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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 sta

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

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