5 ms·

Virtually every take I read on this forum is uninformed. To hear it straight from the horses mouth, here's Matt Levine + SBF getting into the realities of tethe

Virtually every take I read on this forum is uninformed. To hear it straight from the horses mouth, here's Matt Levine + SBF getting into the realities of tether (skip to 48 minutes): https://open.spotify.com/show/1te7oSFyRVekxMBJUSethH?si=05bd2a91f4754945 https://open.spotify.com/show/1te7oSFyRVekxMBJUSethH?si=05bd... I agree with the general sentiment around tether acting very opaque / shady. That said: 1. creation/redemption of tether (read: actual USD wire transfers) has been done on the magnitude of billions of dollars a time by major players in the space 2. during UST collapse, something like $15b of tether was redeemed in less than 2 weeks. so they obviously had that much cash on hand at the time. 3. the academic paper that attempted to show that tether was being created to pump up bitcoin has an extremely simple alternative explanation: as bitcoin went up, holders of bitcoin sold it for tether on centralized exchanges on the way up. so, IMO they could very likely have some bad commercial paper on their books, but i think its much more likely than tether is worth 90 cents on the dollar and not 0, and in the case that it is worth 90 cents on the dollar, it would be extremely likely to continue to trade at par as there's very unlikely to be a scenario which forces any kind of large-scale redemptions.

VHRanger 4y ago
Having looked into tether really deeply I think they're between 50% and 90% backed as you stated. https://www.singlelunch.com/2022/06/14/the-state-of-stablecoin-risks-june-2022/ https://www.singlelunch.com/2022/06/14/the-state-of-stableco... Tether depegging would be an apocalypse nonetheless
- cliftonk 4y ago
  definitely agree that if there were a ~50% depeg in tether things would get very, very ugly in crypto
  - AlexandrB 4y ago
    If Tether was 50% backed and there was a depeg it would probably be much worse than 50%. Presumably USDT would be redeemed at $1 until Tether's reserves were almost gone at which point Tether would have to stop accepting redemptions and the price of USDT could fall arbitrarily close to $0 in a short time.
- ikeboy 4y ago
  This mentions the Celsius loan without mentioning that it was overcollateralized and liquidated with no loss to tether (confirmed by tether at the time and by Celsius's lawyers in court filings).
  - VHRanger 4y ago
    As noted in the article, they announced that the loan was liquidated at a date where the difference in BTC price between when the loan was emitted and the loan was liquidated was greated than the overcollateralization ratio. It's a fairly easily checkable lie.
    - ikeboy 4y ago
      This is just nonsense. Please show your math including sources for the purported ratio and dates.
      - VHRanger 4y ago
        Loan was overcollateralized by 30% and liquidated on June 15, 2022 [1] (BTC price ~21k) The loan was written somewhere in the first half of 2021 - it's when heavy USDT activity starts in the celsius core wallet [2]. BTC price floor in 2021 was $32k. You can't liquidate something 130% overcollateralized and underwritten at a price >$32k (more likely >$40k) at a price of $21k without taking a loss. You'd need a minimum overcollateralization ratio of 150% for their math to check out in the most optimistic scenario. Let me know if you have other easily disproven lies you need debunked. [1] https://blockworks.co/celsius-loan-liquidation-caused-no-losses-to-tether/ https://blockworks.co/celsius-loan-liquidation-caused-no-los... [2] https://etherscan.io/address/0xdb31651967684a40a05c4ab8ec56fc32f060998d https://etherscan.io/address/0xdb31651967684a40a05c4ab8ec56f...
        ikeboy 4y ago
        As expected, no source on the date, just making up nonsense. If you'd look at the documents filed in the Celsius bankruptcy, you'd see a sworn affidavit that says Celsius stopped providing additional collateral in May 2022: https://storage.courtlistener.com/recap/gov.uscourts.nysb.312902/gov.uscourts.nysb.312902.23.0.pdf https://storage.courtlistener.com/recap/gov.uscourts.nysb.31... >In May and June 2022, Celsius made the difficult decision to forgo providing one of its lenders, Tether, issuer of USDT, a stablecoin, additional collateral and agreed to an orderly liquidation of its loan. During the market crash, Tether issued a margin call to Celsius with regard to an outstanding $841 million USDT loan. Although Celsius had always provided sufficient collateral to support its loan, and had never previously been liquidated by Tether, the Company agreed to an orderly liquidation and settlement of its loan with Tether to preserve the remaining collateral in excess of the value of the loan Bitcoin dropped around 30% in May-June, so this timeline lines up exactly with the 130% collateralization ratio.
phphphphp 4y ago
SBF is not the horse, and he has a vested interest in ensuring that the market believes that the market is not built on sand. Bitfinex and Tether have a history of fraud, of losing money, for Tether to be backed today would mean Bitfinex/Tether did a complete 180 and went legit after years of bad dealings. Even if you believe they did a 180, how did they rectify the mess from before they went legit? How did tether become solvent?
cliftonk 4y ago
and btw there are liquid tether credit risk products you can trade if you believe that tether is going to collapse that cost around 20bp / month (so something like 40x payout on annualized premium if tether goes to 0).
erostrate 4y ago
Do you know by what mechanism Tether gets CP for USDT? Would they be paying CP issuers with USDT directly? What would they do with it? I believe you're right just curious about the mechanism.
- cliftonk 4y ago
  They would be paying CP issuers with USD out of a bank account (the same USD used for creation/redemption of USDT).
  - erostrate 4y ago
    So in that theory they do get sufficient USD to cover USDT (as opposed to printing it out of thin air) but are using it to buy questionable CP. I think many people believe they don't even have enough USD to start with, eg because some of their assets are loans collateralised by crypto (such as the Celsius 1B loan). I believe both are true - Tether printed USDT against non-cash, and used some of the actual cash to buy dodgy assets for more yield.
qeternity 4y ago
Taking SBF’s word as gospel is about the least informed thing you can do. Do you notice how they say things like “redeemed” and “backing” which are very vague terms. In a normal security, redemption is clearly defined. But Tether isn’t normal. We know from players like Celsius that Tether will issue loans collateralized by crypto. You say yourself it’s likely they have other toxic assets on their balance sheet. So imagine this scenario: 1. I issue a note for $1B to Tether and they send me 1B USDT. 2. I go about my business, trading crypto, doing whatever, and hopefully I end up with more than 1B USDT. 3. When I redeem, I send my 1B USDT back and Tether retires my note (or sends me back my crypto collateral) likely less some fees. No actual dollars changed hands. And yet this fits in exactly with their narrative and language. I mean hell they have issued a huge amount of USDT over weekends when you couldn’t possibly have wired any money (mayyybe some people banked at Deltec and could transfer between accounts, or via Finex…maybe)
laserlight 4y ago
For those who are like me, wondering what the hell is SBF, it stands for Sam Bankman-Fried [0]. He is the founder of cryptocurrency exchange FTX. [0] https://en.wikipedia.org/wiki/Sam_Bankman-Fried https://en.wikipedia.org/wiki/Sam_Bankman-Fried
rossdavidh 4y ago
If their backing were as solid as you suggest, it is difficult to understand why they have been so unwilling to demonstrate that fact, given how much uncertainty exists around it. Their willingness to sue in NY to keep their backing out of public record, does not suggest that they are at ~90%.
rini17 4y ago
> as bitcoin went up, holders of bitcoin sold it for tether on centralized exchanges on the way up. How does this work exactly? Who is the counterparty selling tether here, and how come it wasn't newly minted USDT?
darcys22 4y ago
I think people dont fully understand the risk of debanking in crypto. If you go to the regular players with a billion dollars in cash, say you are cryptocurrency firm and would like a bank account they will turn you around. This is such a major factor with every cryptocurrency company. Especially 5 years ago when tether was made. Tethers ‘dodgy’ investments is partially driven by there being no other options.
onlyrealcuzzo 4y ago
Even if Tether is 90% backed (a wild supposition) - if there is a run on the bank - they don't have liquid assets, and they'd have to cash out at WAY less than 90%. This is why banks can't be backed by 100% MBSes. Tether will implode. It's just a matter of time.

VHRanger 4y ago

Having looked into tether really deeply I think they're between 50% and 90% backed as you stated. https://www.singlelunch.com/2022/06/14/the-state-of-stablecoin-risks-june-2022/ https://www.singlelunch.com/2022/06/14/the-state-of-stableco... Tether depegging would be an apocalypse nonetheless

cliftonk 4y ago
definitely agree that if there were a ~50% depeg in tether things would get very, very ugly in crypto
- AlexandrB 4y ago
  If Tether was 50% backed and there was a depeg it would probably be much worse than 50%. Presumably USDT would be redeemed at $1 until Tether's reserves were almost gone at which point Tether would have to stop accepting redemptions and the price of USDT could fall arbitrarily close to $0 in a short time.
ikeboy 4y ago
This mentions the Celsius loan without mentioning that it was overcollateralized and liquidated with no loss to tether (confirmed by tether at the time and by Celsius's lawyers in court filings).
- VHRanger 4y ago
  As noted in the article, they announced that the loan was liquidated at a date where the difference in BTC price between when the loan was emitted and the loan was liquidated was greated than the overcollateralization ratio. It's a fairly easily checkable lie.
  - ikeboy 4y ago
    This is just nonsense. Please show your math including sources for the purported ratio and dates.
    - VHRanger 4y ago
      Loan was overcollateralized by 30% and liquidated on June 15, 2022 [1] (BTC price ~21k) The loan was written somewhere in the first half of 2021 - it's when heavy USDT activity starts in the celsius core wallet [2]. BTC price floor in 2021 was $32k. You can't liquidate something 130% overcollateralized and underwritten at a price >$32k (more likely >$40k) at a price of $21k without taking a loss. You'd need a minimum overcollateralization ratio of 150% for their math to check out in the most optimistic scenario. Let me know if you have other easily disproven lies you need debunked. [1] https://blockworks.co/celsius-loan-liquidation-caused-no-losses-to-tether/ https://blockworks.co/celsius-loan-liquidation-caused-no-los... [2] https://etherscan.io/address/0xdb31651967684a40a05c4ab8ec56fc32f060998d https://etherscan.io/address/0xdb31651967684a40a05c4ab8ec56f...
      - ikeboy 4y ago
        As expected, no source on the date, just making up nonsense. If you'd look at the documents filed in the Celsius bankruptcy, you'd see a sworn affidavit that says Celsius stopped providing additional collateral in May 2022: https://storage.courtlistener.com/recap/gov.uscourts.nysb.312902/gov.uscourts.nysb.312902.23.0.pdf https://storage.courtlistener.com/recap/gov.uscourts.nysb.31... >In May and June 2022, Celsius made the difficult decision to forgo providing one of its lenders, Tether, issuer of USDT, a stablecoin, additional collateral and agreed to an orderly liquidation of its loan. During the market crash, Tether issued a margin call to Celsius with regard to an outstanding $841 million USDT loan. Although Celsius had always provided sufficient collateral to support its loan, and had never previously been liquidated by Tether, the Company agreed to an orderly liquidation and settlement of its loan with Tether to preserve the remaining collateral in excess of the value of the loan Bitcoin dropped around 30% in May-June, so this timeline lines up exactly with the 130% collateralization ratio.

phphphphp 4y ago

SBF is not the horse, and he has a vested interest in ensuring that the market believes that the market is not built on sand. Bitfinex and Tether have a history of fraud, of losing money, for Tether to be backed today would mean Bitfinex/Tether did a complete 180 and went legit after years of bad dealings. Even if you believe they did a 180, how did they rectify the mess from before they went legit? How did tether become solvent?

cliftonk 4y ago

and btw there are liquid tether credit risk products you can trade if you believe that tether is going to collapse that cost around 20bp / month (so something like 40x payout on annualized premium if tether goes to 0).

erostrate 4y ago

Do you know by what mechanism Tether gets CP for USDT? Would they be paying CP issuers with USDT directly? What would they do with it? I believe you're right just curious about the mechanism.

cliftonk 4y ago
They would be paying CP issuers with USD out of a bank account (the same USD used for creation/redemption of USDT).
- erostrate 4y ago
  So in that theory they do get sufficient USD to cover USDT (as opposed to printing it out of thin air) but are using it to buy questionable CP. I think many people believe they don't even have enough USD to start with, eg because some of their assets are loans collateralised by crypto (such as the Celsius 1B loan). I believe both are true - Tether printed USDT against non-cash, and used some of the actual cash to buy dodgy assets for more yield.

qeternity 4y ago

Taking SBF’s word as gospel is about the least informed thing you can do. Do you notice how they say things like “redeemed” and “backing” which are very vague terms. In a normal security, redemption is clearly defined. But Tether isn’t normal. We know from players like Celsius that Tether will issue loans collateralized by crypto. You say yourself it’s likely they have other toxic assets on their balance sheet. So imagine this scenario: 1. I issue a note for $1B to Tether and they send me 1B USDT. 2. I go about my business, trading crypto, doing whatever, and hopefully I end up with more than 1B USDT. 3. When I redeem, I send my 1B USDT back and Tether retires my note (or sends me back my crypto collateral) likely less some fees. No actual dollars changed hands. And yet this fits in exactly with their narrative and language. I mean hell they have issued a huge amount of USDT over weekends when you couldn’t possibly have wired any money (mayyybe some people banked at Deltec and could transfer between accounts, or via Finex…maybe)

laserlight 4y ago

For those who are like me, wondering what the hell is SBF, it stands for Sam Bankman-Fried [0]. He is the founder of cryptocurrency exchange FTX. [0] https://en.wikipedia.org/wiki/Sam_Bankman-Fried https://en.wikipedia.org/wiki/Sam_Bankman-Fried

rossdavidh 4y ago

If their backing were as solid as you suggest, it is difficult to understand why they have been so unwilling to demonstrate that fact, given how much uncertainty exists around it. Their willingness to sue in NY to keep their backing out of public record, does not suggest that they are at ~90%.

rini17 4y ago

> as bitcoin went up, holders of bitcoin sold it for tether on centralized exchanges on the way up. How does this work exactly? Who is the counterparty selling tether here, and how come it wasn't newly minted USDT?

darcys22 4y ago

I think people dont fully understand the risk of debanking in crypto. If you go to the regular players with a billion dollars in cash, say you are cryptocurrency firm and would like a bank account they will turn you around. This is such a major factor with every cryptocurrency company. Especially 5 years ago when tether was made. Tethers ‘dodgy’ investments is partially driven by there being no other options.

onlyrealcuzzo 4y ago

Even if Tether is 90% backed (a wild supposition) - if there is a run on the bank - they don't have liquid assets, and they'd have to cash out at WAY less than 90%. This is why banks can't be backed by 100% MBSes. Tether will implode. It's just a matter of time.