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Tether is the big one. If Tether collapses it's going to take down Binance and probably every other exchange with it. People have been warning about this for q

Tether is the big one. If Tether collapses it's going to take down Binance and probably every other exchange with it. People have been warning about this for quite some time [1]. Tether is clearly under capitalized, and if you believe the worst rumors, was basically a perpetual motion machine being used to prop up Bitcoins price. [1] https://coingeek.com/even-binance-thinks-the-tether-stablecoin-is-an-unbacked-scam/ https://coingeek.com/even-binance-thinks-the-tether-stableco...

capableweb 4y ago
> Tether is the big one. If Tether collapses it's going to take down Binance and probably every other exchange with it. Unlikely to bring down certain exchanges that actually keeps peoples currencies around and doesn't lend it out, or fuck around in other ways with peoples deposits. Coinbase comes to mind, where if everyone would take out their money and cryptocurrency ("bank-run"), everyone would likely end up actually getting their things out, although the company in that case would still be fucked.
- xnorswap 4y ago
  Even if exchanges don't (on paper) loan on their capital, they still must have their USD somewhere, and that bank will surely be lending it out. These exchanges are so big that a run on them would cause a run on the institutions they bank with, so you'd still get a liquidity squeeze somewhere, even with everyone acting with the best intentions. And given recent history it's hard to know which exchanges haven't been loaning out their capital.
  - capableweb 4y ago
    Granted, I don't have any insider information on how Coinbase actually deal with things, I'm only judging things by the public information they put out themselves. Also, I don't keep any funds at Coinbase myself, for whatever it's worth. But this is what Coinbase themselves say: > There can’t be a “run on the bank” at Coinbase. As you can review in our publicly filed, audited financial statements, we hold customer assets 1:1. Any institutional lending activity at Coinbase is at the discretion of the customer and backed by collateral. We have no gating for client loan recalls or withdrawals. This is from https://www.coinbase.com/blog/our-approach-to-transparency-risk-management-and-consumer-protection https://www.coinbase.com/blog/our-approach-to-transparency-r...
    - littlestymaar 4y ago
      If their assets are not perfectly liquid (that is, not central bank money, and I'm not talking about “dollar” here, but deposit on a central bank account) then you're exposed to liquidity issue if there is a bank run. That's why the Fed has been created in the first place, to be the lender of last resort in adverse market conditions.
    - nfin 4y ago
      does it mostly help the bank run not end in a catastrophe or does it also helps alleviate a possible bank liquidity squeeze?
    - ptero 4y ago
      Liquidity problems aren't uncommon even for such super-safe assets as US treasuries. US is keen to address those ASAP and usually pumps in a lot of $$ to unblock the market if they see any issues with liquidity. Without such interventions a run on treasuries would be a possibility. This would lead to cascading failures as they are used in leveraged bets far and wide, from hedge funds to pension funds.
- zone411 4y ago
  Binance holds $17.6B worth of USDT and $21.7B of its own stablecoin BUSD. So it would be an ugly picture for them if Tether depegged.
  - pjc50 4y ago
    > $21.7B of its own stablecoin BUSD You can't hold your own coin as an asset! This is what blew up FTX.
    - capableweb 4y ago
      FTX blew up because they used their own token (FTT) as a collateral, not because they were simple holding FTT. Binance doesn't use BUSD as a collateral, but of course they have a supply of their own token.
      - belltaco 4y ago
        >but of course they have a supply of their own token I don't get what's the point of holding your own stable coin except to potentially double the money they have? Lets say they have $100M in cash(from wherever). Now they print 100M BUSD with the earlier $100M backing it up. Now they have $200M that they can borrow against?
        zzleeper 4y ago
        Imagine firms having their own stocks in their books (not for options grants but for themselves). That's complete insanity, but in crypto is just a random Thursday...
  - machina_ex_deus 4y ago
    Wait, 25% of all tether is held by binance? That's a lot. How much is held by other players like bitfinex? Does the bank run need to involve a bank run on exchanges to crash USDT?
- permo-w 4y ago
  just to point out: banks are in practice a legalised Ponzi scheme
xiphias2 4y ago
Kraken has proof of reserves, so it probably won't implode. But sure, there's still too much leverage in the system probably.

capableweb 4y ago

> Tether is the big one. If Tether collapses it's going to take down Binance and probably every other exchange with it. Unlikely to bring down certain exchanges that actually keeps peoples currencies around and doesn't lend it out, or fuck around in other ways with peoples deposits. Coinbase comes to mind, where if everyone would take out their money and cryptocurrency ("bank-run"), everyone would likely end up actually getting their things out, although the company in that case would still be fucked.

xnorswap 4y ago
Even if exchanges don't (on paper) loan on their capital, they still must have their USD somewhere, and that bank will surely be lending it out. These exchanges are so big that a run on them would cause a run on the institutions they bank with, so you'd still get a liquidity squeeze somewhere, even with everyone acting with the best intentions. And given recent history it's hard to know which exchanges haven't been loaning out their capital.
- capableweb 4y ago
  Granted, I don't have any insider information on how Coinbase actually deal with things, I'm only judging things by the public information they put out themselves. Also, I don't keep any funds at Coinbase myself, for whatever it's worth. But this is what Coinbase themselves say: > There can’t be a “run on the bank” at Coinbase. As you can review in our publicly filed, audited financial statements, we hold customer assets 1:1. Any institutional lending activity at Coinbase is at the discretion of the customer and backed by collateral. We have no gating for client loan recalls or withdrawals. This is from https://www.coinbase.com/blog/our-approach-to-transparency-risk-management-and-consumer-protection https://www.coinbase.com/blog/our-approach-to-transparency-r...
  - littlestymaar 4y ago
    If their assets are not perfectly liquid (that is, not central bank money, and I'm not talking about “dollar” here, but deposit on a central bank account) then you're exposed to liquidity issue if there is a bank run. That's why the Fed has been created in the first place, to be the lender of last resort in adverse market conditions.
  - nfin 4y ago
    does it mostly help the bank run not end in a catastrophe or does it also helps alleviate a possible bank liquidity squeeze?
  - ptero 4y ago
    Liquidity problems aren't uncommon even for such super-safe assets as US treasuries. US is keen to address those ASAP and usually pumps in a lot of $$ to unblock the market if they see any issues with liquidity. Without such interventions a run on treasuries would be a possibility. This would lead to cascading failures as they are used in leveraged bets far and wide, from hedge funds to pension funds.
zone411 4y ago
Binance holds $17.6B worth of USDT and $21.7B of its own stablecoin BUSD. So it would be an ugly picture for them if Tether depegged.
- pjc50 4y ago
  > $21.7B of its own stablecoin BUSD You can't hold your own coin as an asset! This is what blew up FTX.
  - capableweb 4y ago
    FTX blew up because they used their own token (FTT) as a collateral, not because they were simple holding FTT. Binance doesn't use BUSD as a collateral, but of course they have a supply of their own token.
    - belltaco 4y ago
      >but of course they have a supply of their own token I don't get what's the point of holding your own stable coin except to potentially double the money they have? Lets say they have $100M in cash(from wherever). Now they print 100M BUSD with the earlier $100M backing it up. Now they have $200M that they can borrow against?
      - zzleeper 4y ago
        Imagine firms having their own stocks in their books (not for options grants but for themselves). That's complete insanity, but in crypto is just a random Thursday...
- machina_ex_deus 4y ago
  Wait, 25% of all tether is held by binance? That's a lot. How much is held by other players like bitfinex? Does the bank run need to involve a bank run on exchanges to crash USDT?
permo-w 4y ago
just to point out: banks are in practice a legalised Ponzi scheme

xiphias2 4y ago

Kraken has proof of reserves, so it probably won't implode. But sure, there's still too much leverage in the system probably.