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Luna is a sideshow. Sad for the people who got caught up in it and lost their savings, but Tether is the real game. When Tether blows up the entire crypto syste
by woeirua 4y ago
Luna is a sideshow. Sad for the people who got caught up in it and lost their savings, but Tether is the real game. When Tether blows up the entire crypto system is going to blow up. And this is why Luna was important, because it caused a loss of confidence in stablecoins across the board. For a while this week, it looked like Tether might actually lose its peg and start a death spiral.
- RyanShook 4y agoIsn't Tether actually backed by dollars though? Edit- here are current reserves: https://tether.to/en/transparency https://tether.to/en/transparency
- JumpCrisscross 4y ago> Isn't Tether actually backed by dollars though? No [1]. [1] https://en.wikipedia.org/wiki/Tether_(cryptocurrency)#Questions_about_dollar_reserves https://en.wikipedia.org/wiki/Tether_(cryptocurrency)#Questi...
- gjs278 4y ago
- smcl 4y agoOh good lord no. It's backed by something they originally said was dollars, they then relented after people poked around a bit and confessed it's just a basket of stuff they consider equivalent to dollars (plus probably some dollars I guess?)
- byecomputer 4y agoassets: NFT of tweet, hubcap, the power of love, cracked iPhone 5
- Tao332 4y agoPizza coupons, beer bottles that can be deposited for a refund in California
- vel0city 4y agoI've never thought of can and bottle deposits as cash equivalents, but it checks out. More trustworthy than a lot of corporate paper out there today.
- vkou 4y agoYou're forgetting the 6 trillion-dollar "IOU, I'm good for it, pinky swear" from Deadbeat Dave. I'm assuming that's what their commercial paper holdings resemble.
- selimthegrim 4y agoI guess we have yet to find out if time ain’t Bitcoin.
- pcthrowaway 4y agoFor all we know, a portion of that is now UST that they scooped at a discount. It's "equivalent to dollars"
- dehrmann 4y agoIt's not that bad: https://tether.to/en/transparency/#reports https://tether.to/en/transparency/#reports
- can16358p 4y agoIf it really is, then there is no problem at all. The problem is: how do we trust that this report is true?
- 0x53 4y agoPeople have been concerned about this for quite some time. It seems the answer that question is definitely not. Here is a somewhat dramatic write up: https://www.singlelunch.com/2021/05/19/the-tether-ponzi-scheme/ https://www.singlelunch.com/2021/05/19/the-tether-ponzi-sche...
- lampshades 4y agoIt's like a fractional reserve situation.
- kirse 4y agoMost of Tether's MC increase has come since the pandemic started. Since then roughly $70B+ USD has been handed to Tether, who have used that $70B+ to purchase backing assets at heavily inflated pandemic valuations, corporate paper of suspect ratings, loans of USD for BTC at high prices, etc. This all works if the assets are stable and inflation continues. If the assets behind Tether are deflating or turn to junk they'll increasingly be unable to redeem. Part of keeping this going is not allowing average retail to redeem their Tether for USD (imagine a one-way bank where you can deposit but not withdraw) and working with the larger crypto trading shops to shore up short-term liquidity issues. A partial asset backing is not necessarily a bad thing (fractional reserve banking), but banks are far more firmly backed and regulated by the USG and have FDIC guarantees. The longer assets deflate and recessionary pressures increase the higher statistical likelihood of an eventual bank run on Tether.
- woeirua 4y agoOnce you have a fractional reserve system a run on the banks becomes inevitable.
- ProjectArcturis 4y agoNo - the FDIC has basically eliminated the possibility of an old-fashioned bank run on traditional regulated banks.
- px43 4y agoDISCLAIMER: Never hold Tether, for obvious reasons That said, Tether can't pop the way LUNA/UST did. UST was basically propped up by the value of LUNA such that when the UST peg is lost, more LUNA gets printed to buy back the difference. This causes the LUNA price to crash when the peg is lost, so people who know better try to sell before the rebalancing, crashing the price further, meaning more LUNA needs to get minted for every UST burned, causing rapid deflation. This is all done in a smart contract, and can't really be turned off. Tether is run by humans. Turning USDT back into USD requires actual human interactions. The peg can be lost, and maybe permanently, but it's not going to suddenly go to zero over night.
- skybrian 4y agoIf Tether isn't redeeming fast enough for the traders who want to cash it in, won't the market price drop quickly in the meantime, due to the run on it?
- px43 4y agoYes, the price would go down, but there's no way to fully deplete the backing assets as there is with UST/LUNA. Unless iFinex literally says "lol we took all your money and won't be doing any more Tether redemptions", there will still be some people with faith in the system, presumably hoping for partial redemptions.
- kirse 4y agoUnless iFinex literally says "lol we took all your money and won't be doing any more Tether redemptions" You mean like this insane set of requirements that makes it basically impossible for the average retail investor to redeem their USDT for USD? [1] - $150 for KYC + verification, minimum transaction amount is $100,000 - U.S. citizens must be classified as Eligible Contract Participant to redeem USDT via the website (ECP = individual investors with more than $10 million, individuals with $1 million net worth, businesses, etc) - 0.1% fee for withdrawals up to a maximum of $1,000, which means Tether is redeemable at $0.99 for up to $1 million - Any individual who is a U.S. Person and any entity that is a U.S. Person is prohibited from using the Site or any Services, [...] Exceptions to this policy may be made by Tether, in its sole discretion, for Eligible Contract Participants only, which shall be customers solely of TLTD. - There's more, but those are the highlights [1] https://cryptoslate.com/you-can-redeem-tether-usdt-11-on-tether-to-but-theres-a-catch/ https://cryptoslate.com/you-can-redeem-tether-usdt-11-on-tet...
- lampshades 4y agoI am just waiting for the day Tether is attacked is some coordinated way like this which tanks the value. It will be chaos, unless USDC, USDP, maybe DAI can replace it before it happens.
- charcircuit 4y agoits value will go back up as its value tanking opens a giant arbitrage opportunity where you cash it out for USD.
- vkou 4y agoYou can only take advantage of USDT-USD arbitrage opportunities during a crisis if you ignore this little thing called 'counterparty risk'. Another term for it is 'picking up pennies in front of a steamroller'.
- woeirua 4y agoThe problem with Tether is that the exchanges themselves have huge stakes in it. If Tether were to lose its peg all of a sudden by a significant amount, the exchanges themselves would have huge holes in their balance sheets. They may refuse to allow redemption of any crypto during that period where they're trying to raise capital otherwise they themselves might go bankrupt. A liquidity crisis in Tether could cause a bank run at every exchange, which could take down the entire crypto ecosystem.
- ProjectArcturis 4y agoThe problem with attacking Tether is, how do you keep your money if by crashing Tether you also bankrupt all the major exchanges?
- smabie 4y agoDefi?
- netheril96 4y agoIt’s certainly possible but much less likely than the attack on Luna. Attacking Luna gives the attacker enormous amounts of profit shorting due to the catastrophic failure inherent in Luna/UST design. Attacking USDT requires much larger capital with much fewer profits and may even backfire.
- thepasswordis 4y agoPeople have been absolutely positive that Tether is going to collapse any second now for about 6 years now and so far it hasn't happened.
- cuteboy19 4y agoThe funny thing is whenever people attacked tether in the past there was always someone who shilled UST because it was "decentralised" and "not a scam"