6 ms·

When Tether Blows Up

84 points by gringoDan 4y ago

bulbosaur123 4y ago
Disagree. Everyone already knows about the Tether scam, so the risk is priced in. Nobody will really lose confidence as everyone expects it to blow up for a decade now. Secondly, people will just switch to USDC.
- iskander 4y ago
  I don't think 0.9993 counts as "priced in" when the consequences of holding significant USDT during another marketwide panic might be total loss of funds: https://pro.coinbase.com/trade/USDT-USDC https://pro.coinbase.com/trade/USDT-USDC
  - EGreg 4y ago
    Yeah, how is Tether trading at the same as USDC and grandparent commenter says it’s “priced in”?
- wungus 4y ago
  How is risk priced in if it’s trading for $1?
- joe_the_user 4y ago
  I think every single large bubble (2008 notably) has used the argument that "since the possibility of this being a fraud been discussed, that possibility is being priced-in by the markets" and yet still the bubbles collapse.
fourstar 4y ago
Looking at your Twitter, it seems a more apt article would be covering Solana's failure to function as a decentralized blockchain, rather than the same tired re-hashed Tether fud that most new crypto participants parrot. https://www.coindesk.com/tech/2020/12/04/solana-devs-call-all-hands-on-deck-as-unknown-bug-stops-block-production/ https://www.coindesk.com/tech/2020/12/04/solana-devs-call-al... https://solana.com/news/04-30-22-solana-mainnet-beta-outage-report-mitigation https://solana.com/news/04-30-22-solana-mainnet-beta-outage-...
- jsemrau 4y ago
  Come on, it's only 30 minute late after the clock lost track of time. https://www.theblockcrypto.com/post/149112/solanas-blockchain-clock-loses-track-of-time-now-running-30-minutes-behind https://www.theblockcrypto.com/post/149112/solanas-blockchai...
- seibelj 4y ago
  VC bag holders trying to make the 7 block eth2 reorg some sort of existential threat, while Solana shuts down for a day and they act like it’s no biggie. Absolutely hilarious.
iskander 4y ago
The 2020/2021 bubble is going to look like a big missed opportunity for the crypto industry to get Tether's books right. It might have been their one and only chance to find enough dollars to actually make their backing 1:1. Now that that bubble is in the past and future bubbles are at the mercy of both public sentiment and macroeconomic conditions, Tether just has to hope that a majority of USDT stays "on the sidelines" and doesn't actually get withdrawn into the real economy. They won't necessarily implode like UST but the possibility hangs over every downturn and panic.
- Proven 4y ago
jackblemming 4y ago
Does anyone else not care about cold takes like this? Even if you know something is going to crash, the important bit is knowing when. Guess what, Google, Facebook, and Netflix aren’t going to be around in a trillion years. Shocking, I know.
- fullshark 4y ago
  Not everyone is just trying to trade and ride waves for profit, a lot of people are just putting their life savings in crypto and holding. They should understand the tether risk before doing so.
  - iskander 4y ago
    Awareness is healthily increasing and many people have shifted long-term holdings to a real centralized 1:1 stable (USDC) or extremely over-collaterized decentralized stable (DAI). The Curve "3crv" pool (which allows large volume low slippage conversion between USDT, USDC, and DAI) has been at >50% USDT for a long time, going up to as high as 80% when people are truly spooked: https://curve.fi/3pool https://curve.fi/3pool
- bushbaba 4y ago
  Well to be fair. The earth itself is only 4.5 Billion years old. Some experts expect our Sun will transition to a Red Giant in ~5 Billion years and stop generating heat. /sarcasm A trillion years is a long time. :D
zamadatix 4y ago
As much as I have always had zero faith in Tether since the beginning I've also been reading about how it's going to blow up for about just as long. Here is an article from 5 years ago https://hackernoon.com/what-will-happen-when-the-shit-hits-the-fan-with-tether-f59f92fd8dca https://hackernoon.com/what-will-happen-when-the-shit-hits-t...
- mattzito 4y ago
  “The markets can stay irrational longer than you can stay solvent” It’s hard to predict when things are going to fall apart. Archegos capital worked for quite a while until one day it didn’t.
  - MichaelBurge 4y ago
    > “The markets can stay irrational longer than you can stay solvent” I'm pretty sure if they had damning evidence, a single hedge fund could single-handedly force the market to collapse in a couple weeks. Keep in mind hedge funds can manage billions of dollars, cryptocurrency market caps are manipulated and the true order book depth is much smaller, and many cryptocurrency people are trading 100x leveraged perpetual futures on dodgy exchanges. At some point it's disrespectful to even allow the market to exist.
    - sdfhdhjdw3 4y ago
      > I'm pretty sure if they had damning evidence, a single hedge fund could single-handedly force the market to collapse in a couple weeks. Exactly, like they did with GME. Oh wait.
      - deleted 4y ago
        [deleted]
      - deleted 4y ago
        [deleted]
    - jcranmer 4y ago
ldjkfkdsjnv 4y ago
No way it blows up. Too many people have a vested interest in keeping it alive. Tether probably could have blown up years ago. At this point, there are definitely unseen and unknown backers who would prevent it.
- mattzito 4y ago
  I think that’s probably true for some amount of correction, but presumably there’s some amount where the juice just isn’t worth the squeeze anymore, right? A quick google search says there’s 14b tether in circulation - if that’s true and it falls 50%, who is going to put in multiple billions to try to prop it up?
  - ldjkfkdsjnv 4y ago
    If tether goes down, so does bitcoin. This post may as well be about bitcxoin going to zero then
    - SV_BubbleTime 4y ago
      >If tether goes down, so does bitcoin. Doubt that. I’m sure almost anyone here could wow me with technical reasons why they are correlated… In the end because this is all illusionary and not backed by anything tangible, it’s faith-based speculation. When Tether pops, Bitcoin probably goes up. No one will have learned any lessons, just that they picked they wrong one, but this one over here is “safe”. It’s all what people can be made to believe, and I’m pretty sure the average crypto gambler can be made to believe lots of things that aren’t rational. Who hasn’t seen that themselves?
      - deleted 4y ago
        [deleted]
  - tyrfing 4y ago
    Tether is at 75B right now, up from 5B pre-pandemic. > if that’s true and it falls 50%, who is going to put in multiple billions to try to prop it up? Anyone who has information on the backing assets. If Tether embezzled or lost 30 billion and were able to buy back all USDT at 50 cents, they would make billions in profit as well as erase that shortage.
NeutralForest 4y ago
No issue with the author but I wish I could filter HN to not have crypto related news here. It's really polluting my tech related feeds.
- cinntaile 4y ago
  I agree so I just started flagging the crypto related news I see. The discussions rarely follow HN guidelines.
- ad-astra 4y ago
  Big waste for great minds. But I guess it’s their choice.
- SilasX 4y ago
  Same, but I also want to toggle it so that I specifically see the stories that are crypto related. Best I can do is search comments several keywords and then sift through batches of them that come from the same story.
- ntoskrnl 4y ago
  The problem is people upvote headlines that support their view regardless of the content. I don't mind high quality posts from either camp, or actual news (on this site called Hacker News), but when we have daily posts like this with nothing new to add, it gets to be a bit much. I'm going to start flagging them like the sibling post mentioned, but this account might be too new for it to matter.
sbierwagen 4y ago
> Any exchange with USDT-denominated crypto prices will see those prices explode, as there will be few sellers of crypto for a soon-to-be-worthless asset. This will also blow up arbitrage bots that move tokens between exchanges, as they quickly and automatically pour coins into a defaulted exchange. A fun “picking up pennies in front of a steamroller” risk in what’s supposed to be a risk free trade.
rinze 4y ago
It won't be soon enough.
ddjsn111 4y ago
acchow 4y ago
I feel like Tether wanted to prove, once again, that the entire system is illusory anyway just like how the Bretton Woods system ended in 1971 (no more convertibility of USD into gold). As long as people use USD effectively, who cares whether or not it is backed by actual gold?
- SV_BubbleTime 4y ago
  >As long as people use USD effectively, who cares whether or not it is backed by actual gold? Because unlike all crypto coin asserts, its backed with guns.
  - qgin 4y ago
    The guns really do back the USD. It's true that value is set by supply and demand for both crypto and USD, but there's a key difference. Yes, crypto and USD both have a limited supply (at any given time). But the demand for crypto can fall to zero with the only real-world change being a change in people's feelings. But USD demand is more than just feelings. There is a floor in the demand for USD because anyone who wants to live or do business in the United States are obligated by law (and ultimately, guns) to pay taxes in USD. For this reason, USD demand can't go to zero until the entire US economy collapses (and with the aforementioned guns, US economic interests will likely be protected). Obviously that floor in demand doesn't represent 100% of the demand for USD, but it's a floor on which a lot of confidence and subsequent demand can be built.
  - acchow 4y ago
    100% agree.
- adra 4y ago
  The system promised other nations for gold, not necessarily US depositors, remember that. Also that this pillar of the financial system only started operating on the gold standard in the 1930's? The system has been dead for as long as it was ever alive and its continues to be held up as this shining pinnacle of capital market control done right.
Tenoke 4y ago
HN posters have successfully predicted 9 out of the last 0 Tether blow ups. More seriously, it's mostly seething while reposting the same stuff with this article potentially holding the record for being short enough to not even repeat most of the usual let alone add anything compared to the pages and pages of previous posts on the topic[0]. Which doesn't mean it won't blow up, just that those discussions are particularly motivated and low quality. 0. https://hn.algolia.com/?q=tether https://hn.algolia.com/?q=tether
- Ologn 4y ago
  > HN posters have successfully predicted 9 out of the last 0 Tether blow ups. People predicting stock market declines have thus far been predicting something which declines and then eventually bounces back. This will not happen to Tether - when it blows up, like Mt. Gox, or a host of other crypto scams have - it will not be coming back. As someone else here said, markets can remain irrational longer than you or I can remain solvent. Bernie Madoff's Ponzi scheme collapsed in 2008 not due to Harry Markopolos talking to the SEC in 2000 (or after) - it collapsed because everyone started withdrawing their money at once, and then the whole house of cards collapsed.
  - Animats 4y ago
    It collapsed because everyone started withdrawing their money at once, and then the whole house of cards collapsed. That may be happening to Tether now. Take a look at Tether's market cap chart.[1] Click on Overview->Market cap-> 1 month. You can see the cashouts. Between 5:09 AM and 5:14 AM on May 27, 2022, the market cap of USDT suddenly dropped by $750 million dollars. There have been five huge cashouts like that since May 13th. About 12% of Tether has been cashed out in the last 3 weeks. This never happened to Tether before. Until now, market cap was "line goes up". Biggest previous drop in market cap was about 1% in mid-2021. So, how long can Tether pay out 4% of its market cap per week? Looks like we're going to find out. [1] https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/currencies/tether/
    - ahnick 4y ago
abriosi 4y ago
Tether speculation aside, this is a very low quality post. HN bias of crypto is the only reason this piece achieves first page There are so many interesting things to discuss about Tether, for instance, I would like to know the insides of how Tether is providing shadow banking to crypto exchanges and how does it mean for future scenarios Anyone has anything shareable?
panphora 4y ago
Tether was invented because crypto couldn't find legitimate outflows through traditional banking institutions. So, converting to fiat was impossible. Tether and other stable coins came along and said: we'll keep $1 USD for every token we have, so you don't need to cash out your crypto as fiat to see how much it's worth — just trade it for a stable coin! So, Bitcoin isn't actually worth $30k+, it's worth $30k+ in stable coins because that's what it's traded in. It's only connection to fiat is stable coins. if ($1 !== $1) // i.e. Tether is a scam that's not fully backed All crypto will experience a MASSIVE crash The first wave of the massive crash will be due to a loss of confidence in stable coins, the second wave will be a massive panic at not being able to get out of the market fast enough because there's not enough liquidity, and the third wave will be structural problems revealing themselves because most crypto platforms/ecosystems are codependent on each other (massive cross-investments, promissory notes, shared accounts, weird accounting practices, and tons of leveraged bets). When the fiat inflows stop and instead try to reverse, it's going to be wild.
- Animats 4y ago
  When the fiat inflows stop and instead try to reverse, it's going to be wild. That started 3 weeks ago. See my post above.
- tjader 4y ago
  > It's only connection to fiat is stable coins. This is simply wrong. There are several exchanges that trade Bitcoin directly with fiat, even USD. It may not be a majority of volume, but it is significant.

84 points by gringoDan 4y ago

Disagree. Everyone already knows about the Tether scam, so the risk is priced in. Nobody will really lose confidence as everyone expects it to blow up for a decade now. Secondly, people will just switch to USDC.

iskander 4y ago
I don't think 0.9993 counts as "priced in" when the consequences of holding significant USDT during another marketwide panic might be total loss of funds: https://pro.coinbase.com/trade/USDT-USDC https://pro.coinbase.com/trade/USDT-USDC
- EGreg 4y ago
  Yeah, how is Tether trading at the same as USDC and grandparent commenter says it’s “priced in”?
wungus 4y ago
How is risk priced in if it’s trading for $1?
joe_the_user 4y ago
I think every single large bubble (2008 notably) has used the argument that "since the possibility of this being a fraud been discussed, that possibility is being priced-in by the markets" and yet still the bubbles collapse.

fourstar 4y ago

Looking at your Twitter, it seems a more apt article would be covering Solana's failure to function as a decentralized blockchain, rather than the same tired re-hashed Tether fud that most new crypto participants parrot. https://www.coindesk.com/tech/2020/12/04/solana-devs-call-all-hands-on-deck-as-unknown-bug-stops-block-production/ https://www.coindesk.com/tech/2020/12/04/solana-devs-call-al... https://solana.com/news/04-30-22-solana-mainnet-beta-outage-report-mitigation https://solana.com/news/04-30-22-solana-mainnet-beta-outage-...

jsemrau 4y ago
Come on, it's only 30 minute late after the clock lost track of time. https://www.theblockcrypto.com/post/149112/solanas-blockchain-clock-loses-track-of-time-now-running-30-minutes-behind https://www.theblockcrypto.com/post/149112/solanas-blockchai...
seibelj 4y ago
VC bag holders trying to make the 7 block eth2 reorg some sort of existential threat, while Solana shuts down for a day and they act like it’s no biggie. Absolutely hilarious.

iskander 4y ago

The 2020/2021 bubble is going to look like a big missed opportunity for the crypto industry to get Tether's books right. It might have been their one and only chance to find enough dollars to actually make their backing 1:1. Now that that bubble is in the past and future bubbles are at the mercy of both public sentiment and macroeconomic conditions, Tether just has to hope that a majority of USDT stays "on the sidelines" and doesn't actually get withdrawn into the real economy. They won't necessarily implode like UST but the possibility hangs over every downturn and panic.

Proven 4y ago

jackblemming 4y ago

Does anyone else not care about cold takes like this? Even if you know something is going to crash, the important bit is knowing when. Guess what, Google, Facebook, and Netflix aren’t going to be around in a trillion years. Shocking, I know.

fullshark 4y ago
Not everyone is just trying to trade and ride waves for profit, a lot of people are just putting their life savings in crypto and holding. They should understand the tether risk before doing so.
- iskander 4y ago
  Awareness is healthily increasing and many people have shifted long-term holdings to a real centralized 1:1 stable (USDC) or extremely over-collaterized decentralized stable (DAI). The Curve "3crv" pool (which allows large volume low slippage conversion between USDT, USDC, and DAI) has been at >50% USDT for a long time, going up to as high as 80% when people are truly spooked: https://curve.fi/3pool https://curve.fi/3pool
bushbaba 4y ago
Well to be fair. The earth itself is only 4.5 Billion years old. Some experts expect our Sun will transition to a Red Giant in ~5 Billion years and stop generating heat. /sarcasm A trillion years is a long time. :D

zamadatix 4y ago

As much as I have always had zero faith in Tether since the beginning I've also been reading about how it's going to blow up for about just as long. Here is an article from 5 years ago https://hackernoon.com/what-will-happen-when-the-shit-hits-the-fan-with-tether-f59f92fd8dca https://hackernoon.com/what-will-happen-when-the-shit-hits-t...

mattzito 4y ago
“The markets can stay irrational longer than you can stay solvent” It’s hard to predict when things are going to fall apart. Archegos capital worked for quite a while until one day it didn’t.
- MichaelBurge 4y ago
  > “The markets can stay irrational longer than you can stay solvent” I'm pretty sure if they had damning evidence, a single hedge fund could single-handedly force the market to collapse in a couple weeks. Keep in mind hedge funds can manage billions of dollars, cryptocurrency market caps are manipulated and the true order book depth is much smaller, and many cryptocurrency people are trading 100x leveraged perpetual futures on dodgy exchanges. At some point it's disrespectful to even allow the market to exist.
  - sdfhdhjdw3 4y ago
    > I'm pretty sure if they had damning evidence, a single hedge fund could single-handedly force the market to collapse in a couple weeks. Exactly, like they did with GME. Oh wait.
    - deleted 4y ago
      [deleted]
    - deleted 4y ago
      [deleted]
  - jcranmer 4y ago

ldjkfkdsjnv 4y ago

No way it blows up. Too many people have a vested interest in keeping it alive. Tether probably could have blown up years ago. At this point, there are definitely unseen and unknown backers who would prevent it.

mattzito 4y ago
I think that’s probably true for some amount of correction, but presumably there’s some amount where the juice just isn’t worth the squeeze anymore, right? A quick google search says there’s 14b tether in circulation - if that’s true and it falls 50%, who is going to put in multiple billions to try to prop it up?
- ldjkfkdsjnv 4y ago
  If tether goes down, so does bitcoin. This post may as well be about bitcxoin going to zero then
  - SV_BubbleTime 4y ago
    >If tether goes down, so does bitcoin. Doubt that. I’m sure almost anyone here could wow me with technical reasons why they are correlated… In the end because this is all illusionary and not backed by anything tangible, it’s faith-based speculation. When Tether pops, Bitcoin probably goes up. No one will have learned any lessons, just that they picked they wrong one, but this one over here is “safe”. It’s all what people can be made to believe, and I’m pretty sure the average crypto gambler can be made to believe lots of things that aren’t rational. Who hasn’t seen that themselves?
    - deleted 4y ago
      [deleted]
- tyrfing 4y ago
  Tether is at 75B right now, up from 5B pre-pandemic. > if that’s true and it falls 50%, who is going to put in multiple billions to try to prop it up? Anyone who has information on the backing assets. If Tether embezzled or lost 30 billion and were able to buy back all USDT at 50 cents, they would make billions in profit as well as erase that shortage.

NeutralForest 4y ago

No issue with the author but I wish I could filter HN to not have crypto related news here. It's really polluting my tech related feeds.

cinntaile 4y ago
I agree so I just started flagging the crypto related news I see. The discussions rarely follow HN guidelines.
ad-astra 4y ago
Big waste for great minds. But I guess it’s their choice.
SilasX 4y ago
Same, but I also want to toggle it so that I specifically see the stories that are crypto related. Best I can do is search comments several keywords and then sift through batches of them that come from the same story.
ntoskrnl 4y ago
The problem is people upvote headlines that support their view regardless of the content. I don't mind high quality posts from either camp, or actual news (on this site called Hacker News), but when we have daily posts like this with nothing new to add, it gets to be a bit much. I'm going to start flagging them like the sibling post mentioned, but this account might be too new for it to matter.

sbierwagen 4y ago

> Any exchange with USDT-denominated crypto prices will see those prices explode, as there will be few sellers of crypto for a soon-to-be-worthless asset. This will also blow up arbitrage bots that move tokens between exchanges, as they quickly and automatically pour coins into a defaulted exchange. A fun “picking up pennies in front of a steamroller” risk in what’s supposed to be a risk free trade.

rinze 4y ago

It won't be soon enough.

ddjsn111 4y ago

acchow 4y ago

I feel like Tether wanted to prove, once again, that the entire system is illusory anyway just like how the Bretton Woods system ended in 1971 (no more convertibility of USD into gold). As long as people use USD effectively, who cares whether or not it is backed by actual gold?

SV_BubbleTime 4y ago
>As long as people use USD effectively, who cares whether or not it is backed by actual gold? Because unlike all crypto coin asserts, its backed with guns.
- qgin 4y ago
  The guns really do back the USD. It's true that value is set by supply and demand for both crypto and USD, but there's a key difference. Yes, crypto and USD both have a limited supply (at any given time). But the demand for crypto can fall to zero with the only real-world change being a change in people's feelings. But USD demand is more than just feelings. There is a floor in the demand for USD because anyone who wants to live or do business in the United States are obligated by law (and ultimately, guns) to pay taxes in USD. For this reason, USD demand can't go to zero until the entire US economy collapses (and with the aforementioned guns, US economic interests will likely be protected). Obviously that floor in demand doesn't represent 100% of the demand for USD, but it's a floor on which a lot of confidence and subsequent demand can be built.
- acchow 4y ago
  100% agree.
adra 4y ago
The system promised other nations for gold, not necessarily US depositors, remember that. Also that this pillar of the financial system only started operating on the gold standard in the 1930's? The system has been dead for as long as it was ever alive and its continues to be held up as this shining pinnacle of capital market control done right.

Tenoke 4y ago

HN posters have successfully predicted 9 out of the last 0 Tether blow ups. More seriously, it's mostly seething while reposting the same stuff with this article potentially holding the record for being short enough to not even repeat most of the usual let alone add anything compared to the pages and pages of previous posts on the topic[0]. Which doesn't mean it won't blow up, just that those discussions are particularly motivated and low quality. 0. https://hn.algolia.com/?q=tether https://hn.algolia.com/?q=tether

Ologn 4y ago
> HN posters have successfully predicted 9 out of the last 0 Tether blow ups. People predicting stock market declines have thus far been predicting something which declines and then eventually bounces back. This will not happen to Tether - when it blows up, like Mt. Gox, or a host of other crypto scams have - it will not be coming back. As someone else here said, markets can remain irrational longer than you or I can remain solvent. Bernie Madoff's Ponzi scheme collapsed in 2008 not due to Harry Markopolos talking to the SEC in 2000 (or after) - it collapsed because everyone started withdrawing their money at once, and then the whole house of cards collapsed.
- Animats 4y ago
  It collapsed because everyone started withdrawing their money at once, and then the whole house of cards collapsed. That may be happening to Tether now. Take a look at Tether's market cap chart.[1] Click on Overview->Market cap-> 1 month. You can see the cashouts. Between 5:09 AM and 5:14 AM on May 27, 2022, the market cap of USDT suddenly dropped by $750 million dollars. There have been five huge cashouts like that since May 13th. About 12% of Tether has been cashed out in the last 3 weeks. This never happened to Tether before. Until now, market cap was "line goes up". Biggest previous drop in market cap was about 1% in mid-2021. So, how long can Tether pay out 4% of its market cap per week? Looks like we're going to find out. [1] https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/currencies/tether/
  - ahnick 4y ago

abriosi 4y ago

Tether speculation aside, this is a very low quality post. HN bias of crypto is the only reason this piece achieves first page There are so many interesting things to discuss about Tether, for instance, I would like to know the insides of how Tether is providing shadow banking to crypto exchanges and how does it mean for future scenarios Anyone has anything shareable?

panphora 4y ago

Tether was invented because crypto couldn't find legitimate outflows through traditional banking institutions. So, converting to fiat was impossible. Tether and other stable coins came along and said: we'll keep $1 USD for every token we have, so you don't need to cash out your crypto as fiat to see how much it's worth — just trade it for a stable coin! So, Bitcoin isn't actually worth $30k+, it's worth $30k+ in stable coins because that's what it's traded in. It's only connection to fiat is stable coins. if ($1 !== $1) // i.e. Tether is a scam that's not fully backed All crypto will experience a MASSIVE crash The first wave of the massive crash will be due to a loss of confidence in stable coins, the second wave will be a massive panic at not being able to get out of the market fast enough because there's not enough liquidity, and the third wave will be structural problems revealing themselves because most crypto platforms/ecosystems are codependent on each other (massive cross-investments, promissory notes, shared accounts, weird accounting practices, and tons of leveraged bets). When the fiat inflows stop and instead try to reverse, it's going to be wild.

Animats 4y ago
When the fiat inflows stop and instead try to reverse, it's going to be wild. That started 3 weeks ago. See my post above.
tjader 4y ago
> It's only connection to fiat is stable coins. This is simply wrong. There are several exchanges that trade Bitcoin directly with fiat, even USD. It may not be a majority of volume, but it is significant.