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You want to imply that the short is unprofitable because the asset is so good that it'll never decline in value. That is the exact opposite of the reality (and

by toss1 4y ago

You want to imply that the short is unprofitable because the asset is so good that it'll never decline in value. That is the exact opposite of the reality (and misses the entire point of the article). The point is that shorting tether is likely to be enormously profitable, but you won't be able to collect your profits This is because no well capitalized and stable broker or exchange will touch Tether, and the only counterparties who might lend you the Tether to short are extremely likely to go bankrupt when Tether does collapse. So, you'll put your millions of dollars at risk on deposit, pay your interest, and end up with a $100 million or whatever profit, owed to you by a now-bankrupt exchange, so your profit will never arrive at your bank account, and your best case is suing the husk of a bankrupt exchange whose shady owners absconded to a non-extradition country. The trade is bad because only disreputable and insufficiently capitalized counter-parties will touch it, not because Tether is great in any way.

scotty79 4y ago
> You want to imply that the short is unprofitable because the asset is so good that it'll never decline in value. Absolutely not. I think tether is garbage that benefits almost noone except its creators. I'm just amused by the fact that stability of a bad thing is increased because betting against it is worse than for it. > The point is that shorting tether is likely to be enormously profitable, but you won't be able to collect your profits. Hence not profitable at all. :-) Betting for it is risky, betting against it is risky. Maybe that's a huge part of its stability? Like stability on the edge of the knife held over lava pit. Nobody benefits from going to either side despite equilibrium being uncomfortable?
- grey-area 4y ago
  No it’s stable because they’re lying about what it is backed by. It’s easy to make a scam look superficially stable if you are not called on it or make it impossible to call you on your promises.
  - scotty79 4y ago
    They have 66bn, of actual money that people paid for tether, in circulation. It won't be that easy to bring it down. Also the question is, do people really want to call them on their promises. That's another thing noone would benefit from.
    - rippercushions 4y ago
      It's exceedingly unlikely that Tether has anything close to 66B of "real money" backing it. The most likely theory at this point is that most of it is FTX-style IOUs from other crypto companies marked at absurd pre -crypto winter valuations, which will collapse like a house of cards the instant they are touched or even exposed to light.
    - bananapub 4y ago
      > They have 66bn, of actual money that people paid for tether, in circulation. what's your source for that? Tether itself admitted that isn't true: https://cointelegraph.com/news/tether-to-reduce-secured-loans-to-zero-in-2023-amid-battle-against-fud https://cointelegraph.com/news/tether-to-reduce-secured-loan...
      - scotty79 4y ago
        That's very interesting. I wasn't aware of that. I guess in the crypto winter there's very little need for new tether so they found another way to make money. Risks are obvious, that the borrower defaults and collateral drops so they won't be able to recover full amount of tether. Risks and rewards in the form of the cost of the loan. They announced they are curbing this activity so maybe it brought them more loss than gain? They still probably didn't leak mucj tether this way. But I now see that it's not that 66 bln of dollars changed hands, but most of it in crypto valued at bull market prices. So if people wanted to cash out into dollars they would probably collapse. But why would people want to cash out into dollars en masse and pay tax on that? And if they want to cash out into crypto there's no problem becuse the crypto is cheap now so tether doesn't need to give away much for each USDT they redeem.
- toss1 4y ago
  Ah, so you are saying that it is such a mess that no one can/will take either side of the 'bet', so forces that would ordinarily more quickly push it off it's pseudo-equilibrium are absent? Yes I agree that those forces are minimal for Tether (and crypto in general) vs other investments. But it seems at most like a minor second- or third-order effect; technically existing but not practically moving (or stabilizing) the markets.

by toss1 4y ago

scotty79 4y ago

> You want to imply that the short is unprofitable because the asset is so good that it'll never decline in value. Absolutely not. I think tether is garbage that benefits almost noone except its creators. I'm just amused by the fact that stability of a bad thing is increased because betting against it is worse than for it. > The point is that shorting tether is likely to be enormously profitable, but you won't be able to collect your profits. Hence not profitable at all. :-) Betting for it is risky, betting against it is risky. Maybe that's a huge part of its stability? Like stability on the edge of the knife held over lava pit. Nobody benefits from going to either side despite equilibrium being uncomfortable?

grey-area 4y ago
No it’s stable because they’re lying about what it is backed by. It’s easy to make a scam look superficially stable if you are not called on it or make it impossible to call you on your promises.
- scotty79 4y ago
  They have 66bn, of actual money that people paid for tether, in circulation. It won't be that easy to bring it down. Also the question is, do people really want to call them on their promises. That's another thing noone would benefit from.
  - rippercushions 4y ago
    It's exceedingly unlikely that Tether has anything close to 66B of "real money" backing it. The most likely theory at this point is that most of it is FTX-style IOUs from other crypto companies marked at absurd pre -crypto winter valuations, which will collapse like a house of cards the instant they are touched or even exposed to light.
  - bananapub 4y ago
    > They have 66bn, of actual money that people paid for tether, in circulation. what's your source for that? Tether itself admitted that isn't true: https://cointelegraph.com/news/tether-to-reduce-secured-loans-to-zero-in-2023-amid-battle-against-fud https://cointelegraph.com/news/tether-to-reduce-secured-loan...
    - scotty79 4y ago
      That's very interesting. I wasn't aware of that. I guess in the crypto winter there's very little need for new tether so they found another way to make money. Risks are obvious, that the borrower defaults and collateral drops so they won't be able to recover full amount of tether. Risks and rewards in the form of the cost of the loan. They announced they are curbing this activity so maybe it brought them more loss than gain? They still probably didn't leak mucj tether this way. But I now see that it's not that 66 bln of dollars changed hands, but most of it in crypto valued at bull market prices. So if people wanted to cash out into dollars they would probably collapse. But why would people want to cash out into dollars en masse and pay tax on that? And if they want to cash out into crypto there's no problem becuse the crypto is cheap now so tether doesn't need to give away much for each USDT they redeem.
toss1 4y ago
Ah, so you are saying that it is such a mess that no one can/will take either side of the 'bet', so forces that would ordinarily more quickly push it off it's pseudo-equilibrium are absent? Yes I agree that those forces are minimal for Tether (and crypto in general) vs other investments. But it seems at most like a minor second- or third-order effect; technically existing but not practically moving (or stabilizing) the markets.