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It's trivially easy for anyone to short tether, simply take out a DeFi loan of tether backed by any other crypto collateral (including e.g. USDC so you don't ha

It's trivially easy for anyone to short tether, simply take out a DeFi loan of tether backed by any other crypto collateral (including e.g. USDC so you don't have liquidation risk). It will just cost you a few % APR to keep the position open

NelsonMinar 5y ago
I'm not sure I follow your short structure but you're mentioning other cryptocurrencies. Is there a clean bet where I sell Tethers and get dollars? (USDC are not dollars.)
- louloulou 5y ago
  Yup, you can do it on Kraken (https://trade.kraken.com/charts/KRAKEN:USDT-USD?period=1d https://trade.kraken.com/charts/KRAKEN:USDT-USD?period=1d)
- jkhdigital 5y ago
  So convert the USDC to dollars and withdraw the dollars. Done.
  - graeme 5y ago
    In the event Tether busts, the entire crypto markets will freeze up, and it’s plausible usdc will not be redeemable or face a run. USDC aren’t dollars and have been opaque about their backing. The bulk of their assets are in “cash and cash equivalents” which sound good, except they include less than 90 day commercial paper here! They also don’t state its quality or say how much of their cash/equivalents are CP rather than cash or treasuries. Never been audited, only attestations
    - rdtwo 5y ago
      Yeah but where do they run to? I could see dark money having to run into BTC and ETH because real dollar redemption is a problem if you operate out of China for example.
      - graeme 5y ago
        A run means “run on the bank” where you go to Circle and ask to trade in your USDC for dollars.
    - jkhdigital 5y ago
      It’s called leverage. Every player in the financial system uses it; some have cut deals with the government to socialize catastrophic losses so we pretend the leverage doesn’t exist but there it is. As long as Coinbase allows on-demand redemptions nobody is going to care about an audit because it’s trivially easy to just convert all your USDC to real dollars almost immediately. Can’t say the same for Tether.
      - jcranmer 5y ago
        > As long as Coinbase allows on-demand redemptions nobody is going to care about an audit because it’s trivially easy to just convert all your USDC to real dollars almost immediately. And what happens if Coinbase were unable to convert all the USDC because the demand exceeded their stockpile of USD?
        usrusr 5y ago
        Likely some very accidental network misconfigurion, we apologize for the inconvenience?
  - NelsonMinar 5y ago
    Like I said, USDC is not dollars. If you're betting on Tether collapsing you sure as hell aren't going to take payment on that bet in USDC.
    - X6S1x6Okd1st 5y ago
      They're different organizations, few people seriously think that USDC is going to 0.
      - jkhdigital 5y ago
        And USDC can be converted back into actual dollars, on demand, not via a market transaction but literally a 1:1 conversion, through a variety of exchanges. You cannot say the same of Tether.
    - TacticalCoder 5y ago
      USDC is backed by Coinbase (USDC are issued by Centre, a joint venture of Coinbase and Circle if I'm not mistaken). And Coinbase is an HN unicorn. Everybody at Coinbase is known, it's operated from the US. Coinbase ain't anywhere, not even remotely, like tether/bitfinex. There totally exists a world in which USDT goes to 0 while USDC is still worth 1 USD.
      - endisneigh 5y ago
        So your logic is that big, known entities can’t go bankrupt or be scams?
        jkhdigital 5y ago
        No, the logic is that it is less likely. Anyways, Coinbase allows on-demand conversion of USDC to USD so you really only have to hold the USDC (and Coinbase’s counterparty risk) for about a day for that process to complete. At some point that window might close but given that Coinbase is a publicly traded stock in the US and must report financials, there is quite a bit less risk compared to Tether.
- XorNot 5y ago
  Short version is no unless you actually get someone to loan you their tethers under contract, and you sell them to someone else for USD with the promise you'll return them. This architecture doesn't exist AFAIK - certainly no trustworthy parties are offering it (since why would they want Tethers?).
arcticbull 5y ago
Nope, occasionally exchanges will manipulate the price up to liquidate shorts - for instance the highest recorded trade price of USDT was about $1000 and dexes leave you at risk of flashbots and smart contract bugs.
- X6S1x6Okd1st 5y ago
  I've held a short position on USDT through AAVE for a couple months now. USDT would have to go to ~2 to liquidate me.
  - qeternity 5y ago
    If USDT goes, so does AAVE and everything else. And as has been mentioned, the iFinex crew have squeezed USDT to $1,000 before.
    - X6S1x6Okd1st 5y ago
      AAVE on polygon has 1B in ETH, 851M in Dai, 1B in USDC and only 215M in USDT. Why would AAVE blow up if USDT blows up?
      - dustintrex 5y ago
        Because the fiat valuations of ETH, DAI, USDC and all coins will tank if Tether implodes.
        anonymoushn 5y ago
        Why? USDC is backed by dollars and treasuries...
        dustintrex 5y ago
        Not anymore it isn't, and they've admitted it: https://beincrypto.com/coinbase-drops-guarantee-of-usdc-stablecoin-to-dollar-backing/ https://beincrypto.com/coinbase-drops-guarantee-of-usdc-stab...
qeternity 5y ago
Absolutely do not do this. Do not bet against the house inside casino walls. If you have enough capital to weather potential dislocations, the only real way to play this is to be long off shore (perps, probably) and short CME. This position is long BTC/USDT vs short BTC/USD, the net of which is short USDT/USD. The reason for doing it this way is if it doesn’t play out, or goes to 100k first, you’re just wearing a bit of spread and funding risk, but let’s call it delta neutral. OTOH, if Tether nukes, crypto will explode in Tether terms (since it’s worthless) and implode in USD terms. Now, you won’t actually get paid on your offshore long because the house is bust, so you’ll have a paper cut there (keep as little margin as possible). But your CME short will pay you nice, hard, centrally cleared greenbacks.
- altrus 5y ago
  I don't entirely understand this; could you provide a concrete example, or actual trades, that could be involved in such a position? (I'm just curious how it would actually look like in practice.)
  - qeternity 5y ago
    Binance: buy $1m BTC/USDT CME: short $1m BTC futures (which are dollar settled and thus BTC/USD) On Binance you are long BTC, and short USDT. On CME you are short BTC and long USD (implicitly on the fiat legs). So if we add that up, the BTC positions net off and you’re just left with short USDT and long USD which is the desired outcome. In practice, if Tether implodes I would expect everyone to sell Tether (by buying crypto with it) and then due to panic, to send that crypto to exchanges with fiat off ramps where they will then sell it. So the price of BTC on Binance goes to the moon, and the price on CME collapses. You will likely lose whatever money you had on Binance (your profit is denominated in worthless USDT and Binance is probably bankrupt at this point) however you should make multiples of that with your CME short. This is all of course not investment advice and extremely hypothetical.
    - deleted 5y ago
      [deleted]
qeternity 5y ago
No, this doesn’t work. You’re not short USDT/USD in the above which is what people really mean when they say short Tether (since we’re talking about losing the peg). You’re already short USDT anytime you buy crypto in USDT terms (i.e. BTC/USDT). But if Tether nukes, and you’re long BTC/USDT you will likely lose a lot of money, even if BTC/USDT goes to the moon. Why? Because BTC in terms of all other fiat (BTC/USD) will implode. You must have a short crypto vs long fiat leg to net off and leave you with a true Tether vs fiat structure.
- ahtihn 5y ago
  > You’re already short USDT anytime you buy crypto in USDT terms (i.e. BTC/USDT That doesn't make any sense. If I buy BTC with USD and then transfer it to an exchange with a BTC/USDT pair, I'm not suddenly "short USDT". So I don't see why buying BTC with USDT directly makes me short USDT either if I didn't borrow the USDT but bought it with USD
  - qeternity 5y ago
    > If I buy BTC with USD and then transfer it to an exchange with a BTC/USDT pair, I'm not suddenly "short USDT". It does, it just doesn’t make you short against USD which is what you’re thinking of. It only makes you short vs. BTC which we expect to collapse in price as well. This is why you need the other leg. > So I don't see why buying BTC with USDT directly makes me short USDT either if I didn't borrow the USDT but bought it with USD Which is why I keep talking about margin and perpetual swaps. Since we expect to lose our shirt on Binance, we need a levered position which means borrowing the USDT which will ultimately become worthless. This borrowing happens implicitly in a swap or future. Back to your first question, when you buy something, you’re going to denominate that in some unit of account. We usually write this price as saying asset A is $X or asset B is €Y. But in reality every market is two asset pairs, no different to FX or crypto. We could have talked in terms of A/USD being X or B/EUR being Y. It’s just a different convention. So when we talk about (for instance) the price of AAPL stock, what we really mean is AAPL/USD. Or when we talk about the price of crude oil we really mean CL/USD. I am buying AAPL, selling USD. Or I am selling crude oil, buying dollars. To illustrate let’s say that you’re long AAPL (AAPL/USD). If shortly after you buy AAPL, the dollar loses purchasing power versus all other currencies, net net we would expect AAPL to go up in price (otherwise known as inflation). It’s not that AAPL became more valuable, it’s that the USD became less valuable. So you’re implicitly short the dollar. You sell your AAPL, and pocket your profit. You could frame this as being short USD and then covering your short. Same thing. The opposite also holds true. Let’s say you short AAPL (remember: AAPL/USD). This leaves you long USD. If the purchasing power of USD increases, ceteris paribus, the price of AAPL should fall (otherwise known as deflation). You cover your short, and pocket your profit. You can view that as being short AAPL and AAPL going down, or you can view that as being long USD and the dollar going up. It’s the same thing.

NelsonMinar 5y ago

I'm not sure I follow your short structure but you're mentioning other cryptocurrencies. Is there a clean bet where I sell Tethers and get dollars? (USDC are not dollars.)

louloulou 5y ago
Yup, you can do it on Kraken (https://trade.kraken.com/charts/KRAKEN:USDT-USD?period=1d https://trade.kraken.com/charts/KRAKEN:USDT-USD?period=1d)
jkhdigital 5y ago
So convert the USDC to dollars and withdraw the dollars. Done.
- graeme 5y ago
  In the event Tether busts, the entire crypto markets will freeze up, and it’s plausible usdc will not be redeemable or face a run. USDC aren’t dollars and have been opaque about their backing. The bulk of their assets are in “cash and cash equivalents” which sound good, except they include less than 90 day commercial paper here! They also don’t state its quality or say how much of their cash/equivalents are CP rather than cash or treasuries. Never been audited, only attestations
  - rdtwo 5y ago
    Yeah but where do they run to? I could see dark money having to run into BTC and ETH because real dollar redemption is a problem if you operate out of China for example.
    - graeme 5y ago
      A run means “run on the bank” where you go to Circle and ask to trade in your USDC for dollars.
  - jkhdigital 5y ago
    It’s called leverage. Every player in the financial system uses it; some have cut deals with the government to socialize catastrophic losses so we pretend the leverage doesn’t exist but there it is. As long as Coinbase allows on-demand redemptions nobody is going to care about an audit because it’s trivially easy to just convert all your USDC to real dollars almost immediately. Can’t say the same for Tether.
    - jcranmer 5y ago
      > As long as Coinbase allows on-demand redemptions nobody is going to care about an audit because it’s trivially easy to just convert all your USDC to real dollars almost immediately. And what happens if Coinbase were unable to convert all the USDC because the demand exceeded their stockpile of USD?
      - usrusr 5y ago
        Likely some very accidental network misconfigurion, we apologize for the inconvenience?
- NelsonMinar 5y ago
  Like I said, USDC is not dollars. If you're betting on Tether collapsing you sure as hell aren't going to take payment on that bet in USDC.
  - X6S1x6Okd1st 5y ago
    They're different organizations, few people seriously think that USDC is going to 0.
    - jkhdigital 5y ago
      And USDC can be converted back into actual dollars, on demand, not via a market transaction but literally a 1:1 conversion, through a variety of exchanges. You cannot say the same of Tether.
  - TacticalCoder 5y ago
    USDC is backed by Coinbase (USDC are issued by Centre, a joint venture of Coinbase and Circle if I'm not mistaken). And Coinbase is an HN unicorn. Everybody at Coinbase is known, it's operated from the US. Coinbase ain't anywhere, not even remotely, like tether/bitfinex. There totally exists a world in which USDT goes to 0 while USDC is still worth 1 USD.
    - endisneigh 5y ago
      So your logic is that big, known entities can’t go bankrupt or be scams?
      - jkhdigital 5y ago
        No, the logic is that it is less likely. Anyways, Coinbase allows on-demand conversion of USDC to USD so you really only have to hold the USDC (and Coinbase’s counterparty risk) for about a day for that process to complete. At some point that window might close but given that Coinbase is a publicly traded stock in the US and must report financials, there is quite a bit less risk compared to Tether.
XorNot 5y ago
Short version is no unless you actually get someone to loan you their tethers under contract, and you sell them to someone else for USD with the promise you'll return them. This architecture doesn't exist AFAIK - certainly no trustworthy parties are offering it (since why would they want Tethers?).

arcticbull 5y ago

Nope, occasionally exchanges will manipulate the price up to liquidate shorts - for instance the highest recorded trade price of USDT was about $1000 and dexes leave you at risk of flashbots and smart contract bugs.

X6S1x6Okd1st 5y ago
I've held a short position on USDT through AAVE for a couple months now. USDT would have to go to ~2 to liquidate me.
- qeternity 5y ago
  If USDT goes, so does AAVE and everything else. And as has been mentioned, the iFinex crew have squeezed USDT to $1,000 before.
  - X6S1x6Okd1st 5y ago
    AAVE on polygon has 1B in ETH, 851M in Dai, 1B in USDC and only 215M in USDT. Why would AAVE blow up if USDT blows up?
    - dustintrex 5y ago
      Because the fiat valuations of ETH, DAI, USDC and all coins will tank if Tether implodes.
      - anonymoushn 5y ago
        Why? USDC is backed by dollars and treasuries...
        dustintrex 5y ago
        Not anymore it isn't, and they've admitted it: https://beincrypto.com/coinbase-drops-guarantee-of-usdc-stablecoin-to-dollar-backing/ https://beincrypto.com/coinbase-drops-guarantee-of-usdc-stab...

qeternity 5y ago

Absolutely do not do this. Do not bet against the house inside casino walls. If you have enough capital to weather potential dislocations, the only real way to play this is to be long off shore (perps, probably) and short CME. This position is long BTC/USDT vs short BTC/USD, the net of which is short USDT/USD. The reason for doing it this way is if it doesn’t play out, or goes to 100k first, you’re just wearing a bit of spread and funding risk, but let’s call it delta neutral. OTOH, if Tether nukes, crypto will explode in Tether terms (since it’s worthless) and implode in USD terms. Now, you won’t actually get paid on your offshore long because the house is bust, so you’ll have a paper cut there (keep as little margin as possible). But your CME short will pay you nice, hard, centrally cleared greenbacks.

altrus 5y ago
I don't entirely understand this; could you provide a concrete example, or actual trades, that could be involved in such a position? (I'm just curious how it would actually look like in practice.)
- qeternity 5y ago
  Binance: buy $1m BTC/USDT CME: short $1m BTC futures (which are dollar settled and thus BTC/USD) On Binance you are long BTC, and short USDT. On CME you are short BTC and long USD (implicitly on the fiat legs). So if we add that up, the BTC positions net off and you’re just left with short USDT and long USD which is the desired outcome. In practice, if Tether implodes I would expect everyone to sell Tether (by buying crypto with it) and then due to panic, to send that crypto to exchanges with fiat off ramps where they will then sell it. So the price of BTC on Binance goes to the moon, and the price on CME collapses. You will likely lose whatever money you had on Binance (your profit is denominated in worthless USDT and Binance is probably bankrupt at this point) however you should make multiples of that with your CME short. This is all of course not investment advice and extremely hypothetical.
  - deleted 5y ago
    [deleted]

qeternity 5y ago

No, this doesn’t work. You’re not short USDT/USD in the above which is what people really mean when they say short Tether (since we’re talking about losing the peg). You’re already short USDT anytime you buy crypto in USDT terms (i.e. BTC/USDT). But if Tether nukes, and you’re long BTC/USDT you will likely lose a lot of money, even if BTC/USDT goes to the moon. Why? Because BTC in terms of all other fiat (BTC/USD) will implode. You must have a short crypto vs long fiat leg to net off and leave you with a true Tether vs fiat structure.

ahtihn 5y ago
> You’re already short USDT anytime you buy crypto in USDT terms (i.e. BTC/USDT That doesn't make any sense. If I buy BTC with USD and then transfer it to an exchange with a BTC/USDT pair, I'm not suddenly "short USDT". So I don't see why buying BTC with USDT directly makes me short USDT either if I didn't borrow the USDT but bought it with USD
- qeternity 5y ago
  > If I buy BTC with USD and then transfer it to an exchange with a BTC/USDT pair, I'm not suddenly "short USDT". It does, it just doesn’t make you short against USD which is what you’re thinking of. It only makes you short vs. BTC which we expect to collapse in price as well. This is why you need the other leg. > So I don't see why buying BTC with USDT directly makes me short USDT either if I didn't borrow the USDT but bought it with USD Which is why I keep talking about margin and perpetual swaps. Since we expect to lose our shirt on Binance, we need a levered position which means borrowing the USDT which will ultimately become worthless. This borrowing happens implicitly in a swap or future. Back to your first question, when you buy something, you’re going to denominate that in some unit of account. We usually write this price as saying asset A is $X or asset B is €Y. But in reality every market is two asset pairs, no different to FX or crypto. We could have talked in terms of A/USD being X or B/EUR being Y. It’s just a different convention. So when we talk about (for instance) the price of AAPL stock, what we really mean is AAPL/USD. Or when we talk about the price of crude oil we really mean CL/USD. I am buying AAPL, selling USD. Or I am selling crude oil, buying dollars. To illustrate let’s say that you’re long AAPL (AAPL/USD). If shortly after you buy AAPL, the dollar loses purchasing power versus all other currencies, net net we would expect AAPL to go up in price (otherwise known as inflation). It’s not that AAPL became more valuable, it’s that the USD became less valuable. So you’re implicitly short the dollar. You sell your AAPL, and pocket your profit. You could frame this as being short USD and then covering your short. Same thing. The opposite also holds true. Let’s say you short AAPL (remember: AAPL/USD). This leaves you long USD. If the purchasing power of USD increases, ceteris paribus, the price of AAPL should fall (otherwise known as deflation). You cover your short, and pocket your profit. You can view that as being short AAPL and AAPL going down, or you can view that as being long USD and the dollar going up. It’s the same thing.