5 ms·

Tether effectively denominates the entirety of all crypto valuations, so going to any exotic length to do a specific "short Tether" trade seems silly. Just sho

Tether effectively denominates the entirety of all crypto valuations, so going to any exotic length to do a specific "short Tether" trade seems silly. Just shorting BTC/USD will have the same effect.

rewtraw 4y ago
But with crypto’s tendency for huge volatility, it’s much more difficult to maintain a short BTC position without getting blown out.
baobabKoodaa 4y ago
No, shorting BTC/USD has a completely different risk profile than shorting Tether (USDT/USDC or similar pair). The key difference is that BTC can spike up to basically any value (thus liquidating your short, even if it eventually comes back down), whereas USDT won't trade above $1.05 or so.
- femto113 4y ago
  Considering the two risks as independent surmises that BTC goes up substantially (in USD terms) via some mechanism other than printing Tether, which AFAICT never happens. If/when BTC does go up you can simply short again at the higher level. If you're not sufficiently capitalized to handle margin calls you really shouldn't be doing shorts, but even small investors can do this trade by buying the BITI ETF.
  - baobabKoodaa 4y ago
    > Considering the two risks as independent surmises that BTC goes up substantially (in USD terms) via some mechanism other than printing Tether, which AFAICT never happens. BTC goes up and down for a multitude for reasons. For example, Matt Damon going on tv makes BTC go up. You have an extremely simplistic view of the markets if you believe the only reason for BTC to go up is "Tether money printer goes brrrr". Yes, it's one of the reasons. It's not the only one. > If/when BTC does go up you can simply short again at the higher level. If you actually tried to put this proposal in an excel and model the returns, you would immediately notice that "short BTC" and "short USDT" have completely different outcomes and "simply short again" is not a remedy that fixes this issue.
    - femto113 4y ago
      You can't just Excel the Tether short because the basic premise is no one knows the truth about them. Tether on the surface is a perfect business: people give them real money in exchange for tokens they mint themselves for free. They don't have to pay any interest, they get tons of float, they're denominated in the world's primary reserve currency, they have almost no regulatory burden, the tech is mostly other peoples problem, etc. It's literally impossible for them to lose money, even if the whole rest of the crypto world blows up--unless you believe they're being stupid risky with their reserves, or that they don't actually have 1-to-1 reserves in dollar denominated assets. But if you believe it is only the former (like they have it all in high-yield Chinese real estate developer paper) then why not just short the risky asset directly? The reason people are attracted to this short is because they believe it is in fact the latter scenario, and that eventually some event (or series of events) will reveal the emperor has no (or at least not enough) clothes and the peg will collapse. My point is if/when it does it's going to take everything else down with it: Tether is the market, its daily trade volume is roughly the sum of every other currency's, there is no way BTC/USD can shrug off a USDT depeg.
      - baobabKoodaa 4y ago
        > You can't just Excel the Tether short because the basic premise is no one knows the truth about them. You can model the expected value of all kinds of bets without knowing what the exact outcomes will be. > if you believe [that Tether has solid reserves] ... No, I don't believe that. Tether is a pile of burning garbage on a train wreck that's happening in slow motion over multiple years. Don't assume that I must be a Tether bull just because I disagreed with you on some related point. > The reason people are attracted to this short is because they believe it is in fact the latter scenario, and that eventually some event (or series of events) will reveal the emperor has no (or at least not enough) clothes and the peg will collapse. My point is if/when it does it's going to take everything else down with it [...] I understood your point the first time you explained it, and I already explained to you why you are wrong. Yes, if Tether collapses, everything else will crash as well. That's not the point of contention here. The point of contention is whether shorting Tether has the same expected value and risk as shorting BTC. It doesn't, because the risk that Tether goes up from $1.00 to $2.00 is practically non-existant, whereas the risk that BTC doubles in price is considerable. If you make any kind of simple EV calculations (with any assumptions you want!) you will immediately see that these bets are quite different in nature.

Tether effectively denominates the entirety of all crypto valuations, so going to any exotic length to do a specific "short Tether" trade seems silly. Just shorting BTC/USD will have the same effect.

rewtraw 4y ago

But with crypto’s tendency for huge volatility, it’s much more difficult to maintain a short BTC position without getting blown out.

baobabKoodaa 4y ago

No, shorting BTC/USD has a completely different risk profile than shorting Tether (USDT/USDC or similar pair). The key difference is that BTC can spike up to basically any value (thus liquidating your short, even if it eventually comes back down), whereas USDT won't trade above $1.05 or so.

femto113 4y ago
Considering the two risks as independent surmises that BTC goes up substantially (in USD terms) via some mechanism other than printing Tether, which AFAICT never happens. If/when BTC does go up you can simply short again at the higher level. If you're not sufficiently capitalized to handle margin calls you really shouldn't be doing shorts, but even small investors can do this trade by buying the BITI ETF.
- baobabKoodaa 4y ago
  > Considering the two risks as independent surmises that BTC goes up substantially (in USD terms) via some mechanism other than printing Tether, which AFAICT never happens. BTC goes up and down for a multitude for reasons. For example, Matt Damon going on tv makes BTC go up. You have an extremely simplistic view of the markets if you believe the only reason for BTC to go up is "Tether money printer goes brrrr". Yes, it's one of the reasons. It's not the only one. > If/when BTC does go up you can simply short again at the higher level. If you actually tried to put this proposal in an excel and model the returns, you would immediately notice that "short BTC" and "short USDT" have completely different outcomes and "simply short again" is not a remedy that fixes this issue.
  - femto113 4y ago
    You can't just Excel the Tether short because the basic premise is no one knows the truth about them. Tether on the surface is a perfect business: people give them real money in exchange for tokens they mint themselves for free. They don't have to pay any interest, they get tons of float, they're denominated in the world's primary reserve currency, they have almost no regulatory burden, the tech is mostly other peoples problem, etc. It's literally impossible for them to lose money, even if the whole rest of the crypto world blows up--unless you believe they're being stupid risky with their reserves, or that they don't actually have 1-to-1 reserves in dollar denominated assets. But if you believe it is only the former (like they have it all in high-yield Chinese real estate developer paper) then why not just short the risky asset directly? The reason people are attracted to this short is because they believe it is in fact the latter scenario, and that eventually some event (or series of events) will reveal the emperor has no (or at least not enough) clothes and the peg will collapse. My point is if/when it does it's going to take everything else down with it: Tether is the market, its daily trade volume is roughly the sum of every other currency's, there is no way BTC/USD can shrug off a USDT depeg.
    - baobabKoodaa 4y ago
      > You can't just Excel the Tether short because the basic premise is no one knows the truth about them. You can model the expected value of all kinds of bets without knowing what the exact outcomes will be. > if you believe [that Tether has solid reserves] ... No, I don't believe that. Tether is a pile of burning garbage on a train wreck that's happening in slow motion over multiple years. Don't assume that I must be a Tether bull just because I disagreed with you on some related point. > The reason people are attracted to this short is because they believe it is in fact the latter scenario, and that eventually some event (or series of events) will reveal the emperor has no (or at least not enough) clothes and the peg will collapse. My point is if/when it does it's going to take everything else down with it [...] I understood your point the first time you explained it, and I already explained to you why you are wrong. Yes, if Tether collapses, everything else will crash as well. That's not the point of contention here. The point of contention is whether shorting Tether has the same expected value and risk as shorting BTC. It doesn't, because the risk that Tether goes up from $1.00 to $2.00 is practically non-existant, whereas the risk that BTC doubles in price is considerable. If you make any kind of simple EV calculations (with any assumptions you want!) you will immediately see that these bets are quite different in nature.