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> Oh, I understand why it hasn't collapsed already. I feel stupid, but I still actually don't. If considerably more people will want to sell it than there is a

by krick 5y ago

> Oh, I understand why it hasn't collapsed already. I feel stupid, but I still actually don't. If considerably more people will want to sell it than there is a demand for it, the price will have to go down, no matter what, as long as "price" is anything more than a decorative label on the exchange's website and you actually can swap it for any currency at all. So, either the exchange should cover all that demand, which doesn't sound reasonable (I'm not sure it's realistic, and even if it was — why would they do that? if this happens, Tether is dead, they can either abandon it or go down with it), or there actually must be some demand. So, I assume it's the latter. But why would there be any demand for it, if everybody (basically) knows that USDT is a scam? It isn't the same thing as "SHIBA is a scam" or whatever, because even if everyone agrees SHIBA is essentially worthless, people are buying it to speculate, so it can hold onto a belief that others believe it will grow. You cannot speculate on USDT, since USDT cannot grow by definition, it's a stablecoin (and not the only one — there are others with better reputation). It can only crash. So why doesn't it?

gnopgnip 5y ago
While crypto prices are rising generally there are more people putting money in and fewer people taking money out. Even a short shift in the market isn't enough to change that. But a longer term crypto recession would have a run on the exchanges, many would want to cash out, and the price isn't going to be stable
michaelmrose 5y ago
If I understand correctly nobody has a useful handle to profit from killing it and all the players have an incentive in it's continued existence. Killing it would require large scale collaboration among individuals who collectively would all be hurt.
- tylerrobinson 5y ago
  > all the players have an incentive in it's continued existence Even retail investors? Why do they hold a stablecoin that has any risk at all, with no upside? What is the retail investor’s end game here?
  - deleted 5y ago
    [deleted]
  - graeme 5y ago
    Large yields on stablecoins, inability to bank on KYC exchanges, desire to gamble on leveraged exchanges like Binance. In each case no one believes it will collapse while they hold.
    - tylerrobinson 5y ago
      Can you elaborate on how a stablecoin gives the holder any yields? I thought the whole idea is that it doesn’t appreciate or depreciate.
      - graeme 5y ago
        You can lend them to centralized lending platforms such as Celsius, or on Defi platforms, for 9+% APR. This is a highly risky activity pitched as not risky.
        tylerrobinson 5y ago
        Ah, thank you for explaining. I assume the idea here is that the borrower of the stablecoin is then using it to make a bet on the continued price appreciation of some other currency, making it a leveraged bet. Crazy risky. Who is supposed to enforce the terms of the borrowing? Or is it done programmatically somehow?
        graeme 5y ago
        Yup, exactly. Most used seem to be loans to buy more crypto. With centralized lenders (Nexo, Celsius, Blockfi) you sign over ownership of your crypto to them and hope they will meet their promises. In Defi it’s programmatic. I am less familiar with the mechanics there. I figure there is massive risk when I see 20+% yields but do not understand the system.
jcranmer 5y ago
To make the price of USDT (or anything, for that matter) go down, someone who holds it must be trying and failing to offload it at the current price. Conversely, it's possible to prop up the price by being willing to buy fairly large amounts at the current price, burning your cash stockpile in the process. Meaningfully shorting the price of USDT requires getting access to a large stockpile without adding to Tether's (or its confederates') reserves and burning through their entire reserves. There are two ways this can be done. The first is to be a large holder of USDT already, one whose nominal position is greater than the entire reserve pile, and attempt to liquidate it in favor of USD (this is basically a bank run). Or you can artificially induce this by borrowing enough USDT and selling it to either soak up the entire reserves or induce others to do so as well. But Tether's reserves are probably substantial enough to make this latter option infeasible except for the very largest financial institutions. Now the largest holders of USDT are those exchanges that immediately convert any USD you put into them into USDT. And so long as you don't try to withdraw that USDT for real USD, they're unlikely to sell any stocks of USDT they hold (in your name or in their own name). Effectively, this means that so long as there is a net inflow of hard currency into the cryptocurrency ecosystem, no Tether crisis is likely to happen. However, should there be a sustained net outflow... well, we'll discover who the equivalent of Lehman Brothers in the cryptocurrency world is.

by krick 5y ago

gnopgnip 5y ago

While crypto prices are rising generally there are more people putting money in and fewer people taking money out. Even a short shift in the market isn't enough to change that. But a longer term crypto recession would have a run on the exchanges, many would want to cash out, and the price isn't going to be stable

michaelmrose 5y ago

If I understand correctly nobody has a useful handle to profit from killing it and all the players have an incentive in it's continued existence. Killing it would require large scale collaboration among individuals who collectively would all be hurt.

tylerrobinson 5y ago
> all the players have an incentive in it's continued existence Even retail investors? Why do they hold a stablecoin that has any risk at all, with no upside? What is the retail investor’s end game here?
- deleted 5y ago
  [deleted]
- graeme 5y ago
  Large yields on stablecoins, inability to bank on KYC exchanges, desire to gamble on leveraged exchanges like Binance. In each case no one believes it will collapse while they hold.
  - tylerrobinson 5y ago
    Can you elaborate on how a stablecoin gives the holder any yields? I thought the whole idea is that it doesn’t appreciate or depreciate.
    - graeme 5y ago
      You can lend them to centralized lending platforms such as Celsius, or on Defi platforms, for 9+% APR. This is a highly risky activity pitched as not risky.
      - tylerrobinson 5y ago
        Ah, thank you for explaining. I assume the idea here is that the borrower of the stablecoin is then using it to make a bet on the continued price appreciation of some other currency, making it a leveraged bet. Crazy risky. Who is supposed to enforce the terms of the borrowing? Or is it done programmatically somehow?
        graeme 5y ago
        Yup, exactly. Most used seem to be loans to buy more crypto. With centralized lenders (Nexo, Celsius, Blockfi) you sign over ownership of your crypto to them and hope they will meet their promises. In Defi it’s programmatic. I am less familiar with the mechanics there. I figure there is massive risk when I see 20+% yields but do not understand the system.

jcranmer 5y ago

To make the price of USDT (or anything, for that matter) go down, someone who holds it must be trying and failing to offload it at the current price. Conversely, it's possible to prop up the price by being willing to buy fairly large amounts at the current price, burning your cash stockpile in the process. Meaningfully shorting the price of USDT requires getting access to a large stockpile without adding to Tether's (or its confederates') reserves and burning through their entire reserves. There are two ways this can be done. The first is to be a large holder of USDT already, one whose nominal position is greater than the entire reserve pile, and attempt to liquidate it in favor of USD (this is basically a bank run). Or you can artificially induce this by borrowing enough USDT and selling it to either soak up the entire reserves or induce others to do so as well. But Tether's reserves are probably substantial enough to make this latter option infeasible except for the very largest financial institutions. Now the largest holders of USDT are those exchanges that immediately convert any USD you put into them into USDT. And so long as you don't try to withdraw that USDT for real USD, they're unlikely to sell any stocks of USDT they hold (in your name or in their own name). Effectively, this means that so long as there is a net inflow of hard currency into the cryptocurrency ecosystem, no Tether crisis is likely to happen. However, should there be a sustained net outflow... well, we'll discover who the equivalent of Lehman Brothers in the cryptocurrency world is.