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Armchair economist here - one implication of this is that a crypto liquidation will cause global interest rates to spike at a time when they will need to be low

Armchair economist here - one implication of this is that a crypto liquidation will cause global interest rates to spike at a time when they will need to be lower to calm the markets. Selling massive amounts of debt with no additional demand means the required return must be higher.

heisgone 11mo ago
deleted
- onlyrealcuzzo 11mo ago
  The US Treasury market is BY FAR the deepest most liquid market in the world.
  - kylebenzle 11mo ago
    The US housing market is the largest market in the world.
wslh 11mo ago
Good point but it seems like Tether is very healthy, it has the double of daily volume than Bitcoin now and doesn't really depend on crypto rails [1]. [1] Stable Coins ⊄ Blockchains: https://www.linkedin.com/pulse/stable-coins-blockchains-sebastian-raul-wain-zep3f/ https://www.linkedin.com/pulse/stable-coins-blockchains-seba...
delabay 11mo ago
Stablecoins are now a regulated industry with laws in place to address this very concern. Tether is currently not compliant, but as the largest player in the space, has a great incentive to maintain its dominance.
- axus 11mo ago
  Regulated industry.. like banking, stocks, and mortgage origination!
- duxup 11mo ago
  What would the regulation ... enforce? Some sort of behavior by Tether and others?
  - delabay 11mo ago
    Regulators also have enforcement functions. Are you asking how laws work?
    - duxup 11mo ago
      I’m just curious what is being enforced to prevent what exactly. I think I’m missing what scenario people are thinking of in general.
SideburnsOfDoom 11mo ago
The USA is going to have a fantastic fiscal reputation if/when that has happened.
tim333 11mo ago
I'm not sure I see that, depending what you mean by crypto liquidation. If you mean the prices of dogecoin etc. falling then that mostly just effects the number of Tethers changing hands between one speculator and another and wouldn't really affect the bond market. If you mean Tether holders redeeming them for US dollars, that would involve selling treasuries but I doubt it would drive the price down that much. That's a very liquid market.
- nikhizzle 11mo ago
  I mean tether redemptions. Hedge funds liquidating treasuries last year significantly distorted yields for a short while.
yieldcrv 11mo ago
that's very armchair indeed a crypto liquidation results in more people going to Tether. "tethered" and "tethering" has been a verb in the crypto space for like 10 years when market demand of tether is too great the value goes about $1.00 and the organization relies on arbitragers to deposit more to cause the minting of Tethers at $1.00 and selling it into the open market if the price is above $1.00 pushing the market rate back down to $1.00 Tethers in existence still continue to grow in that scenario Its nearly 1:1 backing, most of the time, even a mass redemption event of Tethers will be orderly and fine. those crisis of confidence have alreay occurred, those stress tests have already happened, far faaaar beyond what any bank would survive all fiat collateralized stablecoins function the same way and there are many case studies, actual events that happened, that show it occurring orderly, uneventfully.
- sunshine-o 11mo ago
  > when market demand of tether is too great the value goes about $1.00 and the organization relies on arbitragers to deposit more to cause the minting of Tethers at $1.00 and selling it into the open market if the price is above $1.00 pushing the market rate back down to $1.00 I'm not sure of this. USDT can only be minted by tether [0] (line 406), hopefully when they acquire more treasuries. I am not exactly sure where the price of USDT come from and I am pretty sure there is not only one. But I would guess it is an aggregate of the prices on exchanges. The chainlink oracle [1] is probably the most authoritative one. - [0] https://etherscan.io/token/0xdac17f958d2ee523a2206206994597c13d831ec7#code https://etherscan.io/token/0xdac17f958d2ee523a2206206994597c... - [1] https://data.chain.link/feeds/ethereum/mainnet/usdt-usd https://data.chain.link/feeds/ethereum/mainnet/usdt-usd
  - yieldcrv 11mo ago
    Nobody is “setting the price”, people trade. supply and demand. on many venues and contracts. the oracles just read from those (and sometimes the venues and contracts read from the oracles) when tethers and trading at $1.04 or anything higher than $1.00 arbitrageurs wire money to their account at the Tether organization (bitfinex, otc services) to instruct the organization to mint Tether the organization does everything necessary: takes the deposited money and buys US treasuries, mints the equivalent amount of Tethers and gives those tethers to the customer The customer deposited $1 and received 1 tether. Some exchange venues have people rushing to buy 1 Tether for $1.04 Customer sells their tether to them and has some other form of crypto that they can try to get back into dollars and do it all over again, until flooding the market with Tether supply back to $1.00 this happens all day every day for a decade, more pronounced during panic selling periods

heisgone 11mo ago

deleted

onlyrealcuzzo 11mo ago
The US Treasury market is BY FAR the deepest most liquid market in the world.
- kylebenzle 11mo ago
  The US housing market is the largest market in the world.

wslh 11mo ago

Good point but it seems like Tether is very healthy, it has the double of daily volume than Bitcoin now and doesn't really depend on crypto rails [1]. [1] Stable Coins ⊄ Blockchains: https://www.linkedin.com/pulse/stable-coins-blockchains-sebastian-raul-wain-zep3f/ https://www.linkedin.com/pulse/stable-coins-blockchains-seba...

delabay 11mo ago

Stablecoins are now a regulated industry with laws in place to address this very concern. Tether is currently not compliant, but as the largest player in the space, has a great incentive to maintain its dominance.

axus 11mo ago
Regulated industry.. like banking, stocks, and mortgage origination!
duxup 11mo ago
What would the regulation ... enforce? Some sort of behavior by Tether and others?
- delabay 11mo ago
  Regulators also have enforcement functions. Are you asking how laws work?
  - duxup 11mo ago
    I’m just curious what is being enforced to prevent what exactly. I think I’m missing what scenario people are thinking of in general.

SideburnsOfDoom 11mo ago

The USA is going to have a fantastic fiscal reputation if/when that has happened.

tim333 11mo ago

I'm not sure I see that, depending what you mean by crypto liquidation. If you mean the prices of dogecoin etc. falling then that mostly just effects the number of Tethers changing hands between one speculator and another and wouldn't really affect the bond market. If you mean Tether holders redeeming them for US dollars, that would involve selling treasuries but I doubt it would drive the price down that much. That's a very liquid market.

nikhizzle 11mo ago
I mean tether redemptions. Hedge funds liquidating treasuries last year significantly distorted yields for a short while.

yieldcrv 11mo ago

that's very armchair indeed a crypto liquidation results in more people going to Tether. "tethered" and "tethering" has been a verb in the crypto space for like 10 years when market demand of tether is too great the value goes about $1.00 and the organization relies on arbitragers to deposit more to cause the minting of Tethers at $1.00 and selling it into the open market if the price is above $1.00 pushing the market rate back down to $1.00 Tethers in existence still continue to grow in that scenario Its nearly 1:1 backing, most of the time, even a mass redemption event of Tethers will be orderly and fine. those crisis of confidence have alreay occurred, those stress tests have already happened, far faaaar beyond what any bank would survive all fiat collateralized stablecoins function the same way and there are many case studies, actual events that happened, that show it occurring orderly, uneventfully.

sunshine-o 11mo ago
> when market demand of tether is too great the value goes about $1.00 and the organization relies on arbitragers to deposit more to cause the minting of Tethers at $1.00 and selling it into the open market if the price is above $1.00 pushing the market rate back down to $1.00 I'm not sure of this. USDT can only be minted by tether [0] (line 406), hopefully when they acquire more treasuries. I am not exactly sure where the price of USDT come from and I am pretty sure there is not only one. But I would guess it is an aggregate of the prices on exchanges. The chainlink oracle [1] is probably the most authoritative one. - [0] https://etherscan.io/token/0xdac17f958d2ee523a2206206994597c13d831ec7#code https://etherscan.io/token/0xdac17f958d2ee523a2206206994597c... - [1] https://data.chain.link/feeds/ethereum/mainnet/usdt-usd https://data.chain.link/feeds/ethereum/mainnet/usdt-usd
- yieldcrv 11mo ago
  Nobody is “setting the price”, people trade. supply and demand. on many venues and contracts. the oracles just read from those (and sometimes the venues and contracts read from the oracles) when tethers and trading at $1.04 or anything higher than $1.00 arbitrageurs wire money to their account at the Tether organization (bitfinex, otc services) to instruct the organization to mint Tether the organization does everything necessary: takes the deposited money and buys US treasuries, mints the equivalent amount of Tethers and gives those tethers to the customer The customer deposited $1 and received 1 tether. Some exchange venues have people rushing to buy 1 Tether for $1.04 Customer sells their tether to them and has some other form of crypto that they can try to get back into dollars and do it all over again, until flooding the market with Tether supply back to $1.00 this happens all day every day for a decade, more pronounced during panic selling periods