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After that hedge fund issued a $1M reward on Tether backing I did some more investigation and the thing I realized is that 1) Tether is inherently backed by BS

by kirse 5y ago

After that hedge fund issued a $1M reward on Tether backing I did some more investigation and the thing I realized is that 1) Tether is inherently backed by BS and 2) crafting any sort of Tether short is near impossible because everyone in the game - Tether, the exchanges, etc. - will all be against you if you're winning in the short. There's that scene in "The Big Short" where Mark Baum and crew know the subprime bonds are junk but they visit the ratings agency and they're not downgrading. [1] That same thing will happen if crypto has a major run. The exchanges already conveniently "go down" when Bitcoin dumps even now. Every single time, it's become a running joke. If we had a serious Tether blow-up or BTC move that would rock the boat, everything would get locked down and you'd have no way to buy back your Tether short for pennies on the dollar. When tril/billions are on the line, ain't no way you're getting your millions, especially in this unregulated wild west. [1] https://www.youtube.com/watch?v=9xZx1lf2tvs https://www.youtube.com/watch?v=9xZx1lf2tvs

oarabbus_ 5y ago
>That same thing will happen if crypto has a major run. The exchanges already conveniently "go down" when Bitcoin dumps even now To this point specifically: is there any proof this is malicious? Amazon, Facebook, Google have all had outages before; shouldn't we apply Hanlon's Razor when a cryptocurrency exchange fails to serve requests during a massive traffic spike?
- graeme 5y ago
  The exchanges never go down when the crypto price rises, only when it falls. Further, an honest exchange makes money on people’s trades. Going down when volume is high means giving up peak profits. Equivalent of amazon reliably going down on black friday.
  - jimmydorry 5y ago
    Most exchanges started as garage-based operations and most were built quickly or shodily. It wouldn’t be surprising if most of them have enormous piles of technical debt, especially as the number of alt coins exploded. Making a robust exchange is hard and requires an amazon level of development. Huge movements in price correlate with massive increases in volume. The simplest explanation remains firmly in the realm of poor platform, in my mind, rather than nefarious and illegal manipulation. Just look at Robinhood. They offer a sleek looking product, but their crypto offering falls down under load (positive and negative) regularly.
  - patchtopic 5y ago
    This has occasionally been mentioned elsewhere about some of the sketchier exchanges. I have never seen it mentioned with any of the exchanges I use - is there any non-anecdotal confirmation of this phenomena?
    - graeme 5y ago
      Here is Coinbase having an outage during last big dump: https://mobile.twitter.com/CoinbaseSupport/status/1453447862268809218 https://mobile.twitter.com/CoinbaseSupport/status/1453447862...
  - oarabbus_ 5y ago
    Well, I still don't think that's concrete evidence of maliciousness. First and most importantly, the crypto market can drop 15-20%+ in a 24 hour period; similar rises take multiple days on high-volume, large-cap coins. This is actually not specific to cryptocurrencies, there's a well known phrase in the equity markets "bulls take the stairs, bears take the elevator (or 'the window')". Similarly, with such volatile assets, when the price falls dramatically, many people are running for the exits. On the other hand, when the price is skyrocketing, many people have a "hodl" mentality, think the price will rise up further, etc. If the price falls off a cliff everyone is trying to sell, but when the price spikes many feel "I missed my chance, better wait for a dip" and aren't rushing to buy.
dcolkitt 5y ago
You can easily short Tether on DeFi platforms that can’t be locked down.
- arcticbull 5y ago
  Not really, and you shouldn't try. The highest recorded price for 1 USDT was $1000 at a centralized exchange, and do you really trust your counter-party in a DeFi transaction not to get flash-loaned into oblivion or to rely on a bad oracle? [1] You also have to post crypto collateral which may get rekt alongside a Tether collapse. Who even knows what that might look like? The only way to win is not to play. [1] http://rekt.news http://rekt.news
  - lemmonii 5y ago
    The only realistic way to short tether is to take a DeFi Tether loan and use some other stablecoin (You must trust that it's peg will hold longer than USDT's) as collateral.
paulgb 5y ago
I’ve been shorting a few bitcoin-related public companies on the theory that in a run on Tether they will have to liquidate large bitcoin holdings and bring down the rest of the market. It’s not as direct, but I’m less worried about counterparty risk. I wrote up my thesis here: https://paulbutler.org/2021/betting-against-bitcoin/ https://paulbutler.org/2021/betting-against-bitcoin/
- hossbeast 5y ago
  Very interesting read, and it's refreshing to read some contrary opinions on the topic.
  - vkou 5y ago
    The only contrary opinion would be the obvious one - that their correlation to tether's fortunes are not 1:1, and that shorting them gives you a bounded upside, and an unlimited, completely uncorrelated downside. If the Fed prints another trillion dollars tomorrow, their stock price could double, wiping out your short...
- tuesdayrain 5y ago
  >I’ve been shorting a few bitcoin-related public companies on the theory that in a run on Tether they will have to liquidate large bitcoin holdings I doubt a run on tether would even cause a 50% drop in BTC price. Hope your account doesn't blow up when Bitcoin inevitably reaches 1 million per coin ;)
  - panarky 5y ago
    Either markets work or they don't. Sure, in the short term, unregulated markets can be manipulated. But Tether's been around more than seven years, more than enough time for the "smart money" to profit by obliterating them. You can sell Tether on Coinbase for U.S. Dollar deposits to your bank account. The fact that Tether maintains its 1:1 peg to the dollar is a signal that maybe all the smart guys who have been confidently predicting its imminent and inevitable failure for the last seven years might be missing something.
toomuchtodo 5y ago
https://news.ycombinator.com/item?id=28792735 https://news.ycombinator.com/item?id=28792735

by kirse 5y ago

oarabbus_ 5y ago

>That same thing will happen if crypto has a major run. The exchanges already conveniently "go down" when Bitcoin dumps even now To this point specifically: is there any proof this is malicious? Amazon, Facebook, Google have all had outages before; shouldn't we apply Hanlon's Razor when a cryptocurrency exchange fails to serve requests during a massive traffic spike?

graeme 5y ago
The exchanges never go down when the crypto price rises, only when it falls. Further, an honest exchange makes money on people’s trades. Going down when volume is high means giving up peak profits. Equivalent of amazon reliably going down on black friday.
- jimmydorry 5y ago
  Most exchanges started as garage-based operations and most were built quickly or shodily. It wouldn’t be surprising if most of them have enormous piles of technical debt, especially as the number of alt coins exploded. Making a robust exchange is hard and requires an amazon level of development. Huge movements in price correlate with massive increases in volume. The simplest explanation remains firmly in the realm of poor platform, in my mind, rather than nefarious and illegal manipulation. Just look at Robinhood. They offer a sleek looking product, but their crypto offering falls down under load (positive and negative) regularly.
- patchtopic 5y ago
  This has occasionally been mentioned elsewhere about some of the sketchier exchanges. I have never seen it mentioned with any of the exchanges I use - is there any non-anecdotal confirmation of this phenomena?
  - graeme 5y ago
    Here is Coinbase having an outage during last big dump: https://mobile.twitter.com/CoinbaseSupport/status/1453447862268809218 https://mobile.twitter.com/CoinbaseSupport/status/1453447862...
- oarabbus_ 5y ago
  Well, I still don't think that's concrete evidence of maliciousness. First and most importantly, the crypto market can drop 15-20%+ in a 24 hour period; similar rises take multiple days on high-volume, large-cap coins. This is actually not specific to cryptocurrencies, there's a well known phrase in the equity markets "bulls take the stairs, bears take the elevator (or 'the window')". Similarly, with such volatile assets, when the price falls dramatically, many people are running for the exits. On the other hand, when the price is skyrocketing, many people have a "hodl" mentality, think the price will rise up further, etc. If the price falls off a cliff everyone is trying to sell, but when the price spikes many feel "I missed my chance, better wait for a dip" and aren't rushing to buy.

dcolkitt 5y ago

You can easily short Tether on DeFi platforms that can’t be locked down.

arcticbull 5y ago
Not really, and you shouldn't try. The highest recorded price for 1 USDT was $1000 at a centralized exchange, and do you really trust your counter-party in a DeFi transaction not to get flash-loaned into oblivion or to rely on a bad oracle? [1] You also have to post crypto collateral which may get rekt alongside a Tether collapse. Who even knows what that might look like? The only way to win is not to play. [1] http://rekt.news http://rekt.news
- lemmonii 5y ago
  The only realistic way to short tether is to take a DeFi Tether loan and use some other stablecoin (You must trust that it's peg will hold longer than USDT's) as collateral.

paulgb 5y ago

I’ve been shorting a few bitcoin-related public companies on the theory that in a run on Tether they will have to liquidate large bitcoin holdings and bring down the rest of the market. It’s not as direct, but I’m less worried about counterparty risk. I wrote up my thesis here: https://paulbutler.org/2021/betting-against-bitcoin/ https://paulbutler.org/2021/betting-against-bitcoin/

hossbeast 5y ago
Very interesting read, and it's refreshing to read some contrary opinions on the topic.
- vkou 5y ago
  The only contrary opinion would be the obvious one - that their correlation to tether's fortunes are not 1:1, and that shorting them gives you a bounded upside, and an unlimited, completely uncorrelated downside. If the Fed prints another trillion dollars tomorrow, their stock price could double, wiping out your short...
tuesdayrain 5y ago
>I’ve been shorting a few bitcoin-related public companies on the theory that in a run on Tether they will have to liquidate large bitcoin holdings I doubt a run on tether would even cause a 50% drop in BTC price. Hope your account doesn't blow up when Bitcoin inevitably reaches 1 million per coin ;)
- panarky 5y ago
  Either markets work or they don't. Sure, in the short term, unregulated markets can be manipulated. But Tether's been around more than seven years, more than enough time for the "smart money" to profit by obliterating them. You can sell Tether on Coinbase for U.S. Dollar deposits to your bank account. The fact that Tether maintains its 1:1 peg to the dollar is a signal that maybe all the smart guys who have been confidently predicting its imminent and inevitable failure for the last seven years might be missing something.

toomuchtodo 5y ago

https://news.ycombinator.com/item?id=28792735 https://news.ycombinator.com/item?id=28792735