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I’m not saying tether is fully backed (I think it’s been admitted they’re not), but do people not understand how it even ostensibly works? When people sell oth

I’m not saying tether is fully backed (I think it’s been admitted they’re not), but do people not understand how it even ostensibly works? When people sell other crypto for tether/USDC, they are essentially “buying” tether/USDC. Which tether and circle “print” out of thin air… but ostensibly back by selling the other crypto they just received for real dollars. With the huge crash, a lot of people were selling their crypto.

gruez 5y ago
>When people sell other crypto for tether/USDC, they are essentially “buying” tether/USDC. Which tether and circle “print” out of thin air… but ostensibly back by selling the other crypto they just received for real dollars. You're missing the previous links in the chain. When you sell your crypto at an exchange, your counterparty isn't the exchange, it's another person who wants to buy crypto. Therefore you making the trade doesn't cause new USDT to be printed. That happens before the trade, when your counterparty made the deposit. Money flowing into the cryptocurrency ecosystem causes tethers to be printed; money flowing out causes it to be destroyed. If people were all simultaneously cashing out (on net), it would stand to reason that tethers be destroyed, not issued.
- qeternity 5y ago
  Precisely. So many Tether defenders simply have no idea how exchanges or markets work for that matter. It's truly scary how much confidence people have in topics they do not understand.
- zhoujianfu 5y ago
  If I were tether themselves, I know I’d be personally market making every usdt trading pair on every major exchange myself. And when people bought my tethers for crypto I’d turn around and sell the crypto for usd and issue more usdt.
  - gruez 5y ago
    That sounds like a lot of work for nothing? Suppose 1 BTC = $50k >And when people bought my tethers for crypto now you have 1 BTC, and $49,995 (assuming $10 spread and you were a maker) USDT (aka IOUs) outstanding >I’d turn around and sell the crypto for usd now you have 0 BTC, $49,995 USDT outstanding, and $50,005 (assuming $10 spread and you were a maker) From a balance sheet point of view that looks like a pretty standard market making operation. You don't need to be issuing unbacked IOUs for it to work. The only advantage that tether has is access to the initial $50k capital for market making, but you don't need to be a stablecoin issuer to pull this off. You could just as well embezzle an exchange's funds directly. Actually come to think of it, if you wanted to market make and you were ifinex/tether, the biggest advantage you can get isn't the free funds you can issue/embezzle, it's the differentiated order flow you can get as an exchange operator. You can categorize order flows as toxic/non-toxic[1] (maybe based on account trading history?), and keep them for yourself to internalize. [1] https://www.ceedtrading.com/glossary/toxic-order-flow/ https://www.ceedtrading.com/glossary/toxic-order-flow/

gruez 5y ago

>When people sell other crypto for tether/USDC, they are essentially “buying” tether/USDC. Which tether and circle “print” out of thin air… but ostensibly back by selling the other crypto they just received for real dollars. You're missing the previous links in the chain. When you sell your crypto at an exchange, your counterparty isn't the exchange, it's another person who wants to buy crypto. Therefore you making the trade doesn't cause new USDT to be printed. That happens before the trade, when your counterparty made the deposit. Money flowing into the cryptocurrency ecosystem causes tethers to be printed; money flowing out causes it to be destroyed. If people were all simultaneously cashing out (on net), it would stand to reason that tethers be destroyed, not issued.

qeternity 5y ago
Precisely. So many Tether defenders simply have no idea how exchanges or markets work for that matter. It's truly scary how much confidence people have in topics they do not understand.
zhoujianfu 5y ago
If I were tether themselves, I know I’d be personally market making every usdt trading pair on every major exchange myself. And when people bought my tethers for crypto I’d turn around and sell the crypto for usd and issue more usdt.
- gruez 5y ago
  That sounds like a lot of work for nothing? Suppose 1 BTC = $50k >And when people bought my tethers for crypto now you have 1 BTC, and $49,995 (assuming $10 spread and you were a maker) USDT (aka IOUs) outstanding >I’d turn around and sell the crypto for usd now you have 0 BTC, $49,995 USDT outstanding, and $50,005 (assuming $10 spread and you were a maker) From a balance sheet point of view that looks like a pretty standard market making operation. You don't need to be issuing unbacked IOUs for it to work. The only advantage that tether has is access to the initial $50k capital for market making, but you don't need to be a stablecoin issuer to pull this off. You could just as well embezzle an exchange's funds directly. Actually come to think of it, if you wanted to market make and you were ifinex/tether, the biggest advantage you can get isn't the free funds you can issue/embezzle, it's the differentiated order flow you can get as an exchange operator. You can categorize order flows as toxic/non-toxic[1] (maybe based on account trading history?), and keep them for yourself to internalize. [1] https://www.ceedtrading.com/glossary/toxic-order-flow/ https://www.ceedtrading.com/glossary/toxic-order-flow/