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Can anybody with an understanding of the matter ELI5 to me how it can be that, given all the uncertainty, 1 Tether is still trading for ~1 USD on the major exch

by rsp1984 5y ago

Can anybody with an understanding of the matter ELI5 to me how it can be that, given all the uncertainty, 1 Tether is still trading for ~1 USD on the major exchanges? That price seems to be determined by the open market. There are competing stablecoins. Is everybody just so confident that Tether is the real deal?

zatertip 5y ago
No short of sufficient size yet
- gruez 5y ago
  How would a short change things? If it did push down the price, all that would mean is that tether could rebuy them at a discount and make a profit.
teh_infallible 5y ago
It certainly is strange that Tether hasn’t been shut down for counterfeiting, which is essentially what they are doing. I assume people in the banking industry allow them to operate as a way to hold leverage over the crypto markets and absorb capital that would otherwise flow to altcoins.
- gruez 5y ago
  > It certainly is strange that Tether hasn’t been shut down for counterfeiting, which is essentially what they are doing. It really isn't counterfeiting. If you made fake hundred dollar bills and passed them off, that'll be counterfeiting. However, if you decided to give a bunch of people $100 IOUs and claim they're "totally backed by real dollars in a vault somewhere", but they're not, then it's just fraud. The NY AG and/or CFPB were able to prosecute/fine them for that, but they also got rid of the "totally backed by real dollars in a vault somewhere" claim, so whether they're currently committing fraud is unclear.
- leoh 5y ago
  You can’t pull a rug out from under your own feet
- repomies69 5y ago
  There are some other stablecoins, like USDC (about half the size of Tether. Why would Tether need to be closed down while USC not? Or do you think all of them should be shut down? Tether is just an IOU note. I don't have problems with IOU notes, unless someone forces me to use them. Personally I haven't used tether and probably never will, however I don't have any problem if someone else wants to use it.
  - arez 5y ago
    you don't understand the problem of printing IOUs and buying btc with it. You don't have to care, but you will if everything goes to zero
Qworg 5y ago
Why do you assume the price is determined by the open market? Who are the large scale crypto entities that would bet against Tether? This happens every time the price dips, but the current best explanation/theory is that Tether prints more USDT with BTC backing from exchanges, who then use that USDT to buy BTC from the market. The issue is that the exchange is part of that loop.
drexlspivey 5y ago
The price is not being determined on the open market, Tether's whole job is to maintain the peg at 1-to-1. Contrary to the FUD that is being recycled in here on all Tether topics, Tether doesn't print new money just because they feel like it, they do it in response to the demand for USDT in order to maintain the price at $1. Yesterday cryptos crashed hard, people started moving out of their crypto positions and into stablecoins. Demand for stablecoins increased bringing their price > $1. Tether printed USDT and exchanged them for USD (and put the USD into their reserves) in order to bring the price down and maintain the peg. When the opposite happens they will sell some of their USD reserves for USDT.
- scrubs 5y ago
  Huh? They peg on Saturday? (OP's ref'd txn has a Sat date on it. They wait to peg only for nice round numbers like $1B exactly? No cents? No decimal? They don't peg end-of-day, or at market-close, month or quarter end? Is there an official financial notification of peg events like a crypto-currency corporate event calendar? Nobody should be surprised because pegging is telescoped ahead right? Is there an offset in another block chain showing USD movement? Surely they didn't just phone the bank (broker) and do a regular ACH transfer, right? They used non main stream tooling cause they're the cool kids? And where's proof USD moved in offset? C'mon ... there's nothing here to take seriously. Heck, based on this nonsense I can peg USD out of my garage with carrots. Wanna know what? Wholefoods produce then straight to the keyboard. See you guys on the flip side with CyrptoCarrots, the organic sustainable cyrpto coin.
  - drexlspivey 5y ago
    I am not quite following what you are saying. When a currency is pegged to another, the central bank is actively buying and selling it's currency on the secondary market in order to maintain the peg ratio. It certainly doesn't happen at the end of every month or quarter.

zatertip 5y ago

No short of sufficient size yet

gruez 5y ago
How would a short change things? If it did push down the price, all that would mean is that tether could rebuy them at a discount and make a profit.

teh_infallible 5y ago

It certainly is strange that Tether hasn’t been shut down for counterfeiting, which is essentially what they are doing. I assume people in the banking industry allow them to operate as a way to hold leverage over the crypto markets and absorb capital that would otherwise flow to altcoins.

gruez 5y ago
> It certainly is strange that Tether hasn’t been shut down for counterfeiting, which is essentially what they are doing. It really isn't counterfeiting. If you made fake hundred dollar bills and passed them off, that'll be counterfeiting. However, if you decided to give a bunch of people $100 IOUs and claim they're "totally backed by real dollars in a vault somewhere", but they're not, then it's just fraud. The NY AG and/or CFPB were able to prosecute/fine them for that, but they also got rid of the "totally backed by real dollars in a vault somewhere" claim, so whether they're currently committing fraud is unclear.
leoh 5y ago
You can’t pull a rug out from under your own feet
repomies69 5y ago
There are some other stablecoins, like USDC (about half the size of Tether. Why would Tether need to be closed down while USC not? Or do you think all of them should be shut down? Tether is just an IOU note. I don't have problems with IOU notes, unless someone forces me to use them. Personally I haven't used tether and probably never will, however I don't have any problem if someone else wants to use it.
- arez 5y ago
  you don't understand the problem of printing IOUs and buying btc with it. You don't have to care, but you will if everything goes to zero

Qworg 5y ago

Why do you assume the price is determined by the open market? Who are the large scale crypto entities that would bet against Tether? This happens every time the price dips, but the current best explanation/theory is that Tether prints more USDT with BTC backing from exchanges, who then use that USDT to buy BTC from the market. The issue is that the exchange is part of that loop.

drexlspivey 5y ago

The price is not being determined on the open market, Tether's whole job is to maintain the peg at 1-to-1. Contrary to the FUD that is being recycled in here on all Tether topics, Tether doesn't print new money just because they feel like it, they do it in response to the demand for USDT in order to maintain the price at $1. Yesterday cryptos crashed hard, people started moving out of their crypto positions and into stablecoins. Demand for stablecoins increased bringing their price > $1. Tether printed USDT and exchanged them for USD (and put the USD into their reserves) in order to bring the price down and maintain the peg. When the opposite happens they will sell some of their USD reserves for USDT.

scrubs 5y ago
Huh? They peg on Saturday? (OP's ref'd txn has a Sat date on it. They wait to peg only for nice round numbers like $1B exactly? No cents? No decimal? They don't peg end-of-day, or at market-close, month or quarter end? Is there an official financial notification of peg events like a crypto-currency corporate event calendar? Nobody should be surprised because pegging is telescoped ahead right? Is there an offset in another block chain showing USD movement? Surely they didn't just phone the bank (broker) and do a regular ACH transfer, right? They used non main stream tooling cause they're the cool kids? And where's proof USD moved in offset? C'mon ... there's nothing here to take seriously. Heck, based on this nonsense I can peg USD out of my garage with carrots. Wanna know what? Wholefoods produce then straight to the keyboard. See you guys on the flip side with CyrptoCarrots, the organic sustainable cyrpto coin.
- drexlspivey 5y ago
  I am not quite following what you are saying. When a currency is pegged to another, the central bank is actively buying and selling it's currency on the secondary market in order to maintain the peg ratio. It certainly doesn't happen at the end of every month or quarter.