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My question is: how have Tether managed to turn a profit on billions of dollars of long treasuries when the same thing literally bankrupted several banks with a

My question is: how have Tether managed to turn a profit on billions of dollars of long treasuries when the same thing literally bankrupted several banks with actual risk managers. Tether have never admitted to taking a loss, ever - and have continued operating despite admitting to the SDNY being short as much as 1/3 of their entire backing store at one point. Really makes you think. Either they are the single best traders on the face of the earth - and remember there's like 3 of them on a hammock in the Bahamas, including a plastic surgeon who used to sell pirated Microsoft products - or there's something more to this story. That aside it's hard to see what the crypto community is so in love with here. This is - at best - an opaque, trusted, centralized dollar derivative whose leadership refuses to actually verify their holdings. They also have the ability to randomly freeze coins without due process -- and they do! Even more so than other stablecoin issuers. Far more than Circle. And they cooperate with the US government, allegedly. Their main differentiator appears to be running a PayPal for pig butchering scams in Cambodia, and they seem to be antithetical to everything crypto stands for. No idea why we're even giving this story the time of day, it's the same baseless claims they've been making the whole time but with marginally higher numbers. Let's revisit this when they actually post an audit.

latchkey 3y ago
> it's hard to see what the crypto community is so in love with here It is easy to see what the crypto community is so in love here. They provide a way for traders, globally, to sit in "dollars", they bought up a whole bunch of bitcoin for what is now super cheap (and they are a large holder) [0], and are now reaping in the profits from that and their US bonds. The longer that rates stay high, the more money they make. [0] https://www.coindesk.com/markets/2024/01/18/tether-purchased-another-89k-bitcoin-for-380m-remaining-11th-largest-btc-holder/ https://www.coindesk.com/markets/2024/01/18/tether-purchased...
- arcticbull 3y ago
  And as usual, you come in with ad hominems. Nice to see some things never change. [edit](Ah, I see you stealthily removed them. I maintain the people who have to resort to calling names are usually in the weakest position - although I do enjoy yelling at clouds from time to time). Long-dated bonds go down in price when interest rates go up, as our friends at SVB learned. So the bonds they claimed to have years ago should be significantly under face value on their books. Unless they're the world's greatest hammock-based trading team. The question is why wouldn't the crypto community embrace USDC over USDT where they have actual, verified deposits, and a redemption process? And why is it always so much to ask for an audit? You know if they produced an audit from an actual auditor who didn't run away from them (like last time) I'd believe them, right?
  - latchkey 3y ago
    Fine, I'll remove that bit. I don't see it as an ad hominem to describe the way you make comments, but hey... if it irks you so badly, I can remove it. They got rid of their long dated papers [0]. Because the crypto community is FAR bigger outside of the US and those people don't want the US to have direct control over their funds. This line is bluring now that USDT is starting to enforce blacklists. [0] https://blockworks.co/news/tether-says-usdt-stablecoin-now-backed-by-t-bills https://blockworks.co/news/tether-says-usdt-stablecoin-now-b...
    - arcticbull 3y ago
      > They got rid of their long dated papers [0]. Which they would have had to take a loss on, so where is that loss? See what I mean? Either they're the world's greatest traders, or something doesn't add up. And it's not like they have a sterling reputation for honesty. Again, this would be very easy for them to clear up, by just hiring an auditor. Not that big an ask for 1/10th of a trillion dollars under management.
      - latchkey 3y ago
        ¯\_(ツ)_/¯ businesses have losses and gains. Agreed that they could and should be more transparent. Disagree that they should just go out of business or that they are horrible people just because they exist and don't play the game the way you want it played.
        deleted 3y ago
        [deleted]
        FireBeyond 3y ago
        > they are horrible people just because they exist and don't play the game the way you want it played Multiple people involved have lied multiple times, materially, about their business operations. Not just "lack of candor" or transparency, but active deception. Reducing that to "don't play the game the way you want it played" is facile.
awrence 3y ago
Very simply? If the conspiracy theories about their scamminess were wrong and they did what they said which was hold dollars without duration exposure (mostly cash and tbills). Then once rates got hiked they were basically the only bank equivalent in the world with captive depositors that couldn’t just take their money to competitors and they were able to keep all the interest (4-5 bn per year currently). Which incidentally they’re now using in part to load up (substantially) on btc with house money. I don’t know what the truth is obviously for sure but this story is extremely possible and plausible. It doesn’t mean they were particularly good traders. It means if true basically they were disciplined and didn’t trade at all and are now benefitting from massive upside on their set up resulting from monetary policy and regulatory conditions driving their popularity.
- FireBeyond 3y ago
  > It means if true basically they were disciplined and didn’t trade at all That is, excuse the phrasing, a metric fuckton of discipline that most people on the planet would find hard to exercise. At one point, their minting of Tether implied they were banking half a billion dollars a day. They sat on that from $6B 2 years ago to a claimed $80B now? Still no audit, though. Just "attestations". The difference is the attestation just says "at one moment in time, this much money was in accounts". You could get a short term loan (remember how Bitfinex and Tether used to pretend that they were independent, until people asked why parties A, B, C were the same parties A, B, C on each side of their loan contracts when they borrowed?). You and I can't buy a house on a mere attestation of accounts - funnily enough, lenders want to see how we acquired that money. But these clowns can stand on stage at Davos and say "Yeah, we've banked a billion a week for the last two years, trust us, you don't need an audit". I know that comparing investment to revenue is not apples-to-apples, but to get an idea of what that incoming cash looks like? You're on the scale of Saudi Aramco. Samsung. Alphabet.
  - awrence 3y ago
    Hmmm can’t speak to the likelihood of their actual inflows but tens of billions of usd from global participants that are functionally shut out from usd pipes is really very reasonable. It’s 0.25% of M2. What amuses me a bit is how shocked it can seem to people for them to “sit” on 80 bn dollars. It’s literally what they’re supposed to be doing! And no one can imagine they’re actually doing it. I don’t know. I like to think that’s what I’d do if I said that’s what I was doing… I feel like I would. But apparently we now think when someone is entrusted with a pile of money to keep as such they’d be irrational not to risk their customer funds and yolo into mismatching risk to try and pick up some yield… when did that become the expected norm?
s1artibartfast 3y ago
Long treasuries are still profitable, you just have to avoid a bank run and liquidity crisis forcing you to sell out early. Being opaque about what exactly you are invested in helps prevent short term liquidity risk due to a run. SVB would have turned a profit eventually if it didn't have to disclose vulnerability. Similarly, you don't need a bathing suit as long as you can find one before the tide goes out.
- deleted 3y ago
  [deleted]
gandalfian 3y ago
>"My question is: how have Tether managed to turn a profit on billions of dollars of long treasuries when the same thing literally bankrupted several banks"< Perhaps they bought short term treasury bill so they redeemed them in full every few months avoiding the risk? T bills are still 4% or something. Or they are just lying...

latchkey 3y ago

> it's hard to see what the crypto community is so in love with here It is easy to see what the crypto community is so in love here. They provide a way for traders, globally, to sit in "dollars", they bought up a whole bunch of bitcoin for what is now super cheap (and they are a large holder) [0], and are now reaping in the profits from that and their US bonds. The longer that rates stay high, the more money they make. [0] https://www.coindesk.com/markets/2024/01/18/tether-purchased-another-89k-bitcoin-for-380m-remaining-11th-largest-btc-holder/ https://www.coindesk.com/markets/2024/01/18/tether-purchased...

arcticbull 3y ago
And as usual, you come in with ad hominems. Nice to see some things never change. [edit](Ah, I see you stealthily removed them. I maintain the people who have to resort to calling names are usually in the weakest position - although I do enjoy yelling at clouds from time to time). Long-dated bonds go down in price when interest rates go up, as our friends at SVB learned. So the bonds they claimed to have years ago should be significantly under face value on their books. Unless they're the world's greatest hammock-based trading team. The question is why wouldn't the crypto community embrace USDC over USDT where they have actual, verified deposits, and a redemption process? And why is it always so much to ask for an audit? You know if they produced an audit from an actual auditor who didn't run away from them (like last time) I'd believe them, right?
- latchkey 3y ago
  Fine, I'll remove that bit. I don't see it as an ad hominem to describe the way you make comments, but hey... if it irks you so badly, I can remove it. They got rid of their long dated papers [0]. Because the crypto community is FAR bigger outside of the US and those people don't want the US to have direct control over their funds. This line is bluring now that USDT is starting to enforce blacklists. [0] https://blockworks.co/news/tether-says-usdt-stablecoin-now-backed-by-t-bills https://blockworks.co/news/tether-says-usdt-stablecoin-now-b...
  - arcticbull 3y ago
    > They got rid of their long dated papers [0]. Which they would have had to take a loss on, so where is that loss? See what I mean? Either they're the world's greatest traders, or something doesn't add up. And it's not like they have a sterling reputation for honesty. Again, this would be very easy for them to clear up, by just hiring an auditor. Not that big an ask for 1/10th of a trillion dollars under management.
    - latchkey 3y ago
      ¯\_(ツ)_/¯ businesses have losses and gains. Agreed that they could and should be more transparent. Disagree that they should just go out of business or that they are horrible people just because they exist and don't play the game the way you want it played.
      - deleted 3y ago
        [deleted]
      - FireBeyond 3y ago
        > they are horrible people just because they exist and don't play the game the way you want it played Multiple people involved have lied multiple times, materially, about their business operations. Not just "lack of candor" or transparency, but active deception. Reducing that to "don't play the game the way you want it played" is facile.

awrence 3y ago

Very simply? If the conspiracy theories about their scamminess were wrong and they did what they said which was hold dollars without duration exposure (mostly cash and tbills). Then once rates got hiked they were basically the only bank equivalent in the world with captive depositors that couldn’t just take their money to competitors and they were able to keep all the interest (4-5 bn per year currently). Which incidentally they’re now using in part to load up (substantially) on btc with house money. I don’t know what the truth is obviously for sure but this story is extremely possible and plausible. It doesn’t mean they were particularly good traders. It means if true basically they were disciplined and didn’t trade at all and are now benefitting from massive upside on their set up resulting from monetary policy and regulatory conditions driving their popularity.

FireBeyond 3y ago
> It means if true basically they were disciplined and didn’t trade at all That is, excuse the phrasing, a metric fuckton of discipline that most people on the planet would find hard to exercise. At one point, their minting of Tether implied they were banking half a billion dollars a day. They sat on that from $6B 2 years ago to a claimed $80B now? Still no audit, though. Just "attestations". The difference is the attestation just says "at one moment in time, this much money was in accounts". You could get a short term loan (remember how Bitfinex and Tether used to pretend that they were independent, until people asked why parties A, B, C were the same parties A, B, C on each side of their loan contracts when they borrowed?). You and I can't buy a house on a mere attestation of accounts - funnily enough, lenders want to see how we acquired that money. But these clowns can stand on stage at Davos and say "Yeah, we've banked a billion a week for the last two years, trust us, you don't need an audit". I know that comparing investment to revenue is not apples-to-apples, but to get an idea of what that incoming cash looks like? You're on the scale of Saudi Aramco. Samsung. Alphabet.
- awrence 3y ago
  Hmmm can’t speak to the likelihood of their actual inflows but tens of billions of usd from global participants that are functionally shut out from usd pipes is really very reasonable. It’s 0.25% of M2. What amuses me a bit is how shocked it can seem to people for them to “sit” on 80 bn dollars. It’s literally what they’re supposed to be doing! And no one can imagine they’re actually doing it. I don’t know. I like to think that’s what I’d do if I said that’s what I was doing… I feel like I would. But apparently we now think when someone is entrusted with a pile of money to keep as such they’d be irrational not to risk their customer funds and yolo into mismatching risk to try and pick up some yield… when did that become the expected norm?

s1artibartfast 3y ago

Long treasuries are still profitable, you just have to avoid a bank run and liquidity crisis forcing you to sell out early. Being opaque about what exactly you are invested in helps prevent short term liquidity risk due to a run. SVB would have turned a profit eventually if it didn't have to disclose vulnerability. Similarly, you don't need a bathing suit as long as you can find one before the tide goes out.

deleted 3y ago
[deleted]

gandalfian 3y ago

>"My question is: how have Tether managed to turn a profit on billions of dollars of long treasuries when the same thing literally bankrupted several banks"< Perhaps they bought short term treasury bill so they redeemed them in full every few months avoiding the risk? T bills are still 4% or something. Or they are just lying...