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What happens if enough people want to exchange USDT for actual USD? Tether goes down the same way SVB went down: Unable to offload long-term government bonds fo

by nikanj 1y ago

What happens if enough people want to exchange USDT for actual USD? Tether goes down the same way SVB went down: Unable to offload long-term government bonds for full dollar value

OutOfHere 1y ago
It won't go down. It will merely break its dollar peg, dipping in value temporarily until the bonds mature, at which time it would restore its peg. Most people would be wise enough to not sell it at a dipped value if an independent audit report can confirm the Treasury backing.
- bb88 1y ago
  If I buy a CD from a bank, it has a fixed APR and insured by the FDIC. If I buy a stock there's upside and downside, but regulated by the SEC. A stable coin has no upside and all downside.
  - OutOfHere 1y ago
    > A stable coin has no upside and all downside. That is completely false since the stablecoin legislation passed this year requires the issuer to hold adequate funds backing their issuance. The stablecoin is in effect regulated by the government.
    - bb88 1y ago
      There's still no FDIC for stable coins. If there's fraud, well, maybe you get your money back, maybe not. And there's still no interest to compensate for the risk of holding a stable coin.
      - OutOfHere 1y ago
        Personally I treat stablecoins as suitable for temporary holding only. I move to real cryptocurrency as soon as possible, to the few that appreciate in the long term despite their pumps and dumps.
        bb88 1y ago
        I'm not against stable coins per se because they could offer a 7% APR to provide an upside to match the risk. A stable coin that can figure that out will draw money from Tether and Circle.
        wbnns 1y ago
        I think we'll see this soon, perhaps on Tempo, the new L1 backed by Stripe and Paradigm.
Spivak 1y ago
I mean you're not wrong. Tether is effectively operating as a weird kind of bank and is susceptible to the same failure modes if people go on a bank run. You just don't get to run to the FDIC if it happens. USDT does have some nice properties compared to a bank account like being able to mint accounts at will, no deposit or transfer limits, no KYC, faster settlement than wire transfers, can send internationally with little fanfare. I'm sure there's someone who is pumped about this but I'm not sure if the market is large enough to support the size they've grown to.

by nikanj 1y ago

What happens if enough people want to exchange USDT for actual USD? Tether goes down the same way SVB went down: Unable to offload long-term government bonds for full dollar value

OutOfHere 1y ago

It won't go down. It will merely break its dollar peg, dipping in value temporarily until the bonds mature, at which time it would restore its peg. Most people would be wise enough to not sell it at a dipped value if an independent audit report can confirm the Treasury backing.

bb88 1y ago
If I buy a CD from a bank, it has a fixed APR and insured by the FDIC. If I buy a stock there's upside and downside, but regulated by the SEC. A stable coin has no upside and all downside.
- OutOfHere 1y ago
  > A stable coin has no upside and all downside. That is completely false since the stablecoin legislation passed this year requires the issuer to hold adequate funds backing their issuance. The stablecoin is in effect regulated by the government.
  - bb88 1y ago
    There's still no FDIC for stable coins. If there's fraud, well, maybe you get your money back, maybe not. And there's still no interest to compensate for the risk of holding a stable coin.
    - OutOfHere 1y ago
      Personally I treat stablecoins as suitable for temporary holding only. I move to real cryptocurrency as soon as possible, to the few that appreciate in the long term despite their pumps and dumps.
      - bb88 1y ago
        I'm not against stable coins per se because they could offer a 7% APR to provide an upside to match the risk. A stable coin that can figure that out will draw money from Tether and Circle.
        wbnns 1y ago
        I think we'll see this soon, perhaps on Tempo, the new L1 backed by Stripe and Paradigm.

Spivak 1y ago

I mean you're not wrong. Tether is effectively operating as a weird kind of bank and is susceptible to the same failure modes if people go on a bank run. You just don't get to run to the FDIC if it happens. USDT does have some nice properties compared to a bank account like being able to mint accounts at will, no deposit or transfer limits, no KYC, faster settlement than wire transfers, can send internationally with little fanfare. I'm sure there's someone who is pumped about this but I'm not sure if the market is large enough to support the size they've grown to.