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Tether says its cryptocurrency is worth $2B–but its audit failed

arstechnica.com

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Re: Tether says its cryptocurrency is worth $2B–but its audit failed

#81

Post by AlexCoventry »

simias wrote: post #21
koolba wrote: post #2

> 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…

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.

My favorite theory is that they're currently solvent if you take their cryptocurrency assets at current fiat prices into account.

In this theory, the regulatory suppression of their banking relationships forced them to hold the crypto assets they were taking in return for USDT, and they have made out like bandits -- on paper, for now -- from the crazy demand for cryptocurrency over the last 6 months.

If that's the case, it might be possible to estimate how far the current crash would have to go for them to hit insolvency, from the history of USDT releases.

On the other hand, hopefully they've been diversifying the holdings they're prevented from liquidating into other price-stable commodities like gold and oil, via in- kind trades.

If any of this is true, I can see how it would make them shy about an audit. It's very precarious, even if there's no theft intended by it.

Re: Tether says its cryptocurrency is worth $2B–but its audit failed

#82

Post by phragomax »

sanxiyn wrote: post #17

Nobody seems to discuss this, so I want to mention it here: for the first time in history, Tether was revoked in January 31st. Amount was 30 million. http://omniexplorer.info/lookuptx.aspx?txid=24db40680654b8b5... Specifically, its transaction type is 56. https://github.com/OmniLayer/spec#field-transaction-type I don't think this is a strong evidence, but if Tether is issued out of thin air, it is somewhat strange to…

There were 30 million Tether stolen in November.... I would speculate that this revocation is to make it so the stolen tokens are unable to be used.

https://www.coindesk.com/tether-claims-30-million-stable-tok...

Re: Tether says its cryptocurrency is worth $2B–but its audit failed

#83

Post by tCfD »

JumpCrisscross wrote: post #48
arisAlexis wrote: post #39

Earlier quoted context omitted.

not really. In cryptospace governments want to ban things. Measures need.to be taken as this is just a centralized tool for the decentralised economy

> In cryptospace governments want to ban things American regulators default to permissiveness, particularly in the face of new financial technologies. Their laissez faire comment-and-wait approach to Bitcoin, ICOs and related events is not particularly jarring. But India's regulators are of the shoot-first-ask-questions-later variety [1]. Cryptocurrencies are a unique global phenomenon of immense regulatory restraint…

The stewards of Bitcoin and cryptocurrency messaging have done a fantastic job persuading the popular finance and technology influence classes that cryptocurrency is nothing less than a new internet- scale revolution. The corollary implication being of course that obstructing it would be tantamount to banning the internet in the early 90s, with correspondingly dire consequences for a country's or company's growth prospects. The hitherto extremely light touch of most regulatory bodies (bordering on enthusiastic support in many cases) reflects the general sentiment that nobody wants to be remembered the myopic Luddite Who Banned Bitcoin. This effect is amplified by the penetration of its more mundane corruptive potential, as a number of journalists and politicians themselves are materially interested in promoting state-level cryptocurrency adoption. The highly close-held supply of all cryptocurrencies has helped perpetuate the narrative of cryptocurrency's inevitable triumph through extraordinarily centralized domination of liquidity and thus price and market cap signalling. But eventually even diehard HODLbugs have to cash in...

Re: Tether says its cryptocurrency is worth $2B–but its audit failed

#84

Post by qwerty456127 »

Every currency is only worth what people believe it is, nothing else, it doesn't really matter what did it actually cost to make it. Even if that's true, trying to convince people it's not backed the way it was meant to is nearly as questionable ethically as issuing unbaked coins probably was. If people keep believing nobody will get hurt, if people stop believing the results can be catastrophic. Of course this is a slippery idea itself yet the matter is too serious to just ignore it.

Re: Tether says its cryptocurrency is worth $2B–but its audit failed

#85

Post by jmkni »

apo wrote: post #36

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…

It's similar to Bernie Madoff as well. Harry Markopolos spent years trying to warn people that he was running a ponzi scheme, and he was ignored until the whole thing finally blew up.

Re: Tether says its cryptocurrency is worth $2B–but its audit failed

#86

Post by Xixi »

apo wrote: post #36

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…

And they are entirely right to claim that Mt. Gox is responsible for their loss. Writing "scam" on a giant red flag in front of your door is not a valid waiver of responsibility.

Re: Tether says its cryptocurrency is worth $2B–but its audit failed

#87

Post by whataretensors »

LargeWu wrote: post #73
jobigoud wrote: post #26

Earlier quoted context omitted.

Banks are private companies and they create money all the time when they make loans.

There's a major difference between fractional reserve banking and printing money. The former is a well-understood and well-regulated practice that actually drives economic activity. The latter is likely what Bitfinex is doing with Tether, is 100% counter to their stated practices, and serves only to artificially drive up the price of other assets.

> The former is a well-understood and well-regulated practice that actually drives economic activity

There's a lot of money in convincing people this is true but I have my doubts.

Re: Tether says its cryptocurrency is worth $2B–but its audit failed

#88

Post by Ajedi32 »

bradleyjg wrote: post #80
Ajedi32 wrote: post #76

Earlier quoted context omitted.

> If the bank issued you a cryptocurrency at a rate of $1/coin then it would be same thing as giving you your dollars back. It would reduce the banks reserves. Why would it reduce their reserves? The bank would still be holding your USD, and they only have to give it back when you trade the coin back to them for cash.

In that model the bank is selling you a coin for USD. It takes your $100 and issues you 100 coins. That $100 is no longer yours--you have the coins instead, though the bank promises that it will buy them back at a $1 per coin. On their books they have a liability of $100 (the repurchase obligation) and they have $100 in cash. You're right that it doesn't affect their reserves, but it also doesn't act as a multiplier.…

Right. How is that any different from when you deposit $100 in the bank and the bank promises to give you your $100 back when you ask for it? That doesn't reduce their reserves; it _increases_ them.

Only difference with using coins this way is that rather than the $100 being tied to you as an individual, it'd instead be tied to the coin itself. (So whoever possesses $100 worth of the bank's coin can get that same amount back in USD.)

Re: Tether says its cryptocurrency is worth $2B–but its audit failed

#89

Post by Nursie »

AlexCoventry wrote: post #81
simias wrote: post #21

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.

My favorite theory is that they're currently solvent if you take their cryptocurrency assets at current fiat prices into account. In this theory, the regulatory suppression of their banking relationships forced them to hold the crypto assets they were taking in return for USDT, and they have made out like bandits -- on paper, for now -- from the crazy demand for cryptocurrency over the last 6 months. If that's the ca…

It would also still be fraudulent, given their claims to be backed by USD...

Re: Tether says its cryptocurrency is worth $2B–but its audit failed

#90

Post by Nursie »

Canada wrote: post #77
simias wrote: post #30

Earlier quoted context omitted.

The bigger conspiracy is that Tether might have been used to pump the price of bitcoin and other cryptocurrencies. The theory goes something like this: - Bitcoin starts dipping. - Bitfinex/Tether generates millions of USDT out of thin air. - They use them to buy Bitcoins, sending the price back up. - Once the price is high enough they can sell a few of these Bitcoins they effectively got "for free" and make a ton of…

How much Tether out of thin air would it take to do that? There's only $2B tether in total, but BTC alone trades $8B every day. And that's down a lot compared to the last few months.

But that's not 8 billion of new money coming in to the system.

2 billion of new demand (almost a billion in January alone) is a hge deal.

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