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> As of this writing, on May 20th, it has yet to regain the peg This is misleading. Tether has consistently traded between $0.998 and $0.999 between May 13th

> As of this writing, on May 20th, it has yet to regain the peg This is misleading. Tether has consistently traded between $0.998 and $0.999 between May 13th and May 20th. See https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/currencies/tether/ Is it trading at 0.1% lower than it was before the Terra USD collapse? Yes. Has it "lost its peg"? No.

downrightmike 4y ago
Anything less than 1.00 might as well be 0.
patio11 4y ago
It's remarkable that a stablecoin which was able to mostly maintain the peg for years at a time now needs to redefine what being pegged means, and that this state of affairs has continued for more than a week. That's why I mentioned it.
- JumpCrisscross 4y ago
  > now needs to redefine what being pegged means Completely. For context, "the Reserve Primary Fund broke the buck when its net asset value (NAV) fell to $0.97 cents per share" [1]. [1] https://www.investopedia.com/articles/economics/09/money-market-reserve-fund-meltdown.asp https://www.investopedia.com/articles/economics/09/money-mar...
  - makomk 4y ago
    That's something different, though. Money market funds are meant to be safe interest bearing investments: they're expected to give a small positive return on investment in normal times, and to be safe enough that people will at least get their original investment back in bad times. That's why it's a big deal when something happens which causes them to return less than was invested by any amount: a safe investment, which gave lower returns in exchange for that supposed safety, wasn't. The goal of Tether is a little different. One USDT is meant to be worth one USD. It's just as much a problem for the purposes people use it for if USDT is trading above one dollar as below, because they're paying more than its value. That is, the Tether peg is meant to be two-sided, both above and below, and all that's happened is that it's gone from trading at slightly above the nominal value to trading slightly below it. That's not really "breaking the peg" in any meaningful sense.
    - JumpCrisscross 4y ago
      > money market funds are meant to be safe interest bearing investments Tether is supposed to be a safe non-interest bearing instrument. (Its promoters just keep the interest.)
- Grimburger 4y ago
  - kasey_junk 4y ago
    Thats breaking the peg though! Tether says its 1 to 1 with the pegged fiat currency. It doesn’t say its .98-1.01. There are pegs that do this sort of range based pegging but Tether is not claiming that.
    - ntoskrnl 4y ago
      Tether's claim is that verified users can redeem USDT for USD 1:1 at https://tether.to/ https://tether.to/. Exchanges like Kraken are secondary markets and Tether does not claim anything about them.
      - jfk13 4y ago
        > verified users can redeem USDT for USD 1:1 Or maybe not, who knows: "Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all." Oh, and don't forget the fees: "Fee per fiat withdrawal: The greater of $1,000 or 0.1%"
      - hiq 4y ago
        > verified users can redeem USDT for USD 1:1 at https://tether.to https://tether.to This has been debunked for a while already, nobody believes that anymore.
  - JumpCrisscross 4y ago
    > We take the 00:00Z price each day for 365 days and then average it Take the average price at close of Lehman Brother's stock in 2008 and you get a positive number. That doesn't make it less broke. > holds its price above a $0.98 average When we say money market funds "broke the buck" in 2008, we are talking about one fund going to 97¢ [1]. Moving the goalpost to on average outperforming what counts as badly bust in real markets concedes a lost peg. [1] https://www.investopedia.com/articles/economics/09/money-market-reserve-fund-meltdown.asp https://www.investopedia.com/articles/economics/09/money-mar...
- zionic 4y ago
  On the other hand DAI fluctuates between 0.999 and 1.001 all the time. Is it not "stable". I am no fan of tether, but small fluctuations like this have always been normal for "stable coins".
  - SilasX 4y ago
    That’s the point. Dai goes below and above $1. Tether has stuck below $1. That’s an important difference. Longer comment: https://news.ycombinator.com/item?id=31449400 https://news.ycombinator.com/item?id=31449400
    - retcon 4y ago
      This might be fine in a open regulated market. See my above comment.
  - retcon 4y ago
    This is why in regulated markets you can inspect the ticker: to provide a audit record for proof that nobody is funding themselves or the asset by arbitrage.
  - rglullis 4y ago
    DAI has been designed to be soft-pegged. It is meant to fluctuate around the $1 mark, but it never guarantees any kind of parity.
- ntoskrnl 4y ago
  Peeking at the long term chart[1], I don't think 0.1% is notable. In Oct 2018, it bounced around ~1% under the peg for most of 2 months. Then in Dec 2018, it bounced around 1-2% over the peg for 2 months. A similar swing happened in Apr-Jun 2017. I'm actually surprised, I've never looked at this chart before and I didn't expect to see swings of several percentage points. But at any rate the current 0.1% is pretty tame in comparison and I'm sure it's just the cost of moving money to arbitrage. [1]: https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/currencies/tether/
  - hiq 4y ago
    On https://coinmarketcap.com/currencies/tether/historical-data/ https://coinmarketcap.com/currencies/tether/historical-data/ you can see that all the highs for the past 7 days have been strictly under $1, has this ever happened before?
    - ntoskrnl 4y ago
      If you zoom in to the first time period I mention (Oct 2018), and inspect visually, it was strictly under $1 for nearly two months. Right after that it was strictly over $1 for nearly two months. That's if you trust that site's data of course. Remember this is the price on the secondary market, and these are just random people who see the price and then shuffle money around so they can buy a dollar for 99.9 cents. Anyone can do it (if you can stomach exposure to USDT of course). So if the system is working properly the price should generally hover within $1 plus or minus the cost to move money, but there's nothing keeping it at exactly $1.000000.
  - 77fourtyfive 4y ago
    coinmarketcap/coingecko are generally not very reliable for evaluating the stability of stablecoin pegs most liquidity tends to aggregate on dexes like Curve, which is also where you could have seen the whole LUNA/UST debacle play out in real time as large actors swapped out of UST into USDC/USDT/DAI
SilasX 4y ago
Eh, that just comes down to the arbitrary definition of how much of a discount you consider "losing the peg". Sidestepping the definitional issue, I certainly worry when a pegged asset trades at a persistent discount, even a small one, when it didn't before. A stablecoin should generally trade at a premium just as often as it trades at a discount. When one goes long periods without ever being above, that is a strong signal. And when everyone panics, that's exactly when it's too late to get out. You have to beat the rush. Remember, even up until the morning of May 9th, the day of the real TerraUSD depeg, people made that exact objection. "Oh come, on being 0.1% off is normal for stablecoin." Indeed it is -- but not in a persistent fashion! Disclaimer: I closed out my Tether longs last week.
- shuckles 4y ago
  Before you thought Tether was unable to hold a peg why would you be long Tether? Isn’t it better to just be long the USD?
  - SilasX 4y ago
    I had invested in liquidity pools (which collect fees for you for facilitating trades between tokens that you contribute), and some such pools had Tether. One downside of such pools is that, if any one of the assets in it goes to zero, all your invested capital goes to zero (though you keep the fees). It was therefore a Tether long. I had also held a small amount for online purchases. More generally, the reason to hold a stablecoin rather than a "real" dollar is because you need the former in order to interface with smartcontracts on blockchains. Also, to buy from merchants who sell goods for stablecoins because they're in a grey market that banks don't want to touch. Side note: I don't know why people keep asking that question -- it gets asked and answered each time this topic comes up e.g. https://news.ycombinator.com/item?id=31352262 https://news.ycombinator.com/item?id=31352262
    - rglullis 4y ago
      USDC has the exact same properties as USDT, but has no legal issue and is backed by an entity that is a infinitely more trustworthy. There is Gemini USD - similar story. There is DAI if you are long on ETH/BTC and still want/need liquidity. Curve has a pool without USDT (cDAI/cUSDC). Uniswap lets you make any type of pair. On its heyday (before v3), I was providing to DAI/USDC and I was getting 2% returns per month. So my question is: why USDT, when there is a handful of better stabletokens that can be used for the exact same purpose? If it is common knowledge that Tether is not to be trusted, why would any honest person still use it?
graeme 4y ago
It’s not just 0.1% off the peg. It’s 0.1% off and facing large redemptions. That makes the peg loss seem significant
- grapehut 4y ago
  The large redemptions are what is causing them to be 0.1% off the peg...
  - thebean11 4y ago
    Or is being 0.1% below peg causing large redemptions? People buying USDT at a discount and redeeming at face value.
    - kasey_junk 4y ago
      Thats why breaking the peg is so bad. Its a visious cycle so both are correct.
      - thebean11 4y ago
        No it's not..people buying in order to redeem brings the price closer to the peg, not further away.
  - graeme 4y ago
    Definitely. But a lot of people have looked at the small depeg and said “it’s not big, and they’ve depegged in the past. What’s the issue?” It’s seeing the redemptions that show it is significant
TameAntelope 4y ago
I'm not an expert by any means on this topic, but for non-crypto assets that are pegged, going even 0.1% below the peg is a huge deal. A peg is a peg, it's supposed to be more or less certain.
- drexlspivey 4y ago
  No it's not, if you think pegs are supposed to stay forever at the same price you don't understand how markets and order books work.
  - TameAntelope 4y ago
    I very much don't understand how markets and order books work, but people who do understand those things tell me pretty consistently how big of a deal it is when a money market fund loses its peg, even by a tiny amount.
    - vagab0nd 4y ago
      Define "tiny". Is 0.1% tiny? 0.01%? 0.001%? USDT maintains its peg by allowing certain entities to redeem USDT 1 to 1. How much USDT's price fluctuates depends on how well that mechanism works, and market conditions.
      - graeme 4y ago
        By claiming certain entities can redeem 1:1. No one has ever documented a Tether redemption. They have a very tiny number of clients and the terms say they don’t have to redeem at all.
        drexlspivey 4y ago
        > No one has ever documented a Tether redemption Are you just making stuff up? There were $10B worth of redemptions only last week.
onlyrealcuzzo 4y ago
Why hasn't anyone pegged a stable coin to $0.99 before? The $0.99 Only Store could do stable coin. You could even redeem your coins for items in the store!
mnaei 4y ago
Keep in mind that the relationship here is non-linear. A small de-peg signals a large imbalance of funds. This non-linear relationship is literally programmatically hard coded in the case of money markets such as curve.fi Currently the largest money market pool (https://curve.fi/3pool https://curve.fi/3pool) it has a 5:1 USDT:USDC imbalance. In dollar amounts, the pool contains $1b USDT and $0.2b USDC. This 5:1 imbalance only gives way to a 0.1% de-pegg. In the past the balance used to be perfectly 1:1 USDT:USDC. The fact that a multi-million dollar arbitrage opportunity still exist is worrisome.

downrightmike 4y ago

Anything less than 1.00 might as well be 0.

patio11 4y ago

It's remarkable that a stablecoin which was able to mostly maintain the peg for years at a time now needs to redefine what being pegged means, and that this state of affairs has continued for more than a week. That's why I mentioned it.

JumpCrisscross 4y ago
> now needs to redefine what being pegged means Completely. For context, "the Reserve Primary Fund broke the buck when its net asset value (NAV) fell to $0.97 cents per share" [1]. [1] https://www.investopedia.com/articles/economics/09/money-market-reserve-fund-meltdown.asp https://www.investopedia.com/articles/economics/09/money-mar...
- makomk 4y ago
  That's something different, though. Money market funds are meant to be safe interest bearing investments: they're expected to give a small positive return on investment in normal times, and to be safe enough that people will at least get their original investment back in bad times. That's why it's a big deal when something happens which causes them to return less than was invested by any amount: a safe investment, which gave lower returns in exchange for that supposed safety, wasn't. The goal of Tether is a little different. One USDT is meant to be worth one USD. It's just as much a problem for the purposes people use it for if USDT is trading above one dollar as below, because they're paying more than its value. That is, the Tether peg is meant to be two-sided, both above and below, and all that's happened is that it's gone from trading at slightly above the nominal value to trading slightly below it. That's not really "breaking the peg" in any meaningful sense.
  - JumpCrisscross 4y ago
    > money market funds are meant to be safe interest bearing investments Tether is supposed to be a safe non-interest bearing instrument. (Its promoters just keep the interest.)
Grimburger 4y ago
- kasey_junk 4y ago
  Thats breaking the peg though! Tether says its 1 to 1 with the pegged fiat currency. It doesn’t say its .98-1.01. There are pegs that do this sort of range based pegging but Tether is not claiming that.
  - ntoskrnl 4y ago
    Tether's claim is that verified users can redeem USDT for USD 1:1 at https://tether.to/ https://tether.to/. Exchanges like Kraken are secondary markets and Tether does not claim anything about them.
    - jfk13 4y ago
      > verified users can redeem USDT for USD 1:1 Or maybe not, who knows: "Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all." Oh, and don't forget the fees: "Fee per fiat withdrawal: The greater of $1,000 or 0.1%"
    - hiq 4y ago
      > verified users can redeem USDT for USD 1:1 at https://tether.to https://tether.to This has been debunked for a while already, nobody believes that anymore.
- JumpCrisscross 4y ago
  > We take the 00:00Z price each day for 365 days and then average it Take the average price at close of Lehman Brother's stock in 2008 and you get a positive number. That doesn't make it less broke. > holds its price above a $0.98 average When we say money market funds "broke the buck" in 2008, we are talking about one fund going to 97¢ [1]. Moving the goalpost to on average outperforming what counts as badly bust in real markets concedes a lost peg. [1] https://www.investopedia.com/articles/economics/09/money-market-reserve-fund-meltdown.asp https://www.investopedia.com/articles/economics/09/money-mar...
zionic 4y ago
On the other hand DAI fluctuates between 0.999 and 1.001 all the time. Is it not "stable". I am no fan of tether, but small fluctuations like this have always been normal for "stable coins".
- SilasX 4y ago
  That’s the point. Dai goes below and above $1. Tether has stuck below $1. That’s an important difference. Longer comment: https://news.ycombinator.com/item?id=31449400 https://news.ycombinator.com/item?id=31449400
  - retcon 4y ago
    This might be fine in a open regulated market. See my above comment.
- retcon 4y ago
  This is why in regulated markets you can inspect the ticker: to provide a audit record for proof that nobody is funding themselves or the asset by arbitrage.
- rglullis 4y ago
  DAI has been designed to be soft-pegged. It is meant to fluctuate around the $1 mark, but it never guarantees any kind of parity.
ntoskrnl 4y ago
Peeking at the long term chart[1], I don't think 0.1% is notable. In Oct 2018, it bounced around ~1% under the peg for most of 2 months. Then in Dec 2018, it bounced around 1-2% over the peg for 2 months. A similar swing happened in Apr-Jun 2017. I'm actually surprised, I've never looked at this chart before and I didn't expect to see swings of several percentage points. But at any rate the current 0.1% is pretty tame in comparison and I'm sure it's just the cost of moving money to arbitrage. [1]: https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/currencies/tether/
- hiq 4y ago
  On https://coinmarketcap.com/currencies/tether/historical-data/ https://coinmarketcap.com/currencies/tether/historical-data/ you can see that all the highs for the past 7 days have been strictly under $1, has this ever happened before?
  - ntoskrnl 4y ago
    If you zoom in to the first time period I mention (Oct 2018), and inspect visually, it was strictly under $1 for nearly two months. Right after that it was strictly over $1 for nearly two months. That's if you trust that site's data of course. Remember this is the price on the secondary market, and these are just random people who see the price and then shuffle money around so they can buy a dollar for 99.9 cents. Anyone can do it (if you can stomach exposure to USDT of course). So if the system is working properly the price should generally hover within $1 plus or minus the cost to move money, but there's nothing keeping it at exactly $1.000000.
- 77fourtyfive 4y ago
  coinmarketcap/coingecko are generally not very reliable for evaluating the stability of stablecoin pegs most liquidity tends to aggregate on dexes like Curve, which is also where you could have seen the whole LUNA/UST debacle play out in real time as large actors swapped out of UST into USDC/USDT/DAI

SilasX 4y ago

Eh, that just comes down to the arbitrary definition of how much of a discount you consider "losing the peg". Sidestepping the definitional issue, I certainly worry when a pegged asset trades at a persistent discount, even a small one, when it didn't before. A stablecoin should generally trade at a premium just as often as it trades at a discount. When one goes long periods without ever being above, that is a strong signal. And when everyone panics, that's exactly when it's too late to get out. You have to beat the rush. Remember, even up until the morning of May 9th, the day of the real TerraUSD depeg, people made that exact objection. "Oh come, on being 0.1% off is normal for stablecoin." Indeed it is -- but not in a persistent fashion! Disclaimer: I closed out my Tether longs last week.

shuckles 4y ago
Before you thought Tether was unable to hold a peg why would you be long Tether? Isn’t it better to just be long the USD?
- SilasX 4y ago
  I had invested in liquidity pools (which collect fees for you for facilitating trades between tokens that you contribute), and some such pools had Tether. One downside of such pools is that, if any one of the assets in it goes to zero, all your invested capital goes to zero (though you keep the fees). It was therefore a Tether long. I had also held a small amount for online purchases. More generally, the reason to hold a stablecoin rather than a "real" dollar is because you need the former in order to interface with smartcontracts on blockchains. Also, to buy from merchants who sell goods for stablecoins because they're in a grey market that banks don't want to touch. Side note: I don't know why people keep asking that question -- it gets asked and answered each time this topic comes up e.g. https://news.ycombinator.com/item?id=31352262 https://news.ycombinator.com/item?id=31352262
  - rglullis 4y ago
    USDC has the exact same properties as USDT, but has no legal issue and is backed by an entity that is a infinitely more trustworthy. There is Gemini USD - similar story. There is DAI if you are long on ETH/BTC and still want/need liquidity. Curve has a pool without USDT (cDAI/cUSDC). Uniswap lets you make any type of pair. On its heyday (before v3), I was providing to DAI/USDC and I was getting 2% returns per month. So my question is: why USDT, when there is a handful of better stabletokens that can be used for the exact same purpose? If it is common knowledge that Tether is not to be trusted, why would any honest person still use it?

graeme 4y ago

It’s not just 0.1% off the peg. It’s 0.1% off and facing large redemptions. That makes the peg loss seem significant

grapehut 4y ago
The large redemptions are what is causing them to be 0.1% off the peg...
- thebean11 4y ago
  Or is being 0.1% below peg causing large redemptions? People buying USDT at a discount and redeeming at face value.
  - kasey_junk 4y ago
    Thats why breaking the peg is so bad. Its a visious cycle so both are correct.
    - thebean11 4y ago
      No it's not..people buying in order to redeem brings the price closer to the peg, not further away.
- graeme 4y ago
  Definitely. But a lot of people have looked at the small depeg and said “it’s not big, and they’ve depegged in the past. What’s the issue?” It’s seeing the redemptions that show it is significant

TameAntelope 4y ago

I'm not an expert by any means on this topic, but for non-crypto assets that are pegged, going even 0.1% below the peg is a huge deal. A peg is a peg, it's supposed to be more or less certain.

drexlspivey 4y ago
No it's not, if you think pegs are supposed to stay forever at the same price you don't understand how markets and order books work.
- TameAntelope 4y ago
  I very much don't understand how markets and order books work, but people who do understand those things tell me pretty consistently how big of a deal it is when a money market fund loses its peg, even by a tiny amount.
  - vagab0nd 4y ago
    Define "tiny". Is 0.1% tiny? 0.01%? 0.001%? USDT maintains its peg by allowing certain entities to redeem USDT 1 to 1. How much USDT's price fluctuates depends on how well that mechanism works, and market conditions.
    - graeme 4y ago
      By claiming certain entities can redeem 1:1. No one has ever documented a Tether redemption. They have a very tiny number of clients and the terms say they don’t have to redeem at all.
      - drexlspivey 4y ago
        > No one has ever documented a Tether redemption Are you just making stuff up? There were $10B worth of redemptions only last week.

onlyrealcuzzo 4y ago

Why hasn't anyone pegged a stable coin to $0.99 before? The $0.99 Only Store could do stable coin. You could even redeem your coins for items in the store!

mnaei 4y ago

Keep in mind that the relationship here is non-linear. A small de-peg signals a large imbalance of funds. This non-linear relationship is literally programmatically hard coded in the case of money markets such as curve.fi Currently the largest money market pool (https://curve.fi/3pool https://curve.fi/3pool) it has a 5:1 USDT:USDC imbalance. In dollar amounts, the pool contains $1b USDT and $0.2b USDC. This 5:1 imbalance only gives way to a 0.1% de-pegg. In the past the balance used to be perfectly 1:1 USDT:USDC. The fact that a multi-million dollar arbitrage opportunity still exist is worrisome.