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The "same" thing cannot happen to Tether A different but similar thing can happen. There's no death spiral mechanism in Tether. Either you can redeem it for $1
by shawabawa3 4y ago
The "same" thing cannot happen to Tether
A different but similar thing can happen. There's no death spiral mechanism in Tether. Either you can redeem it for $1 (for a limited definition of "you", their redemption requirements are nuts), or you can't
Tether breaking the peg would look different, with the peg slowly dropping over weeks or months as people got less and less confident in Tether's reserves
- chalst 4y agoIt's true that USDT is not an algorithmic stablecoin, so it's different. Market sentiment, though, tends to change quite quickly: I would not expect a collapse, if and when it happens, to take weeks. It's not that different. There's also little reason to have confidence in Tether's reserves: Tether have refused to have traditional accounts produced, and they are known to have lied about the nature of the reserves, having initially claimed to be 100% backed by cash, but due to a leak we know the reserves include debts. Debts generally are illiquid, and you need highly liquid assets to defend a peg.