3 ms·
so thinking about this. assumption: bitfinex has "dollars" to backup every USDT. If bitfinex will buy a USDT for a $1 if it drops below $1 to maintain the peg
by compsciphd 4y ago
so thinking about this.
assumption: bitfinex has "dollars" to backup every USDT.
If bitfinex will buy a USDT for a $1 if it drops below $1 to maintain the peg, they can do this because they have "dollars" backing each share.
however, they would also have to destroy that USDT on purchase (as they just spend the $1 backing it). They could print more USDT (/ sell that back) for $1 and they would be whole again, but if there is downwards pressure on USDT, one should expect to see the market cap for tether to drop while bitfinex is buying/destroying currently existing USDT.
If one doesn't see this drop, wouldn't that be indicative of a problem?
- LegitShady 4y agoDoes destroying currency (reducing the amount in circulation) put downward pressure on it? Not in my experience.
- compsciphd 4y agoI (believe) what I said if there's downward pressure on the currency, therefore to maintain the peg they have to buy it (and in a sense destroy it). not that destroying it leads to downward pressure, but that we should see a reduction in market cap. I'm wondering if we can see this fluctuation in market cap.