12 ms·
It's not backed. Once the Tether scam unravels, it's not clear how badly it will affect Bitcoin's price. But it's going to be bad. There's a chance that Tether
by ogogmad 4y ago
It's not backed. Once the Tether scam unravels, it's not clear how badly it will affect Bitcoin's price. But it's going to be bad.
There's a chance that Tether has been pumping BTC.
- cypherpunks01 4y agoWouldn't Tether have unraveled during the huge amount of withdrawals during the Luna collapse? I thought it was going to, but surprised that it appears to have made it through processing everyone's withdrawals.
- ahnick 4y agoThey are likely not solvent (i.e. they have enough liquid funds to cover everyone withdrawing their money all at once), but they apparently can cover a high percentage of USDT withdrawals. It is still very fishy b/c if you look at the lending rates on Bitfinex there is currently an 18.825% APR for USD. If there was really zero risk with USDT I think you'd see a whole lot more volume pumping through that system.
- Canada 4y agoHow much of those are to cover the leverage of customers?
- htrp 4y agoVery few people converted to cash. It was mostly crypto to crypto iirc (Luna -> Terra -> Tether -> BTC/ETH) Also Terra was the algorithmically pegged stablecoin to Luna (not Tether in case that was the confusion)
- deleted 4y ago[deleted]
- fckgw 4y agoUSDT experienced it's longest de-pegging event ever during the Luna collapse. It didn't drop as low as previous events but it went on a long time.
- josu 4y ago>USDT experienced it's longest de-pegging event ever during the Luna collapse. This is not true: https://trading.bitfinex.com/t/UST:USD https://trading.bitfinex.com/t/UST:USD
- fckgw 4y agoA $1 stable coin being worth 99 cents is a depeg, and it was at that price for nearly a month after Luna/Terra collapse.
- jimmydorry 4y agoBut it was not the longest period of de-pegging, which was your original claim.
- roflyear 4y agoWhat was? I can't really get that by just looking at some charts on an exchange...
- jimmydorry 4y agoWhy can't you see that on a chart? https://i.imgur.com/FQbszHZ.png https://i.imgur.com/FQbszHZ.png A quick eyeball has January to July 2018 where a Tether was worth less than $1.
- josu 4y agoIt depegged for much longer periods in 2019. EDIT: Screenshot https://www.tradingview.com/x/I92ccibV/ https://www.tradingview.com/x/I92ccibV/
- ARandumGuy 4y agoTether (and the various exchanges that use it) has enough liquidity to process withdrawals, and likely has enough slack in the system to process periods of higher then normal withdrawal amounts. As long as Tether has some liquidity, things will keep operating as normal. However, if the amount of money withdrawn is greater then the amount deposited, eventually Tether's reserves will dry up. Once that happens, anyone with outstanding USDT will be stuck with a worthless asset. Only Tether knows how close we are to that point, and they aren't saying.
- liuliu 4y agoHow do we know they processed withdrawals to plain USD and how much? Is there any tracker on that? Thanks!
- distortedsignal 4y agoI think a good way is to check out CoinMarketCap's Market Cap tracker. Let me elaborate. I think Market Cap = (value per asset) * (total # of assets in the market). So the Market Cap of USDT SHOULD BE roughly equal to the number of Tethers on the market (assuming the price of a single Tether is stable, which isn't a bad assumption right now). Since "every Tether is backed 1:1 by USD" and Tether is (more-or-less) pegged 1:1 to USD, if you see the market cap drop by a significant margin, it's likely that the drop was an outflow to currency. If we check the Luna crash event (~early May - ~early June 2022), we can see that USDT lost ~18B in market cap over that period. So (I think) we can assume that there was (roughly) 18B of dollar outflow over that period. If any of my statements here are incorrect, please correct me. I'm a software engineer, not a finance artist or an MBA, and the last business class I took was summer school in High School in like 2006.
- ac29 4y ago> "every Tether is backed 1:1 by USD" Tether does not make this claim, I'm not sure why you put it in quotes
- JumpCrisscross 4y ago> we can assume that there was (roughly) 18B of dollar outflow over that period Couldn’t Tether burn tokens it holds on its own or affiliates’ books to create that impression?
- distortedsignal 4y agoThis is a good point - the issuer of Tether (iFinex?) could burn USDT that they hold without paying out to currency. I'm not sure how holding Tether would benefit the issuer of Tether, though, since anytime anyone transferred USDT to the issuer they would expect a cash payout. So I guess my statement "USDT is backed 1:1" should actually be "circulating USDT is supposedly backed 1:1 by USD." Any "burnable Tether" should be subtracted from the Market Cap to find the actual "backed Tether." I don't know of any way to find how much USDT is held by the issuer of Tether (or their coparties) and how much is held by other wallets at any given time. I suspect that calculation would require a significantly greater knowledge of the blockchains that USDT is on than what I have.
- rossdavidh 4y agoWell, it's possible "backed", in the sense that there are dollar-denominated assets backing it. They've already admitted that it's not actual dollars, and that some of them at least are foreign assets. Which probably means it's Chinese dollar-denominated debt, perhaps stuff like Evergrande bonds that you could get for $0.05 on the dollar. So, it is "backed", perhaps, in that there are dollar denominated assets. But, functionally, it's probably not backed in a way that does anyone any good. So your basic point is correct. At some point, people rush for the exits, and when they do, BTC may collapse with it.
- ufo 4y agoI wouldn't be surprised if it were even worse than that, e.g. promissory notes from Bitfinex (themselves)
- puffoflogic 4y agoIf it's good enough for the SSA why not for tether?
- looknee 4y agoA close friend of mine does banking in Nassau, Bahamas and works with Tether, and according to him Tether is where they sling all of their lowest rated junk chinese bonds. He has been telling me to go nowhere near it for the last 5 years and I have not.
- tromp 4y agoThere's no way it's fully backed. I doubt that if Tether liquidated all their assets, they could cover even 90% of outstanding Tether. But they can spin all kinds of BS about how those assets are really worth more on paper...
- mistrial9 4y agothe whole of the US stock exchanges and many of the supporting assets, are already like that.
- quickthrowman 4y agoStocks aren’t pegged to the dollar, you’re comparing apples and wrenches. Tether is much more like a money market fund than an equity or bond. If your point is that there isn’t infinite liquidity at the current market price for an equity or bond, you’re correct, but it’s irrelevant since tether is nothing like an equity or bond.
- mistrial9 4y agoyes, the distinctions you make are relevant; my point is exactly that there is NOWHERE NEAR the liquidity in ordinary markets.. I was too quick to object and with insufficient distinction, I stand corrected
- potatolicious 4y ago+1 on all of the above, and to add: there isn't infinite liquidity on securities, and that's ok. And that's exactly the problem: Tether is pretending not be be an security, even though it transparently is. Heck, to generalize on this, this is kind of the ur-problem with crypto generally: a bunch of things pretending to be currencies but are actually securities. The whole subterfuge is intentional, to foist risky assets on people by lying about their nature, and to avoid the (hard fought and hard justified) regulations around said risky assets.
- YawningAngel 4y ago
- gonzo41 4y agoThe fun begins!
- jbirer 4y agoWhat's wrong? They are doing fractional reserve banking.
- PragmaticPulp 4y agoFractional reserve banking means that banks must reserve a fraction of the deposits. They lend out the rest. The deposit is still on record and the obligation to repay it still exists. If a bank never takes deposits, they have nothing to lend out. If Tether was printing Tethers without having deposits in place, they're not doing fractional reserve banking.
- scotty79 4y agoDo you think they have no money kept? Because if they kept fractions then it's fractional.
- Wata26363 4y agoNo, a tether is not accompanied with an iou to the "bank". In fact it's the other way around. If they're not fully covered its simply theft.
- banannaise 4y agoFractional reserve banking still means having assets that cover your liabilities; those assets simply may not be liquid (i.e. they are loans that will be paid back over a period of years). If you don't have assets on your books, and have instead either walked with or lost a large portion of the money, then you're not doing fractional reserve banking, you're running a confidence scheme. If Tether, as suspected, was largely "backed" by crypto assets and Bitfinex shares, then they're gambling with the bank funds... and the recent losses in the crypto markets mean that they have been losing those bets. (I edited the last portion of this substantially to make it more concise.)
- cuteboy19 4y agoTwo cases 1. You deposit $100 in the bank. It keeps $30 as cash and lends out the rest to someone. The money is still there on the balance sheet (but with a risk that it might not be returned) 2. You deposit $100 with Mr. Paulo in return getting 100USDT. Mr. Paolo spends $70 on private jets and ho*kers. If you ever want back more than $30, you're out of luck.
- deleted 4y ago[deleted]
- iLoveOncall 4y ago> There's a chance that Tether has been pumping BTC. A chance? It's an absolute certainty. Not only most exchanges have only a USDT:BTC pair and not a USD:BTC pair, but if you look at recent (~1.5 years) sudden spikes in BTC price, they correspond almost always to a new supply of USDT being released by Tether. The only upward momentum Bitcoin has had since the last ATH has been due to Tether printing money, so it's safe to say that not only it's pumping it, but it's probably contributing 80%+ of its value. If Tether dies, it's the end of cryptocurrency, period.
- kranke155 4y agoIt’s end of cryptocurrency as a wild speculative asset. Ethereum and decentralised apps will still exist, which is all that matters. Bitcoin is a failed open source project turned Ponzi. I can’t wait for tether to take it to the absolute bottom and end the current epoch of crypto-as-speculation. Crypto will have its uses as a decentralised application platform.
- tehjoker 4y agoYou say that, but the only plausible non-substitutable use of bitcoin I've seen is sending money overseas or buying drugs. If its monetary value collapses, I don't see these other uses at all replacing it. It could just die, though more likely some marginal stuff will continue indefinitely trying to recapture lost glory.
- kranke155 4y agoNFTs have actually solved a real problem in the art world. I've said it many times before here so you can browse through my comment history to see why. Spoilers: - saying "but there is fraud" is not an argument against NFTs, because actually an automated solution for NFT fraud is conceivable. And the fact that there is fraud does not take away from the thousands of artists using it legitimately. Plus, authenticating you are buying from a real artist in the NFT space is actually not that hard. I actually think there is a huge potential to decentralized applications, but this is essentially faith for now so I won't add much more to the discussion.
- spookthesunset 4y ago> Once the Tether scam unravels We've all been saying this for literally years now and yet here we are. The crypto market doesn't make any sense at all. It has to crash sometime, right? I mean it is obvious to anybody paying any attention that tether is a scam. How has it gone on this long? What will finally do it in?
- deleted 4y ago[deleted]
- bb88 4y ago1. The people using it don't care if it is, as they may be trying to grift each other anyway, or be using it for short term holding, transferring between crypto accounts. 2. We would only see this on a massive sell off when Tether can't prop up the price fast enough with their reserves (by buying USDT with USD). This almost happened on May 11 of 2022. 3. The Madoff scam went years and years before finally being outed in 2008. Decades perhaps?
- rhodorhoades 4y agoTether is hard coded to bounce between their float. Tether made a mega fuck ton of money when that float widened and so did all the hft firms. Most of the tether is held by insiders and they can utilize that tether to obtain 100x leverage. You can literally see on chain when the yield widened back in may 11th, that sythetix and other leverage platforms got a huuuge influx of USDT and they used that USDT to purchase more USDT on the low… and guess what? Made a killing. They are too powerful with too much money and too much centralized collusion to fail on their own. And the US policy still can’t define crypto, let alone police it properly. Only the full might of the US judicial system will make tether fail.
- dereg 4y ago> We would only see this on a massive sell off when Tether can't prop up the price fast enough with their reserves (by buying USDT with USD). This almost happened on May 11 of 2022. This did not almost happen. Do you enjoy writing fiction?
- 4y ago
- somewhereoutth 4y agoWhen the casino admits it doesn't have the cash to back the chips out on the floor - pandemonium ensues.
- Scoundreller 4y agoI wonder what percentage they consider “lost” every year and book as revenue?
- tinus_hn 4y ago> It’s not backed. Then again, neither is a typical bank account.
- smt88 4y agoAbsolutely wrong. Typical bank accounts in the US are FDIC-insured.
- anonymoushn 4y agoUp to any amount of deposits?
- warkdarrior 4y agoEach account is insured up to $250k, and you can open as many accounts as you wish. Source: https://www.fdic.gov/resources/deposit-insurance/faq/index.html https://www.fdic.gov/resources/deposit-insurance/faq/index.h...
- Scoundreller 4y agoNononono!!!! > Deposits are insured up to at least $250,000 per depositor, per FDIC-insured bank, per ownership category If you want have more than $250k insured in regular accounts, spread it across multiple banks (or put some in a joint acct, but that has its own risks). Opening a chequing account and a savings account at the same bank doesn’t give you $500k of coverage if you were to put 250k in each.
- mariojv 4y agoThank you for this. I was under the assumption one could open any number of accounts at the same bank and get the same insurance guarantee. It is good to read the specific language.
- tinus_hn 4y agoWhich is not the same as backed 100% by real dollars. It’s just another level of guarantees, just like the guarantees given by Tether. Obviously it’s very reasonable to trust one more than the other, but neither are backed 100% by real money.
- Geee 4y agoStop spouting lies and non-sense. There is no evidence whatsoever that Tether is a "scam" or that it has been "pumping" BTC. You might as well claim that 911 was an inside job and we didn't go to the moon. Same type of people spout these "truths". Claiming something to be true in the complete absence of evidence, or contrary to existing evidence, makes you a nutjob. Tether is an integral part of the whole cryptocurrency ecosystem, and it's insane to claim that the global industry operates closely with a "scam that soon unravels" without the industry players being worried at all. Large exchanges are not some shadowy operations which can just close their eyes when they are exposed to risk.
- r00fus 4y agoIt makes sense if you consider all of crypto as a scam (greater tulip theory).
- jazzyjackson 4y ago> Large exchanges are not some shadowy operations which can just close their eyes when they are exposed to risk. is this sarcasm? because the 2008 mortgage crisis showed that yes, large non-shadowy institutions can absolutely keep their eyes closed.
- AlexandrB 4y agoYou'd think that after 2008 it would be obvious that even experienced financial institutions can be fooled into ignoring red flags when money is on the line. Greed is a hell of a drug. This same comment could have been posted about LUNA and large crypto investors like 3AC 6 months ago. > LUNA/UDT is an innovative part of the whole cryptocurrency ecosystem, and it's insane to claim that the global industry operates closely with a "scam that soon unravels" without the industry players being worried at all. Large investors are not some shadowy operations which can just close their eyes when they are exposed to risk. The red flags around Tether are many, but the biggest is that it would be easy for them to prove that USDT is backed 1:1 with USD if it actually was. The fact that they've consistently avoided offering such proof is all the evidence I need. It's the same reason no one believes Craig Wright is Satoshi.
- 4y ago
- swalsh 4y agoUSDC is the only reliable stable coin. Some dislike it because they have shown that they will use the blacklist feature (which USDT has too, to be fair) but frankly, I'd prefer my bank backed stablecoin is compliant with US law.
- sizzle 4y agoIsn’t tether USDT built on ethereum? How does it affect btc exactly? Can you buy BTC with USDT or am I missing something about the connection between the two?
- papercrane 4y agoIt's generally assumed that if USDT collapsed it would drag down the entire crypto market.
- epolanski 4y agoTether is highly backed by BTC and only partially by cash. Then they print Tether to buy Bitcoin which pumps the backing value..