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Tether skeptic here. This is not a depeg. Most likely this is just because of the current sell-off of crypto currencies - there are a lot more sellers than buye

Tether skeptic here. This is not a depeg. Most likely this is just because of the current sell-off of crypto currencies - there are a lot more sellers than buyers out there right now. Right now, when you can buy a tether at $0.997 and (in theory) sell it back to tether at $1, there's not much scope for profits after costs. So there's not going to be a lot of money pushing the price back up. IOW it's kind of 'expected' that a stablecoin might drift tiny amounts away from its theoretical peg. It's just not worth it. (n.b. even Tether themselves charge a 0.1% fee to redeem their coins) If/when tether drops below (say) $0.99, and there's no influx of money trying to support it, that's when USDT is in trouble.

phire 4y ago
Stable-coins should be drifting slightly-high during mass-selloffs of the more volatile cryptocurrencies, as more people try to get onto stable ground. And if you check the "slightly" more reputable stable coins like USDC, TUSD and BUSD, they are indeed drifting slightly high. But instead Tether is drifting low, quite low. I agree it's not quite a depeg, but it shows that many people distrust Tether and want to get rid of it at times like this.
- troon-lover 4y ago
- steeleduncan 4y ago
  Yes, depegging is an instantaneous event that happens when Tether fail to redeem a Tether at "face value". As long as they continue to do that, the value of Tether on an open market is only relevant in that it expresses the concerns of traders that they will eventually depeg. Obviously as the price drops it becomes increasingly profitable to buy on the open market and sell back to Tether, depleting their fiat reserves and bringing closer the moment when they stop exchanging at face value, and it all ends.
  - CGamesPlay 4y ago
    Why does tether not “buy back” all of those coins that it would be a loss to redeem? It seems like that would drive up the price and reduce their reserves by less than the alternative.
    - kylecordes 4y ago
      They probably can't move big money into the exchanges fast enough to keep up. Possibly quite a lot of panicked exit from so-called stable coins going on.
    - steeleduncan 4y ago
      I've no doubt they are doing that right now, they would be insane not to. It is presumably what they did to restore confidence during last month's price dip. The problem arises if (my guess is when) they no longer have the funds to do so.
- joosters 4y ago
  It depends upon where you think the money is going. If you believe people are parking their assets in USDT, then yes, you'd expect there to be upward pressure on the price of tether. If instead, people are getting out of crypto altogether, they won't be holding USDT, instead they will be getting hold of actual dollars (which, depending upon the coins, might involve selling a random coin for USDT and then trading that for USD). In that case, there would be selling pressure on USDT.
  - curiousllama 4y ago
    You’re right in the abstract, but in the specifics, Tether is deviating from the market in a worrying direction. Just a worrying signal.
  - nuclearnice1 4y ago
    Sounds right but if there was a general departure from crypto, I don’t expect Phire’s observation that “USDC, TUSD and BUSD, they are indeed drifting slightly high” to hold.
    - nix0n 4y ago
      Departing from crypto is generally done in two steps, first convert from speculative to stable then convert from stable to fiat. If some exchanges are making the second step much harder than the first, then a lot of people attempting to depart crypto could have the effect that we're seeing.
      - nuclearnice1 4y ago
        Sounds plausible To elaborate tether is making the switch to dollars harder so people are preferring other stable coins?
        nix0n 4y ago
        No, I think the prices are going up because that's where the money gets stuck. People don't want stable coins, or any coins, they want fiat (they got into unstable coins as a way to get more fiat).
- lkrubner 4y ago
  "as more people try to get onto stable ground" Stable ground is not a cryptocurrency, what is stable are USA national bonds. The Federal bonds of the USA are the safest asset in the world, and it is what all traders go for when they need safety. No national government of a English speaking country has defaulted on its debt since the Stop of the Exchequer in 1672, and the USA has a huge military which further protects its bonds https://en.wikipedia.org/wiki/Stop_of_the_Exchequer https://en.wikipedia.org/wiki/Stop_of_the_Exchequer
  - ardme 4y ago
  - bombcar 4y ago
    To be fair, part of this is that since around that time the major English speaking countries of note could print the money the bonds were issued in (first the British Empire, now the American one). This means that there may have been "effective defaults" where instead of defaulting on the bond, the currency was weakened. There's also the question if the CSA were ever really a "major English-speaking country" because they did default: https://en.wikipedia.org/wiki/Confederate_war_finance https://en.wikipedia.org/wiki/Confederate_war_finance
    - randomhodler84 4y ago
      Yeah, this. You can’t go broke if you can print the money. What is going to be interesting in the next 10y is BTC denominated bonds. Then we will see exactly who can and will default.
      - lkrubner 4y ago
        Why would anyone want bonds that make default more likely? The idea is insane.
    - jcranmer 4y ago
      > There's also the question if the CSA were ever really a "major English-speaking country" because they did default: https://en.wikipedia.org/wiki/Confederate_war_finance https://en.wikipedia.org/wiki/Confederate_war_finance If I'm reading the sources correctly, the CSA never technically defaulted until it ceased to exist as a meaningful entity. The CSA never paid the interest on the junk bonds, but those bonds appeared to have a clause permitting it to defer any payments while the war was ongoing; the cotton bonds were actually serviced in full throughout the entire war.
Anderkent 4y ago
Just because the incentives to reassert the peg don't work out because of costs doesn't mean this isn't a depeg.
spywaregorilla 4y ago
> Right now, when you can buy a tether at $0.997 and (in theory) sell it back to tether at $1 No, you can't. Not even in theory. You have no right to redeem. They can choose to buy it back from you for $1, but it's not a right of the token.
- Yeahsureok 4y ago
  Everyone in the developed world can sign up for kraken right now. Why are mistruths like this always presented so strongly and at the top here? Are you all so heavily invested in this belief? You can sell tether for usd, all day every day, I guess screaming into the void and getting upvotes is more valuable on an emotional level. https://trade.kraken.com/charts/KRAKEN:USDT-USD https://trade.kraken.com/charts/KRAKEN:USDT-USD
  - anonymoushn 4y ago
    That's not redeeming. Redeeming is sending your Tethers to Tether and receiving a USD wire transfer. Fairly few entities can do this. We can't do it yet.
    - Yeahsureok 4y ago
      So imagine you get what you want here, and tether open trading for all customers down to those who want to redeem 20 cents... Ignoring that the last person who tried to create a digital token pegged to USD. Ignoring all the AMC/KYC risks You'd actually be happy? You truly wouldn't just move onto accusing them of facilitating money laundering on a massive scale as tethers can move across borders for a few cents? I doubt this.
    - prvit 4y ago
      >Fairly few entities can do this What do you mean? You just have to complete the fairly simple KYC process and you can start redeeming. Perhaps you mean that fairly few entities have bothered to do this?
      - 4y ago
kasey_junk 4y ago
Where can you redeem tether for $1? If the answer is “nowhere” it’s a depeg by definition. If you can trivially redeem tether for $1 why is it trading for less than that? Money market funds are considered to have broken the peg the minute you can’t get a dollar for dollar out of them, why are we redefining the term for crypto?
- bidirectional 4y ago
  You can get a dollar for a dollar, it's just not worthwhile to do so yet for arbitrageurs due to the tiny magnitude of the drift. Tether actually depegging happens when someone tries to redeem with them and they can't do it, the market price is misleading. An analogous money market fund example would be if I can't redeem until tomorrow noon yet need to urgently meet some financing need today, I could sell to someone for a tiny discount and they can redeem tomorrow.
  - kasey_junk 4y ago
    Where can you redeem it for a dollar? Tether doesn’t promise they will redeem it. Have there been large redemptions?
    - bidirectional 4y ago
      With the Tether organisation themselves. They have enabled redemptions well in excess of 10 billion dollars since the start of the market crash.
    - 22c 4y ago
      Day traders generally can't redeem Tether, you need to be a "verified customer of Tether". Most Tether redemptions are done by large institutions.
      - kasey_junk 4y ago
        So why aren’t those large institutions arbing the spread right now? If the answer is that they don’t have faith they can get the redemptions to cover their positions that’s also breaking the peg.
trompetenaccoun 4y ago
It amazes me that HN consistently falls for fear mongering and conspiracies when it comes to anything finance related. Quite remarkable for a forum full of tech savvy people. That site OP linked to doesn't even load currently. Apparently their servers got fried. Looks like today, someone's not making bank... man. Edit: Apparently it can do Chrome but has issues with Firefox.
- thablackbull 4y ago
  Hacker News is somewhat good for Tech, especially if the commentor actually is a domain expert, but outside of it can be quite woeful. Ironically, every once in a while an article or post about something like the Dunning-Kruger effect comes up, everyone is suddenly fully aware of how this applies to them.
chadash 4y ago
I have a question on this. If the redemption fee is 0.1%, then that makes a USDT worth $0.999. Why is it assumed that a tether should be worth $1.00 and not $0.999?
- anonymoushn 4y ago
  You're correct. To expand a bit, in general, when demand for crypto trading is going up, Tether should be worth about 10bps more than a dollar (because this is what Tether will charge you to create new Tethers, and the supply is mostly expanding), and when demand for crypto trading is going down, Tether should be worth about 10bps less than a dollar (because this is what Tether will give you for your Tethers, and the supply is mostly contracting).
- renonce 4y ago
  That's exactly the case, and I would consider a price below $0.999 or a price above $1.001 to be a depeg. It's just that few people cared enough about such a tiny fee so Tether can earn $2m out of every $1b minted. At its worst times Tether charged 3% redemption fee, making 1USDT equal 0.97USD, but by disguising it as a fee they could claim that 1USDT is just 1USD.
anonymoushn 4y ago
Tether charges you 10bps. So you make money from buying here. We'll buy some.
deleted 4y ago
[deleted]
saurik 4y ago
Not only is there a 0.1% fee--and so of course USDT can easily be sitting at $0.999 without it even being strange--but it will take a day or two to round-trip the money through the antiquated legacy banking systems with Tether, so you have to additionally take into account the lost opportunity cost.

phire 4y ago

Stable-coins should be drifting slightly-high during mass-selloffs of the more volatile cryptocurrencies, as more people try to get onto stable ground. And if you check the "slightly" more reputable stable coins like USDC, TUSD and BUSD, they are indeed drifting slightly high. But instead Tether is drifting low, quite low. I agree it's not quite a depeg, but it shows that many people distrust Tether and want to get rid of it at times like this.

troon-lover 4y ago
steeleduncan 4y ago
Yes, depegging is an instantaneous event that happens when Tether fail to redeem a Tether at "face value". As long as they continue to do that, the value of Tether on an open market is only relevant in that it expresses the concerns of traders that they will eventually depeg. Obviously as the price drops it becomes increasingly profitable to buy on the open market and sell back to Tether, depleting their fiat reserves and bringing closer the moment when they stop exchanging at face value, and it all ends.
- CGamesPlay 4y ago
  Why does tether not “buy back” all of those coins that it would be a loss to redeem? It seems like that would drive up the price and reduce their reserves by less than the alternative.
  - kylecordes 4y ago
    They probably can't move big money into the exchanges fast enough to keep up. Possibly quite a lot of panicked exit from so-called stable coins going on.
  - steeleduncan 4y ago
    I've no doubt they are doing that right now, they would be insane not to. It is presumably what they did to restore confidence during last month's price dip. The problem arises if (my guess is when) they no longer have the funds to do so.
joosters 4y ago
It depends upon where you think the money is going. If you believe people are parking their assets in USDT, then yes, you'd expect there to be upward pressure on the price of tether. If instead, people are getting out of crypto altogether, they won't be holding USDT, instead they will be getting hold of actual dollars (which, depending upon the coins, might involve selling a random coin for USDT and then trading that for USD). In that case, there would be selling pressure on USDT.
- curiousllama 4y ago
  You’re right in the abstract, but in the specifics, Tether is deviating from the market in a worrying direction. Just a worrying signal.
- nuclearnice1 4y ago
  Sounds right but if there was a general departure from crypto, I don’t expect Phire’s observation that “USDC, TUSD and BUSD, they are indeed drifting slightly high” to hold.
  - nix0n 4y ago
    Departing from crypto is generally done in two steps, first convert from speculative to stable then convert from stable to fiat. If some exchanges are making the second step much harder than the first, then a lot of people attempting to depart crypto could have the effect that we're seeing.
    - nuclearnice1 4y ago
      Sounds plausible To elaborate tether is making the switch to dollars harder so people are preferring other stable coins?
      - nix0n 4y ago
        No, I think the prices are going up because that's where the money gets stuck. People don't want stable coins, or any coins, they want fiat (they got into unstable coins as a way to get more fiat).
lkrubner 4y ago
"as more people try to get onto stable ground" Stable ground is not a cryptocurrency, what is stable are USA national bonds. The Federal bonds of the USA are the safest asset in the world, and it is what all traders go for when they need safety. No national government of a English speaking country has defaulted on its debt since the Stop of the Exchequer in 1672, and the USA has a huge military which further protects its bonds https://en.wikipedia.org/wiki/Stop_of_the_Exchequer https://en.wikipedia.org/wiki/Stop_of_the_Exchequer
- ardme 4y ago
- bombcar 4y ago
  To be fair, part of this is that since around that time the major English speaking countries of note could print the money the bonds were issued in (first the British Empire, now the American one). This means that there may have been "effective defaults" where instead of defaulting on the bond, the currency was weakened. There's also the question if the CSA were ever really a "major English-speaking country" because they did default: https://en.wikipedia.org/wiki/Confederate_war_finance https://en.wikipedia.org/wiki/Confederate_war_finance
  - randomhodler84 4y ago
    Yeah, this. You can’t go broke if you can print the money. What is going to be interesting in the next 10y is BTC denominated bonds. Then we will see exactly who can and will default.
    - lkrubner 4y ago
      Why would anyone want bonds that make default more likely? The idea is insane.
  - jcranmer 4y ago
    > There's also the question if the CSA were ever really a "major English-speaking country" because they did default: https://en.wikipedia.org/wiki/Confederate_war_finance https://en.wikipedia.org/wiki/Confederate_war_finance If I'm reading the sources correctly, the CSA never technically defaulted until it ceased to exist as a meaningful entity. The CSA never paid the interest on the junk bonds, but those bonds appeared to have a clause permitting it to defer any payments while the war was ongoing; the cotton bonds were actually serviced in full throughout the entire war.

Anderkent 4y ago

Just because the incentives to reassert the peg don't work out because of costs doesn't mean this isn't a depeg.

spywaregorilla 4y ago

> Right now, when you can buy a tether at $0.997 and (in theory) sell it back to tether at $1 No, you can't. Not even in theory. You have no right to redeem. They can choose to buy it back from you for $1, but it's not a right of the token.

Yeahsureok 4y ago
Everyone in the developed world can sign up for kraken right now. Why are mistruths like this always presented so strongly and at the top here? Are you all so heavily invested in this belief? You can sell tether for usd, all day every day, I guess screaming into the void and getting upvotes is more valuable on an emotional level. https://trade.kraken.com/charts/KRAKEN:USDT-USD https://trade.kraken.com/charts/KRAKEN:USDT-USD
- anonymoushn 4y ago
  That's not redeeming. Redeeming is sending your Tethers to Tether and receiving a USD wire transfer. Fairly few entities can do this. We can't do it yet.
  - Yeahsureok 4y ago
    So imagine you get what you want here, and tether open trading for all customers down to those who want to redeem 20 cents... Ignoring that the last person who tried to create a digital token pegged to USD. Ignoring all the AMC/KYC risks You'd actually be happy? You truly wouldn't just move onto accusing them of facilitating money laundering on a massive scale as tethers can move across borders for a few cents? I doubt this.
  - prvit 4y ago
    >Fairly few entities can do this What do you mean? You just have to complete the fairly simple KYC process and you can start redeeming. Perhaps you mean that fairly few entities have bothered to do this?
    - 4y ago

kasey_junk 4y ago

Where can you redeem tether for $1? If the answer is “nowhere” it’s a depeg by definition. If you can trivially redeem tether for $1 why is it trading for less than that? Money market funds are considered to have broken the peg the minute you can’t get a dollar for dollar out of them, why are we redefining the term for crypto?

bidirectional 4y ago
You can get a dollar for a dollar, it's just not worthwhile to do so yet for arbitrageurs due to the tiny magnitude of the drift. Tether actually depegging happens when someone tries to redeem with them and they can't do it, the market price is misleading. An analogous money market fund example would be if I can't redeem until tomorrow noon yet need to urgently meet some financing need today, I could sell to someone for a tiny discount and they can redeem tomorrow.
- kasey_junk 4y ago
  Where can you redeem it for a dollar? Tether doesn’t promise they will redeem it. Have there been large redemptions?
  - bidirectional 4y ago
    With the Tether organisation themselves. They have enabled redemptions well in excess of 10 billion dollars since the start of the market crash.
  - 22c 4y ago
    Day traders generally can't redeem Tether, you need to be a "verified customer of Tether". Most Tether redemptions are done by large institutions.
    - kasey_junk 4y ago
      So why aren’t those large institutions arbing the spread right now? If the answer is that they don’t have faith they can get the redemptions to cover their positions that’s also breaking the peg.

trompetenaccoun 4y ago

It amazes me that HN consistently falls for fear mongering and conspiracies when it comes to anything finance related. Quite remarkable for a forum full of tech savvy people. That site OP linked to doesn't even load currently. Apparently their servers got fried. Looks like today, someone's not making bank... man. Edit: Apparently it can do Chrome but has issues with Firefox.

thablackbull 4y ago
Hacker News is somewhat good for Tech, especially if the commentor actually is a domain expert, but outside of it can be quite woeful. Ironically, every once in a while an article or post about something like the Dunning-Kruger effect comes up, everyone is suddenly fully aware of how this applies to them.

chadash 4y ago

I have a question on this. If the redemption fee is 0.1%, then that makes a USDT worth $0.999. Why is it assumed that a tether should be worth $1.00 and not $0.999?

anonymoushn 4y ago
You're correct. To expand a bit, in general, when demand for crypto trading is going up, Tether should be worth about 10bps more than a dollar (because this is what Tether will charge you to create new Tethers, and the supply is mostly expanding), and when demand for crypto trading is going down, Tether should be worth about 10bps less than a dollar (because this is what Tether will give you for your Tethers, and the supply is mostly contracting).
renonce 4y ago
That's exactly the case, and I would consider a price below $0.999 or a price above $1.001 to be a depeg. It's just that few people cared enough about such a tiny fee so Tether can earn $2m out of every $1b minted. At its worst times Tether charged 3% redemption fee, making 1USDT equal 0.97USD, but by disguising it as a fee they could claim that 1USDT is just 1USD.

anonymoushn 4y ago

Tether charges you 10bps. So you make money from buying here. We'll buy some.

deleted 4y ago

[deleted]

saurik 4y ago

Not only is there a 0.1% fee--and so of course USDT can easily be sitting at $0.999 without it even being strange--but it will take a day or two to round-trip the money through the antiquated legacy banking systems with Tether, so you have to additionally take into account the lost opportunity cost.