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Fears grow over Tether ‘printing press’ as auditors part ways

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Re: Fears grow over Tether ‘printing press’ as auditors part ways

#11

Post by joosters »

elif wrote: post #4
jandrese wrote: post #2

Are there actually people in the world who think Tether's USDT pricing is legitimate? I can't figure out how in the hell it could be. It doesn't make any sense at all. I have to admit that I didn't consider it's effect on the price of Bitcoin as a whole. If it really is inflating the bubble that hard then yeah, it's going to pop at some point. Probably sooner rather than later.

It is /possible/ that their books add up, in a technical sense which would make wall street blush. They never claim that USDT are backed up by USD. They claim that every USDT is backed up 1:1 by "Assets." Here's the scene: BFX is hacked, loses banking, and has tens of thousands of crypto millionaires ready to sue them. What they /do/ have is cold storage of lots of crypto under their control. Say they start with 0 ho…

From their homepage: Every tether is always backed 1-to-1, by traditional currency held in our reserves

Re: Fears grow over Tether ‘printing press’ as auditors part ways

#12

Post by djrogers »

elif wrote: post #4
jandrese wrote: post #2

Are there actually people in the world who think Tether's USDT pricing is legitimate? I can't figure out how in the hell it could be. It doesn't make any sense at all. I have to admit that I didn't consider it's effect on the price of Bitcoin as a whole. If it really is inflating the bubble that hard then yeah, it's going to pop at some point. Probably sooner rather than later.

It is /possible/ that their books add up, in a technical sense which would make wall street blush. They never claim that USDT are backed up by USD. They claim that every USDT is backed up 1:1 by "Assets." Here's the scene: BFX is hacked, loses banking, and has tens of thousands of crypto millionaires ready to sue them. What they /do/ have is cold storage of lots of crypto under their control. Say they start with 0 ho…

You're describing a one-man Ponzi scheme, and it cannot work in the long run - it only works as long as more money is coming in, which requires the value of BTC to rise indefinitely.

Consider what happened in your scenario when BTC lost ~40% of it's value essentially overnight. Did BFX have enough extra BTC reserves to cover? What if they did but it had dropped 50, 60, or 70%?

It doesn't take much work to see the impossibility of 'backing' a stablecoin with an asset other than what it's value is tied to...

Re: Fears grow over Tether ‘printing press’ as auditors part ways

#14

Post by vkou »

djrogers wrote: post #12
elif wrote: post #4

Earlier quoted context omitted.

It is /possible/ that their books add up, in a technical sense which would make wall street blush. They never claim that USDT are backed up by USD. They claim that every USDT is backed up 1:1 by "Assets." Here's the scene: BFX is hacked, loses banking, and has tens of thousands of crypto millionaires ready to sue them. What they /do/ have is cold storage of lots of crypto under their control. Say they start with 0 ho…

You're describing a one-man Ponzi scheme, and it cannot work in the long run - it only works as long as more money is coming in, which requires the value of BTC to rise indefinitely. Consider what happened in your scenario when BTC lost ~40% of it's value essentially overnight. Did BFX have enough extra BTC reserves to cover? What if they did but it had dropped 50, 60, or 70%? It doesn't take much work to see the imp…

I think the parent poster is well aware that this is a pyramid scheme that can only keep going as long as Bitcoin is growing in price.

But here's an important thing - even if BTC drops in price, they aren't obligated to give you a broken penny for your tether. It is unredeemable for USD.

Re: Fears grow over Tether ‘printing press’ as auditors part ways

#15

Post by vkou »

LittlePeter wrote: post #5

I don't understand why Bitcoin will crash if Tether is indeed a scam. Those who exchanged Bitcoin for Tether will be holding worthless Tether tokens and will want to quickly exchange it for something else... like Bitcoin or some other cryptocurrency. Shouldn't the converse be true: Bitcoin price starts to rise as more and more people start to realize Tether is worthless?

There is speculation that bitcoin's price is propped up by Tether being printed, and sold for BTC.

Re: Fears grow over Tether ‘printing press’ as auditors part ways

#16

Post by dragonwriter »

colorincorrect wrote: post #13

can someone explain to me why USDT's price is related to BTC?

A number of exchanges don't actually trade $/BTC they trade USDT/BTC. This accounts for enough of the market that the apparent $/BTC price is perceived as largely being driven by the USDT/BTC price, such that a correction in $/USDT price would see a similar correction in $/BTC price.

(In theory, this could be wrong, and a correction in $/USDT price could instead be reflected in opposite motion in USDT/BTC price, but the theory is that USDT has largely served as a vehicle to inject a bunch of fake dollars into Bitcoin trading, artificially inflating the in-dollars price of BTC.)

Re: Fears grow over Tether ‘printing press’ as auditors part ways

#17

Post by curuinor »

djrogers wrote: post #9
socialist_coder wrote: post #6

I would think that the orgs / people holding Tether would be the ones to suffer the most, not the holders of BTC. And who is holding the Tether that was exchanged for BTC? Probably Bitfinex, right? So, if Tether does turn out to be not backed by USD, they would be left holding worthless Tether. The BTC is already transferred out and gone. I think this is much more realistic assessment on the risk to Bitcoin: > Julian…

> I would think that the orgs / people holding Tether would be the ones to suffer the most, not the holders of BTC They will suffer, but the ~$2.4B in tether value is tiny compared to the value of BTC that it's been driving/propping up. If tether dies BTC would only have to drop about 1% to take another $2B off the table. If it drops 10, 20, or 50% there will be blood. > > Julian Hosp, co-founder of cryptocurrency pa…

Given the thinness of every crypto market and the rampant wash trading, there's a real chance of something bigger than the magic the gathering exchange fiasco

Re: Fears grow over Tether ‘printing press’ as auditors part ways

#18

Post by argc_argv »

joosters wrote: post #11
elif wrote: post #4

Earlier quoted context omitted.

It is /possible/ that their books add up, in a technical sense which would make wall street blush. They never claim that USDT are backed up by USD. They claim that every USDT is backed up 1:1 by "Assets." Here's the scene: BFX is hacked, loses banking, and has tens of thousands of crypto millionaires ready to sue them. What they /do/ have is cold storage of lots of crypto under their control. Say they start with 0 ho…

From their homepage: Every tether is always backed 1-to-1, by traditional currency held in our reserves

Read the legal fine print... They say it's backed yes, but they did not say how to redeem. (hint: they have full right of controlling how usdt is "redeemed")

Re: Fears grow over Tether ‘printing press’ as auditors part ways

#19

Post by phpnode »

LittlePeter wrote: post #5

I don't understand why Bitcoin will crash if Tether is indeed a scam. Those who exchanged Bitcoin for Tether will be holding worthless Tether tokens and will want to quickly exchange it for something else... like Bitcoin or some other cryptocurrency. Shouldn't the converse be true: Bitcoin price starts to rise as more and more people start to realize Tether is worthless?

If counterfeit Tether has been used to prop up the market the losses of the comparatively few people who actually hold Tether will be a drop in the ocean compared to the affect on BTC price. The bitcoin price is a function of demand, if Tether tuns out to be a scam, and has been used to artificially inflate that demand, then the price can only go down. There is also the problem that if Tether collapses, there will be a run on all exchanges that accept Tether, particularly Bitfinex, and the resulting panic will send BTC through the floor.

Re: Fears grow over Tether ‘printing press’ as auditors part ways

#20

Post by joosters »

argc_argv wrote: post #18
joosters wrote: post #11

Earlier quoted context omitted.

From their homepage: Every tether is always backed 1-to-1, by traditional currency held in our reserves

Read the legal fine print... They say it's backed yes, but they did not say how to redeem. (hint: they have full right of controlling how usdt is "redeemed")

I'm not arguing that they're genuine, the quote was simply to show that they do in fact claim to hold $/£/etc to back the tokens, and not just general 'assets' that the parent comment described.
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