptcy insurance, and there isn't a government that is likely to bail Tether out. They're not too big to fail. Oh, Tether would try some tricks to slow down the process. But they may not be able to stop the run on the bank/exchange. So now, let's assume Tether is worth zero. What happens to Coinbase and it's clients? Buying Bitcoin would not be a huge problem. Coinbase might have to change their procedures, but they could still find people willing to accept US Dollars in return for Bitcoin. The trouble would be selling Bitcoin. On a normal day, they just trade Bitcoin for USDT, and if necessary, go to Tether and trade the USDT for US Dollars. But if the normal system doesn't work because a USDT is worth zero, Coinbase would have trouble selling Bitcoin in a timely manner. People would flood Twitter complaining that they can't get their money out of Bitcoin through Coinbase, and this might trigger a second run. All Coinbase customers might lose confidence at the same time, and try to sell their Bitcoin in their Coinbase accounts at the same time. The price of Bitcoin would crash. Perhaps people would not trust exchanges such as Coinbase for a long time after, and prices might stay low for a long time. This is all just a wild guess. What do I know?