3 ms·

It seems like it would be pretty binary. That is, withdrawals would be orderly... until they are suddenly not. It's not very good evidence for the state of the

It seems like it would be pretty binary. That is, withdrawals would be orderly... until they are suddenly not. It's not very good evidence for the state of their backing now. Maybe they've chewed through all their liquid assets and will explode tomorrow, maybe not. That is, withdrawals wouldn't shake the Tether price at all until someone is told "no you can't withdraw today" and decides to sell their Tethers on the market at a discount instead of withdrawing at par.

marcell 4y ago
That’s an often stated truism that is false. You could have a situation where Tether is 80% capitalized, in which case one USDT is worth $0.80. Or a situation where they have money locked in Treasury bonds for 1 year. In that case, the value of USDT depends on your discount rate and is around $0.95.
atwood22 4y ago
Yes, it’s possible that Tether is suddenly unable to be exchanged for dollars, but it’s pretty impressive they’ve been able to handle a sudden outflow of 20B. They’ve certainly proven their most harsh critics wrong, but there is still risk of course.
- roywiggins 4y ago
  I dunno, if I put $80 of cash into a black box and pull out $20, that doesn't tell you that much about the remaining $60, just that the box wasn't secretly a paper shredder the whole time. Which is great news for the lucky early redeemer. Not much use to later redeemers though, if it turns out that the remainder was eaten by hungry rodents.
  - manquer 4y ago
    Depends on how you see it, I am impressed there was even $20 in the box given how poorly and non transparently they are governed. The current global market climate makes it tough to keep the $80Billion in investments both liquid and on par even if they invested in traditional portfolio baskets, a traditional bank would likely struggle if quarter of their deposits liquidated in a month and may not be able to easily meet cash reserve ration requirements to support future withdrawals.

marcell 4y ago

That’s an often stated truism that is false. You could have a situation where Tether is 80% capitalized, in which case one USDT is worth $0.80. Or a situation where they have money locked in Treasury bonds for 1 year. In that case, the value of USDT depends on your discount rate and is around $0.95.

atwood22 4y ago

Yes, it’s possible that Tether is suddenly unable to be exchanged for dollars, but it’s pretty impressive they’ve been able to handle a sudden outflow of 20B. They’ve certainly proven their most harsh critics wrong, but there is still risk of course.

roywiggins 4y ago
I dunno, if I put $80 of cash into a black box and pull out $20, that doesn't tell you that much about the remaining $60, just that the box wasn't secretly a paper shredder the whole time. Which is great news for the lucky early redeemer. Not much use to later redeemers though, if it turns out that the remainder was eaten by hungry rodents.
- manquer 4y ago
  Depends on how you see it, I am impressed there was even $20 in the box given how poorly and non transparently they are governed. The current global market climate makes it tough to keep the $80Billion in investments both liquid and on par even if they invested in traditional portfolio baskets, a traditional bank would likely struggle if quarter of their deposits liquidated in a month and may not be able to easily meet cash reserve ration requirements to support future withdrawals.