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Crypto Market Roiled by New Allegations Against Tether, Bitfinex

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Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#131

Post by abakker »

nostrademons wrote: post #116
abakker wrote: post #111

Earlier quoted context omitted.

>The US dollar hasn't been backed by anything since 1971 and is still ticking strong. I think you might be overstating. The US dollar is not backed by an asset because it is an asset . At this point, the dollar is backed by the government, the government's authority, its military power, and the future value of its debt. That is not gold, but it is not nothing either.

By the same token, cryptocurrencies are backed by the computing networks underlying them, the potential future usage of these computing networks, and by your ability to buy guns, drugs, and hacks with them. This is also not gold (although you can buy gold-backed cryptocurrency: see Digix), but not nothing either. That's why cryptocurrency evangelists harp on adoption and new use-cases: the value of any currency is pr…

That's an interesting analysis. I hadn't thought of it that way before, simply because I wouldn't really value any other currency that way. I.e. I would not consider the growth in the ability to use euros in additional countries to have much impact on their value. I guess my thinking is that as long as there are exchanges, you can buy anything with bitcoin just like you can buy anything with dollars.

What sets that exchange rate is demand for bitcoins, and demand for bitcoins would be equivalent to what you can buy only with bitcoins. So, I guess in a way that tracks to exactly what you describe. The part that doesn't track is the profit potential. Currency speculation is an interesting thing, but it doesn't usually track with the use of a currency.

I am pretty bearish on the long term viability for cryptocurrency growth, though. I expect transact in bitcoins about as often as I transact in any other currency...almost never. There are no wages, products, services, or geographic areas that require the use of bitcoin.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#132

Post by ceejayoz »

ShorsHammer wrote: post #99
nlh wrote: post #70

Earlier quoted context omitted.

There's a huge difference: Yes, the bank only holds $0.10 in cash, but at least in the US, the F.D.I.C. backs up every dollar in your bank account up to $250,000. That's a major reason the reserve banking system functions. If there were an F.D.I.C. for tether then I'm sure people would have different expectations (and likewise, if there were no F.D.I.C. for the US banking system).

I can only imagine what would happen to the value of that USD were the FDIC invoked.

No need to imagine. It's a pretty routine procedure.

https://www.npr.org/templates/story/story.php?storyId=102384...

> The next day, Ric Carey, an Umpqua vice president, heads into that meeting. "The FDIC had taken a location approximately two miles from the main office of the bank in a hotel under a different name," he says later. "And they've been through quite a few of these. I think one of the gentlemen leading the discussion said, 'You know, I've done over 200 of these over my 25 years, and let me tell you how it's going to work.' "

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#133

Post by lenticular »

nonbel wrote: post #84
nlh wrote: post #70

Earlier quoted context omitted.

There's a huge difference: Yes, the bank only holds $0.10 in cash, but at least in the US, the F.D.I.C. backs up every dollar in your bank account up to $250,000. That's a major reason the reserve banking system functions. If there were an F.D.I.C. for tether then I'm sure people would have different expectations (and likewise, if there were no F.D.I.C. for the US banking system).

The FDIC is more a feel-good measure: >"Currently, the Deposit Insurance Fund (DIF), which is a fund set aside to cover the insurance obligations of the FDIC, has a required reserve ratio of only 1.35%. And that is only after a decision was made in October of 2015 to raise it, from its original level of 1.15%. Even more daunting, the DIF has until 2020 to reach this new 1.35% required reserve level. This means that,…

The government is able to issue debt.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#134

Post by Waterluvian »

therein wrote: post #76
themagician wrote: post #71

Earlier quoted context omitted.

The lesson will never be learned. The Ponzi scheme is as old as money itself. It’s never gone away. The one thing that crypto currency truly has revolutionized is the Ponzi scheme. You can do it any number of ways, add any number of twists, and do it over and over again. With crypto you don’t even have to be subtle. When the pot gets big enough you just outright steal it. It’s possible that Satoshi himself will try t…

> It’s possible that Satoshi himself will try to liquidate his stake at some point, crashing BTC itself and make off with a cool billion. Who knows. That might have been the plan all along. Not quite possible with the auditing capabilities Bitcoin provides. The moment any amount from those accounts is moved, Bitcoin would probably tank.

Wouldn't someone in that position just start a slow and consistent divestment over a long period of time? Make it business as usual.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#135

Post by dmurray »

nostrademons wrote: post #65
Animats wrote: post #17

So why hasn't the bottom fallen out of Tether yet?

Tether functions as sort of the reserve currency of crypto. Many exchanges don't even offer fiat money or banking connections - to use them, you have to send Bitcoin in from another exchange or a personal wallet, then you can convert it into Tether or other altcoins. People who are "getting out of crypto" by selling Bitcoins because they think the price is gonna drop oftentimes are actually buying Tethers. When 80% o…

This is a fascinating view of things. It's not totally incongruous that Tether could just be worth approximately 1 USD indefinitely, "by convention" or in the same way that Bitcoin has value.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#136

Post by ShorsHammer »

vkou wrote: post #107
ShorsHammer wrote: post #99

Earlier quoted context omitted.

I can only imagine what would happen to the value of that USD were the FDIC invoked.

FDIC insurance has been invoked many times in its history, including over 14 billion in payments over the last decade.

$14 billion is hardly significant. The USD index certainly wasn't good until very recently: https://fred.stlouisfed.org/graph/?g=nJWC

My bank in Australia has $500 billion AUD (~$350B USD) of cash deposits on it's liability book. That's just one bank.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#137

Post by lenticular »

chimpburger wrote: post #125
ticmasta wrote: post #77

Earlier quoted context omitted.

>> The delicious irony in it all is that the money in your bank is backed by about $0.10 for every dollar they owe savers. I'll be generous and assume you know thtat banks don't store your money in a big vault a la Scrooge McDuck There's a big difference between banks redistributing your money as loans and mortgages vs. a cryptocurrency tied to a supposed dollar-backed instrument 100% controlled by the same party. Th…

You misunderstood. With the "Fractional Reserve Banking" system, banks lend out money that is NOT under deposit. They are licensed to lend out money created from nothing. This is the mechanism by which money is created https://courses.lumenlearning.com/boundless-economics/chapte...

Yes everyone knows this. However, the difference is regulation, collateral, and FDIC insurance. There's been a huge number of instances of exchanges or other parties screwing over Bitcoin users, but there has not been a single loss of bank deposits since the FDIC has existed.

No one is actually checking that Tether backs their currency 100%, you know.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#138

Post by Scoundreller »

Waterluvian wrote: post #134
therein wrote: post #76

Earlier quoted context omitted.

> It’s possible that Satoshi himself will try to liquidate his stake at some point, crashing BTC itself and make off with a cool billion. Who knows. That might have been the plan all along. Not quite possible with the auditing capabilities Bitcoin provides. The moment any amount from those accounts is moved, Bitcoin would probably tank.

Wouldn't someone in that position just start a slow and consistent divestment over a long period of time? Make it business as usual.

The wallets have been untouched for a decade. The first bitcoin to sell from it wouldn't actually crash the market, but the emotional effect of a small chunk of a very large chunk suddenly moving would be fairly big.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#139

Post by Scoundreller »

patio11 wrote: post #24
apo wrote: post #14

Here's the filing: https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet...

This is riveting. I find myself wanting to give you pull quotes but honestly just scroll down, especially to the points where they quote chats that Bitfinex showed them under subpoena.

If you want to read more like this, here are some internal chats from a recently defunct Canadian exchange between the CEO and an employee: https://www.reddit.com/r/QuadrigaCX2/comments/b13t6l/gerrys_...

There are also references to Crypto Capital. QuadrigaCX is on their homepage.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#140

Post by 6nf »

csomar wrote: post #7

I think the news was out for some time and only now the rumor started to confirm. Tether is trading at exactly $1/$1 on Kraken. It had touched $0.85/$1 on October 2018 though. It was discounted for the last quarter of the last year. The discount lasted for several months suggesting lack of liquidity and possibly lack of funds. The Tether discount suddenly disappeared. And suddenly a discount/premium appeared on Bitfi…

Why would you hold significant amounts of Tether? There's no upside and all of the downside.

Why do you do it?

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