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I haven't looked into it, but it looks like they lied about being backed by cash (or at least, somehow implied it). Now they claim to be backed by cash and cas
by norswap 5y ago
I haven't looked into it, but it looks like they lied about being backed by cash (or at least, somehow implied it).
Now they claim to be backed by cash and cash equivalents, namely a lot of "commercial paper" (short term debt obligations), which is widely believed to be in Chinese markets.
For some reason though, they won't reveal exactly what it is they hold. It could be that they think the market will not react kindly to the kind of assets they hold, or that they entered some kind of weird agreement no to reveal them.
I highly doubt they're not backed by assets whose face value adds up to the total UST distribution, because multiple auditors have said they were fully backed. But it is possibly that some of these assets are junk that won't (or have a high risk not to) redeem at face value.
Even in very bad scenarios, UST could fall to 0.8$ if 20% of Tether's asset default (and they burned through profits). Problematic but not quite such as a risk as it going to zero, which is why people still hold it.
- alasdair_ 5y ago> multiple auditors have said they were fully backed. Which auditors? The only ones I know of quit before making a statement (which is a very bad sign).
- rglullis 5y agoThe problem is worse than that. They also use their BTC holdings as part of their assets they hold, which allows them to pump the BTC/USDT rate (print USDT, use it to buy BTC, see prices of BTC going up because of artificial demand, say "BTC is up, our holdings have increased in value and we can print more", rinse and repeat.
- rpmisms 5y agoIsn't that just a pump and dump?
- KarlKemp 5y agoNo. "Pump[ing]" by buying something is entirely legal. And the price should come down just as much when you are trying to cash in, so the mechanism doesn't really work, or anyone with enough money could just do it repeatedly using whatever traded asset they want. "Pump and dump" refers to promoting some investment by other means, usually spreading some false news.
- tehlike 5y agoIt can be still pump and dump because rising price induces fomo.
- TomSwirly 5y ago> "Pump[ing]" by buying something is entirely legal. I beg to differ. The Securities and Exchanges Act of 1934 criminalizes all sorts of things that are deemed market manipulation, and inflating the price of a security by false trading, i.e. selling it to yourself or a conspirator, is one of the very things it was created to prohibit.
- rglullis 5y agoMarket manipulation, yes. Pump and dump is a subset of it.
- tehlike 5y agoOnce they do circular dependency with BTC and tether, they might even go one step further and back 1000 tethers with 1000 tethers they hold themselves.
- tehlike 5y agoNo auditor audited tether. Tether got few attestations from an unknown company a few times, but they have also been caught red handed by NYAG for moving funds a day before attestation snapshot is taken, and moved it the day after. For the uninitiated, attestation verifies a single point in time, so it's easy to game it. And this is something tether has done.
- norswap 5y agoIt might indeed have been such an attestation.
- empraptor 5y agomakes me wonder if they loaned Tethers to their buddies (or themselves) so they can buy cryptos then "backed" the Tethers with the loans. wouldn't surprise me given the kind of unscrupulous scumbags that are often found operating crypto related ventures.