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USDT is the fuel that powers a lot the crypto ecosystem. Good luck trying to move USD around between different places in the crypto ecosystem (especially outsid

USDT is the fuel that powers a lot the crypto ecosystem. Good luck trying to move USD around between different places in the crypto ecosystem (especially outside office hours). While possible it's complicated, slow and has terrible uptime. The biggest crypto markets in the world are quoted in tether.

TomSwirly 4y ago
Your answer is not false, but does not explain why someone would hold Tether instead of using it as an intermediate vehicle.
- cormacrelf 4y ago
  The wisdom of holding is always relative to the rest of the market and what else you could be holding. Imagine a metals exchange. If copper were going up in value compared to the other metals, you’d want to hold copper. But you can also sell all your metals for cash. You would do this when all the metals are going down in value, which means USD is the “best-performing metal” and you want to be holding it. You always want to be holding the thing going up in value the most. Sometimes it’s USD, and the fact that it is also your reference point for pricing everything else doesn’t mean it’s not front of the pack sometimes. Obviously when you buy USD with your copper, the value of USD goes up. But since it’s all denominated in USD, that just looks like “all metals go down in price but especially copper”, and because so many other markets set the value of USD, it really just looks like “copper goes down”. It’s similar to the relative velocities etc you do when you study physics. So primetime for holding cash is when there is deflation and you expect to be able to buy more for your dollars later, so you stash it in a bank account or under your mattress. This is generally bad for a regular economy because people stop spending and the economy slows down. That’s why there’s always a little bit of inflation, because better that than deflation! Inflation makes people use their money lest it lose value / gather dust sitting still, and spending money makes the economy run. Having to beat inflation with your investment is a chore, but it’s better that everybody individually decides to do something with their money. I digress. For Tether, where the only things you can really buy are other cryptocurrencies, deflation just looks like a crypto bear market. So people are likely holding USDT right now. At the same time, given that the value of USD is set by many trillions of dollars changing hands and millions of contracts priced in it every day, compared to Tether which is like a gift card for a record store that might go out of business, it’s possible for USDT to get unpegged if that record store posts bad results. The strength of the proposition that USDT can be redeemed for USD is the only thing holding it together.
  - jakelazaroff 4y ago
    This all is a good explanation for why you might hold USD instead of other assets. It’s a less compelling explanation for why you might hold USDT, which would be the same as holding USD except it also might crash and leave you with nothing.
    - cormacrelf 4y ago
      I'm not going to do the job of Tether's accountants. There is no compelling reason to hold it given this risk. Nevertheless people do, and the reason is what I said + they additionally believe the claims about it being redeemable 1:1 for USD + it's easier to buy and sell crypto with it than actual USD.
      - jakelazaroff 4y ago
        >* There is no compelling reason to hold it given this risk.* Sounds like we're on the same page :)
  - logifail 4y ago
    > If copper were going up in value compared to the other metals, you’d want to hold copper. But you can also sell all your metals for cash. You would do this when all the metals are going down in value, which means USD is the “best-performing metal” and you want to be holding it. I'm not sure I follow that description, are you really saying one buys commodities when they're rising in price and sells when they're falling? You make it sound like there's a trend one can observe .. and predict the future? Back to real life, take a look a the copper price chart zoomed out to one year[0] It's been going up - and also down - all the time. I'm reminded of the proverb "Nobody rings a bell at the top or the bottom of a market"... [0] https://www.bloomberg.com/quote/HG1:COM https://www.bloomberg.com/quote/HG1:COM
    - cormacrelf 4y ago
      Uh yeah, predicting the future is the entire idea. People are always guessing what the price is going to be in the future. If you guess correctly you make money when you sell later. If you don't, you lose money. Lots of people are highly incentivised & therefore trying really hard to predict the future, and this is what makes capitalism an efficient resource allocator. That's not only true of metals exchanges. If you think the price of copper is going up, you could also survey for and build a copper mine. That knocks on to labour markets, as you're now hiring miners. So the market's predictions can move the price of everything, and everything readjusts itself to match, all on its own, and finds itself ready (i.e. a whole mine built & ready to go) for when the prediction comes true, or adjusts itself back when it doesn't. The effect of efficient resource allocation + predictive power is that when e.g. supply goes down but demand is up, people have tried to predict this and have already built capacity for more supply. This is pretty fundamental to how most of the world works. Markets function in general terms as information -> price machines, where people are rewarded for seeking out information and converting it into prices by moving money. If you HAVE INFORMATION that suggests copper's going to go up in value, you buy copper, and because you did that, it DOES GO UP A BIT. So the information becomes a price signal, in advance of the event that actually affects copper supply/demand. If you predict a supply/demand change, and then your prediction "comes true", the price moves, and you can sell at a profit. Magic. You are rewarded for predicting, and in exchange the market learns the correct price a little bit earlier by incorporating your "bets" in the market price. This is known as news being "priced in". Every single day watching financial markets involves big news that some analyst at a bank mispredicted, and then the price has to move a little further or a little back to correct the value it had "priced in". Sometimes announcements come in as predicted, and the markets barely react at all, even to a huge profit announcement. It's because they already knew. They predicted it. As people "share" the information they have about the assets in the market by buying and selling, the price walks about as it discovers its value. On short timescales, this fluctuation is largely made up of people fretting about really tiny predictions in a capricious and flighty way. The most valuable information, i.e. the stuff that will let you buy in lowest and sell highest, is information the market doesn't know yet. Only some of the information is revealed by buying/selling, as it's a weaker signal than the prediction actually coming true & being reported as news. The creation of newsworthy events happens slowly, much slower than people can trade. People can make a lot of money doing insider trading, because they can predict the future value very accurately & without trades sending a huge signal as they're anonymous! But everyone agrees it's unfair to everyone else, so it's not allowed. All the people playing this game are trying to predict, because predictions are more lucrative than current information that the market already knows. But they can also be wrong. Fortunately the price of an asset is the aggregate of everyone making predictions, and this averages out to a more useful summary of "what do these 300,000 people think" rather than "one dude at one trading desk". The "invisible hand of the free market" is the emergent wisdom of a whole lot of people trying to guess what's going to happen in the future. And it is pretty wise -- capitalism is actually pretty good at resource allocation to projects that are going to be most useful in the future. It performs better than a Politburo at this task. The main criticism of it is not that it's bad at this job, but that it is too good at it -- and too ruthless at exploiting the information it has to the detriment of the poor humans without much capital at the bottom.
- lampshades 4y ago
  People hold Tether because it is away from the eyes of governments.
  - Bud 4y ago
    How precisely is it away from the eyes of governments? We've seen ample reporting in recent days about just how easy it is to trace crypto assets.
- vagab0nd 4y ago
  Besides convenience, the answer seems to be yield.
rglullis 4y ago
Fiat-backed, collaterized stable coins that are better than USDT - USDC (Circle USD) - GUSD (Gemini USD) - BUSD (Binance USD) - EURS (Stasis EUR) Crypto backed (overcollaterized) stable coins that are soft-pegged and better than USDT - DAI (MakerDAO) - sUSD (Synthetix USD) - sEUR (Synthetix EUR) No one needs USDT anymore. The fact that even Binance gets more credibility than Tether should tell you how scammy the people still trading USDT really are.
- cuteboy19 4y ago
  If this was two weeks ago you most certainly would have included UST at the top of this list. People reading this should definitely question the other ones on the list as well. what proof do we have that the rest of these coins are really stable?
  - rglullis 4y ago
    No. I wouldn't. Never used Terra, and I already said here that I never understood these "algostables" with no collateral. As for "proof", you should've learned already that there is no such thing as "proof" with any of them. It's all about risk. For the fiat backed, the risk could be measured by the trustworthiness of the institution behind it and how they are managing the real fiat they have in hand. I'll risk them of my list if I hear that any of them is doing any kind of shady (we are collaterized by other assets that are not money) like Tether. DAI and synths also have a non-zero chance of catastrophe, but at least this is mitigated by the over-collaterization. Synthetix requires something like 6x the SNX for each sUSD you can mint and their governance was not afraid to increase this requirement (and consequently reduce their sUSD supply) when their token went down.
    - cuteboy19 4y ago
      But Terra did have collateral. Luna equal to 1 USD was burnt (more like locked) once a UST was minted. The whole conceit of DAI is that instead of burning luna at a rate of $1 they would burn it at a rate of $1.5 , The mechanism is exactly the same! And it will fail in exactly the same way.
overtonwhy 4y ago
Tether is the fuel for unlicensed unregulated exchanges that are happy to list the shit coins that legit exchanges won't touch because they're pump and dump scams. All those sketchy exchanges are almost certainly not keeping client funds segregated either so when Tether goes down all those exchanges will become insolvent and probably just disappear with the rest of the money.

TomSwirly 4y ago

Your answer is not false, but does not explain why someone would hold Tether instead of using it as an intermediate vehicle.

cormacrelf 4y ago
The wisdom of holding is always relative to the rest of the market and what else you could be holding. Imagine a metals exchange. If copper were going up in value compared to the other metals, you’d want to hold copper. But you can also sell all your metals for cash. You would do this when all the metals are going down in value, which means USD is the “best-performing metal” and you want to be holding it. You always want to be holding the thing going up in value the most. Sometimes it’s USD, and the fact that it is also your reference point for pricing everything else doesn’t mean it’s not front of the pack sometimes. Obviously when you buy USD with your copper, the value of USD goes up. But since it’s all denominated in USD, that just looks like “all metals go down in price but especially copper”, and because so many other markets set the value of USD, it really just looks like “copper goes down”. It’s similar to the relative velocities etc you do when you study physics. So primetime for holding cash is when there is deflation and you expect to be able to buy more for your dollars later, so you stash it in a bank account or under your mattress. This is generally bad for a regular economy because people stop spending and the economy slows down. That’s why there’s always a little bit of inflation, because better that than deflation! Inflation makes people use their money lest it lose value / gather dust sitting still, and spending money makes the economy run. Having to beat inflation with your investment is a chore, but it’s better that everybody individually decides to do something with their money. I digress. For Tether, where the only things you can really buy are other cryptocurrencies, deflation just looks like a crypto bear market. So people are likely holding USDT right now. At the same time, given that the value of USD is set by many trillions of dollars changing hands and millions of contracts priced in it every day, compared to Tether which is like a gift card for a record store that might go out of business, it’s possible for USDT to get unpegged if that record store posts bad results. The strength of the proposition that USDT can be redeemed for USD is the only thing holding it together.
- jakelazaroff 4y ago
  This all is a good explanation for why you might hold USD instead of other assets. It’s a less compelling explanation for why you might hold USDT, which would be the same as holding USD except it also might crash and leave you with nothing.
  - cormacrelf 4y ago
    I'm not going to do the job of Tether's accountants. There is no compelling reason to hold it given this risk. Nevertheless people do, and the reason is what I said + they additionally believe the claims about it being redeemable 1:1 for USD + it's easier to buy and sell crypto with it than actual USD.
    - jakelazaroff 4y ago
      >* There is no compelling reason to hold it given this risk.* Sounds like we're on the same page :)
- logifail 4y ago
  > If copper were going up in value compared to the other metals, you’d want to hold copper. But you can also sell all your metals for cash. You would do this when all the metals are going down in value, which means USD is the “best-performing metal” and you want to be holding it. I'm not sure I follow that description, are you really saying one buys commodities when they're rising in price and sells when they're falling? You make it sound like there's a trend one can observe .. and predict the future? Back to real life, take a look a the copper price chart zoomed out to one year[0] It's been going up - and also down - all the time. I'm reminded of the proverb "Nobody rings a bell at the top or the bottom of a market"... [0] https://www.bloomberg.com/quote/HG1:COM https://www.bloomberg.com/quote/HG1:COM
  - cormacrelf 4y ago
    Uh yeah, predicting the future is the entire idea. People are always guessing what the price is going to be in the future. If you guess correctly you make money when you sell later. If you don't, you lose money. Lots of people are highly incentivised & therefore trying really hard to predict the future, and this is what makes capitalism an efficient resource allocator. That's not only true of metals exchanges. If you think the price of copper is going up, you could also survey for and build a copper mine. That knocks on to labour markets, as you're now hiring miners. So the market's predictions can move the price of everything, and everything readjusts itself to match, all on its own, and finds itself ready (i.e. a whole mine built & ready to go) for when the prediction comes true, or adjusts itself back when it doesn't. The effect of efficient resource allocation + predictive power is that when e.g. supply goes down but demand is up, people have tried to predict this and have already built capacity for more supply. This is pretty fundamental to how most of the world works. Markets function in general terms as information -> price machines, where people are rewarded for seeking out information and converting it into prices by moving money. If you HAVE INFORMATION that suggests copper's going to go up in value, you buy copper, and because you did that, it DOES GO UP A BIT. So the information becomes a price signal, in advance of the event that actually affects copper supply/demand. If you predict a supply/demand change, and then your prediction "comes true", the price moves, and you can sell at a profit. Magic. You are rewarded for predicting, and in exchange the market learns the correct price a little bit earlier by incorporating your "bets" in the market price. This is known as news being "priced in". Every single day watching financial markets involves big news that some analyst at a bank mispredicted, and then the price has to move a little further or a little back to correct the value it had "priced in". Sometimes announcements come in as predicted, and the markets barely react at all, even to a huge profit announcement. It's because they already knew. They predicted it. As people "share" the information they have about the assets in the market by buying and selling, the price walks about as it discovers its value. On short timescales, this fluctuation is largely made up of people fretting about really tiny predictions in a capricious and flighty way. The most valuable information, i.e. the stuff that will let you buy in lowest and sell highest, is information the market doesn't know yet. Only some of the information is revealed by buying/selling, as it's a weaker signal than the prediction actually coming true & being reported as news. The creation of newsworthy events happens slowly, much slower than people can trade. People can make a lot of money doing insider trading, because they can predict the future value very accurately & without trades sending a huge signal as they're anonymous! But everyone agrees it's unfair to everyone else, so it's not allowed. All the people playing this game are trying to predict, because predictions are more lucrative than current information that the market already knows. But they can also be wrong. Fortunately the price of an asset is the aggregate of everyone making predictions, and this averages out to a more useful summary of "what do these 300,000 people think" rather than "one dude at one trading desk". The "invisible hand of the free market" is the emergent wisdom of a whole lot of people trying to guess what's going to happen in the future. And it is pretty wise -- capitalism is actually pretty good at resource allocation to projects that are going to be most useful in the future. It performs better than a Politburo at this task. The main criticism of it is not that it's bad at this job, but that it is too good at it -- and too ruthless at exploiting the information it has to the detriment of the poor humans without much capital at the bottom.
lampshades 4y ago
People hold Tether because it is away from the eyes of governments.
- Bud 4y ago
  How precisely is it away from the eyes of governments? We've seen ample reporting in recent days about just how easy it is to trace crypto assets.
vagab0nd 4y ago
Besides convenience, the answer seems to be yield.

rglullis 4y ago

Fiat-backed, collaterized stable coins that are better than USDT - USDC (Circle USD) - GUSD (Gemini USD) - BUSD (Binance USD) - EURS (Stasis EUR) Crypto backed (overcollaterized) stable coins that are soft-pegged and better than USDT - DAI (MakerDAO) - sUSD (Synthetix USD) - sEUR (Synthetix EUR) No one needs USDT anymore. The fact that even Binance gets more credibility than Tether should tell you how scammy the people still trading USDT really are.

cuteboy19 4y ago
If this was two weeks ago you most certainly would have included UST at the top of this list. People reading this should definitely question the other ones on the list as well. what proof do we have that the rest of these coins are really stable?
- rglullis 4y ago
  No. I wouldn't. Never used Terra, and I already said here that I never understood these "algostables" with no collateral. As for "proof", you should've learned already that there is no such thing as "proof" with any of them. It's all about risk. For the fiat backed, the risk could be measured by the trustworthiness of the institution behind it and how they are managing the real fiat they have in hand. I'll risk them of my list if I hear that any of them is doing any kind of shady (we are collaterized by other assets that are not money) like Tether. DAI and synths also have a non-zero chance of catastrophe, but at least this is mitigated by the over-collaterization. Synthetix requires something like 6x the SNX for each sUSD you can mint and their governance was not afraid to increase this requirement (and consequently reduce their sUSD supply) when their token went down.
  - cuteboy19 4y ago
    But Terra did have collateral. Luna equal to 1 USD was burnt (more like locked) once a UST was minted. The whole conceit of DAI is that instead of burning luna at a rate of $1 they would burn it at a rate of $1.5 , The mechanism is exactly the same! And it will fail in exactly the same way.

overtonwhy 4y ago

Tether is the fuel for unlicensed unregulated exchanges that are happy to list the shit coins that legit exchanges won't touch because they're pump and dump scams. All those sketchy exchanges are almost certainly not keeping client funds segregated either so when Tether goes down all those exchanges will become insolvent and probably just disappear with the rest of the money.