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Tether Is Breaking Its Peg to the Dollar

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Re: Tether Is Breaking Its Peg to the Dollar

#31

Post by madaxe_again »

bhouston wrote: post #7

I am reminded of this: https://en.wikipedia.org/wiki/Black_Wednesday George Soros broke the Bank of English's attempt to maintain a minimum exchange rate for the Pound against various other European currencies. It was this experience that taught me that you can not cost free fix the exchange rate between currencies unless you are using "magic". And USDT has always seemed magical to me. BTW: https://www.coindesk.com/t…

You say that, but Bretton Woods worked for 26 years - the pegs were based on trade balances, and were adjusted occasionally as needed - no magic involved.

Free floating currencies are more reactive, but fundamentally operate in the same fashion, albeit with far more volatility.

Re: Tether Is Breaking Its Peg to the Dollar

#32

Post by danmaz74 »

akhatri_aus wrote: post #22
SilasX wrote: post #15

Title is misleading; it makes it sound like Tether management is withdrawing some promise that USDTs can be redeemed at par. That would be much bigger news than the actual story, that they are trading for less than par. Not that I’m recommending you touch tethers with a ten foot pole!

The very fact the price is under $1, and holding, means they're not defending the peg; There might be a promise that it's redeemable but if the price shows this for long enough, it means its broken.

I have no idea how this will work out, but IIRC USD stayed at like 0.93 USD for a few months some time ago, and then went back to parity and then occasionally above parity.

Re: Tether Is Breaking Its Peg to the Dollar

#34

Post by Y_Y »

bhouston wrote: post #7

I am reminded of this: https://en.wikipedia.org/wiki/Black_Wednesday George Soros broke the Bank of English's attempt to maintain a minimum exchange rate for the Pound against various other European currencies. It was this experience that taught me that you can not cost free fix the exchange rate between currencies unless you are using "magic". And USDT has always seemed magical to me. BTW: https://www.coindesk.com/t…

For the record, "Bank of English" is a corpus of English texts [0]. I'm sure you wrote "Bank of England" and then were autoincorrected.

[0] https://en.wikipedia.org/wiki/Bank_of_English

Re: Tether Is Breaking Its Peg to the Dollar

#35

Post by Scoundreller »

The article says that Kraken is the only exchange offering a USD/USDT trade.

The article also shows wallets with the top USDT balances, and a Kraken wallet is 13th on the list, with about $16m of USDT, while the top 3 wallets have ~$1.1b between them on other exchanges.

Either Kraken is a small player, or nobody on Kraken holds USDT for long because that's where people go to immediately change it for USD.

Re: Tether Is Breaking Its Peg to the Dollar

#36

Post by hw »

petertodd wrote: post #18
bhouston wrote: post #7

I am reminded of this: https://en.wikipedia.org/wiki/Black_Wednesday George Soros broke the Bank of English's attempt to maintain a minimum exchange rate for the Pound against various other European currencies. It was this experience that taught me that you can not cost free fix the exchange rate between currencies unless you are using "magic". And USDT has always seemed magical to me. BTW: https://www.coindesk.com/t…

No, it's very easy to fix the exchange rate between currencies: make them actually be the same currency. Tether is supposed to be be 100% backed by USD on a 1:1 basis. If that's true, while it may temporarily go higher and lower, and should always return to normal as actual USD moves in and out of the system. The controversy about Tether is very simple: they haven't taken any steps to convince people that's actually…

It doesn't help that Tether requested an audit but ended up severing ties with that audit firm [0]. It's likely Tether wanted a quick audit but the audit firm didn't want to sign their name to it so quickly without doing a deeper dive into the accounts.

They've also just printed $600m in tether a few hours ago. Hopefully that's backed by actual $600m in new customer deposits.

Edit: Market cap of Tether jumped $600m in the past 24h [1], but the Tether were granted over a period of 7 days. Looks like CMC doesn't update the market cap every day.

[0]: https://www.coindesk.com/tether-confirms-relationship-audito...

[1]: https://coinmarketcap.com/currencies/tether/#charts

Re: Tether Is Breaking Its Peg to the Dollar

#37

Post by encoderer »

stefano wrote: post #24
brokensegue wrote: post #21

Earlier quoted context omitted.

they can't withdraw any such promise because it never existed, right?

Yeah. Their TOS says that they're under no obligation of giving you dollars in exchange for tethers. In fact, no one has ever redeemed a single tether and there is no process in place to actually do it. Why people believe that 1 USDT = 1 USD is beyond me.

My understanding is that tether exists so you can sell your alt-coin position to something resembling USD in volatility, vs selling them for btc.

You can use USDT to buy ETH or BTC, and thats enables liquidity to USD fairly easily.

I'm not defending Tether, I'm just pointing this out because your comment makes it sound to me like a trap that nobody has gotten any value out of.

Re: Tether Is Breaking Its Peg to the Dollar

#38

Post by hidenotslide »

brokensegue wrote: post #19
hidenotslide wrote: post #13

Earlier quoted context omitted.

Either tether is trading at a discount due to liquidity issues like a closed-end fund or due to real credit issues (fraud).

well it's the former? right?

I have no clue, you'd have to ask people who sell below par.

If they are selling because they can't access the normal withdrawal mechanism (e.g. US customers or people in a rush relative to processing delays) then it is the former. If they are speculatively shorting it is more likely the latter.

It could be both: people who can't do normal withdrawal and think there is at least 2% chance of fraud.

Re: Tether Is Breaking Its Peg to the Dollar

#39

Post by beojan »

downrightmike wrote: post #26
brndnmtthws wrote: post #20

A good book to read for anyone interested in economics is called "The End of Alchemy: Money, Banking, and the Future of the Global Economy", by Mervyn King, who was head of the Bank of England for about 10 years and during the financial crises of 2007-8. In the book, he discusses "the alchemy of money" which he roughly defines as how money isn't necessarily backed by any tangible assets. A lot of what happens in the…

I think you'd like this overview of England's South Sea Company and how John Blunt used all kinds of now illegal monetary fraud to become England's largest company, worth more than their GDP: https://www.youtube.com/watch?v=k1kndKWJKB8

> become England's largest company, worth more than their GDP:

In case people don't realize, GDP is the total amount a country produces per year, not the total value of the country. There's nothing impossible about a country's largest company being worth more than it's GDP.

Re: Tether Is Breaking Its Peg to the Dollar

#40

Post by bradleyjg »

petertodd wrote: post #18
bhouston wrote: post #7

I am reminded of this: https://en.wikipedia.org/wiki/Black_Wednesday George Soros broke the Bank of English's attempt to maintain a minimum exchange rate for the Pound against various other European currencies. It was this experience that taught me that you can not cost free fix the exchange rate between currencies unless you are using "magic". And USDT has always seemed magical to me. BTW: https://www.coindesk.com/t…

No, it's very easy to fix the exchange rate between currencies: make them actually be the same currency. Tether is supposed to be be 100% backed by USD on a 1:1 basis. If that's true, while it may temporarily go higher and lower, and should always return to normal as actual USD moves in and out of the system. The controversy about Tether is very simple: they haven't taken any steps to convince people that's actually…

> they haven't taken any steps to convince people that's actually true

The best way of convincing people of that is to provide a facility that allows people to trade the one currency for the other at par.

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