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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 y

by 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.

by phire 4y ago

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.