61–70 of 120 posts
There are similarities to Mt. Gox. One of the most important is the near-complete lack of user panic, despite ample warnings, right up to the collapse. I remember vividly seeing Mt. Gox users warned to leave. They didn't. Somehow, they discounted or ignored every warning. Then they became angry when their money was stolen. Then they claimed Mt. Gox was responsible for their loss. History seems to be repeating itself…
> But those "frequent professional audits" have been slow in coming. The accounting firm Friedman LLP had been working on an audit of Tether and Bitfinex—a cryptocurrency exchange that is closely linked to Tether—since May. But last Saturday, Tether admitted to Coindesk that its relationship with Friedman had "dissolved." In the normal business world it's a very bad sign when your auditor fires you as a customer. > S…
> So it's possible Tether is keeping the identity of its bank secret to avoid attracting scrutiny from local regulators The whole purpose of Tether is to trade USD after Bitfinex lost USD banking relationships. No naturally, if banking relationships were public, they would be at risk. More likely, these aren't traditional bank accounts at all. These are probably dollars pledged by corporations and hedge funds but hel…
At the least I can describe with certainty that Tether is the exact opposite of Bitcoin: centralized, opaque, and trust-based. Ironic.
Earlier quoted context omitted.
What surprises me most is that despite all these red flags USDT still holds its peg mostly well. Right now it trades less than a cent below the dollar on kraken for instance. It seems like cryptocurrency traders are paradoxically pretty trusting.
I agree that the audit failure makes Tether look super shady. But when traders continue to buy and sell within 1% of parity, that's a signal that maybe there's more going on here. I don't buy the concept that Bitfinex can somehow rig the price on other exchanges. If traders are all selling Tether, while simultaneously new Tethers are getting printed, then the price should tank. When the price doesn't tank, that shoul…
Earlier quoted context omitted.
Tether is in the top 20 in cryptocurrencies by Market cap. What generally happens when an altcoin goes bust is that people try to cash out (buy bitcoin with tether and then sell bitcoin or HOLD). Also, miners will stop mining tether and will move to other cryptocoins. I think it will have a large measurable affect but we shall see.
Tether is issued, not mined.
It's pretty clear that tether is a scam. A more interesting question to me is whether a legitimate tether could break even. That is, is the risk-free demand deposit interest rate high enough to support the services that would be needed for a full reserve cryptocoin? Services which include creation/redemption facilities, proof of work rewards to drive a blockchain, and third party audits to ensure that the trusts aren…
Could an actual bank perhaps decide to issue cryptocurrency to its customers at a $1/coin exchange rate? Wouldn't be full reserve, given that it's a bank, but the deposits would be FDIC-insured, right?
Banks have to know their customers (KYC) [1]. This requirement is multifarious; banks have KYC obligations to the justice system, the U.S. Treasury, systemic financial regulators (e.g. the Fed), specific financial regulators (e.g. FINRA, the FDIC), et cetera.
In the olden days, a discerning gentleman might request an anonymous, numbered Swiss bank account [2]. Over time, it became clear these "discerning gentlemen" were politicians hiding graft money or arms and drug runners storing profits. Anonymous accounts were globally banned and KYC laws were born.
This is the fundamental flaw of all "stablecoins". They're an overly-complex instantiation of anonymous (and illegal) bank accounts. Needless to say, over-complicating something doesn't make it go away.
Earlier quoted context omitted.
What surprises me most is that despite all these red flags USDT still holds its peg mostly well. Right now it trades less than a cent below the dollar on kraken for instance. It seems like cryptocurrency traders are paradoxically pretty trusting.
it's actually because they are probably solvent. be critical when everyone is sure about something without insider knowledge
There are similarities to Mt. Gox. One of the most important is the near-complete lack of user panic, despite ample warnings, right up to the collapse. I remember vividly seeing Mt. Gox users warned to leave. They didn't. Somehow, they discounted or ignored every warning. Then they became angry when their money was stolen. Then they claimed Mt. Gox was responsible for their loss. History seems to be repeating itself…
The difference between mtGox and this is that bitfinex is seemingly infinitely solvent. Some estimates are like 20-30 million revenue per day. Its the top running exchange. I doubt they would expose themselves to a bankrupcy event having such a cash cow. I believe they did market manipulation, and that they are committing fraud with tether, but I'm not convinced tether is not solvent.
Earlier quoted context omitted.
Keeping pace with the market. Tether burning coins is an expected and healthy part of their supply management strategy. Think about how you'd keep a finite-supply coin pegged to a value - you'd print and burn tokens as needed to stabilize the value of the coin.
This is not what Tether is intended to be. Tether is not pegged to the value of 1 USD. The value of Tether does not need to be stabilized. Tether is a 1 for 1 USD backed coin, meaning it's entirely within the scope of Tether for the value of 1USDT to reach $1.10, $1.20 or even $1.50 -- if the market decides that is the value of it. The point of Tether is that for each USDT there is a corresponding USD in an account b…
And on the flip side, if Tether redeems any Tetherbuck for $1USD, on demand and quickly and without solvency concerns, why and how could the value of a Tetherbuck ever drop below $1USD?
Any deviation from $1USD value means the market disbelieves one of the above things.
There are similarities to Mt. Gox. One of the most important is the near-complete lack of user panic, despite ample warnings, right up to the collapse. I remember vividly seeing Mt. Gox users warned to leave. They didn't. Somehow, they discounted or ignored every warning. Then they became angry when their money was stolen. Then they claimed Mt. Gox was responsible for their loss. History seems to be repeating itself…
To be fair, plenty of people tried to withdraw from Mt. Gox and were stonewalled [1]. Which, one can imagine, exacerbated the problem. 1: https://www.reddit.com/r/Bitcoin/comments/1po4gq/mtgox_slow_...
There are similarities to Mt. Gox. One of the most important is the near-complete lack of user panic, despite ample warnings, right up to the collapse. I remember vividly seeing Mt. Gox users warned to leave. They didn't. Somehow, they discounted or ignored every warning. Then they became angry when their money was stolen. Then they claimed Mt. Gox was responsible for their loss. History seems to be repeating itself…
The difference between mtGox and this is that bitfinex is seemingly infinitely solvent. Some estimates are like 20-30 million revenue per day. Its the top running exchange. I doubt they would expose themselves to a bankrupcy event having such a cash cow. I believe they did market manipulation, and that they are committing fraud with tether, but I'm not convinced tether is not solvent.
So was mtGox.