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It's easy to cut their commercial paper holdings to zero! They never had any to begin with! The commercial paper market is small, and everyone in the market pr

It's easy to cut their commercial paper holdings to zero! They never had any to begin with! The commercial paper market is small, and everyone in the market pretty much knows everyone else. No one ever noticed a new player - and in the time Tether expanded its balance sheet by $30Bn - there wasn't even enough commercial paper printed if Tether bought it all: https://www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether https://www.bloomberg.com/news/features/2021-10-07/crypto-my... The easiest way to preserve value in a bear market is to have no value to preserve in the first place [=

lamontcg 4y ago
Yes. The title article literally is all about how Tether was making collateralized loans of Tether to Celsius where the collateral was crypto: > How do we know this? Because we can see Celsius borrowing from Tether. And we now know those loans were collateralized. > We do not know the precise collateral arrangements except that Alex Mashinsky told the FT: > If you give them enough collateral, liquid collateral, bitcoin, ethereum and so on . . . they will mint tether against it It isn't USD, it isn't treasuries, it isn't commercial paper (Chinese or otherwise). At the end of the day it is going to be 90% crypto collaterialized loans that makes up Tether. It is so weird to clearly read an article about the funding mechanism behind Tether and people literally refuse to read it correctly and start yapping about commercial paper.
- onlyrealcuzzo 4y ago
  How does it work? 1. Celsius calls up Tether and asks for $30Bn to buy Bitcoins. 2. Tether says, sure, prints 30 Bn USDT out of thin air, gives it to Celsius, and Celsius uses that to buy Bitcoins. 3. Celsius collects a bunch of money from retail investors. 4. Celsius steals all the Bitcoins and files for bankruptcy - and, oopsie, the retail investors lose everything. The Celsius insiders obviously get something out of this. They got Bitcoins for nothing. They can and did sell those Bitcoins for the miniscule fiat liquidity that exists for Bitcoin. What does Tether get? They're printing funny money out of thin air. Sure, it doesn't cost them anything. But they have to know that none of that funny money is going to get paid back with real money. So why lend Tethers to someone else, so they can sell Bitcoins for real money - instead of just printing Tethers for themselves to capture all fiat inflows?
  - JumpCrisscross 4y ago
    > What does Tether get? Celsius has Bitcoins. They borrow $30bn against those Bitcoins from Tether. Tether charges interest.
  - lamontcg 4y ago
    1. Celsius has closer to $500M in BTC in a cold wallet that for security reasons they do not want to touch and trade with on a daily basis. 2. They call up Tether who loans them $500M worth of USDT which they can use as a more liquid security to loan out or trade crypto with. 3. They pay interest to Tether on the loan in crypto. 4. Eventually they have to pay back the USDT loan with USDT, although if their BTC value hasn't declined they probably extend the loan period instead -- although sending the USDT back is probably how Tether gets burned. 5. If the loans are denominated in $USD and Tether accepts USDT at the market rate for paying back the loans that would be a mechanism that would naturally pin Tether to the $USD via arbitrage by people who want to buy a cheaper USDT token to pay back their loans with whenever Tether falls, and don't want to be actively paying back Tether with their USDT when the price has fallen. > But they have to know that none of that funny money is going to get paid back with real money. To first order, none of it is about $USD so literally nobody cares, and its all just funny money collateralized by other funny money. It is very much like someone sitting on a vault full of Gold (the BTC cold wallet) that wants to borrow money (the USDT in the crypto space) in order to have liquidity (buy crypto shit with it).
jpgvm 4y ago
US commercial paper maybe not. Chinese? Sure. but if so there is zero chance they got out without severe losses unless they were holding all 30B in Alibaba AAAA bonds or something.
- onlyrealcuzzo 4y ago
  That's global commercial paper... The US commercial paper market is the largest in the world: https://www.bloombergprep.com/practice/cfa/10b/lesson/5cf41e/fixed-income-lm-8-fi-2-fixed-income-markets-issuance-trading-and-funding-us-commercial-paper-vs-eurocommercial-paper/#:~:text=The%20US%20commercial%20paper%20(USCP,be%20denominated%20in%20any%20currency https://www.bloombergprep.com/practice/cfa/10b/lesson/5cf41e.... Look, Tether said they don't own any Chinese commercial paper: https://www.bloomberg.com/news/articles/2022-07-27/tether-says-there-is-no-chinese-commercial-paper-among-reserves https://www.bloomberg.com/news/articles/2022-07-27/tether-sa... I don't know why you'd believe they have commercial paper - but think they lied about what kind of commercial paper they had.
davidgerard 4y ago
there's also a bit of a difference between 90-day CP from IBM or Amazon, and perpetually rolled over CP ("loans" that never in fact get paid back) from Honest Jan's Crypto Casino and Bait Shop
bidirectional 4y ago
You don't need to trade with an intermediary in the commercial paper market, companies could directly issue the paper to Tether, no one would ever know about it. They could then reduce their holdings to zero by holding the paper to maturity and buying treasuries with the proceeds. By definition this being commercial paper means it would take just months to do this.
- namdnay 4y ago
  That's even more obvious to spot: someone in one of these companies would have talked by now
  - bidirectional 4y ago
    Why would they? Tether said they had commercial paper, so it's not some mind-blowing revelation and they'd be risking their job by doing so.
    - namdnay 4y ago
      the quantity of paper they claim to hold would mean having major stakes in at least a dozen very big organisations. the probability that not a single employee or ex-employee leaked anything is very low, especially since such a leak would obviously help tether
- onlyrealcuzzo 4y ago
  You're assuming the commercial paper market is much bigger than it is. You can't go out and find $30B worth of commercial paper that no one else knows about and buy it in 3 months. When governments around the world were stuffing everyone and every company to the brim with money - and banks couldn't find anyone to borrow money beside people to buy third homes in Ibiza - how did Tether find a bunch of companies that wanted to print $30B of commercial paper in 3 months that no one in the market was competing for? Oh - and also - this heretofore undiscovered market was bigger than the previously known commercial paper market? Yeah, right... It didn't happen.

lamontcg 4y ago

Yes. The title article literally is all about how Tether was making collateralized loans of Tether to Celsius where the collateral was crypto: > How do we know this? Because we can see Celsius borrowing from Tether. And we now know those loans were collateralized. > We do not know the precise collateral arrangements except that Alex Mashinsky told the FT: > If you give them enough collateral, liquid collateral, bitcoin, ethereum and so on . . . they will mint tether against it It isn't USD, it isn't treasuries, it isn't commercial paper (Chinese or otherwise). At the end of the day it is going to be 90% crypto collaterialized loans that makes up Tether. It is so weird to clearly read an article about the funding mechanism behind Tether and people literally refuse to read it correctly and start yapping about commercial paper.

onlyrealcuzzo 4y ago
How does it work? 1. Celsius calls up Tether and asks for $30Bn to buy Bitcoins. 2. Tether says, sure, prints 30 Bn USDT out of thin air, gives it to Celsius, and Celsius uses that to buy Bitcoins. 3. Celsius collects a bunch of money from retail investors. 4. Celsius steals all the Bitcoins and files for bankruptcy - and, oopsie, the retail investors lose everything. The Celsius insiders obviously get something out of this. They got Bitcoins for nothing. They can and did sell those Bitcoins for the miniscule fiat liquidity that exists for Bitcoin. What does Tether get? They're printing funny money out of thin air. Sure, it doesn't cost them anything. But they have to know that none of that funny money is going to get paid back with real money. So why lend Tethers to someone else, so they can sell Bitcoins for real money - instead of just printing Tethers for themselves to capture all fiat inflows?
- JumpCrisscross 4y ago
  > What does Tether get? Celsius has Bitcoins. They borrow $30bn against those Bitcoins from Tether. Tether charges interest.
- lamontcg 4y ago
  1. Celsius has closer to $500M in BTC in a cold wallet that for security reasons they do not want to touch and trade with on a daily basis. 2. They call up Tether who loans them $500M worth of USDT which they can use as a more liquid security to loan out or trade crypto with. 3. They pay interest to Tether on the loan in crypto. 4. Eventually they have to pay back the USDT loan with USDT, although if their BTC value hasn't declined they probably extend the loan period instead -- although sending the USDT back is probably how Tether gets burned. 5. If the loans are denominated in $USD and Tether accepts USDT at the market rate for paying back the loans that would be a mechanism that would naturally pin Tether to the $USD via arbitrage by people who want to buy a cheaper USDT token to pay back their loans with whenever Tether falls, and don't want to be actively paying back Tether with their USDT when the price has fallen. > But they have to know that none of that funny money is going to get paid back with real money. To first order, none of it is about $USD so literally nobody cares, and its all just funny money collateralized by other funny money. It is very much like someone sitting on a vault full of Gold (the BTC cold wallet) that wants to borrow money (the USDT in the crypto space) in order to have liquidity (buy crypto shit with it).

jpgvm 4y ago

US commercial paper maybe not. Chinese? Sure. but if so there is zero chance they got out without severe losses unless they were holding all 30B in Alibaba AAAA bonds or something.

onlyrealcuzzo 4y ago
That's global commercial paper... The US commercial paper market is the largest in the world: https://www.bloombergprep.com/practice/cfa/10b/lesson/5cf41e/fixed-income-lm-8-fi-2-fixed-income-markets-issuance-trading-and-funding-us-commercial-paper-vs-eurocommercial-paper/#:~:text=The%20US%20commercial%20paper%20(USCP,be%20denominated%20in%20any%20currency https://www.bloombergprep.com/practice/cfa/10b/lesson/5cf41e.... Look, Tether said they don't own any Chinese commercial paper: https://www.bloomberg.com/news/articles/2022-07-27/tether-says-there-is-no-chinese-commercial-paper-among-reserves https://www.bloomberg.com/news/articles/2022-07-27/tether-sa... I don't know why you'd believe they have commercial paper - but think they lied about what kind of commercial paper they had.

davidgerard 4y ago

there's also a bit of a difference between 90-day CP from IBM or Amazon, and perpetually rolled over CP ("loans" that never in fact get paid back) from Honest Jan's Crypto Casino and Bait Shop

bidirectional 4y ago

You don't need to trade with an intermediary in the commercial paper market, companies could directly issue the paper to Tether, no one would ever know about it. They could then reduce their holdings to zero by holding the paper to maturity and buying treasuries with the proceeds. By definition this being commercial paper means it would take just months to do this.

namdnay 4y ago
That's even more obvious to spot: someone in one of these companies would have talked by now
- bidirectional 4y ago
  Why would they? Tether said they had commercial paper, so it's not some mind-blowing revelation and they'd be risking their job by doing so.
  - namdnay 4y ago
    the quantity of paper they claim to hold would mean having major stakes in at least a dozen very big organisations. the probability that not a single employee or ex-employee leaked anything is very low, especially since such a leak would obviously help tether
onlyrealcuzzo 4y ago
You're assuming the commercial paper market is much bigger than it is. You can't go out and find $30B worth of commercial paper that no one else knows about and buy it in 3 months. When governments around the world were stuffing everyone and every company to the brim with money - and banks couldn't find anyone to borrow money beside people to buy third homes in Ibiza - how did Tether find a bunch of companies that wanted to print $30B of commercial paper in 3 months that no one in the market was competing for? Oh - and also - this heretofore undiscovered market was bigger than the previously known commercial paper market? Yeah, right... It didn't happen.