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Bennett has done a fantastic job. There WILL be a movie about this company when investors lose faith. Like next decades, "the big short".

by adflux 5y ago

fny 5y ago
But how exactly do you short stablecoins? You can't and even if you did the game is heavily rigged against you. If you remember in the movie, Cohodes got his ass handed to him as banks margin called him out of his position and that's in a regulated market. These guys own their market and the exchange on which it originates. There's no way to even verify if they received dollars for every tether issued and by some miracle the yield on USDT is incredible. You'd be losing 4-5% a year guaranteed holding a short position.
- fabianhjr 5y ago
  All shorting consists on 5 steps: 1. Borrow 2. Sell 3. Wait 4. Buy back 5. Close There is USDT lending available. Even more, there is decentralized collateralized lending available. If someone wanted to short USDT there are plenty of opportunities to do so. (And there might be a lot of people doing so, specially now that the shadyness is being reported on some of the more reputable traditional newspapers)
  - alisonkisk 5y ago
    Does "5. Close" happen? In cryptocurrency it's usually some form of "4.5 Rug pull"
  - smabie 5y ago
    Also you can trade the USDT/USD swaps as well
    - arcticbull 5y ago
      You can only do that at exchanges that are seriously exposed to systemic Tether risk and will also collapse if USDT goes down. So even if you're right, you won't get paid on USDT/USD swaps. Shorting USDT at Bitfinex is like shorting Caesars chips at Caesars. News flash: if Caesars goes bankrupt just which cashier do you think is gonna give you which dollars?
      - yokem55 5y ago
        At this moment you can deposit defi borrowed usdt into Coinbase pro, swap it for usdc there, and then swap the usdc back to USD and withdraw to your bank account. Then if tether collapses you'd be able to pay back the borrowed usdt for pennies on the dollar.
        pclmulqdq 5y ago
        The first step (borrowing usdt on a defi platform) needs you to collateralize that loan with some other form of cryptocurrency. You are forced to have exposure to crypto to make the trade that shorts it.
        saalweachter 5y ago
        Have you ever seen the bit in a show (or, hell, been caught by a street hustler) where someone asks for help breaking a large bill, and then after a few rounds of confusion and money being handed back and forth walks away with everything?
- ikeboy 5y ago
  Very easy to do on FTX or aave for basically as much size as you'd like. Yes, it costs 4-5% a year to short. If it blows up in the next few years you'd make a killing though.
  - arcticbull 5y ago
    If USDT blows up FTX goes down with it, and they won't pay you out. That's just a 4-5% annual donation to SBF.
    - ikeboy 5y ago
      Why do you think that? They treat USDT as any other coin, has no special status in the system. FTX is very well capitalized. Can you show me even napkin math that shows FTX going under if USDT blows up in a realistic scenario? (Going from $1 to $0 instantly isn't realistic.)
      - arcticbull 5y ago
        Why isn't going from $1 to $0 not realistic? Tether is completely centralized and has the ability to prevent token transfers on all major networks it operates on. They regularly add to their blacklist, much more often than other stablecoins. Were it seized by the DOJ, they could simply freeze all transfers subject to proof of AML/KYC and source of funds analysis. That would nuke the market for them immediately. I believe FTX has some 10+ billion USDT on hand. That'll put a serious hole in their balance sheet. Not to mention whatever would happen to their futures insurance fund when the collateral evaporates. I'm trying to find my source for their balance sheet size, will follow up.
        ikeboy 5y ago
        It's not realistic instantly. Even Madoff's victims got a recovery eventually. From OP we know at least 25% of tether's reserves is in a bank in cash. If it was seized I could see the market heading to 50-75c or so, there will be lots of people that want to gamble on an eventual recovery. I'm very skeptical that FTX has 10B USDT on the balance sheet. OP here says Sam has billions of tether, which makes sense but is not enough to blow them up, and is likely in Alameda being as he says it's for trading, not in FTX. (Of course it's possible that FTX has 10B in USDT deposits, but that belongs to their customers who would be very sad if it nuked but doesn't directly hurt FTX.) Futures insurance fund may be an issue, yes, especially in scenarios where it shifts very rapidly. If you have math on a plausible scenario and total losses across the major markets I'd be interested in seeing it. But you'd have to be looking at several billion in losses or at over 1B directly attributable to FTX for them to go bust - they've raised over a billion and make 350M/year per recent Forbes article, so that's a lot of capital.
- drfxyjhdyfrhgc 5y ago
  It's very easy to short stablecoins on any defi lending platform. Here are some examples: https://app.fulcrum.trade/trade https://app.fulcrum.trade/trade https://app.cream.finance/ https://app.cream.finance/ https://app.aave.com/markets https://app.aave.com/markets 5% is a low cost for a short position that you believe will eventually pay out 100%.
  - dustintrex 5y ago
    That 100% payout will be in crypto, whose value in USD terms is going to tank if Tether implodes. And that's assuming the lending platform in question survives the carnage.
    - somebodythere 5y ago
      Short against USDC then.
    - drfxyjhdyfrhgc 5y ago
      The payout will be in a different stablecoin. USDC won't collapse with Tether.
      - dustintrex 5y ago
        Would you gamble your entire investment on that? If Tether collapses, there will be major outflows from all stablecoins, and we'll find out which ones have been swimming naked.
        drfxyjhdyfrhgc 5y ago
        I would. I'd wager Tether's collapse would cause inflows to other stablecoins. It's also worth noting that smart contract based stablecoins, such as DAI, are incapable of being under-collateralized.
        dustintrex 5y ago
- tim333 5y ago
  You can short Tether against USD on Kraken. It's rather expensive though.

Bennett has done a fantastic job. There WILL be a movie about this company when investors lose faith. Like next decades, "the big short".

by adflux 5y ago

Bennett has done a fantastic job. There WILL be a movie about this company when investors lose faith. Like next decades, "the big short".

fny 5y ago

But how exactly do you short stablecoins? You can't and even if you did the game is heavily rigged against you. If you remember in the movie, Cohodes got his ass handed to him as banks margin called him out of his position and that's in a regulated market. These guys own their market and the exchange on which it originates. There's no way to even verify if they received dollars for every tether issued and by some miracle the yield on USDT is incredible. You'd be losing 4-5% a year guaranteed holding a short position.

fabianhjr 5y ago
All shorting consists on 5 steps: 1. Borrow 2. Sell 3. Wait 4. Buy back 5. Close There is USDT lending available. Even more, there is decentralized collateralized lending available. If someone wanted to short USDT there are plenty of opportunities to do so. (And there might be a lot of people doing so, specially now that the shadyness is being reported on some of the more reputable traditional newspapers)
- alisonkisk 5y ago
  Does "5. Close" happen? In cryptocurrency it's usually some form of "4.5 Rug pull"
- smabie 5y ago
  Also you can trade the USDT/USD swaps as well
  - arcticbull 5y ago
    You can only do that at exchanges that are seriously exposed to systemic Tether risk and will also collapse if USDT goes down. So even if you're right, you won't get paid on USDT/USD swaps. Shorting USDT at Bitfinex is like shorting Caesars chips at Caesars. News flash: if Caesars goes bankrupt just which cashier do you think is gonna give you which dollars?
    - yokem55 5y ago
      At this moment you can deposit defi borrowed usdt into Coinbase pro, swap it for usdc there, and then swap the usdc back to USD and withdraw to your bank account. Then if tether collapses you'd be able to pay back the borrowed usdt for pennies on the dollar.
      - pclmulqdq 5y ago
        The first step (borrowing usdt on a defi platform) needs you to collateralize that loan with some other form of cryptocurrency. You are forced to have exposure to crypto to make the trade that shorts it.
        saalweachter 5y ago
        Have you ever seen the bit in a show (or, hell, been caught by a street hustler) where someone asks for help breaking a large bill, and then after a few rounds of confusion and money being handed back and forth walks away with everything?
ikeboy 5y ago
Very easy to do on FTX or aave for basically as much size as you'd like. Yes, it costs 4-5% a year to short. If it blows up in the next few years you'd make a killing though.
- arcticbull 5y ago
  If USDT blows up FTX goes down with it, and they won't pay you out. That's just a 4-5% annual donation to SBF.
  - ikeboy 5y ago
    Why do you think that? They treat USDT as any other coin, has no special status in the system. FTX is very well capitalized. Can you show me even napkin math that shows FTX going under if USDT blows up in a realistic scenario? (Going from $1 to $0 instantly isn't realistic.)
    - arcticbull 5y ago
      Why isn't going from $1 to $0 not realistic? Tether is completely centralized and has the ability to prevent token transfers on all major networks it operates on. They regularly add to their blacklist, much more often than other stablecoins. Were it seized by the DOJ, they could simply freeze all transfers subject to proof of AML/KYC and source of funds analysis. That would nuke the market for them immediately. I believe FTX has some 10+ billion USDT on hand. That'll put a serious hole in their balance sheet. Not to mention whatever would happen to their futures insurance fund when the collateral evaporates. I'm trying to find my source for their balance sheet size, will follow up.
      - ikeboy 5y ago
        It's not realistic instantly. Even Madoff's victims got a recovery eventually. From OP we know at least 25% of tether's reserves is in a bank in cash. If it was seized I could see the market heading to 50-75c or so, there will be lots of people that want to gamble on an eventual recovery. I'm very skeptical that FTX has 10B USDT on the balance sheet. OP here says Sam has billions of tether, which makes sense but is not enough to blow them up, and is likely in Alameda being as he says it's for trading, not in FTX. (Of course it's possible that FTX has 10B in USDT deposits, but that belongs to their customers who would be very sad if it nuked but doesn't directly hurt FTX.) Futures insurance fund may be an issue, yes, especially in scenarios where it shifts very rapidly. If you have math on a plausible scenario and total losses across the major markets I'd be interested in seeing it. But you'd have to be looking at several billion in losses or at over 1B directly attributable to FTX for them to go bust - they've raised over a billion and make 350M/year per recent Forbes article, so that's a lot of capital.
drfxyjhdyfrhgc 5y ago
It's very easy to short stablecoins on any defi lending platform. Here are some examples: https://app.fulcrum.trade/trade https://app.fulcrum.trade/trade https://app.cream.finance/ https://app.cream.finance/ https://app.aave.com/markets https://app.aave.com/markets 5% is a low cost for a short position that you believe will eventually pay out 100%.
- dustintrex 5y ago
  That 100% payout will be in crypto, whose value in USD terms is going to tank if Tether implodes. And that's assuming the lending platform in question survives the carnage.
  - somebodythere 5y ago
    Short against USDC then.
  - drfxyjhdyfrhgc 5y ago
    The payout will be in a different stablecoin. USDC won't collapse with Tether.
    - dustintrex 5y ago
      Would you gamble your entire investment on that? If Tether collapses, there will be major outflows from all stablecoins, and we'll find out which ones have been swimming naked.
      - drfxyjhdyfrhgc 5y ago
        I would. I'd wager Tether's collapse would cause inflows to other stablecoins. It's also worth noting that smart contract based stablecoins, such as DAI, are incapable of being under-collateralized.
        dustintrex 5y ago
tim333 5y ago
You can short Tether against USD on Kraken. It's rather expensive though.