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So is there now an arbitrage opportunity? Or are the fees so high that it's not practical for 2% price delta?

aliljet 4y ago
That's the question I had. Ostensibly, people are giving away a dollar for 98 cents right now. I'm confused about why anyone would want to do that unless they thought that tethered dollar isn't actually worth a real US dollar. If USDT is fine, seems like free money is on the table...
- matthewdgreen 4y ago
  They are doing it because nobody has any idea whether USDT is fine except for Tether. So every time it de-pegs, rational people have to run towards the exit and take a loss, since nobody knows whether this is a temporary “Tether makes some bank on fear” incident, or if it’s the big one. Stablecoin issuers have basically two jobs. One is to maintain the peg. But the really important job is to convince people that even if the peg temporarily breaks: the money is still there and it won’t be the start of a collapse. Tether does neither of these things. And worse: they have a financial incentive to sweep their customers into periodic panics, so they can buy up Tethers at a discount. Nobody should be anywhere near this ecosystem, and in a world where competing options exist it’s amazing to me that people are.
  - smsm42 4y ago
    If you aren't sure Tether is good for it, why hold USDT at all? If you hold it, why sell it at every minute movement? That doesn't look like rational behavior, that looks like burning money. If you don't have risk tolerance or don't trust this asset - why own it at all?
    - matthewdgreen 4y ago
      I suspect some people are forced to because they don’t have access to fiat banking through their exchanges. So Tether is their only way to move and store “dollars”. I would hope that we’d see adoption of better US-regulated stablecoins (and we have) but Tether remains sticky around the world.
      - smsm42 4y ago
        There are other stablecoins than Tether. And also, if you don't have any other options, what exactly you are selling USDT for? You must get something in exchange for it, not? So if you think that something is better, why didn't you use it at the first place? I could get it if it was a huge difference - USDT is at 0.50 or something - but if you sell at 0.995 then your preference for USDT was never that strong. For active money trader, it may make sense - if you manage billions, any tiny optimization in risk/reward can yield millions. But if we're talking about retail customer, it makes little sense.
prvit 4y ago
Yeah there is an arbitrage opportunity, it’s not going to last very long though.

That's the question I had. Ostensibly, people are giving away a dollar for 98 cents right now. I'm confused about why anyone would want to do that unless they thought that tethered dollar isn't actually worth a real US dollar. If USDT is fine, seems like free money is on the table...

matthewdgreen 4y ago
They are doing it because nobody has any idea whether USDT is fine except for Tether. So every time it de-pegs, rational people have to run towards the exit and take a loss, since nobody knows whether this is a temporary “Tether makes some bank on fear” incident, or if it’s the big one. Stablecoin issuers have basically two jobs. One is to maintain the peg. But the really important job is to convince people that even if the peg temporarily breaks: the money is still there and it won’t be the start of a collapse. Tether does neither of these things. And worse: they have a financial incentive to sweep their customers into periodic panics, so they can buy up Tethers at a discount. Nobody should be anywhere near this ecosystem, and in a world where competing options exist it’s amazing to me that people are.
- smsm42 4y ago
  If you aren't sure Tether is good for it, why hold USDT at all? If you hold it, why sell it at every minute movement? That doesn't look like rational behavior, that looks like burning money. If you don't have risk tolerance or don't trust this asset - why own it at all?
  - matthewdgreen 4y ago
    I suspect some people are forced to because they don’t have access to fiat banking through their exchanges. So Tether is their only way to move and store “dollars”. I would hope that we’d see adoption of better US-regulated stablecoins (and we have) but Tether remains sticky around the world.
    - smsm42 4y ago
      There are other stablecoins than Tether. And also, if you don't have any other options, what exactly you are selling USDT for? You must get something in exchange for it, not? So if you think that something is better, why didn't you use it at the first place? I could get it if it was a huge difference - USDT is at 0.50 or something - but if you sell at 0.995 then your preference for USDT was never that strong. For active money trader, it may make sense - if you manage billions, any tiny optimization in risk/reward can yield millions. But if we're talking about retail customer, it makes little sense.

prvit 4y ago

Yeah there is an arbitrage opportunity, it’s not going to last very long though.