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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

#41

Post by SilasX »

brokensegue wrote: post #21
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!

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

But it can mean they abandoned whatever pretense they were maintinaing that USDTs could trade at par, even in a wink-wink nudge-nudge sense. That’s what “Tether breaking” implies. (As opposed to “Tether losing value.”)

It’s the difference between a money market mutual fund officially “breaking the buck” vs shareholders marking them as being worth less than a dollar.

Re: Tether Is Breaking Its Peg to the Dollar

#43

Post by SwellJoe »

ahelwer wrote: post #29
brokensegue wrote: post #3

I'm a USDT skeptic but a 2 cent deviation isn't much considering it has often deviated by more than that in the other direction. If it hits 90cents on the dollar I think things are serious.

Also a skeptic: this author doesn't know what they're talking about. "Turning on the printing presses" to defend the USDT/USD price? What? No, the opposite: Tether would have to be buying USDT with USD then destroying it. There remains the possibility that Tether doesn't need to have the money in reserve (or not 100%, anyway). It can just conduct open-market operations to maintain parity: printing & selling Tether wh…

I think the idea is that when Tether turns up the printing press, they are using it to buy Bitcoin, which they can then use to buy USD, which can then be used to buy back some of the USDT on Kraken. The assumption is that there isn't enough USD cash in reserve to actually buy back the Tethers on Kraken (and anywhere else it may be flagging). Since they have no banks (as far as anyone can tell), and it's very difficult to imagine how hundreds of millions of USD is flowing into Tether from institutional investors, I can't figure out how they'd have $2+ billion USD just hanging around.

As with any great Ponzi scheme, you have to pay some of your early investors to keep the thing going. But, at some point, you risk eating into your profits, so you just stop and everything collapses while you disappear to the island you bought with your stolen money.

If they want to keep going, they have to buy some USDT on Kraken to prop up the price. But, if they're done with the con and want to cash out...now might be when they do it. A few hundred million worth of various crypto assets is not a bad take.

Re: Tether Is Breaking Its Peg to the Dollar

#44

Post by oelmekki »

Scoundreller wrote: post #35

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.

Yes, this USDTUSD market on kraken is an anomaly: it has very small volume, and nobody is really interested in trading that.

Poloniex has many USDT markets, as they use it to compensate for the fact they do not provide markets against fiat. As such, those markets have way more volume.

The market visualization and analysis tools website tradingview.com offers a computed charts of USDTUSD from poloniex (symbol: POLONIEX:USDTUSD). It tells a whole different story than kraken charts: https://www.tradingview.com/chart/?symbol=POLONIEX:USDTUSD . Basically, usdt is stable there.

There's still a problem here: tradingview does not tell (afaik) how they are computing this price. I would assume they do a mean or average of various BTCUSD markets on several exchanges, then check it against BTCUSDT on poloniex, or something like that. But I don't know any official explainer about it.

Re: Tether Is Breaking Its Peg to the Dollar

#45

Post by gruez »

hw wrote: post #36
petertodd wrote: post #18

Earlier quoted context omitted.

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 i…

>They've also just printed $600m in tether a few hours ago.

when? https://omniexplorer.info/default.aspx?filter=grant

Re: Tether Is Breaking Its Peg to the Dollar

#46

Post by brokensegue »

hidenotslide wrote: post #38
brokensegue wrote: post #19

Earlier quoted context omitted.

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.

there is no normal withdrawal mechanism.

Re: Tether Is Breaking Its Peg to the Dollar

#47

Post by brokensegue »

encoderer wrote: post #37
stefano wrote: post #24

Earlier quoted context omitted.

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.

lots of people get value out of ponzi schemes too (until they don't)

Re: Tether Is Breaking Its Peg to the Dollar

#48

Post by gruez »

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.

>In fact, no one has ever redeemed a single tether and there is no process in place to actually do it.

It's called withdrawing at any of the exchanges that support tether.

Re: Tether Is Breaking Its Peg to the Dollar

#49

Post by SwellJoe »

bfuller wrote: post #28
ericb wrote: post #12

Earlier quoted context omitted.

It seems like there's about a $150-$200 difference between the USD/USDT exchanges at the moment. Note that CEX.io has one of the highest, and they are also currently unable to allow USD withdrawls "because of high demand backing up their financial partner." https://www.cryptocompare.com/coins/btc/markets/USD CEX.io (see middle paragraph for shady explanation) https://blog.cex.io/news/recent_updates-16999

Reminds me so much of Mt Gox

But, spread across multiple exchanges. I'm tempted to short some things (including Tether on Kraken), but I'm also concerned any exchange that USDT touches will be insolvent after the crash. Kraken seems to have limited exposure, compared to some others, but when the shit really hits the fan, it's unlikely to matter, as it'll take significant chunks of the market with it, maybe including some exchanges that don't touch USDT but that are playing a little loose with their reserves. I would expect a retreat to quality as it starts to unfold, so Coinbase will maybe do OK (though some think GDAX is involved, or at least complicit, in wash trades), but I suspect a lot of folks will just want out of crypto completely. So, USD will increase in value relative to all of the other trading pairs...and some will be left holding the bag, if they're HODL-or-die.

Re: Tether Is Breaking Its Peg to the Dollar

#50

Post by cstrat »

I never quite understood how tether is supposed to be pegged to the USD. If there is no liquidity in an exchange wouldn't the price just fluctuate with supply/demand. If people are wanting to buy them more than people trying to sell them, wouldn't the price just appreciate?

Also - who is sitting and holding all these tethers? There are 2.2 billion of them out there...

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