5 ms·

The author's Internet point is that they think Tether is bust and why big money is not shorting it (you can't find a counterparty to make a big trade with that

by yborg 4y ago

The author's Internet point is that they think Tether is bust and why big money is not shorting it (you can't find a counterparty to make a big trade with that is any less dodgy than Tether itself). They then describe a mechanism for making the trade in which the counterparty is a DeFi protocol that is, of course, just as dodgy as Tether itself. The whole ecosystem currently remains a giant confidence game, as Matt Levine described well in a recent article. This doesn't mean there isn't a lot of money to be made - casinos make a lot of money at an activity with no direct economic value - but right now you are best served only putting in money you can easily lose.

Aperocky 4y ago
Big money is not shorting it because there's no way to short it at scale. There are no broker that will survive to close the short, and you need a broker to short.
- OJFord 4y ago
  That's the same thing GP is saying - nobody reliable, not 'in the game', wants to take the other side of the trade. (Presumably there is a price at which they do, but also at which nobody's remained interested.)
  - Aperocky 4y ago
    want vs reality. In fact, I would want to bet against USDT with a reasonable proportion of my savings, but there are no safe way to ensure such a contract will be honored in the case that it actually went to 0.
- dghlsakjg 4y ago
  USDT is super interesting since it doesn't behave like a normal market priced asset. You know it won't ever go up in value, and you know that if it goes down, it goes down to 0 VERY QUICKLY, with maybe a chance of a claim against unverified assets that might pay out after years of litigation.
  - alienalp 4y ago
    In past USDT depeg to around 0.9$ for short time. This is very unlikely to be the case since even if they are insolvent they have a reserve. You probably think that way because of LUNA crash which was backed by almost nothing. For example in defi stablecoins with issues do not depeg to zero or anywhere close to zero if they are still backed to some extent.
    - dghlsakjg 4y ago
      Our opinions differ in that you trust Tether's reserve. I don't. It has been more than 5 years since they were audited. By their own admission, they have 10 billion of their 66 billion dollars in unsecured loans and "other investments". An org whose entire raison d' etre is to hold money should be pretty open to outside audits. It should actually be a pretty easy audit. Why have they been foot-dragging so long?
      - alienalp 4y ago
        I didn't said i trust Tether's reserves. However even if with a hole they have a reserve at the end.
nico 4y ago
> The whole ecosystem currently remains a giant confidence game Money is also a giant confidence game. Any human system is that. It’s all made up.
- omgsean 4y ago
  Money largely gains its value from its ability to be used to pay taxes. If there is someone who controls land and an army and says "this is valuable and you have to pay a certain amount to me at certain intervals" then it is valuable, at least within that political configuration.
  - G3rn0ti 4y ago
    > Money largely gains its value from its ability to be used to pay taxes. Even for contemporary fiat currencies today this is neither historically nor theoretically true. Currencies gain their value largely from being convenient in settling trades and being a measure of value when calculating costs, risks and profits. Ultimately, it does not really matter what this money is based on e.g. gold, paper or digital information. For anybody interested in this perspective and in a more general criticism of fiat money I strongly recommend reading "Ethics of Money Production" by Jörg Guido Hülsmann. (1) (1) https://books.google.de/books/about/Ethics_of_Money_Production.html?id=9j8n4xsghl0C&redir_esc=y https://books.google.de/books/about/Ethics_of_Money_Producti...
- TheRealPomax 4y ago
  ...and... where were you going with that? Just because we made something up doesn't mean there aren't different levels of stability for that made up model, or different levels of real world results from acting on those models.
  - nico 4y ago
    What it means is that there is no “real” justification for something to be valuable, is what people agree on. If enough people agree that crypto is valuable and want to buy it, then it is valuable for as long as people believe it is. Just like any other form of currency.
SilasX 4y ago
Some of the crypto platforms are scam[1], but no one seriously claims Aave Or Compound, the defi borrowing platforms you can do this with, are scams. There is, of course, always the risk of unforeseen bugs that prevent withdrawls, or crashes that happen so fast the collateral can't be liquidated in time. But that's different from saying that Aave or Compound are themselves "confidence games" that can't be expected to pay you back when you're right. I know for my part, I made non-trivial money on Compound shorting MKR, LINK, and UNI (the Uniswap token) with BTC/ETH as collateral. [1] Whether you replace "scam" with "confidence game" is irrelevant to this point.
- ivalm 4y ago
  I think the claim is that usdt crash will be highly correlated with all other crypto going to zero, so any crypto collaterized counterparty will fail. Ability to payout USDT short relies on confidence in other crypto.
  - SilasX 4y ago
    I got that part. But the claim here would be that your USDC collateral would go to zero. Yes, USDC is "a crypto" and if you lump it in with all crypto, you will casually think it will magically go to zero too, despite being backed with non-crypto assets and a level of conventional oversight from the financial markets. Or is the whole idea that it's somehow deeply insightful to not make this distinction?
    - ivalm 4y ago
      You’re right that if the short is entirely usdc collaterized. But reading the blog: > Still, just over half the collateral on Aave is ETH or stETH, and another 13% is wBTC. Aave’s designed to liquidate positions before the become under-collateralized. Let’s hope that happens fast enough if Tether depegs. That sounds like you still have counterparty risk with regular crypto going to 0 due to pool liquidation (your collateral is not custodially held, but is in a pool).
      - 4y ago

by yborg 4y ago

Aperocky 4y ago

Big money is not shorting it because there's no way to short it at scale. There are no broker that will survive to close the short, and you need a broker to short.

OJFord 4y ago
That's the same thing GP is saying - nobody reliable, not 'in the game', wants to take the other side of the trade. (Presumably there is a price at which they do, but also at which nobody's remained interested.)
- Aperocky 4y ago
  want vs reality. In fact, I would want to bet against USDT with a reasonable proportion of my savings, but there are no safe way to ensure such a contract will be honored in the case that it actually went to 0.
dghlsakjg 4y ago
USDT is super interesting since it doesn't behave like a normal market priced asset. You know it won't ever go up in value, and you know that if it goes down, it goes down to 0 VERY QUICKLY, with maybe a chance of a claim against unverified assets that might pay out after years of litigation.
- alienalp 4y ago
  In past USDT depeg to around 0.9$ for short time. This is very unlikely to be the case since even if they are insolvent they have a reserve. You probably think that way because of LUNA crash which was backed by almost nothing. For example in defi stablecoins with issues do not depeg to zero or anywhere close to zero if they are still backed to some extent.
  - dghlsakjg 4y ago
    Our opinions differ in that you trust Tether's reserve. I don't. It has been more than 5 years since they were audited. By their own admission, they have 10 billion of their 66 billion dollars in unsecured loans and "other investments". An org whose entire raison d' etre is to hold money should be pretty open to outside audits. It should actually be a pretty easy audit. Why have they been foot-dragging so long?
    - alienalp 4y ago
      I didn't said i trust Tether's reserves. However even if with a hole they have a reserve at the end.

nico 4y ago

> The whole ecosystem currently remains a giant confidence game Money is also a giant confidence game. Any human system is that. It’s all made up.

omgsean 4y ago
Money largely gains its value from its ability to be used to pay taxes. If there is someone who controls land and an army and says "this is valuable and you have to pay a certain amount to me at certain intervals" then it is valuable, at least within that political configuration.
- G3rn0ti 4y ago
  > Money largely gains its value from its ability to be used to pay taxes. Even for contemporary fiat currencies today this is neither historically nor theoretically true. Currencies gain their value largely from being convenient in settling trades and being a measure of value when calculating costs, risks and profits. Ultimately, it does not really matter what this money is based on e.g. gold, paper or digital information. For anybody interested in this perspective and in a more general criticism of fiat money I strongly recommend reading "Ethics of Money Production" by Jörg Guido Hülsmann. (1) (1) https://books.google.de/books/about/Ethics_of_Money_Production.html?id=9j8n4xsghl0C&redir_esc=y https://books.google.de/books/about/Ethics_of_Money_Producti...
TheRealPomax 4y ago
...and... where were you going with that? Just because we made something up doesn't mean there aren't different levels of stability for that made up model, or different levels of real world results from acting on those models.
- nico 4y ago
  What it means is that there is no “real” justification for something to be valuable, is what people agree on. If enough people agree that crypto is valuable and want to buy it, then it is valuable for as long as people believe it is. Just like any other form of currency.

SilasX 4y ago

Some of the crypto platforms are scam[1], but no one seriously claims Aave Or Compound, the defi borrowing platforms you can do this with, are scams. There is, of course, always the risk of unforeseen bugs that prevent withdrawls, or crashes that happen so fast the collateral can't be liquidated in time. But that's different from saying that Aave or Compound are themselves "confidence games" that can't be expected to pay you back when you're right. I know for my part, I made non-trivial money on Compound shorting MKR, LINK, and UNI (the Uniswap token) with BTC/ETH as collateral. [1] Whether you replace "scam" with "confidence game" is irrelevant to this point.

ivalm 4y ago
I think the claim is that usdt crash will be highly correlated with all other crypto going to zero, so any crypto collaterized counterparty will fail. Ability to payout USDT short relies on confidence in other crypto.
- SilasX 4y ago
  I got that part. But the claim here would be that your USDC collateral would go to zero. Yes, USDC is "a crypto" and if you lump it in with all crypto, you will casually think it will magically go to zero too, despite being backed with non-crypto assets and a level of conventional oversight from the financial markets. Or is the whole idea that it's somehow deeply insightful to not make this distinction?
  - ivalm 4y ago
    You’re right that if the short is entirely usdc collaterized. But reading the blog: > Still, just over half the collateral on Aave is ETH or stETH, and another 13% is wBTC. Aave’s designed to liquidate positions before the become under-collateralized. Let’s hope that happens fast enough if Tether depegs. That sounds like you still have counterparty risk with regular crypto going to 0 due to pool liquidation (your collateral is not custodially held, but is in a pool).
    - 4y ago