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Top stablecoins shed $7B in May as traders redeem tokens en masse
- ur-whale 4y agoIs $7B a lot? Isn't Tether's cap alone around 10 times that? Is this an observable trend or just a small spike of an otherwise generally volatile phenomenon?
- toomuchtodo 4y agoIt is potentially the slow start of a run as interest rates rise and lower risk assets offer improved yields versus crypto offerings. Besides Luna, Tether recently required recapitalization, so there is evidence of stress. No one knows (or would admit publicly if they did, lots of money to be made if you do) what’ll be the linchpin causing a full blown run and a rapid decapitalization of remaining stablecoins. If and when it occurs, it will happen slowly, and then all of a sudden as counterparties race to the exits. Last folks out hold the bags. https://www.kalzumeus.com/2022/05/20/tether-required-recapitalization/ https://www.kalzumeus.com/2022/05/20/tether-required-recapit...
- viraptor 4y ago> Isn't Tether's cap alone around 10 times that? Tether's cap is not the same as Tether's available liquidity to redeem the token. We don't know what's the limit of withdrawals they can handle in reality.
- ur-whale 4y ago> We don't know what's the limit of withdrawals they can handle in reality. Yes that's a fair point (and it's likely some of the other stablecoins share that problem), but still, isn't $7B a rather tiny portion of the overall stablecoin market cap?
- FireBeyond 4y agoYeah, about that. Used to be that you couldn't redeem unless you were a whale. Unless you weren't a US national. Unless you'd given 90-120 days notice. Unless there was a fee paid. People literally put up bounties hunting any successful redemption of Tether. Especially since, and this is as true now, as it was then: "Tether makes no guarantees, promises or arrangement that the Tether stablecoin is or will be redeemable in any way, shape or form."
- Grimburger 4y agoYou can redeem $0.30 worth of tether right here: https://trade.kraken.com/charts/KRAKEN:USDT-USD https://trade.kraken.com/charts/KRAKEN:USDT-USD There's very good reason to do a lot of KYC and set limits on people who want to get USD for their USDT. The last person who tried to operate such a business was locked up in a US prison for nearly a decade. Good motivation to not deal with retail customers and the slow burn US justice system don't you think? https://www.nytimes.com/2012/10/25/us/liberty-dollar-creator-awaits-his-fate-behind-bars.html https://www.nytimes.com/2012/10/25/us/liberty-dollar-creator... What you want to happen to void this criticism would get the Tether execs put in prison. Though I guess that's what some people here secretly want anyway.
- FireBeyond 4y ago> What you want to happen to void this criticism would get the Tether execs put in prison. Though I guess that's what some people here secretly want anyway. I mean, it's not like they have, multiple times, lied to people about their financial backing, actively messed around with KYC and AML laws, and have had multiple judgments open against them, or their affiliations with other entities like Bitfinex, when they really were one and the same. Oh wait, they HAVE done ALL of that.
- anonymousab 4y agoSurely it's 100%, surely the Tether project was not abjectly lying about their entire raison d'être this whole time.
- seoaeu 4y agoNah, the raison d'être of the project (like anything cryptocurrency related) is earning the creators tons of money. Scamming a whole bunch of cryptocurrency users by selling them tokens, and then absconding with the assets they’re supposedly backed by would be a highly effective way to do that
- 1-6 4y agoDo Kwon and the Terra Luna fiasco
- esquire_900 4y agoClickbait title it seems; USDT and DAI lost some market share while BUSD and USDC have grown more. > USDC has grown 20% with $10.6 billion more tokens in circulation. BUSD boosted up 22% — representing growth of $4.2 billion. USDT has shed about $4.1 billion, a 5% reduction, while DAI dwindled by 30% — from $8.9 billion to $6.2 billion.
- ur-whale 4y ago> while BUSD and USDC have grown more. If I am not mistaken, USDC (coinbase) is properly and regularly audited for proof-of-reserves? Not so sure about Binance though. But at any rate, if capital starts to migrate to audited stablecoins from POS (and by that, I don't mean proof of stake) like Tether, sounds to me like a good thing.
- throwaway-jim 4y agoBUSD is just rebranded Paxos Standard iirc.
- nlitened 4y agoYou’re thinking about USDP, if I am not mistaken. BUSD is Binance dollar.
- trompetenaccoun 4y agoIt's "Binance Dollar" but it's issued by Paxos. Though it isn't like the first person claimed, the most trusted among the community are DAI and USDC.
- nlitened 4y agoWow, I didn't know that BUSD is also issued by Paxos, thank you.
- hiq 4y ago> USDC (coinbase) is properly and regularly audited I've only found attestations just like USDT, where did you see an audit?
- str34m 4y ago
- bitcharmer 4y agoIt seems we have a serious problem with the first generation of cryptocurrencies being mainly a vehicle for scams and otherwise extracting value from gullible people. From what I've seen so far in most cases "stable-" isn't really stable and currency definitely doesn't work like one. Or am I just biased by sourcing my information from HN and only seeing the cases where crypto crashes and burns instead of all the successful ones no one here is talking about. Are there any?
- iownzerobtc 4y agoUSDC and DAI are both collateralized and doing fine at the moment and can operate as a decentralized currency and payment rail. It is never 100% risk free, though. The best way to maintain peg to dollar is just to hold the dollar. Many stablecoin holders are taking on this higher risk as they seek yield in protocols like Aave and dYdX, or to have ready liquidity to deploy this in the crypto investment market.
- dubswithus 4y agoI don’t think any stable coins hold 1:1 because it would be impossible to earn much money on the float?
- Jamie9912 4y agoI don't get all the bandwagon hate of crypto on this site.. Sure 99% of crypto schemes are b.s and ponzi. But I like to think in terms of use cases. Currently there is no way to send "money" to someone in another country on the other side of the world, in a decentralized way, and without transaction fees. Can this problem be solved without crypto? Probably, but currently crypto is looking like the best way to be able to do this.
- cmeacham98 4y agoI don't need to send money to the other side of the world in a decentralized way. There's a good chance I never will and similarly 99% of people do not and never will have this problem.
- MisterSandman 4y agoI hate crypto as much as the average HNer, but "I don't need it so therefore nobody does" is a stupid and short-sighted reply. There are at least a dozen countries that I can think of that have massive restrictions on how many flows in and out of the country, preventing people from being able to keep their money safe from raging dictators or changing rulers. It's a lot more than 1%.
- joebob42 4y agoIt's not nobody, but I think it's a lot less than 1% of people that are going to need to send a meaningful amount of money to places like that. Obviously providing some service to even .01% of people or whatever is valuable. But at this point Bitcoin is valued like Google which is used by tens of percents of all people.
- OtomotO 4y ago"Decentralized" is the keyword. It's not solved by real world implementations of any major blockchain.
- ceeplusplus 4y agoEthereum based stablecoins are hardly the best way to do this. From a user standpoint you have to 1) buy your stablecoin on some exchange 2) transfer it to your own wallet 3) pay a hefty fee to transfer it to the recipient (>$20 when the network is busy) 4) Recipient pays another hefty fee to transfer it to an exchange so they can offramp. If I'm sending a remittance or similar paying $$$$ in fees is absolutely not desirable. And with current gas prices the cost of sending anything less than 50k is pretty comparable with just doing a wire transfer.
- TekMol 4y agoWhat are people holding all those stable coins for? In contrast to other crypto currencies, nobody is holding it for speculation. I doubt anybody expects stable coins to be a better store of "dollar value" than the dollar itself. Yet, someone holds those $150B worth of stable coins. Who and why?
- agumonkey 4y ago<coin> -> <stablecoin> is a non taxable event in some countries. You can decide when you get to convert to fiat and pay taxes.
- alpark3 4y agoEasier to trade, no issues with tax&bank issues, and a lot of crypto exchanges charge to convert from crypto -> cash, whereas crypto -> crypto(stablecoin) is usually just exchange fees, less than the USD charge.
- TekMol 4y agoOk, I understand that a stablecoin it is easier to handle than the dollar. But who is doing it? What is the use case?
- pvarangot 4y agoTrading. Quick arbitrage, day trading, pump and dumps, leverage. The same thing you can do by having dollars on your stock trading account you usually need coins on your crypto account and it would be crazy to have the volatile ones.
- OtomotO 4y agoThe moment I learned that people want to buy crypto as a means to get rich in (evil ;)) fiat money, I knew I had a ponzi scheme in front of me. The interesting idea behind crypto once was to have a totally different system. Yet in reality, with greedy apes on a spacerock, it was an unreachable Utopia
- nathias 4y agodifferent systems historically come about by extreme violence, genocides and migrations of peoples, a little icky shills and ponzis is a very low price
- OtomotO 4y agoIt would be a low price if it would reach the goal. I am pretty sure they won't though.
- withinboredom 4y agoLike contributing heavily to global climate change?
- chii 4y ago> The interesting idea behind crypto once was to have a totally different system. the problem with this idea is that this idea of a "different" system is just merely going to evolve back into what we have today. The fundamental needs of a financial system doesn't change much, and what we have today is fit for purpose (mostly - there's efficiency to be had and red tape to cut).
- Animats 4y agoThe big question with Tether has been, if they are holding commercial paper, whose commercial paper? Traders who deal in commercial paper of real companies that do real stuff don't see Tether present in that market. The dollar amounts are too big to hide. The suspicion is that their "commercial paper" is high-interest loans to other cryptocurrency companies. With the whole crypto sector in decline, those loans are at risk. This is how you get a 2008-type crash - loans which seem to be unrelated but are tied to a common market. About 11% of Tether has been cashed out in the last month. The real problem for Tether is simple. Why would anyone buy Tether at this point? There's zero upside potential, after all. And the competition, USDC and GUSD, looks better backed. So a steady outflow is to be expected. We're going to find out how strong their backing is. Watch out for heavily promoted Tether-based "staking" schemes designed to prevent cash-out.
- wallaBBB 4y agoOh it’s even worse. For a while now some[0] have suggested part of the backing is in bonds issues by Chinese real estate companies [0] https://twitter.com/thelastbearsta1/status/1469007200496590848?s=21&t=Y4igVxc1nwkf-Fs3SjtRpQ https://twitter.com/thelastbearsta1/status/14690072004965908...
- kgc 4y agoIt could be worse than that. It could be commercial paper from Bitfinex or one of their other related party holdings.
- zby 4y agoBitfinex seems like a very good business. I mean at least since 2016 - but 8 years is enough. It is possible that they still mismanaged it catastrophically - but fees are really good in crypto exchanges and margin loses are socialized - so they are not a risk factor for the exchange.
- darawk 4y agoChinese real estate would be considerably better than crypto company loans, tbh.
- ww520 4y agoThe collateral for DAI are hihgly crypto correlated - 43.8% USDC, 32.1% ETH, 11.3% WBTC, 5.9% USDP, and others. ETH and WBTC are just Ethereum and BTC, both of which have dropped considerably recently. USDP somehow dropped to ~$0 since April. USDC is sworn to be 100% USD backed so let's take that at face value. DAI is said to have 150% over-collateralization. ETH & WBTC have dropped more than half. Let's say just off by 50%. USDP and others seem got wiped out. $150 x (43.8% + 32.1%/2 + 11.3%/2 + 0%) = ~$98. That means $150 of collateral is worth only ~$98 now, not enough to back $100 of DAI for 1-to-$1 redemption. Looks like DAI is at the verge of de-pegging.
- somebodythere 4y agoDoubtful, Dai is automatically destroyed as the value of its collateral falls via the mechanisms of liquidations and loan paybacks.
- enimodas 4y agoI'm sorry but you don't know what you're talking about. Look into how Dai works, or check daistats.com
- fastball 4y agoDAI's current collateralization ratio is 157.67%. You can verify this straight from the Ethereum mainnet.
- Jommi 4y agoYou have absolutely no idea at all what you are talking about
- fkf 4y agoUSDP which DAI has as collateral is at $1, there exists a different USDP coin which dropped to $0 in April, but that USDP was used hardly anywhere.
- whimsicalism 4y agoNope, you are completely wrong. Wrong USDP, no discussion of how vault liquidation prevents this from happening, Dai is overcollateralized right now at 159% not 98%, USDC is not necessarily crypto correlated, Dai doesn't have $1-to-$1 redemption as it is not a centralized stablecoin, etc. etc.
- can16358p 4y agoWell, staying stable in these times is good (as opposed to Luna/UST). This is battle testing and future-proofing stability to some extent. And honestly 4% is nothing in crypto world.
- jsemrau 4y agoI read about this last week [1] and am still quite perplexed about Tether and its a backing. If you look at the redemption pattern you can see large movements. I.e. a whale must be withdrawing funds. This really reminds me of 2008. [1] https://app.finclout.io/t/kVr06N0 https://app.finclout.io/t/kVr06N0
- onlyrealcuzzo 4y agoI would imagine exchanges hold a lot of Tether. All of them should be trying to limit their exposure as much as possible as fast as possible.
- smoovb 4y agoExchanges like Binance, FTX and Bitfinex are all Tether supporters, and will not let if fail - or they go down too. Since they themselves hold a larger portion of it, they can in a sense, control if it fails or not.
- moonbug 4y agoit's telling that the value change in these things is always denominated in USD. it's almost as if they don't have any intrinsic value.
- onlyrealcuzzo 4y agoThey definitely don't have an intrinsic STABLE value. If you say something is worth 0.01BTC - you need to know the exact date. Otherwise it could be a >50% difference ($400+).
- whimsicalism 4y agoWhat does?
- taspeotis 4y agoLook I am very ignorant about all this stuff but ... is there any downside to shorting a stablecoin? Please be gentle with me: Like if you short it and the price doesn't move (by design) are you out any money? The price won't go up (by design) because nobody's going to spend too much money from their reserves to support a price over US$1. But it's possible for the reserves to run dry in which case the price goes down and you win.
- axlee 4y agoYou end up paying the transaction fees, which are insane. On top of the interest.
- hoschicz 4y agoYou don't on chains such as Polygon, Fantom, etc etc etc. Really only Ethereum is very expensive; you don't have to use it.
- louracryft 4y agoI'm just a lurker on crypto issues, but if you're avoiding transaction fees by trading on a company's private chain, aren't your assets also held by that private company? So if you wanted to redeem your assets from a private chain, wouldn't those trades need to interact with the company's holdings, rather than the wider marketplace?
- tremarley 4y agoThe funding rate could get expensive
- acjohnson55 4y agoIt's probably a little tough to find an instrument that gives you exactly the short exposure you want. You could sell BTCUSDT perpetuals and buy BTCBUSD perpetuals to hedge your BTC exposure. But holding that position isn't free. You could bleed fees for years until you finally get proven right.
- 4y ago
- davidgerard 4y agoThere is no evidence that the tether was redeemed for anything. We know from the CFTC settlement, and statements from Celsius CEO Alex Mashinsky, that Tether Inc has a history of issuing tethers and then accounting the loan itself as the backing for the issuance - literally just printing pseudo-money out of thin air. I would first presume the tether "redemptions" were just cancellations of these loans. No dollars or other consideration left Tether Inc.
- luka-birsa 4y agoI really wonder if USDT bashing will get old or will people finally get that USDT will not just disappear overnight. They've redeemed 11% of their total capitalization and nothing happened. I despise shady accounting practices and I'm sure Tether is on par with a good american financial institution, but I highly doubt it they will ever default. I know it's a long shot, but hear me out: 1. Their redemption process can be handled in a way to prevent an uncontrolled bank run. You can redeem 100.000 minimum, hence it's a not a retail bank run for sure. 2. They print the dollars for much of the old school crypto ecosystem, with all players acknowledging their importance. So unless the key players in the field want to take USDT down, it's not going down. Even the NYAG tried and gave them a penny fine instead. And even the article here really lacks context. The USDT reedeming right now is tied to all the negative publicity in the media. I've traded through this current depeg (a week ago), that was purely speculative and generated by the panic. A twitter thread stared to report a depeg, and more and more people piled on the exchanges to swap USDT for BUSD and USDC. In the end a lot of USDT was redeemed, nothing happened, expect that some people made a lot of money on the panic itself (and the premium). I've been hearing the same story for the past 6 years. USDT will fail, they don't have any backing, US will shut them down,.... And the world keeps on turning. Sorry to break it to you. Nothing is going to happen until key crypto players have a legit alternative that will keep the ecosystem alive.
- smoovb 4y agoLarge US Banks are required to handle a 10% of capitalization bank run. So USDT has already exceeded widely accepted fractional reserve requirements.
- MerelyMortal 4y agoAs long as there is a BTC/USDT and a BTC/USD market, Tether will work. If someone wants to sell USDT for USD, All Tether has to do is buy BTC with USDT, then sell the BTC for USD.