6 ms·
By 2.5 usd cents?
by LatteLazy 4y ago
By 2.5 usd cents?
- ddorian43 4y agoIt can cause a bank run. Would you trust Tether or USD if you're uncertain?
- kasey_junk 4y agoThat’s a huge deal for something that’s supposedly pegged. If that were to happen to a traditional money market account it would be front page financial news.
- capableweb 4y agoUnless it goes below 0.92 USD (all time low of USDT, in 2017-2018, which it recovered from), I'm not sure it's as big deal as you make it sound like.
- ddorian43 4y agoIt will go there. The ponzi will break sooner or later. The nice thing is, that the more it continues, the bigger the fall will be.
- herendin 4y ago>The nice thing is, that the more it continues, the bigger the fall will be. Why is that "nice"?
- ddorian43 4y agoIt's nicer than the alternative (to explode even later)
- herendin 4y ago>The nice thing is, that the more it continues, the bigger the fall will be. >It's nicer than the alternative (to explode even later) These two outcomes are mutually exclusive. You're speaking nonsense.
- ddorian43 4y agoBoth outcomes are nicer than the alternative (all crypto-bros become billionaire and everyone else staying poor and being enslaved)
- kasey_junk 4y agoI would argue that means it’s not pegged (which is fine!). But people seem to think there is a peg on usdt and there isn’t, at least not as the term is used in traditional finance.
- Semaphor 4y agoGoing in with full naivety, assuming the company actually has enough USD to redeem every single USDT in existence, but it’s a slow, manual process only offered to big holders. Wouldn’t the peg still not always hold in a volatile situation, like the current one? All that’s required is enough people not trusting Tether Inc.
- kasey_junk 4y ago“it’s a slow, manual process only offered to big holders” Is the most charitable reading you can give and I think it’s outside of peoples expectations of what a peg means. I’m actually quite fine with tether having whatever redemption rules they want, but that is not the traditional definition you’d see with something like a money market. I would never say usdt is pegged to the dollar.
- Semaphor 4y agoSo instead of a peg [0], it’s kinda like a crawling peg [1], or an even better match, the linked exchange rate system in Hong Kong [2] [0]: https://en.wikipedia.org/wiki/Fixed_exchange_rate_system https://en.wikipedia.org/wiki/Fixed_exchange_rate_system [1]: https://en.wikipedia.org/wiki/Crawling_peg https://en.wikipedia.org/wiki/Crawling_peg [2]: https://en.wikipedia.org/wiki/Linked_exchange_rate_system_in_Hong_Kong https://en.wikipedia.org/wiki/Linked_exchange_rate_system_in...
- manholio 4y agoThat's precisely how you would keep a peg: let the market enforce it and bear the brunt of the speculative action, then intervene brutally to restore the peg and reward those who held the line with profits. If you do it a few times, nobody will bet against the peg ever again. Of course, this is all predicated on you actually having the massive assets required to fight a speculative market. That shouldn't be a problem for something like USDT which should be backed 1:1. So let's sit back and enjoy some price discovery (though I wouldn't be caught dead in USDT).
- mijoharas 4y ago> which should be backed I think the major issue is that there seems to be a lot of evidence that it isn't.
- gilrain 4y ago> That shouldn't be a problem for something like USDT which should be backed 1:1. What if we all know it’s backed 1:1 by junk bonds?
- pjc50 4y agoReminded of when the UK was unable to defend the stablepound against, er, Soros: https://www.investopedia.com/terms/b/black-wednesday.asp https://www.investopedia.com/terms/b/black-wednesday.asp
- le-mark 4y agoMoney market funds sometimes are priced above or below $1 due to market conditions. It’s rare but does happen.
- ptero 4y agoIf a large money market fund is priced 2.5% away from peg I suspect it is either a huge arbitrage opportunity that will get arbitraged in minutes if not seconds, or a strong signal that this fund is toast. Not an expert, would be happy to be refuted.
- pjc50 4y agohttps://www.investopedia.com/terms/b/breaking-the-buck.asp https://www.investopedia.com/terms/b/breaking-the-buck.asp
- amouat 4y agoThat's big! Theoretically you can make a lot of money on the spread ("beware picking up pennies in front of a streamroller")
- twoodfin 4y agoWouldn’t that arbitrage put increasing pressure on the backer? If you’re taking on risk that your 98¢ USDT is actually worth less than that, presumably you’ll want to redeem it ASAP.
- LatteLazy 4y agoYou do get some pretty juicy spreads in Crypto though... The CME.BTCX22 has a 5% spread against spot.
- neural_thing 4y ago98 cents is not a stable state for a stable coin. Either it gets back to $1 or is forced to liquidate at however much their assets fetch in a sale.
- ausudhz 4y agoYa how is possible? They supposed to have a 1 to 1 with collaterals to cover the valuation. Well, is pretty obvious (and everybody knew it) that is not the case.
- vidarh 4y agoAll it takes is for there to be low demand on one or more exchanges and for them to not quickly enough place buys to prop it up as people choose to sell lower rather than hold. It could mean a great deal or not much at all, and doesn't really tell us anything about the proportion of collateral unless it depegs much more and they fail to get it under control.
- Kiro 4y agoWhat do you mean? The market sets the price so it's not like it's magically fixed at 1. If it depegs it's because people lose confidence in it and don't trust the $1 value, but there's otherwise nothing special with it. This can happen even if it's actually fully backed (which I doubt).
- vidarh 4y agoIt's not even necessarily confidence (though there probably are also people who are freaking out). If people have their money in USDT and fear losing out on other action (e.g. if you believe there'll be a rebound after the big drop of a lot of the coins the other day), you may be prepared to take a loss to sell your USDT even if you have a 100% confidence that Tether will get it back under control. You'd only need to believe - reasonably or not - that you could potentially increase your net return on betting on a rebound in another coin by more than the depeg. That says nothing about whether or not those sentiments are reasonable, of course.
- ausudhz 4y agoLol? It's pegged because they have enough money to cover their evaluation!!!! If tether is worth 100B in market cap, they must have 100B in assets (collaterals) to cover their evaluation! It's not a sentiment what the hell are you talking about. Economics 101 If that's the case tomorrow someone can create a new token, say is 1-1 with USD, collect a few billions and run away?
- wbl 4y agoReserve Primary fund made history going to $0.97
- smcl 4y agoSo the progression thus far as I see it has been: * Every 1 USDT is backed by exactly 1 USD * Ignore the haters, it's 1:1, we promise! * Ok well it's 1:1 cash equivalents but that's just as good! * Ok that includes commercial paper, but live a little! To the moooon! * Ok so it's strayed a bit and now is not exactly backed 1:1, but it's only 2.5 cents out, come on that's barely anything I wonder what the next stage will be.
- LatteLazy 4y agoMinute to minute peg breaks have nothing to do with backing. You might not believe tether is properly backed. That's fine. But let's not pretend this is connected...