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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

#241

Post by bhouston »

nostrademons wrote: post #89
eunoia wrote: post #75

Earlier quoted context omitted.

> We'd expect to see a rise in the price of BTC at USDT-based exchanges as Tether holders need to convert to Bitcoin to get out, along with a fall in BTC at fiat exchanges as they sell that Bitcoin. To some extent this is happening (Coinbase Pro's BTC price is almost $100 less than Tether-only exchanges like Binance or Bitfinex), but it's less severe than I would expect from a true run on the bank. The small spread i…

Bitfinex reports their prices in USD but I'm pretty sure that's bullshit. It's like saying "Each Tether is worth $1 because we say so." The Kraken price is much more accurate. I suspect the price is holding up because most holders of Tether don't consider this a big problem. Either they believe that the NY AG will find that there are adequate reserves backing Tether after all, or they believe the reserves don't matte…

This is much worse than not having reserves. In reserve banking there may be insufficient liquidity to handle a significant withdraw event but theoretically the money in the bank balances, it is just not liquid because it is lent out.

The situation with tether is much much worse. About 30% of the money invested in tether is gone and unlikly to come back. The books do not balance, it is not a timing issue, it isn't a liquity issue tether or bitfinex is insolvent.

This is important to realize, tether or bitfinex is insolvent/bankrupt if that 850m is truly gone. It is covering up this with loans between related parties, but the legality of those loans is probably questionable at best but bitfinex and tether are intertwined such that they likely have shared liabilities legally.

Someone is bankrupt right now. Maybe both.

The fact that tether or bitfinex isn't dropping or outright dead confuses the hell out of me. Is it so critical to crypto now and so central that even if it is involvement we have to believe in it or the sake of this whole market? This market isn't rational or I must be missing something.

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

#242

Post by bhaak »

dragonwriter wrote: post #54
berbec wrote: post #3

Is this a surprise to anyone? I was under the impression that even the most ardent HODL-er thought Tether was, at best, a very risky investment, and more likely a total scam.

But from this, it looks like Bitfinex was completely amateur hour, and that—but for Tether being raided to cover the results of that—Tether might not have been a scam at all.

Yes, that's the surprising bit. Tether USD backing seems to have been fine.

But Bitfinex screwed up, I guess partly due to panicking because they couldn't get a proper bank connection.

It also seems that the money is lost, just not accessible, at least at the moment.

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

#243

Post by ehrtt »

bitreality wrote: post #236
aijoe wrote: post #192

Earlier quoted context omitted.

1% fluctuation is normal. Tethering is stabilized through arbitrage.

The only way Tether can be stablized through "arbitrage" is if there is a risk-free way to trade 1 Tether for 1 USD. For the average user, there is no direct way to cash out your Tether for 1:1 USD. I imagine that big clients do have the ability to trade Tether for USD. Because of that, they will buy up discounted Tethers on exchanges and redeem them to Tether Company for 1 USD each. HOWEVER, this clearly relies on T…

Not true. You can trade USDT for USD on Kraken.

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

#244

Post by omarchowdhury »

Complexicate wrote: post #195
omarchowdhury wrote: post #188

Earlier quoted context omitted.

> And it would be pretty ironic if it the coins moved and price of bitcoin crashed and actually became a peer to peer electronic currency for the masses. The price of Bitcoin isn't what is preventing it from becoming a bonafide peer to peer electronic currency. Scalability and UX issues are.

I agree with UX, but scalability has a working solution in the Lightning Network. However, that needs major UX development... Bitcoin also needs fungibility: "Fungibility is the only property of sound money that is missing from Bitcoin & Litecoin. Now that the scaling debate is behind us, the next battleground will be on fungibility and privacy. I am now focused on making Litecoin more fungible by adding Confidential…

> but scalability has a working solution in the Lightning Network.

Not without an increase in the block size, which has been a contentious issue. At 7 transactions per second, it would take 31 years of full blocks for every person on Earth to just open a Lightning channel each, in uninterrupted succession.

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

#245

Post by ShorsHammer »

JumpCrisscross wrote: post #175
ShorsHammer wrote: post #145

Earlier quoted context omitted.

No bank can survive 20% of depositors wanting their money over 3 months. Those long-term assets (aka loans) aren't guaranteed, realisable to pay creditors nor of fixed value.

> Those long-term assets (aka loans) aren't guaranteed They can be sold to the Federal Reserve at its discount window. That's a founding reason for the Fed's existence. Ensuring liquidity crises don't prompt solvency ones.

Socialised losses for private gain is acceptable I guess?

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

#246

Post by samdfonseca »

conanbatt wrote: post #234
marvinalone wrote: post #128

Earlier quoted context omitted.

USD is backed (among other things) by the government accepting taxes in it. If you don't pay, they will come to your house with guns and take you away. This creates a demand for USD that is completely unlike any demand for crypto.

Again this weird argument. If the USD were valued due to its tax-demand, raising taxes would increase the value of the dollar! Also the gov creates more supply to the dollar than the tax demand always, so its not really clear. And most taxation is a percentage of income or value measured in dollars itself. This argument never clicked for me: where is it coming from?

This is correct, raising taxes would increase demand for dollars. Supply is greater than the tax demand, but much of the additional demand comes from the tax in dollars requirement. Since businesses have to pay sales tax in dollars, they're inclined to only accept dollars to avoid complex accounting and exchange rate liability. Being able to transact with US businesses is a large source of dollar demand.

It's also worth pointing out that income doesn't always translate to inflows of physical dollars. Complex corporate accounting standards often result in recognizing revenue before any cash is received, and non-cash transactions that affect income.

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

#247

Post by gzu »

panarky wrote: post #219
geofft wrote: post #191

Earlier quoted context omitted.

I don't understand cryptocurrency markets at all, but, could there be something where the only people participating in the USDT market are those who are at least somewhat confident that USDT is what it claims to be and therefore are pricing it at $1? What do you get out of participating in the market if you expect Tether to be fraudulent? You'd personally price it at zero, then, right? Can you profitably short it, or…

> if you hold USDT and want to sell it for cheap, who is going to buy it for cheap-but-nonzero? The market price for one Tether is currently $0.9984 because traders are buying at that price. So if anyone holds Tethers and believes there's greater than 1% probability that it goes to zero, the rational trade is to sell. The fact that the price holds at parity tells me that Tether is not an obvious fraud.

There is complacency among the exchanges though. You really believe all that volume and price action is legitimate? Exchanges want tether to be worth what they say it’s worth, 1 USD. The alternative is a massive crash in tether and therefore bitcoin price therefore altcoins price therefore profit (trading fees) for exchanges. The scam can go on much longer than you/anyone can imagine.

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

#249

Post by aedron »

This article goes to great alarmist lengths, past the point of being deceiving. Just the very first line:

> One of the world’s most widely traded virtual currencies faces renewed doubts about its stability [...]

Tether is nothing in terms of crypto currency penetration. It does not even have a percent of daily trading. Then a few paragraphs down:

> [...] within an hour of the attorney general’s statement and Tether slid 1.4 percent.

1.4 per cent. Even big cap stocks fluctuate that much some days.

> At the time of the correspondence, Bitcoin was trading at around $6,500. It dropped 4.7 percent to $5,236.03 at 12:10 p.m. in Hong Kong on Friday.

So they mention a price from 8 months ago, and then mention yesterday's price, implying that it fell that much because of this event.

Garbage journalism.

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

#250

Post by askmike »

Semaphor wrote: post #213
orthecreedence wrote: post #205

Earlier quoted context omitted.

It's been suggested that a large percentage of the crypto market cap is based on tethers which have been used to prop up prices but also used to hedge against falling BTC prices. Essentially, bitfinex prints tether whenever the price of BTC drops, and in the meantime, people use these printed tethers to hedge against BTC (and buy back in when the price trends upward again). So there are many iterations of compounded…

I've heard that theory, but I can't say I understand it. Let's say USDT goes to 0 instantly. All traders lose their parked money. I can see a crash from panic and from people recouping their lost safe money, but what else does it have to do with with cryptocurrencies?

If USDT would go to 0 instantly many things would happen (a few of the biggest BTC fiat markets would not be able to operate, such as binance's main BTC market). As a practical example big traders would obviously sell their tether straight into crypto on those markets. But since they don't want to be exposed to that much crypto they would sell the same amount on other exchanges (such as Coinbase). In these chaotic events the biggest traders will fly to safety for most on their books (actual fiat, or hedged via derivatives).

But that's not the potential issue being described: Tether is supposed to be worth 1 dollar. A lot of big crypto markets run on tether. If it turns out that a lot of crypto was bought with synthetic dollars (tether) that turned out to be a lot less than a dollar, that would mean the price of many crypto projects got to where it is by imaginary money. In another word: overpriced.

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