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Serious question: why are these types of articles not causing Tether (and by extension Bitcoin) to collapse? How long will this charade last?

by dom96 4y ago

HeartStrings 4y ago
Because eveyone is aware of Tether since 2015. It’s a known unknown, risk is priced in. And anyone with a brain has exchanged it for much safer USDC.
ur-whale 4y ago
> why are these types of articles not causing Tether It is indeed a very interesting question. The scamminess of Tether is pretty much obvious to everyone in the crypto world at this point (this article brings fairly little that's new to light). As I mentioned somewhere else in the thread, I believe the explanation might be that Tether fills an absolutely essential role in providing liquidity to Cryto markets. So fundamental that everyone allows it to continue to operate in spite of knowing how rotten to the core the whole thing is.
unicornmama 4y ago
Because it’s in no one’s interest to see Tether collapse. The damage to the crypto “ecosystem” would be profound. So the major players work together to make sure the music doesn’t stop.
- polygamous_bat 4y ago
  This is the correct answer. In regular markets, price discovery happens because people can take both long and short positions on an asset, and thus the equilibrium price reflects something close to the true price (theoretically anyway.) In tether, there is no real way to short it because of the counterparty risk -- if you short Tether and win, when the time comes for the payout your counterparty would have gone the way of Tether itself, and you will have no one to collect payouts off of.
  - chii 4y ago
    > you will have no one to collect payouts off of. any yet, back in the GFC, people shorted mortgage bonds so much that paying out would've bankrupted the banks (as they are the counterparty). So why doesn't that apply here? As long as you are the first to collect the short, you will still win.
    - polygamous_bat 4y ago
      Because the US government doesn't want the US economy to go up in flames, and thus stepped in to make sure the bank's debtors are made (somewhat) whole. Who would be the "lender of last resort" in crypto?
    - vkou 4y ago
      In the GFC, most people expected the system of rules, trade settlements, and, at last resort, lawsuits to probably make them whole when they trade in a volatile environment against counterparties that they believe are likely to go bust. (There are still ways to guess right, but lose big on a trade, like shorting a company, whose stock collapses, and then gets delisted!) In the crypto world, your counterparties might, quite literally, run off to Singapore, leaving you holding a worthless bag of toxic garbage.
    - HWR_14 4y ago
      Unlike the GFC, the first evidence of any weakness will be your counterparty being bankrupt. With the GFC, it was based on available information that the specific trades were going bad. In this case it will be "redeem for a dollar, redeem for a dollar, I cannot redeem/am broke so obviously your short is now good".
    - unicornmama 4y ago
      IIRC those credit default swaps actually almost became worthless overnight due to an important bank almost failing.
  - pcthrowaway 4y ago
    You can short it on a decentralized exchange if you want to avoid counterparty risk You then have a different risk though, protocol (smart contract) risk. As long as the smart contracts don't have exploits, you'll be able to withdraw your collateral after repaying your borrowed Tether. Of course, this also means you have to be fairly overcollateralized. If you want to short say $100 of Tether you'd do well to deposit $200 of funds as collateral, because each asset has its own collateralization ratio that's not 1:1 to protect against liquidity crunches. Aave and Compound (v2) would be safe places to execute a strategy like this, as they've been battle-tested for years at this point and have received multiple audits. There's always risk of course, but I don't think this is any more risky shorting through a centralized exchange, and much more transparent than something like shorting traditional securities
- Kranar 4y ago
  There were major players involved in other cryptocurrencies/stable coins that ultimately failed. There's absolutely no shortage (pun intended) of people who want to see Bitcoin and/or Tether collapse and have a vested financial interest in seeing it fall. If there were a verifiable reason for either of these to fail, it would. Tether continues to survive for one simple reason, up to this point anyone has been able to redeem 1 USDT for 1 USD through Bitfinex and that ultimately is what holds the peg. Bitfinex themselves buy up USDT when it dips below 1 USD which is actually one of their sources of revenue and about 60% of all USDT is held on Bitfinex.
  - FireBeyond 4y ago
    > up to this point anyone has been able to redeem 1 USDT for 1 USD through Bitfinex What do you mean "up to this point anyone"? For several years Bitfinex (who also assured everyone that they had NOTHING to do with Tether) or Tether would only let you redeem if you were a "whale" with over $30K in holdings, were a non US-national, were subject to a six month waiting period. Random people absolutely could not redeem say 10 USDT. Also during that period people would post bounties, some of which were a couple of thousand dollars, for -anyone- to demonstrate that they'd been able to redeem, and none of those bounties were ever claimed. Things might be different now, but let's not try to claim that it's all been all good so far.
  - loeg 4y ago
    > and have a vested financial interest in seeing it fall Who can actually profit from it falling? The problem with shorting it is that you have to find someone who will remain solvent when Tether collapses to take the other side of the bet.
- georgeecollins 4y ago
  >> Because it’s in no one’s interest to see Tether collapse. That kind of sounds like magical thinking. On the other hand trying to short USDT sounds insane from a practical point of view. I think the reality is that we talk and think about all crypto way more than they actually are going to matter, particularly relative to the amount they are actually used. Not the BS "market cap" which is phoney in so many ways. Can we admit that maybe this isn't very important?
- HeartStrings 4y ago
  It’s in shorters’ interest.
neysofu 4y ago
Why would Bitcoin collapse as a consequence of Tether collapsing? I would expect to see a temporary drop due to market instability and low investors' confidence amid fear, but surely not a collapse.
- woodruffw 4y ago
  All available public evidence points to a significant portion (majority?) of Bitcoin’s current valuation being supported by Tether.
  - deleted 4y ago
    [deleted]
  - nullc 4y ago
    I don't believe I've ever seen any such evidence. The only attempt I've seen about supporting that is a time series analysis that showed that the total tether issued increased at times when Bitcoin's price increased-- which is exactly what you'd expect to see happen without any funny business: 'crypto' mania fuels demand for both Bitcoin and tether. I don't have any doubt that tether is up to all manner of funny business (e.g. printing unbacked coins and loaning them out for people to 'invest' in defi ponzis), but mostly its used to trade against varrious altcoins that are only traded on off-shore exchanges not used to trade against Bitcoin. The arguments that it plays some major role with bitcoin from what I see appear to be conjecture and logically unsound reasoning rather than clear and convincing evidence. If you're aware of something better-- I'd love to see it. Absent that kind of connection I wouldn't be surprised to see demand for Bitcoin _rise_ once the instability fear cleared: prior to tether being used to purchase sketch-coins at offshore exchanges Bitcoin was the exclusive option for that purpose.
  - HeartStrings 4y ago
    Can you link to this evidence, pleaase?
- NotYourLawyer 4y ago
  Because tether is being used to create artificial demand for btc.
Panzer04 4y ago
So long as tether is well-enough capitalised to meet redemptions everything will be fine. Right up until they run out real dollars... In theory, slightly depegged tether is actually to their advantage, assuming they have enough capital.
- chii 4y ago
  > In theory, slightly depegged tether is actually to their advantage, assuming they have enough capital. why is that? Do you mean that they could buy tether back at a lower price than they issued it at, and thus pocket the difference?
  - deleted 4y ago
    [deleted]
  - drexlspivey 4y ago
    Yes that's one way to make money. They also make currently 4.75% on $67B of issued Tether = $3B+ per year just by buying US Treasuries. Even if they were undercapitalized in the past my guess is they are fine now
    - michpoch 4y ago
      That's not exactly how it works. You can't make 4.75% of $67B if you never had $67B in real dollars. They could have as well never received any USD / fiat.
      - drexlspivey 4y ago
        > They could have as well never received any USD / fiat What do you mean by that? What do they do with the tether they issue then?
        riffraff 4y ago
        They mean there is no proof they issued tether for real money, and instead they could have issued it for collateral in crypto or IOU by other crypto entities. Which would explain why nobody in the financial industry knows them even if they supposedly manage 60B$.
1vuio0pswjnm7 4y ago
As long as the websites are up, publish "quotes" that appear to represent alleged "gains" and the amount of withdrawals remains reasonably low. Like any Ponzi scheme. NB. "Withdrawals" here means what the article calls "redemptions". It means recovering the fiat currency that one surrendered in order to participate in the Ponzi scheme. Bitcoin could have "collapsed" weeks, months or years ago, but how would anyone know. A Ponzi scheme can be undetectable until the victims try to withdraw their funds. As long as websites publish a purported "quote" then people reading may continue to believe it. People can argue about the "value" of BTC until they are blue in the face (watch for the replies to this comment) but until they actually withdraw the funds they committed in real money to participate, let alone any purported gains, it is all speculation. There are no guarantees because crypto is unregulated.1 These crypto entities are not required by law to disclose anything. How does anyone verify if what they disclose is actually true. If someone believes BTC is truly worth what is published on CoinMarketCap, then they should try cashing out and prove it.2 The ones who cash out early will get their money, but if enough people try to cash out in a short period, then the Ponzi scheme will be exposed. The schemers cannot cover the withdrawals. Most BTC owners will lose their real money. But then, who wants money when one has BTC. If one believes in crypto then perhaps one believes money (fiat currency) is ultimately useless. Tether had to be sued by the NY Attorney General for it to release basic information. Ths sad reality is that the only effective means to getting information about what crypto schemers are doing has been to bring civil or criminal proceedings against them. 1. With respect to the US, crypto is unlike shares of stock, the issuance and trading of which must comply with securities laws. Tether is not registered with the SEC. 2. "Cash out" here means convert to real money (fiat currency). The article refers to this as "redemptions".
- pcthrowaway 4y ago
  Tether?... withdrawals? Not sure what you mean here. Do you mean conversion? With BTC, 99% of users could withdraw their BTC from the exchange and it would have relatively little effect on price (although there might be volatility). Trading for USD would impact the price, and I'm suspecting that's what you mean by "withdrawal". But trading anything into anything else devalues it relative to the other thing. You could say the same thing about a stock. If everyone holding Alphabet decided to try to sell it tomorrow, the price would crater, because that's how markets work. This not the same thing as a Ponzi scheme.
Kranar 4y ago
Because no one cares about random wild speculation and rumors spread across the Internet for almost a decade. What people care about is whether they can take 1 USDT and exchange it for 1 USD, plain and simple. Currently Bitfinex will exchange 1 USDT for 1 USD and they hold a substantial about of USDT, they also buy up USDT when it falls below 1 USD. I'm sure Bitfinex is happy to see reports about Tether's demise spread, because it's free money for them. If at some point it's not possible to redeem 1 USDT for 1 USD, then Tether will collapse like the other stable coins and that's really all there is to it.
- arcticbull 4y ago
  It's literally been covered in CFTC and NYAG settlements. It's not wild speculation, it's not rumors. It's all here. [1, 2] > Currently Bitfinex will exchange 1 USDT for 1 USD and they hold a substantial about of USDT, they also buy up USDT when it falls below 1 USD. I'm sure Bitfinex is happy to see reports about Tether's demise spread, because it's free money for them. No, that's what they say they do. We have no evidence. The last people who stuck up for them in this regard, SBF and Trabucco, are in some pretty hot water. It could be Tether/Bitfinex, but it could be anyone else with an interest in perpetuating the ecosystem. Some exchanges mortally locked in perhaps? > If at some point it's not possible to redeem 1 USDT for 1 USD, then Tether will collapse like the other stable coins and that's really all there is to it. It may not be possible right now. Their terms of service say they can deny basically any redemption at their sole discretion. Anyone denied would not be incentivized to declare the emperor naked. [1] https://ag.ny.gov/press-release/2021/attorney-general-james-ends-virtual-currency-trading-platform-bitfinexs-illegal https://ag.ny.gov/press-release/2021/attorney-general-james-... [2] https://www.cftc.gov/PressRoom/PressReleases/8450-21 https://www.cftc.gov/PressRoom/PressReleases/8450-21
  - ETH_start 4y ago
    No one has complained about being unable to convert their USDT to USD. This is baseless speculation. It's entirely fair to say there is no basis for trusting the company behind Tether, and by extension Tether. It's unfounded FUD to definitively claim that it's a scam.
HideousKojima 4y ago
Rule 1 of investing: Never bet more than you're willing to lose. Rule 2 (which answers your question): the market can stay irrational longer than you can stay solvent
LatteLazy 4y ago
The article doesn't actually say anything bad about tether. The worse parts are that they were once fined. But it's a tiny amount and most banks get fined regularly by all sorts of regulators. Other than that, is it meant to collapse because one of the founders once played hockey in a movie as a kid? Or because another one is asian? Go back and read it. It's not factually wrong, it just couches facts negatively ( eg Jean-Louis van der Velde is also known as Jan Ludovicus van der Velde, but who cares? So he anglosized his name? Teddy Roosevelt was actually called Theodore you know, Ted Cruz is actually Rafael Edward Cruz) None of this would put me off investing in any given company outside for crypto. Would you refuse to buy shares in a company with a CEO who was asian or a CFO who used an anglosized name? I assume not.
- georgeecollins 4y ago
  >> The worse parts are that they were once fined. But it's a tiny amount and most banks get fined regularly by all sorts of regulators. They were forbidden from doing business in New York. That doesn't happen to most banks. https://ag.ny.gov/press-release/2021/attorney-general-james-ends-virtual-currency-trading-platform-bitfinexs-illegal https://ag.ny.gov/press-release/2021/attorney-general-james-...
  - LatteLazy 4y ago
    New York just has a huge hard-on for dumb regs around crypto. If there is actual evidence for why they should be banned, NY should share it. If not, step off the hose.
  - lazide 4y ago
    They were forbidden from doing business in NY because they flat out lied about pretty much everything they were doing or were. including that they had cash reserves, when for years (and maybe still), they didn’t even have bank accounts.
georgeecollins 4y ago
Here's one hypothesis: USDT is used to trade a lot but (hopefully) not a lot of retail investors are holding large amounts of USDT. But like the CEL (Celsius) a lot of the "market cap" of the coin is held in companies that are essentially insolvent. Like CEL, they use their big balance sheet and the relatively thin amount of trading to prop up the value of USDT when necessary. That's just an idea. I am not someone who would know. One thing I have learned in life is that people can know there is a problem in a market but the chickens don't come to roost until the last person is convinced they can't make money. Mortgage backed securities were like that. For a couple years people thought it was a problem, then probably most financial people thought it was a problem, and then a long time later it crashed. It really was waiting for the last person to think they couldn't make any money by trading them.
- chollida1 4y ago
  > But like the CEL (Celsius) a lot of the "market cap" of the coin is held in companies that are essentially insolvent What insolvent companies hold tether? If they did this would be the first thing they would unload as hey can always get park value for their tether.
  - rippercushions 4y ago
    Binance, the largest crypto exchange of them all, has huge USDT holdings and is widely reckoned to be in deep trouble. However, they can't dump it without wrecking the market in the process. One of the famous SBF screenshots showed Binance's CEO deeply concerned about someone selling US$250k (not M! K!) USDT, because they were afraid that might upset the apple cart, even though USDT is notionally backed by $68B of assets.
    - wruza 4y ago
      No interest in questioning your/their sources, but $250k is an order of microbusiness’s hourly amount. It can barely even move a spread on any exchange, unless dropped into an order book as is*. I worked few years ago as a trading bot developer for a company of 3-5 people who traded EUR and USD stablecoins for a local currency as part of their ops. $100k amount was a lazy morning. If an exchange worries about $250k, it’s dead in milliseconds. There must be some huge context missing in that post. * and even in this case a book will just swallow it at the expense of a market-order side and drift back in under a second.
paulpauper 4y ago
Tether does not need perfect 1-1 backing to work. If there are enough funds for everyone who wants to convert to dollars or to sell on the market, it's fine. There has never bene a situation in which all the reserves are needed. The market depth is big enough that it works. I think this is part of why it has proven so resilient.
- ahepp 4y ago
  That's fractional reserve banking, right? It works, but there's a reason it's regulated.
dkobia 4y ago
Crypto to me is a Ponzi scheme analogous to an almost perfect pathogen - doesn’t kill the host and comes back every fall. Greed ensures we always forget.
- kakapo88 4y ago
  Interesting analogy. It is highly adapted to its host for sure. In fact, it's quite impressive how evolved it is, always morphing and camouflaging, keeping the immune system at bay.
- saalweachter 4y ago
  It's a decentralized Ponzi scheme. The Ponzi schemes of history collapsed when the guy at the top got arrested, ran out of money, or ran off with what was left. With Bitcoin, every time one person does one of those three, two more arise.
kobalsky 4y ago
2 things that haven't been mentioned. Why doesn't it collapse? 1. It took one twitter post by CZ to bring down FTX and it had one of the cleanest images around. Maybe people just "ran to the bank" and were able to get their funds back at the expected rate so the panic went down. 2. There's one major FUD about USDT every month published by major sites. If a bank run stemming from a news post was gonna crash it would have happened already.
- tsimionescu 4y ago
  FTX was perhaps uniquely bad at what it was actually doing. I would bet few institutions in the history of the world have ever misplaced 10B$ worth of value, for example. If Tether is somewhat more competent, then they can be far more reliable.
neckardt 4y ago
My understanding is that lack of trust in Tether actually makes Tether money. First a few things to note: - Tether sells 1 USDT for 1 USD - Tether will buy back 1 USDT for 1 USD - Tether is also traded on crypto exchanges When people start to lose trust in USDT, the price of USDT on the crypto exhanges drops. Lets say 1 USDT becomes worth $0.99 on the market. Tether then buys USDT on the exchanges for $0.99, even though they had previously sold that USDT for $1. They have just earned $0.01 on every USDT bought. This accomplishes two things: 1. This pumps the price up so Tether doesn't fully collapse on the market 2. Tether makes money Tether doesn't need to keep one USD in reserve for every USDT out there, they just need to keep enough that if the prices start to drop they can buy back USDT for cheaper than they sold it for and prevent a full bank run. As long as there's a cycle of people periodically losing trust in USDT, Tether skims cents off of the trading market at high enough volume to pay their employees and make a tidy profit.
- tsimionescu 4y ago
  Tether loses money when buying USDT back, at whatever price. Sure, as long as they are buying it back at a smaller price than they originally sold it, they're still ok - but it's not in Tether's interest to give away its cash for USDT (since there are much better ways to make money off of cash than trading it for less than 1 cent). Especially since Tether can just print more USDT whenever they feel like it - it's not like they need to buy USDT before they can sell it again for 1$.
- fghjkjhd 4y ago
  why would i sell my USDT for .99 on an exchange instead of USD1 directly to tether?!?!
csomar 4y ago
It's an insanely profitable business. Tether made lots of mistakes but they got bailed by the high yield of the market. The business will collapse when that stops or maybe they got better after all these years?
jbverschoor 4y ago
Why would bitcoin collapse? When things get bad, people have to go somewhere.. where? Bitcoin
- reiichiroh 4y ago
  It collapses if there’s no next bagholder

Serious question: why are these types of articles not causing Tether (and by extension Bitcoin) to collapse? How long will this charade last?

by dom96 4y ago

Serious question: why are these types of articles not causing Tether (and by extension Bitcoin) to collapse? How long will this charade last?

HeartStrings 4y ago

Because eveyone is aware of Tether since 2015. It’s a known unknown, risk is priced in. And anyone with a brain has exchanged it for much safer USDC.

ur-whale 4y ago

> why are these types of articles not causing Tether It is indeed a very interesting question. The scamminess of Tether is pretty much obvious to everyone in the crypto world at this point (this article brings fairly little that's new to light). As I mentioned somewhere else in the thread, I believe the explanation might be that Tether fills an absolutely essential role in providing liquidity to Cryto markets. So fundamental that everyone allows it to continue to operate in spite of knowing how rotten to the core the whole thing is.

unicornmama 4y ago

Because it’s in no one’s interest to see Tether collapse. The damage to the crypto “ecosystem” would be profound. So the major players work together to make sure the music doesn’t stop.

polygamous_bat 4y ago
This is the correct answer. In regular markets, price discovery happens because people can take both long and short positions on an asset, and thus the equilibrium price reflects something close to the true price (theoretically anyway.) In tether, there is no real way to short it because of the counterparty risk -- if you short Tether and win, when the time comes for the payout your counterparty would have gone the way of Tether itself, and you will have no one to collect payouts off of.
- chii 4y ago
  > you will have no one to collect payouts off of. any yet, back in the GFC, people shorted mortgage bonds so much that paying out would've bankrupted the banks (as they are the counterparty). So why doesn't that apply here? As long as you are the first to collect the short, you will still win.
  - polygamous_bat 4y ago
    Because the US government doesn't want the US economy to go up in flames, and thus stepped in to make sure the bank's debtors are made (somewhat) whole. Who would be the "lender of last resort" in crypto?
  - vkou 4y ago
    In the GFC, most people expected the system of rules, trade settlements, and, at last resort, lawsuits to probably make them whole when they trade in a volatile environment against counterparties that they believe are likely to go bust. (There are still ways to guess right, but lose big on a trade, like shorting a company, whose stock collapses, and then gets delisted!) In the crypto world, your counterparties might, quite literally, run off to Singapore, leaving you holding a worthless bag of toxic garbage.
  - HWR_14 4y ago
    Unlike the GFC, the first evidence of any weakness will be your counterparty being bankrupt. With the GFC, it was based on available information that the specific trades were going bad. In this case it will be "redeem for a dollar, redeem for a dollar, I cannot redeem/am broke so obviously your short is now good".
  - unicornmama 4y ago
    IIRC those credit default swaps actually almost became worthless overnight due to an important bank almost failing.
- pcthrowaway 4y ago
  You can short it on a decentralized exchange if you want to avoid counterparty risk You then have a different risk though, protocol (smart contract) risk. As long as the smart contracts don't have exploits, you'll be able to withdraw your collateral after repaying your borrowed Tether. Of course, this also means you have to be fairly overcollateralized. If you want to short say $100 of Tether you'd do well to deposit $200 of funds as collateral, because each asset has its own collateralization ratio that's not 1:1 to protect against liquidity crunches. Aave and Compound (v2) would be safe places to execute a strategy like this, as they've been battle-tested for years at this point and have received multiple audits. There's always risk of course, but I don't think this is any more risky shorting through a centralized exchange, and much more transparent than something like shorting traditional securities
Kranar 4y ago
There were major players involved in other cryptocurrencies/stable coins that ultimately failed. There's absolutely no shortage (pun intended) of people who want to see Bitcoin and/or Tether collapse and have a vested financial interest in seeing it fall. If there were a verifiable reason for either of these to fail, it would. Tether continues to survive for one simple reason, up to this point anyone has been able to redeem 1 USDT for 1 USD through Bitfinex and that ultimately is what holds the peg. Bitfinex themselves buy up USDT when it dips below 1 USD which is actually one of their sources of revenue and about 60% of all USDT is held on Bitfinex.
- FireBeyond 4y ago
  > up to this point anyone has been able to redeem 1 USDT for 1 USD through Bitfinex What do you mean "up to this point anyone"? For several years Bitfinex (who also assured everyone that they had NOTHING to do with Tether) or Tether would only let you redeem if you were a "whale" with over $30K in holdings, were a non US-national, were subject to a six month waiting period. Random people absolutely could not redeem say 10 USDT. Also during that period people would post bounties, some of which were a couple of thousand dollars, for -anyone- to demonstrate that they'd been able to redeem, and none of those bounties were ever claimed. Things might be different now, but let's not try to claim that it's all been all good so far.
- loeg 4y ago
  > and have a vested financial interest in seeing it fall Who can actually profit from it falling? The problem with shorting it is that you have to find someone who will remain solvent when Tether collapses to take the other side of the bet.
georgeecollins 4y ago
>> Because it’s in no one’s interest to see Tether collapse. That kind of sounds like magical thinking. On the other hand trying to short USDT sounds insane from a practical point of view. I think the reality is that we talk and think about all crypto way more than they actually are going to matter, particularly relative to the amount they are actually used. Not the BS "market cap" which is phoney in so many ways. Can we admit that maybe this isn't very important?
HeartStrings 4y ago
It’s in shorters’ interest.

neysofu 4y ago

Why would Bitcoin collapse as a consequence of Tether collapsing? I would expect to see a temporary drop due to market instability and low investors' confidence amid fear, but surely not a collapse.

woodruffw 4y ago
All available public evidence points to a significant portion (majority?) of Bitcoin’s current valuation being supported by Tether.
- deleted 4y ago
  [deleted]
- nullc 4y ago
  I don't believe I've ever seen any such evidence. The only attempt I've seen about supporting that is a time series analysis that showed that the total tether issued increased at times when Bitcoin's price increased-- which is exactly what you'd expect to see happen without any funny business: 'crypto' mania fuels demand for both Bitcoin and tether. I don't have any doubt that tether is up to all manner of funny business (e.g. printing unbacked coins and loaning them out for people to 'invest' in defi ponzis), but mostly its used to trade against varrious altcoins that are only traded on off-shore exchanges not used to trade against Bitcoin. The arguments that it plays some major role with bitcoin from what I see appear to be conjecture and logically unsound reasoning rather than clear and convincing evidence. If you're aware of something better-- I'd love to see it. Absent that kind of connection I wouldn't be surprised to see demand for Bitcoin _rise_ once the instability fear cleared: prior to tether being used to purchase sketch-coins at offshore exchanges Bitcoin was the exclusive option for that purpose.
- HeartStrings 4y ago
  Can you link to this evidence, pleaase?
NotYourLawyer 4y ago
Because tether is being used to create artificial demand for btc.

Panzer04 4y ago

So long as tether is well-enough capitalised to meet redemptions everything will be fine. Right up until they run out real dollars... In theory, slightly depegged tether is actually to their advantage, assuming they have enough capital.

chii 4y ago
> In theory, slightly depegged tether is actually to their advantage, assuming they have enough capital. why is that? Do you mean that they could buy tether back at a lower price than they issued it at, and thus pocket the difference?
- deleted 4y ago
  [deleted]
- drexlspivey 4y ago
  Yes that's one way to make money. They also make currently 4.75% on $67B of issued Tether = $3B+ per year just by buying US Treasuries. Even if they were undercapitalized in the past my guess is they are fine now
  - michpoch 4y ago
    That's not exactly how it works. You can't make 4.75% of $67B if you never had $67B in real dollars. They could have as well never received any USD / fiat.
    - drexlspivey 4y ago
      > They could have as well never received any USD / fiat What do you mean by that? What do they do with the tether they issue then?
      - riffraff 4y ago
        They mean there is no proof they issued tether for real money, and instead they could have issued it for collateral in crypto or IOU by other crypto entities. Which would explain why nobody in the financial industry knows them even if they supposedly manage 60B$.

1vuio0pswjnm7 4y ago

As long as the websites are up, publish "quotes" that appear to represent alleged "gains" and the amount of withdrawals remains reasonably low. Like any Ponzi scheme. NB. "Withdrawals" here means what the article calls "redemptions". It means recovering the fiat currency that one surrendered in order to participate in the Ponzi scheme. Bitcoin could have "collapsed" weeks, months or years ago, but how would anyone know. A Ponzi scheme can be undetectable until the victims try to withdraw their funds. As long as websites publish a purported "quote" then people reading may continue to believe it. People can argue about the "value" of BTC until they are blue in the face (watch for the replies to this comment) but until they actually withdraw the funds they committed in real money to participate, let alone any purported gains, it is all speculation. There are no guarantees because crypto is unregulated.1 These crypto entities are not required by law to disclose anything. How does anyone verify if what they disclose is actually true. If someone believes BTC is truly worth what is published on CoinMarketCap, then they should try cashing out and prove it.2 The ones who cash out early will get their money, but if enough people try to cash out in a short period, then the Ponzi scheme will be exposed. The schemers cannot cover the withdrawals. Most BTC owners will lose their real money. But then, who wants money when one has BTC. If one believes in crypto then perhaps one believes money (fiat currency) is ultimately useless. Tether had to be sued by the NY Attorney General for it to release basic information. Ths sad reality is that the only effective means to getting information about what crypto schemers are doing has been to bring civil or criminal proceedings against them. 1. With respect to the US, crypto is unlike shares of stock, the issuance and trading of which must comply with securities laws. Tether is not registered with the SEC. 2. "Cash out" here means convert to real money (fiat currency). The article refers to this as "redemptions".

pcthrowaway 4y ago
Tether?... withdrawals? Not sure what you mean here. Do you mean conversion? With BTC, 99% of users could withdraw their BTC from the exchange and it would have relatively little effect on price (although there might be volatility). Trading for USD would impact the price, and I'm suspecting that's what you mean by "withdrawal". But trading anything into anything else devalues it relative to the other thing. You could say the same thing about a stock. If everyone holding Alphabet decided to try to sell it tomorrow, the price would crater, because that's how markets work. This not the same thing as a Ponzi scheme.

Kranar 4y ago

Because no one cares about random wild speculation and rumors spread across the Internet for almost a decade. What people care about is whether they can take 1 USDT and exchange it for 1 USD, plain and simple. Currently Bitfinex will exchange 1 USDT for 1 USD and they hold a substantial about of USDT, they also buy up USDT when it falls below 1 USD. I'm sure Bitfinex is happy to see reports about Tether's demise spread, because it's free money for them. If at some point it's not possible to redeem 1 USDT for 1 USD, then Tether will collapse like the other stable coins and that's really all there is to it.

arcticbull 4y ago
It's literally been covered in CFTC and NYAG settlements. It's not wild speculation, it's not rumors. It's all here. [1, 2] > Currently Bitfinex will exchange 1 USDT for 1 USD and they hold a substantial about of USDT, they also buy up USDT when it falls below 1 USD. I'm sure Bitfinex is happy to see reports about Tether's demise spread, because it's free money for them. No, that's what they say they do. We have no evidence. The last people who stuck up for them in this regard, SBF and Trabucco, are in some pretty hot water. It could be Tether/Bitfinex, but it could be anyone else with an interest in perpetuating the ecosystem. Some exchanges mortally locked in perhaps? > If at some point it's not possible to redeem 1 USDT for 1 USD, then Tether will collapse like the other stable coins and that's really all there is to it. It may not be possible right now. Their terms of service say they can deny basically any redemption at their sole discretion. Anyone denied would not be incentivized to declare the emperor naked. [1] https://ag.ny.gov/press-release/2021/attorney-general-james-ends-virtual-currency-trading-platform-bitfinexs-illegal https://ag.ny.gov/press-release/2021/attorney-general-james-... [2] https://www.cftc.gov/PressRoom/PressReleases/8450-21 https://www.cftc.gov/PressRoom/PressReleases/8450-21
- ETH_start 4y ago
  No one has complained about being unable to convert their USDT to USD. This is baseless speculation. It's entirely fair to say there is no basis for trusting the company behind Tether, and by extension Tether. It's unfounded FUD to definitively claim that it's a scam.

HideousKojima 4y ago

Rule 1 of investing: Never bet more than you're willing to lose. Rule 2 (which answers your question): the market can stay irrational longer than you can stay solvent

LatteLazy 4y ago

The article doesn't actually say anything bad about tether. The worse parts are that they were once fined. But it's a tiny amount and most banks get fined regularly by all sorts of regulators. Other than that, is it meant to collapse because one of the founders once played hockey in a movie as a kid? Or because another one is asian? Go back and read it. It's not factually wrong, it just couches facts negatively ( eg Jean-Louis van der Velde is also known as Jan Ludovicus van der Velde, but who cares? So he anglosized his name? Teddy Roosevelt was actually called Theodore you know, Ted Cruz is actually Rafael Edward Cruz) None of this would put me off investing in any given company outside for crypto. Would you refuse to buy shares in a company with a CEO who was asian or a CFO who used an anglosized name? I assume not.

georgeecollins 4y ago
>> The worse parts are that they were once fined. But it's a tiny amount and most banks get fined regularly by all sorts of regulators. They were forbidden from doing business in New York. That doesn't happen to most banks. https://ag.ny.gov/press-release/2021/attorney-general-james-ends-virtual-currency-trading-platform-bitfinexs-illegal https://ag.ny.gov/press-release/2021/attorney-general-james-...
- LatteLazy 4y ago
  New York just has a huge hard-on for dumb regs around crypto. If there is actual evidence for why they should be banned, NY should share it. If not, step off the hose.
- lazide 4y ago
  They were forbidden from doing business in NY because they flat out lied about pretty much everything they were doing or were. including that they had cash reserves, when for years (and maybe still), they didn’t even have bank accounts.

georgeecollins 4y ago

Here's one hypothesis: USDT is used to trade a lot but (hopefully) not a lot of retail investors are holding large amounts of USDT. But like the CEL (Celsius) a lot of the "market cap" of the coin is held in companies that are essentially insolvent. Like CEL, they use their big balance sheet and the relatively thin amount of trading to prop up the value of USDT when necessary. That's just an idea. I am not someone who would know. One thing I have learned in life is that people can know there is a problem in a market but the chickens don't come to roost until the last person is convinced they can't make money. Mortgage backed securities were like that. For a couple years people thought it was a problem, then probably most financial people thought it was a problem, and then a long time later it crashed. It really was waiting for the last person to think they couldn't make any money by trading them.

chollida1 4y ago
> But like the CEL (Celsius) a lot of the "market cap" of the coin is held in companies that are essentially insolvent What insolvent companies hold tether? If they did this would be the first thing they would unload as hey can always get park value for their tether.
- rippercushions 4y ago
  Binance, the largest crypto exchange of them all, has huge USDT holdings and is widely reckoned to be in deep trouble. However, they can't dump it without wrecking the market in the process. One of the famous SBF screenshots showed Binance's CEO deeply concerned about someone selling US$250k (not M! K!) USDT, because they were afraid that might upset the apple cart, even though USDT is notionally backed by $68B of assets.
  - wruza 4y ago
    No interest in questioning your/their sources, but $250k is an order of microbusiness’s hourly amount. It can barely even move a spread on any exchange, unless dropped into an order book as is*. I worked few years ago as a trading bot developer for a company of 3-5 people who traded EUR and USD stablecoins for a local currency as part of their ops. $100k amount was a lazy morning. If an exchange worries about $250k, it’s dead in milliseconds. There must be some huge context missing in that post. * and even in this case a book will just swallow it at the expense of a market-order side and drift back in under a second.

paulpauper 4y ago

Tether does not need perfect 1-1 backing to work. If there are enough funds for everyone who wants to convert to dollars or to sell on the market, it's fine. There has never bene a situation in which all the reserves are needed. The market depth is big enough that it works. I think this is part of why it has proven so resilient.

ahepp 4y ago
That's fractional reserve banking, right? It works, but there's a reason it's regulated.

dkobia 4y ago

Crypto to me is a Ponzi scheme analogous to an almost perfect pathogen - doesn’t kill the host and comes back every fall. Greed ensures we always forget.

kakapo88 4y ago
Interesting analogy. It is highly adapted to its host for sure. In fact, it's quite impressive how evolved it is, always morphing and camouflaging, keeping the immune system at bay.
saalweachter 4y ago
It's a decentralized Ponzi scheme. The Ponzi schemes of history collapsed when the guy at the top got arrested, ran out of money, or ran off with what was left. With Bitcoin, every time one person does one of those three, two more arise.

kobalsky 4y ago

2 things that haven't been mentioned. Why doesn't it collapse? 1. It took one twitter post by CZ to bring down FTX and it had one of the cleanest images around. Maybe people just "ran to the bank" and were able to get their funds back at the expected rate so the panic went down. 2. There's one major FUD about USDT every month published by major sites. If a bank run stemming from a news post was gonna crash it would have happened already.

tsimionescu 4y ago
FTX was perhaps uniquely bad at what it was actually doing. I would bet few institutions in the history of the world have ever misplaced 10B$ worth of value, for example. If Tether is somewhat more competent, then they can be far more reliable.

neckardt 4y ago

My understanding is that lack of trust in Tether actually makes Tether money. First a few things to note: - Tether sells 1 USDT for 1 USD - Tether will buy back 1 USDT for 1 USD - Tether is also traded on crypto exchanges When people start to lose trust in USDT, the price of USDT on the crypto exhanges drops. Lets say 1 USDT becomes worth $0.99 on the market. Tether then buys USDT on the exchanges for $0.99, even though they had previously sold that USDT for $1. They have just earned $0.01 on every USDT bought. This accomplishes two things: 1. This pumps the price up so Tether doesn't fully collapse on the market 2. Tether makes money Tether doesn't need to keep one USD in reserve for every USDT out there, they just need to keep enough that if the prices start to drop they can buy back USDT for cheaper than they sold it for and prevent a full bank run. As long as there's a cycle of people periodically losing trust in USDT, Tether skims cents off of the trading market at high enough volume to pay their employees and make a tidy profit.

tsimionescu 4y ago
Tether loses money when buying USDT back, at whatever price. Sure, as long as they are buying it back at a smaller price than they originally sold it, they're still ok - but it's not in Tether's interest to give away its cash for USDT (since there are much better ways to make money off of cash than trading it for less than 1 cent). Especially since Tether can just print more USDT whenever they feel like it - it's not like they need to buy USDT before they can sell it again for 1$.
fghjkjhd 4y ago
why would i sell my USDT for .99 on an exchange instead of USD1 directly to tether?!?!

csomar 4y ago

It's an insanely profitable business. Tether made lots of mistakes but they got bailed by the high yield of the market. The business will collapse when that stops or maybe they got better after all these years?

jbverschoor 4y ago

Why would bitcoin collapse? When things get bad, people have to go somewhere.. where? Bitcoin

reiichiroh 4y ago
It collapses if there’s no next bagholder